December 6, 2001
Railroads plan retirement reform
Update of 1930s system lowers age, lets pension pool play stock market
By CHRIS NEWMARKER
Copley News Service
with Associated Press reports
WASHINGTON, D.C. - Thanks to the U.S. Senate, 60-year-old Floyd
Snodgrass of Peoria is closer to spending days playing golf and carving wood
than working as an engineer at the TP&W Railway.
The Senate voted 90-9 Wednesday to pass an overhaul of the railroad
retirement system that allows workers with at least 30 years to retire with
full benefits at age 60 rather than 62.
"It's been a good life, but you're gone all the time. That's the biggest thing,"
said Snodgrass, a railroad worker for 36 years.
If enacted into law, changes in the railroad pension system also would allow
$15.6 billion in surplus retirement funds to be invested in the stock market;
guarantee benefits after five years of work instead of 10; and provide full
benefits to surviving spouses.
More than 1,000 railroad workers in central Illinois would gain from the
"Once they hit 50 years (old), they're working with pain every day. It takes a
toll on them," said Ed Cavanaugh of United Transport Union workers at the
Peoria & Pekin Union Railway. "If this bill becomes law, it's going to raise the quality of life for these guys."
Sen. Peter Fitzgerald, R-Ill., was among a small group of senators, led by
Minority Whip Don Nickles, R-Okla., and Sen. Phil Gramm, R-Texas, who tried to amend the bill Tuesday. But their attempts were repeatedly voted down.
Both Fitzgerald and Sen. Dick Durbin, D-Ill., voted to pass the bill
Because the Senate version is slightly different than a House bill that passed
384-33 in July, the bill now returns to the House for a final vote, expected
President Bush has not taken a position, but Senate Majority Leader Tom
Daschle, D-S.D., said he expects the president to sign it into law, adding
that there are easily enough votes to override a veto.
The most contentious element of the bill involves creation of a board of
trustees that would, for the first time, invest surplus retirement funds in
private securities, such as stocks.
Rail retirement benefits are paid under a 1930s-era program older than Social Security. As with Social Security, which railroad workers don't receive, taxes paid by the more than 250,000 railroad workers in the system are matched with taxes paid by the companies. Excess funds currently are invested in low-interest-earning U.S. Treasury bonds. The legislation allows moving a portion if that fund - $15.6 billion - into private markets.
Railroad management and labor support the bill because increased returns
from stock investments would allow the companies to pay lower taxes and
the workers to receive expanded benefits.
To sweeten the deal, large railroad companies have even agreed in union
contracts to offer their retirees health insurance - a benefit the bill would
not add to the program.
"The men are looking forward to an earlier retirement than once thought. And
it's time for a newer set of guys to come in," said Randy Brandt, general
chairman of United Transport Union workers at the TP&W in East Peoria.
Critics have said the measure will increase the federal deficit and put
taxpayer dollars at risk in the stock market.
But Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee,
said the budget concerns involved only technical accounting rules because
the $15.6 billion in the fund was paid in just by railroad workers and retirees,
not all taxpayers.
"This legislation provides for many safeguards," he said. "As a practical
matter, this has no effect on the budget."