To the Congress of the United States:

I hereby submit to the Congress the Annual Report of the Railroad Retirement Board for Fiscal Year 1990, pursuant to the provisions of section 7(b)(6) of the Railroad Retirement Act, and section 12(l) of the Railroad Unemployment Insurance Act.

The Railroad Retirement Board (RRB) serves nearly 900,000 railroad retirees and their families and almost 280,000 railroad employees who rely on the system for retirement, unemployment, disability, and sickness insurance benefits. Beneficiaries depend on the financial integrity of the pension funds for payment of their benefits.

This report includes the RRB’s 18th actuarial valuation of the railroad retirement program’s assets and liabilities. The valuation concluded that, barring a sudden, unanticipated, large drop in railroad employment, the railroad retirement system will experience no cash-flow problems for at least 20 years. The long-term stability of the system, however, remains questionable, and under the current financing structure, actual levels of rail employment in the coming years will determine whether additional corrective action is necessary.

The Railroad Retirement Reform Commission, created by the Congress to give the rail sector a chance to address the financial instability of the rail pension, issued its report in September of 1990. I strongly oppose the report’s recommendation to renew the diversion of Federal income taxes to the rail pension. Since 1983, approximately .5 billion in such taxpayers subsidies have been given to the rail pension fund. Railroad pension benefits should be financed solely by rail sector resources, and I will continue to oppose any additional general revenue funding measures for the railroad retirement system.

Other Commission recommendations such as privatization hold promise as equitable reforms to the system; rules protecting private pensions (ERISA) should also apply to the railroad’s private pension system.

The Commission adopted a proposal contained in the Administration’s FY 1992 budget to extend benefits to all rail sector beneficiaries, such as widows and divorced spouses. These individuals would have been eligible for benefits under Social Security but are denied equivalent benefits by the rail system. Conforming rail social security and Social Security would make the rail pension benefit structure more equitable. This Administration has a strong belief in just governance and supports such a measure that would conform benefit eligibility under the Railroad Retirement Act with the Social Security Act.

The Office of Management and Budget (OMB) was concerned with the overall management of RRB programs and engaged in a thorough management review of its operations. As a result of this review, an agreement was reached between OMB and RRB that included a 5-year management plan outlining the specific improvements and resources necessary to achieve much needed reforms at the RRB. Both OMB and RRB are committed to many substantial reforms, and the RRB leadership is demonstrating a new and progressive approach to addressing inefficiencies, debt collection, and automation modernization. I commend the Board for its efforts and urge the Congress to support appropriations for these measures to enhance RRB efficiency, eliminate material weaknesses, and to protect the integrity of the trust funds. The RRB Inspector General’s Office also deserves praise for its diligence in monitoring and enforcing industry compliance with the pension contribution statutes. Such efforts help to preserve the integrity of the rail pension funds, on which rail employees and retirees depend.

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