Dear Brothers and Sisters:

We need your help. For the first time in 25 years, a real opportunity exists to greatly improve benefits paid by the Railroad Retirement System -- but we need your active support to make it happen.

As you know, a strong coalition of 11 labor unions, including the UTU, recently reached a historic agreement with the railroads represented by the National Carriers' Conference Committee to vastly improve your Railroad Retirement System. On this page is the complete description of that historic agreement, which has been signed by the chief executive officers of the members of the coalition.

Legislation that will make these improvements a reality will soon be introduced in Congress. To consider and pass such legislation, our lawmakers ask only that labor and management agree to the changes -- and we've finally passed that hurdle -- and they need to know that those served by the Railroad Retirement System see the need for a change. That's why your phone calls and letters in the days to come are so important to this effort.

When bill numbers are assigned and the legislation is ready for Congressional action, we will need your help and that of the entire membership, active and retired, to secure its passage and to ensure that the BLE and the BMWE do not jeopardize adoption of these important improvements to your pension system.

For your sake, and for the sake of those who will follow you into retirement, let your U.S. senators and representatives in Congress know we're ready for these changes now.

Fraternally yours,

Charles L. Little
UTU International President

Your help needed to secure
improvements for Railroad Retirement
A coalition of unions representing rail workers has reached an historic agreement with the national rail carriers to seek major legislative and contractual improvements to the Railroad Retirement System.

The rail labor coalition that reached this agreement with the carriers is comprised of the following unions: American Train Dispatchers Department-BLE, Brotherhood of Railroad Signalmen, International Association of Machinists, International Brotherhood of Boilermakers, International Brotherhood of Electrical Workers, Hotel Employees & Restaurant Employees International Union, National Conference of Firemen and Oilers-Service Employees International Union, Sheet Metal Workers' International Association, Transport Workers Union, Transportation Communications International Union and the United Transportation Union.

The agreement must now be drafted into legislation, and then passed by Congress. These changes, if enacted, would be the first major benefit improvements to our Railroad Retirement System in more than 25 years.

The improvements are made possible because the agreement calls for changing the current law that limits the investment of Railroad Retirement trust fund assets. Under the agreement, a newly established investment board would be permitted to invest trust fund assets like other large pension plans. According to both sides' actuaries, this should increase future returns. Employees will receive the improvements immediately upon the passage of enabling legislation, and the employers will receive an equivalent phased-in decrease in their Tier II tax rate.

The starting point of negotiations was that nothing could be done to jeopardize the solvency of what already is an excellent retirement system. Doing that meant making sure the Railroad Retirement Board signed off on the numbers, and they have. Just as important, the legislation will require the carriers, and only the carriers, to absorb any future tax increases that might be necessary to protect the system if projections don't pan out, with no tax increase or benefit reduction for employees and retirees. That alone is unprecedented. In the past, employees have had to reduce benefits and suffer tax increases when the system was in crisis.

The following is an in-depth explanation of the improvements in the agreement:

UNREDUCED RETIREMENT BENEFITS
AT AGE 60 WITH 30 YEARS OF SERVICE
Under the proposed change, employees with 30 years of service will be able to retire at age 60 with an unreduced annuity. The fact that retirement ages are rising under Social Security will not impact this; if you have 30 years of service, you will be able to retire at age 60 with an unreduced Tier I and Tier II annuity.

Today, employees must attain 62 years of age and have 30 years of service in order to receive an unreduced annuity. If employees with 30 years of service retire at age 60 or 61, their annuity is permanently reduced by taking 20% or more off the Tier I amount and the annuities of their spouses are also reduced. This significant permanent reduction discourages most eligible employees from retiring before age 62.

RETIREE HEALTH INSURANCE PLAN AT AGE 60
WITH LIFETIME MAXIMUM BENEFIT INCREASES
TIED TO MEDICAL INFLATION RATE
Under the agreement just reached, employees who retire at age 60 with 30 years of service will be eligible for the National Early Retirement Major Medical Benefit Plan otherwise known as GA-46000. Also, the $75,000 lifetime maximum will be annually increased to keep pace with the rate of medical inflation, which is estimated to be much greater than the overall Consumer Price Index (CPI) increases in the foreseeable future.

Reducing the retirement age without achieving health coverage would have little value to the vast majority of our members. Who could afford to retire without medical coverage in today's world of astronomical health costs? We have personally seen member' devastated when forced to take New York Dock separations at age 60, even with very large separation payments, because they faced the prospect of having to buy their own health insurance for five years. From the beginning, our coalition made it clear to the carriers that any reduction in retirement age had to be accompanied by insurance coverage to make it worthwhile. We wanted a reduced retirement age that people can take advantage of, and we got it. Tying increases in the lifetime maximum to medical inflation will provide an element of protection to anyone who retires before the age of 65.

These health insurance improvements are the only part of the agreement that does not require amendments to the Railroad Retirement Act and all the rail carriers in GA-46000 have agreed to them. A committee of labor and management is charged with ensuring that rail carriers outside GA-46000 will agree to equivalent changes. We will seek to exclude from the legislation the Tier II tax reductions from any rail carrier that doesn't agree to these changes.

Today, if employees working for one of the national carriers retire at age 60, they are ineligible for GA-46000 coverage. That means they must purchase an individual plan or be without health coverage until age 65, when Medicare kicks in. Employees must be 61 and have 30 years of service before they are eligible for GA-46000 and eligible employees and dependents are subject to an individual lifetime benefit maximum of $75,000.

GA-46000 was negotiated more than 20 years ago, and this is rail labor's first success in negotiating coverage at a younger age, as well as increasing the lifetime maximum.

EXPANSION OF SURVIVING SPOUSE BENEFITS
The proposed change calls for the widow(er)'s annuity to be guaranteed to be an amount no less than the amount of the annuity the retiree was receiving in the month before death. Hence, an eligible widow(er) will receive the greater of the annuities the widow(er) would have otherwise received under the existing formula or the guaranteed amount. In a major improvement over House Resolution 52 introduced in Congress last year, the guarantee will apply to all eligible widow(er)s effective upon enactment, not just spouses who become widowed after the date of enactment.

This was a must-have part of any agreement, as the current system is inadequate. Retirees should rightly have the expectation that their spouses can live their retirement and not suffer financial devastation when the retiree dies. This improvement fixes what has been a long-standing inequity.

Under current Railroad Retirement and Social Security law, a widow(er) under Social Security or Tier I of Railroad Retirement is eligible for the full amount of the retirement benefit previously paid the deceased employee. In contrast, a widow(er) of the deceased railroad employee is eligible for only 50% of the employee's Tier II benefit.

Consequently, the widow(er) of a retired railroad employee suffers a proportionately greater reduction in family benefit income after the retiree's death than a widow(er) covered under Social Security.

CARRIERS TO ENSURE FUTURE
SOLVENCY OF FUND BY ABSORBING
ANY NECESSARY FUTURE TAX INCREASES
Under the agreement, the carriers will be required to automatically absorb any future tax increases necessary to keep the Railroad Retirement System solvent. In the past, cash flow crises in the Railroad Retirement System led to employees paying higher Tier II taxes and/or cutbacks in benefits and eligibility. Under the agreement this would never happen again.

Based on current projections, the Railroad Retirement System is secure for as long as anyone can project. But projections can prove wrong. Should there be any unforeseen crises, employees and retirees alike will now be able to rest assured that they will not suffer as a result. Under this agreement, all the benefits we achieve, including the 60/30 provision and the improvement in surviving spouse annuities, will be safeguarded. The reductions in taxes that the carriers receive could be rolled back if something changes so that the system can't afford them.

REPEAL OF RETIREMENT BENEFIT
MAXIMUM FOR LONG-TERM EMPLOYEES
The agreement not only calls for the Railroad Retirement Act Maximum (RRAM) to be repealed for future retirees, but also for retirees currently subject to it. Their annuities will immediately increase.

Currently the total amount of Railroad Retirement benefits payable to an employee and spouse is limited to the Railroad Retirement Act Maximum (RRAM) geared to the employee's average monthly earnings prior to retirement. The RRAM amount is derived from the highest two years of creditable Railroad Retirement or Social Security covered earnings in the 10-year period ending with the year the employee's annuity begins.

When the benefit maximum is applicable, the reduction in earned annuities can be significant, and most often penalizes long-service employees with moderate earnings, or employees forced to take New York Dock or Washington Job Protection Act buyouts.

The number of retirees affected by this reduction has grown in recent years, to where it currently affects about 10% of awards.

This improvement has been mischaracterized by some as amounting to a benefit for high-paid railroad CEOs. According to the Railroad Retirement Board, that is simply false. Annuities for higher paid railroad employees are limited by the caps on creditable earnings, which in 2000 are set at $76,200 for Tier I and $56,700 for Tier II.

In other words, the annuity for an employee making $76,000, or a CEO making ten times that amount, is the same. Eliminating the RRAM will not affect this at all.

FIVE-YEAR VESTING
The 10-year vesting requirement under the agreement would be reduced to five (5) years for employees currently in service.

Currently an employee must have 10 years (120 months) of creditable railroad service to be eligible for Railroad Retirement benefits. Vesting for pensions in most other industries is usually shorter than 10 years.

FUTURE IMPROVEMENTS
The agreement calls for automatic future improvements if the retirement plan becomes overfunded. Should the plan assets exceed a level deemed by the Railroad Retirement Board to be more than adequate to pay benefits, employees and the carriers will receive the surplus on a 50-50 basis. The carriers will be able to reduce their tax obligation, and the employees will have the choice of reducing their Tier II tax obligation, or using their share for benefit improvements such as further age reductions or increased monthly annuities.

However, under current projections, using fairly optimistic employment projections and estimates of investment return, the fund would not reach the triggering level for another 40 years. Should employment exceed expectations, and/or investment returns approximate the dizzying levels of the last few years, the triggering level could be reached much sooner.

WHY THIS AGREEMENT?
From the outset of negotiations, the unions which made this agreement to improve Railroad Retirement shared several principles.

First and foremost, the existing Railroad Retirement System could not be put in jeopardy by attaining benefits that were unaffordable.

Second, we relied on the projections of the Board's actuary, whose only interest was in preserving the solvency of the fund.

Third, our top priority was to achieve the maximum affordable reduction in retirement age -- with health insurance -- and to fix the current inequity for surviving spouses.

Finally, we were unwilling to subject union members to higher retirement taxes than they currently pay.

Everyone understood that no reform could be achieved without the agreement of the railroad industry. Historically, neither rail labor nor rail management has ever been able to achieve unilateral changes in Railroad Retirement. No one believed that labor could achieve improvements unilaterally, especially under a Republican-controlled Congress. We were not interested in sponsoring legislation that was doomed to failure. We wanted real, attainable pension reform.

Everyone in rail labor started out wanting to reduce the retirement age as far as possible. The Railroad Retirement Board made it clear early on that our initial goal -- 30/55 -- was simply unaffordable without major tax increases, something to which neither the carriers nor most unions would agree.

The issue of health coverage was all-important. If you reduce the retirement age without providing health insurance, the actuaries determined that very few workers would be able to take advantage of the benefit. While fewer takers reduced the benefit cost, it remained a significant expenditure for all, while only a handful of employees would be able to use it. The vast majority of employees would get nothing out of it. By providing health insurance at age 60, this agreement achieves a real reduction in retirement age for the vast majority of long-term employees.

WHAT'S NEXT?
The agreement now has to be drafted into legislation, and then introduced into Congress. None of the changes will take effect unless Congress approves and the President signs it into law.

Many thought we'd never be able to achieve real improvements in our retirement system, but we've made the all-important first step. Now we have to follow through and get it passed into legislation. We have a powerful coalition -- rail unions, the rail industry and retirees. But there will be those in Congress who oppose it. When the bill is introduced, we'll be calling on each of you to contact your congressional representatives to make the dream of earlier retirement with health insurance a reality.