Description : News Release - 01/21/2000 - BMWE SUES CARRIERS TO BLOCK BAD RAILROAD RETIREMENT DEAL

January 21, 2000, Southfield, MI--The Brotherhood of Maintenance of Way Employes filed suit today in the United States District Court for the Northern district of Illinois, seeking declaratory and injunctive relief against the nation's major rail carriers and their bargaining agent, the National Railway Labor Conference and its National Carriers' Conference Committee. BMWE seeks to enjoin the carriers from "acting in furtherance" of their January 14, 2000 agreement with some rail unions concerning changes to Railroad Retirement benefits and taxes.

The Railroad Retirement system provides rail employees the equivalent of Social Security benefits, plus what are known as "Tier II" benefits, essentially a governmentally administered private pension scheme. Tier II benefits are based on employees' individual career service and earnings. Railroad Retirement benefits are funded out of payroll and income taxes on rail carriers and their employees.

The Railroad Retirement Act dates back to 1937. Over its life, the Act has been repeatedly amended by the Congress on the basis of consensus agreements between rail labor and management.

The financial condition of the Railroad Retirement system is presently more than adequate to improve retirement benefits. In recent negotiations between a coalition of rail unions and the carriers, the railroads sought a substantial reduction in their tax rates, and the unions sought better benefits.

On November 18, 1999, BMWE withdrew from the union bargaining coalition, citing the union's concern that some other coalition members seemed resigned to accept both lower than appropriate retiree benefits, plus carrier tax savings that would tilt the effect of the 'reform' mainly to the benefit of the employers. BMWE stated that it would bargain on its own behalf, but not separately from the coalition. The Brotherhood of Locomotive Engineers also declined to support the deal.

Then, on January 14, 2000, the carriers and the remaining coalition members reached an agreement with the railroads that would reduce the age at which an employee with 360 months of credited service could retire without suffering a reduction in benefits from age 62 to age 60. The carriers would have their Tier II tax obligation reduced by 3.47%, and half of the systems reserves would be invested in equities rather than Treasury obligations.

BMWE believes that the coalition's agreement with the railroads falls far short of an equitable reform of the Railroad Retirement system. The carriers always cite their Railroad Retirement tax obligations as one of their labor costs. Just like wages and other benefits, Railroad Retirement funding is part of the employees' benefit of the bargain struck in collective negotiations. "In BMWE's view, the agreement amounts to a give-back on employee compensation. The coalition unions are free to do whatever they will with regard to negotiating compensation changes for their members. But the carriers have no right to make an agreement with some unions that affects the retirement benefits of employees whose union didn't agree to the changes. If the carriers want a deal, they must negotiate with BMWE in good faith," said Mac A. Fleming, President of BMWE.