Longevity of
Railroad Retirement Beneficiaries
Every three years, the Railroad Retirement Board's Chief
Actuary conducts a study of the longevity of its
annuitants, as part of a valuation of future revenues and
future benefit payments. The following questions and
answers summarize the results of the most recent
longevity study.
What were the study's finding on the life
expectancy of retired male railroaders?
Using data through 1995, the study indicated that, on the
average, a male railroader retiring at age 65 can be
expected to live another 15.5 years. Studies done three,
six, and nine years ago indicated life expectancies of
15.2, 14.8 and 14.7 years, respectively, for this
category of beneficiary, so the most recent data
reflected a continued improvement in longevity.
How did these life expectancy figures compare to
those of disabled annuitants?
As would be expected, disabled annuitants have a shorter
average life expectancy, but the difference decreases
with age. At age 60, a disabled railroader has an average
life expectancy of 14.3 years, or 5.2 years less than a
non-disabled male annuitant of the same age; at age 65, a
disabled annuitant has an average life expectancy of 3.7
years less than a non-disabled 65 year-old annuitant; and
at age 70 the difference is only 2.6 years.
Are women still living longer than men?
In general, women still live longer than men. This is
shown both in the Board's life expectancy studies of male
and female annuitants and by other studies of the general
United States population.
For example, at age 65 a retired female railroader is
expected on the average to live 19.6 years, 4.1 years
longer than a retired male railroader the same age, and
spouses and widows age 65 have an average life expectancy
of 20.2 years and 18.5 years, respectively.
Can individuals use life expectancy figures to
predict how long they will live?
Life expectancy figures are averages for large groups of
people. Any particular individual's lifetime may be much
longer or shorter than the life expectancy of his or her
age and group.
According to the study, from a group of 1,000 retired
male employees at age 65, 889 will live at least 5 years,
726 at least 10 years, 518 at least 15 years and 305 at
least 20 years. Of female age annuitants at age 65, 510
will be alive 20 years later.
How do the life expectancies of railroad
retirement annuitants compare with those of the general
population?
While exact data were not available for direct
comparison, data available to the Railroad Retirement
Board did not indicate significant differences.
RRB Financial Reports
The Railroad Retirement Board is required by law to
submit annual reports and triennial actuarial valuations
to Congress on the financial condition of the railroad
retirement system, as well as annual financial reports on
the railroad unemployment insurance system. These reports
must also include recommendations for any financing
changes which may be advisable in order to ensure the
solvency of the systems. In June, the Board submitted its
20th Actuarial Valuation of the railroad
retirement system's assets and liabilities and a separate
report on the rail unemployment insurance system.
The following questions and answers summarize the
findings of these reports.
How much money is in the Railroad Retirement
Board trust funds?
By the end of the 1996 fiscal year, the balance of the
railroad retirement trust funds was almost $15 billion,
while the railroad unemployment insurance system held a
balance of about $137 million.
What was the overall finding of the 20th
triennial actuarial valuation of the railroad retirement
system's assets and liabilities?
The 20th triennial actuarial valuation was
generally favorable and reflected an improvement over the
last triennial valuation. This was due primarily to
legislation enacted in August 1994 to extend on a
permanent basis the transfer of certain income tax
revenues to the Railroad Retirement Account. The 20th
valuation concluded that, barring a sudden,
unanticipated, large decrease in railroad employment, no
cash-flow problems arise during the next 20 years.
However, like other railroad retirement financial reports
over the last decade, the valuation also indicated that
the long-term stability of the system, under its current
financing structure, is still dependent on future
railroad employment levels.
Over the years, the main source of income to the railroad
retirement system has been a payroll tax on railroad
employment. The amount of income that the tax produces is
directly dependent on the number of railroad employees
covered under the system. Therefore, actual levels of
railroad employment over the coming years will largely
determine whether any financing changes are necessary to
ensure the system's solvency.
What methods were used in forecasting the
financial condition of the railroad retirement system?
The 1997 valuation, which addressed the 75-year period
from 1996 to 2070, projected income and outgo of the
railroad retirement system under three employment
assumptions regarding future railroad employment.
Projecting income and outgo under the three different
assumptions, the report indicated actuarial surpluses
under the optimistic and moderate assumptions with no
cash flow problems during the 75-year projection period.
An actuarial deficiency was indicated only under the
pessimistic assumption; and, even under that assumption,
no cash-flow problem arises until the year 2021.
Did the valuation of the railroad retirement
system recommend any railroad retirement payroll tax rate
changes?
The valuation did not recommend any change in the rate of
tax imposed on employers and employees.
What were the findings of the 1997 report on the
financial condition of the railroad unemployment
insurance system?
The Board's 1997 railroad unemployment insurance
financial report was also favorable, indicating that even
as maximum benefit rates increase 40 percent (from $42 to
$59) from 1996 to 2007, experience-based contribution
rates are expected to keep the unemployment insurance
system solvent except under the Board's most pessimistic
employment assumption. Even then, projections show only a
small, short-term cash flow problem, with quick repayment
of the loan resulting from the shortfall, and the average
employer contribution rate remains well below the maximum
throughout the projection period.
What methods were used to forecast the financial
condition of the railroad unemployment insurance system?
The economic and employment assumptions used in the
unemployment insurance report corresponded to those used
in the report on the retirement system. Projections were
made for various components of income and outgo under
each of three employment assumptions, but for the period
1997-2007.
Unemployment levels are the single most significant
factor affecting the financial status of the railroad
unemployment insurance system. However, the unemployment
insurance system's experience rating provisions adjusting
contribution rates for employment declines, and its
surcharge trigger for maintaining a minimum balance,
ensure financial stability in the advent of adverse
economic conditions.
Did the 1997 report on the railroad unemployment
insurance system recommend any financing changes to the
system?
No financing changes were recommended at this time by the
report. |