11 1 a plan or system established by an employer which makes 2 provision for his employees generally (or for his employees 3 generally and their dependents) or for a class or classes of 4 his employees (or for a class or classes of his employees 5 and their dependents), on account of sickness or accident 6 disability or medical or hospitalization expenses in connec7 tion with sickness or accident disability, (ii) tips (except 8 as is provided under paragraph (3)), (iii) the voluntary 9 payment by an employer, without deduction from the 10 remuneration of the employee, of the tax imposed on such 11 employee by section 3201, or (iv) an amount paid as reim12 bursement or allowance for traveling or other expenses in13 curred or reasonably expected to be incurred in the business 14 of the employer provided any such payment is identified by 15 the employer either by a separate payment or by specifically 16 indicating the separate amounts where both wages and 17 expense reimbursement or allowance are combined in a single 18 payment.". 19 (c) (1) The amendments made by subsection (a) of 20 this section shall be effective January 1, 1975. 21 (2) The amendments made by subsection (b) of this 22 section shall apply with respect to taxable years ending after 23 December 31, 1953: Provided, however, That any taxes paid 24 under the Railroad Retirement Tax Act prior to the date on 12 1 which this Act is enacted shall not be affected or adjusted 2 by reason of the amendments made by such subsection (b) 3 except to the extent that the applicable period of limitation 4 for the assessment of tax and the filing of a claim for credit 5 or refund has not expired prior to the date on which this Act 6 is enacted. If the applicable period of limitation for the filing 7 of a claim for credit or refund would expire within the six8 month period following the date on which this Act is en9 acted, the applicable period for the filing of such a claim for 10 credit or refund shall be extended to include such six-month 11 period. 78-386 763 94TH CONGRESS 1ST SESSION S. 2816 IN THE SENATE OF THE UNITED STATES DECEMBER 18 (legislative day, DECEMBER 15), 1975 Mr. MONTOYA introduced the following bill; which was read twice and referred to the Committee on Labor and Public Welfare A BILL To amend the Railroad Retirement Act of 1974 with respect to the annuities payable under such Act to the widows of retired railroad employees. 1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled. 3 That section 4 of the Railroad Retirement Act of 1974 (88 4 Stat. 1327) is amended by adding at the end thereof the 5 following new subsection: 6 "(j) Notwithstanding any other provision of this Act, 7 whenever a retired employee receives an annuity under this 8 Act in an amount that is larger than the amount that would 9 be payable to the widow of such employee, the amount pay 2 1 2 able to such widow shall be the amount which would have been payable to the retired employee but for his death.". 3 SEC. 2. The amendment made by the first section of this 4 Act shall apply with respect to annuities accruing, under 5 the Railroad Retirement Act of 1974, for months beginning 6 after the date of the enactment of this Act. The CHAIRMAN. This morning we are privileged to have some of the experts in this field testifying, to explain the provisions further. Our first witness this morning is James L. Cowen, who is chairman of the Railroad Retirement Board. Mr. Chairman, we appreciate your getting us under way this morning. STATEMENT OF JAMES L. COWEN, CHAIRMAN, Mr. CowEN. Thank you, Mr. Chairman. I have a prepared statement which, with your permission, I would like to have inserted into the record, but which I would not like to read at this time. However, I have been asked if I would give some background information with respect to the composition of the benefit formulas currently in the Railroad Retirement Act. This I will do, with your permission. The CHAIRMAN. That is fine. Mr. CowEN. The 1974 Railroad Retirement Act restructured the benefit formulas into three major components. The first component is based on social security and railroad retirement credits, in general, and is computed by using the social security formulas. There are some minor differences between the social security eligibility requirements and reduction factors and those in the Railroad Retirement Act. The second tier of benefits is based only on railroad retirement credits, and is a form of pension strictly for railroad service. The third component is the so-called windfall dual benefit. This windfall dual benefit is aimed at preserving rights which were earned under both social security and railroad retirement prior to the end of 1974 which caused a certain amount of duplication of benefits under the old act. The first component is financed through the financial interchange with social security and is generally financed by a tax on the employers and employees equal to the tax on social security-covered employment. This tax is transferred to social security under the financial interchange provision and the benefit amounts paid are reimbursed to the railroad retirement fund account. There is about 15 percent which is not reimbursed. The second tier of benefits are financed by a tax on railroad emplovers which is equivalent to 9.5 percent of taxable payrolls. The third component is financed out of appropriations from general funds over a 25-year period which is to end during fiscal year 2000. These appropriations are supposed to be on a level basis, and are reevaluated every 3 years as part of the railroad retirement actuarial valuations. That is basically how the benefits are computed, and the various components. The CHAIRMAN. Now tell us about this bill and the need for it. Give us a little summary of your other statement. Mr. CowEN. The bill-the first section of the bill would keep certain benefits from being increased as a result of the 1974 amend |