FROM: V. M. Speakman, Jr., Labor Member, Railroad Retirement Board

In view of the further inquiries received by the Railroad Retirement Board concerning the possibility of amending the Railroad Retirement Act to allow employees to retire as early as age 55 with 30 years of service, we are providing additional information. As stated in our October 7, 1998 release to Railway Labor Organization Chief Executives, changes in the Railroad Retirement Act age provisions can be made only be statute and, historically such statutory changes have followed agreements reached through bargaining between Rail Labor and Rail Management.

As you know, I have asked the Chief Actuary of the Railroad Retirement Board to compute additional information on the financial impact of a proposal which assumes employees and spouses would be able to retire with full benefits at age 55 if the employee had 30 years of railroad service. To put this in proper prospective our Chief Actuary has estimated that such a cost would require an increase in tier II payroll taxes of approximately 7.8 percent per year. If the employee would be required to bear the entire cost of this proposal, such an employee who was earning the maximum tier II compensation of $50,700 in 1998 would pay an additional $3,954.60 in tier II payroll taxes. As you know the amount of railroad compensation subject to tier II taxes increases each year based on the rise in average national wages. For example, in 1999 the tier II maximum compensation base will be $53,700. An employee earning that would pay an additional $4,188.60 in 1999 to finance this proposed change. Moreover, if there was a large unanticipated decline in active railroad employment levels the cost would be higher.

Although this is not a pending issue or being considered by the Board, my office is prepared to work with Rail Labor to provide any information needed on this issue.