Many of the European countries and Canada have the kind of retirement system that we in the U.S. dream of. Workers throughout Europe and in Canada are generally able to retire at age 55 with reasonable income and government provided health care. And in the U.S. there is a certain percentage of organized workers who have 30 and out, combinations of years and longevity equal to 80, 85 and 90 after which they are entitled to retire.

But for the most part, U.S. workers retire on Social Security -- a retirement that in many instances is barely adequate. In the railroad industry, we have Railroad Retirement. Railroad Retirement is a good system, especially compared to Social Security. It provides for nearly double the benefit that Social Security provides. It also allows workers who are unable to perform the work of their craft to retire on full benefits after 240 credited months in the system (Occupational Disability).

Full disability under Social Security requires that there is no work that a worker is able to perform, even if there are no available jobs in an area, but the job does exist. For BMWE members, the occupational disability is especially important because the years of performing difficult, highly skilled work outdoors, in all weather, many times away from home living in campcars, motels, etc. with long periods of driving at the beginning and end of the work week, takes a toll on our bodies, making it necessary to avail ourselves of the occupational disability benefit.

Today, Social Security is facing a problem that we in the railroad industry faced in the mid-70s and early 80s. The baby boom generation (those born between the mid-40s and the mid-50s) are in their 40s and 50s and are looking towards retirement in the relatively near future. The numbers who will retire are enormous and will put a strain on the existing funds which provide benefits to Social Security retirees.

This is because it is a pay-as-you-go system, meaning that those working provide the bulk of the benefits for those who retire (between employer and employee contributions). So when there is a "spike" in retirements without an equivalent increase in those working, the system's ability to pay for retirees is jeopardized. This is why the Social Security system is in such trouble in the future, as the baby-boomers retire--there will be a much larger number of retirees being paid for by those actually working (worker to retiree ratio) than there is now.

Due to massive downsizing in the railroad industry (as a result of the growth of the automotive industry which started as early as the 1940s and deregulation in the rail industry), it was necessary to resolve the worker to retiree ratio much earlier. This was especially acute because the Railroad Retirement System provides in addition to the Social Security-like benefit (Tier I), a pension (Tier II) and Occupational Disability.

So the railroads and rail labor bargained and reached agreement on reforms which led to the railroads providing, in addition to the Tier I (Social Security-like) tax which all employers, regardless of industry, pay, a 16.9% per employee tax to the Railroad Retirement Trust Fund. The employee provides, in addition to the Tier 1 employee tax which every worker pays to Social Security, 4.1% of his or her income to the Railroad Retirement Trust Fund. Another reform that occurred at this time, in order to guarantee the solvency of the Trust Fund (and the security of those who retire) was raising the eligibility age of those who retire with 30 years service on full benefits from age 60 to age 62.

As a result of these reforms in the 70s and 80s, the worker to retiree ratio is increasing (i.e. there are more workers per retiree now than there were in the 70s and 80s and this ratio is likely to continue to go down, as the bulk of the downsizing in the railroad industry has already taken place). For those of us who are baby-boomers in the railroad industry, we face a much brighter future than our brothers and sisters who are in the Social Security system because of the demographics (increased worker to retiree ratio).

The negotiations which took place with the railroads during the 70s and 80s were complicated. Although Railroad Retirement is not part of collective bargaining agreements, when railroads pay 16.9% above Tier I benefits, it is part of their labor costs. This meant that wage increases were negatively impacted as a result of the deals we made to provide secure, decent retirement benefits to our members in the railroad industry.

Put another way, the railroads are paying, with pre-tax dollars⁽¹⁾, 16.9% in addition to our wages, health benefits and Tier 1 payments, to our Tier II fund. As a result, our members are able to retire at age 62, after 30 years credit in the Railroad Retirement System, with full benefits and, in the event they are unable to perform the work required by their craft, after 240 months in the Railroad Retirement System regardless of age, AND, this fund is solvent. It must be noted, however, that ALL OF THIS IS OUR MONEY, as the 16.9% per employee for Tier II above the Social Security-like benefit the railroads and all employers pay, was INSTEAD OF wage increases.

When negotiations take place to alter Railroad Retirement, all railroad crafts are involved. There has never been a change to the Railroad Retirement Act without labor and management agreeing to the changes. This means that in addition to getting the railroads to agree to changes, all crafts must also agree. This is because any increases either the railroads pay or the employees pay in taxes in order to obtain better benefits, comes out of increased wages and benefits.

This causes some friction in rail labor. Our members perform difficult, highly skilled labor outdoors over huge distances. The impact on our bodies, as we age, is negative. Railroad workers who operate engines or work in offices or shops also perform highly skilled, difficult work. However they are usually (though not always) indoors and go home nearly every night. The impact on their bodies of their work is less negative than the impact of our work on our bodies.

As many of the leaders of other rail union crafts see it, although everyone wants early retirement at full benefits, those whose bodies are more negatively impacted by their work are generally willing to pay more of their wage increases (which pay the mortgage, send kids to school, allow modest vacations) for early retirement than those whose work less negatively impact them. So although the leadership of many of the crafts believe in earlier retirement, they believe their members are less willing to give up increases in order to get earlier retirement. This makes it difficult to get consensus even within labor for giving up in wage and/or benefit increases what is necessary in order to get early retirement. BMWE is looking into the costs of a BMWE-only bridge pension in order to reduce our retirement age.

Internally, there is another point. Younger workers are generally less interested in paying higher pension and retirement premiums than older workers. I remember many complaints about the cost of railroad retirement coming from workers when I was working on the railroad. Although I believe those complaints were misplaced, just a function of being young and not thinking of retirement, younger workers generally want more in their pockets to cover expenses than in a retirement account.

Given the level of debate within the BMWE about 55 and 30, I considered it necessary to give this full background prior to discussing the 55 and 30 proposal, which BMWE supports as a result of the resolution passed at the last Convention. I have not wavered from fighting to obtain this for our members in any meetings with the railroads or with rail labor even prior to Convention. It is BMWE policy to fight for a reduction in the retirement age with full or improved benefits.

In pursuance of this, I contacted Brother Speakman, the Labor Member of the Railroad Retirement Board, in order to get a realistic projection of what the cost of 55 and 30 would be per member. (See Speakman letter included in this issue.) His estimate was there would be an increase of 7.8% in Tier II taxes according to the Railroad Retirement Board actuary. This would mean that every worker paying into Railroad Retirement would have to have 7.8% more of his or her salary (in pre-tax dollars) paid in order to obtain this benefit. This could be done by having the railroads pay the full 7.8%, the employees pay the 7.8% or some split contribution of the 7.8% paid.

In addition to this, we must recognize that retirement at age 55 would mean that health benefits would be necessary for the period between attaining the age of 55 and the time that we would be eligible for health care (age 65). So in addition to the 7.8% increase, there would be some kind of a health insurance premium that either the retiree would pay from his or her retirement check or would have to be paid by the railroad, again in lieu of wage increases for those who remain working.

UTU has taken the public position that they support 55 and 30 so long as there is no increase in the employer or employee Railroad Retirement tax. But there is no way to obtain the benefit without raising the tax. The position of Rail Labor on this issue is, however, that a reduction in the retirement age is a priority.

A final point. The railroads are looking for changes in the Railroad Retirement Act also. Primarily they are looking to reduce the taxes they pay by improving how the Railroad Retirement Tax Fund invests its money. They are also looking to grandfather those who are in the Railroad Retirement System now and provide all new hires with a different system that would provide the same level of benefits that Railroad Retirement provides at a reduced cost. Rail Labor also has changes it is looking for (in terms of earlier retirement, enhanced survivor benefit, etc). Recognizing that no change can happen without agreement, we'll see how these meetings go, although I am not particularly optimistic about their outcome.

The Rail Division of the Transportation Trades Department of the AFL-CIO has written President Sweeney and asked that I be rail's representative on the AFL-CIO Committee that is dealing with the Social Security question, so that Labor does not overlook Railroad Retirement when it is handling Social Security. The reforms necessary to fix Social Security may be much more drastic than anything required in the Railroad Retirement arena because we have already fixed our solvency problem.

BMWE is working hard on these matters and has assigned key staff to it. I will be writing more about this issue and wish to also recognize that Brother Ron Friend is pursuing this matter. I write this not to discourage anyone about 55 and 30, which I support, but to make certain that we all understand the facts and the difficulties involved in this monumental struggle.

1. Pre-tax dollars mean that the whole amount goes to the Railroad Retirement Trust Fund. When we get a wage increase, what we get in our pocket is much less than the wage increase. For example, if we get a 3% wage increase, federal income tax, Railroad Retirement tax, state and, sometimes local taxes are deducted from it. This amounts to about 35% of the percentage increase. e.g. if we get a $1 increase, we only see in our pocket $.65. When the railroads pay, for example, $1 into Railroad Retirement, the whole $1 goes into the Trust Fund for our retirement (minus the minuscule cost of administering the Railroad Retirement system).