citizens who are so inclined to participate more actively in the occupation of their choice. The present retirement test acts to curtail severely such activity by drastically cutting benefits when the yearly earnings limit of only $1,200 is exceeded. My proposal would allow substantial continuing benefits up until the level of $2,400 outside earnings a year, and would gradually rather than suddenly scale down the benefits for persons exceeding $2,400 in their yearly earnings. This would provide the needed incentive for the full life. In itself it constitutes a needed psychological boost for older people, who under the present law are pressed to close up shop and go home as soon as $1,200 is taken in. My measure would create an incentive among social security beneficiaries to work at all ranges of benefits and for all earnings levels up to $2,400. In addition, I believe that the lowest beneficiary amount per month should be upped from $33 to $40 and that aged widows' benefits should be increased from 75 to 85 percent of the husband's benefit amount. Many feel that this category of beneficiary is treated the most inequitably under the present law. Both changes would save money on public assistance. My bill would finance these improvements by increasing from $4,800 to $6,000 the maximum on earnings taxable and creditable toward benefits. Thus, social security tax rates are not increased, yet the suggested improvements are paid for in a sound and responsible manner. The whole package would help bring about a better balanced system with a financial base that more closely relates benefits to earnings, accommodating increased wages, which is the whole concept of the OASI program. I ask unanimous consent that a brief outline of my four-point measure may be included in the Record at this point in my remarks, followed by a factual analysis of each provision and a table of costs and savings. The PRESIDING OFFICER (Mr. Randolph in the chair). The bill will be received and appropriately referred; and, without objection, the outline, factual analysis and table will be printed in the Record. The bill (S. 3725) to amend title II of the Social Security Act and the Internal Revenue Code so as to increase the minimum insurance benefits payable under such title, to increase the amount of earnings upon which such benefits are based, to increase the amount of such benefits payable to widows, widowers, and parents, to increase the amount of earnings permitted without loss of benefits, and for other purposes, introduced by Mr. Saltonstall, was received, read twice by its title, and referred to the Committee on Finance. The outline, factual analysis, and table, presented by Mr. Saltonstall, are as follows: "BRIEF OUTLINE "1. Change the retirement test on limitation of outside earnings so that for persons with yearly earnings over $1,200, $1 in benefits are withheld for every $2 of earnings over $1,200 up to $2,400. For annual earnings over $2,400, $1 in benefits would be withheld for each $1 in earnings in excess of $2,400. "2. Raise the benefit for persons receiving the smallest minimum monthly amounts from $33 to $40. “3. Increase aged widows' benefit from 75 to 85 percent of the husband's benefit amount. "4. Increase from $4,800 to $6,000 the maximum on earnings taxable and creditable toward benefits. "FACTUAL ANALYSIS "I "A combination proposal: withhold $1 in benefits for each $2 of earnings in excess of $1,200 and up to $2,400, and withhold $1 in benefits for each $1 in earnings in excess of $2,400: The chief disadvantages of the 1-for-2 proposal are the increases in cost and the fact that some benefits would be paid to people at relatively high earnings levels. A way to reduce these disadvantages would be to modify the proposal by a provision that earnings above $2,400 a year would reduce benefits dollar for dollar. With this modification the man and wife getting the present maximum of $180 would get no benefits for the year at the point when the man's earnings reached $3,960 and the cost would be 0.08 percent of payroll rather than 0.11 percent. The proposal would furnish an incentive to work at all ranges of benefits, and for all earnings levels up to $2,400 and would guarantee against loss as a result of earning above that amount. And while it does not have the simplicity that is so attractive about the straight 1-for-2 proposal, it nevertheless, like the straight 1-for-2 proposal, would remove the incentive for the beneficiary to seek out jobs paying less than $1,200 and to restrict his work activity so as not to go above that amount. "Increase to $40 the minimum monthly amount payable to an old-age insurance beneficiary, a disability insurance beneficiary, and a sole survivor beneficiary. "An estimated 1.8 million beneficiaries would benefit from this increase in the minimum, effective January 1, 1961: 1.2 million old-age insurance beneficiaries. 200,000 wives, 250,000 widows and parents, and over 100,000 mothers and children. A very high proportion of those who receive assistance supplementation would be affected by this proposal. In some of these cases there would be some saving in public assistance funds; in others, funds would be made available to provide a more adequate total income for the family or otherwise meet needs that are not now met. "Generally it is undesirable to reduce the spread of benefits in a wage related system; however, the relatively small increase to $40 does not reduce the spread significantly. Moreover, if the increase in the minimum benefit were combined with an increase in the earnings base, so that the maximum as well as the minimum primary insurance amount were raised, the spread of benefits would not be reduced. "The cost is estimated at 0.04 percent of payroll. "III "Increase the aged widow's benefit from 75 percent to 85 percent of the primary insurance amount of the insured worker. (The proposal would apply also to the aged widower's benefit and to the single parent's benefit.) "Under present law a widow gets a benefit amounting to three-fourths of the primary insurance amount-that is. the amount her husband would have been paid if he had lived and qualified for benefits. There is no reason to suppose that an aged widow needs less to live on than her husband would have needed if she had died and he had lived. All beneficiary studies have shown that aged widows are generally the neediest group among the beneficiaries. "An increase in the widow's insurance benefit to 100 percent of the primary insurance amount could be justified. An increase of that magnitude would, however, be quite costly. An adjustment to 85 percent would be considerably less costly and would seem a reasonable step to be taken at this time. "If the widow's insurance benefit were increased to 85 percent of the primary insurance amount it could be expected that the need for supplementary old-age assistance payments to a substantial proportion of the widows who now get old-age assistance to supplement insurance benefits would be reduced. "The cost of the proposal is estimated to be 0.23 percent of payroll. “IV "Increase from $4,800 to $6,000 the maximum on earnings taxable and creditable under the old-age, survivors, and disability insurance program. "In the opinion of the Department (and this opinion is shared, at least in its general application, by the Advisory Council on Social Security Financing and by other study groups and experts who have considered the question) it is essential that the maximum on earnings taxable and creditable under the program be raised as earnings go up. "One of the essential characteristics of the old-age and survivors insurance program is that benefits are related to earnings. If the maximum on creditable earnings is not increased as wages rise, fewer and fewer workers will have their benefits in fact related to their earnings. Originally all of the wages of all but the very most highly paid workers were covered by the program so that the very great majority of the Nation's workers had their full earnings capacity insured. At present the program covers all of the earnings of only the lower paid half of the regularly employed men in the country. In the opinion of the Department, the principle of covering all the wages of the large majority of covered workers is a sound one. While it is not at all necessary to restore the original situation, under which all but 6 percent of regularly employed men had full coverage of their earnings, it does seem desirable that three-fourths or so of regularly employed male workers should have all their earnings taxed and credited toward their benefits. An increase to $6,000 would accomplish this objective. "Another important consideration about the earnings base is that failure to increase it as earnings go up means that a smaller and smaller proportion of payroll is available to serve as the financial base of the program. At present it is estimated that about 22 percent of total earnings in covered work is not taxable to finance the program. With an earnings base of $6,000 the percentage of earnings in covered work that would be nontaxable would be reduced to about 14 percent. "If the earnings base were increased it would, of course, be necessary to increase the maximum benefit payable in order that creditable wages above the present wage base will result in higher benefits. This increase in benefit amount, however, would be quite gradual. "In addition to being desirable in itself, the recommended increase in the earnings base would make it possible to adopt the other recommended changes (which would result in paying additional benefits) without increasing the tax rate that is required to finance the program. Because all of a worker's earnings (up to the earnings base) are subject to the same tax rate, but a higher percentage of his earnings is paid in benefits at lower earnings levels than at higher earnings levels, raising the earnings base increases the income to the system more than it increases the benefits payable. An increase in the earnings base to $6,000 would reduce the level-premium cost of the program by 0.4 percent of taxable payroll (0.38 percent for old-age and survivors insurance, and 0.02 percent for disability insurance.) “In summary, the recommended increase in the wage base to $6,000 would provide a sounder financial base for the program, would reinforce the relationship of benefits to wages, and would improve the protection afforded by the program for a great many people at moderate wage levels who will be retiring in the future; and it also would make possible, without an increase in the contribution rate, the other improvements that are recommended. Increase aged widows benefit from 75 percent to 85 percent of husband's benefit amount... Retirement test proposal. Increase from $4,800 to $6,000 the maximum on earnings taxable and creditable toward benefits.. Total... 4 34 3-.03 "The savings have been calculated only for the 1st year. It is very important to keep in mind that there will be much greater savings effects from the proposals in later years. It also should be noted that the general fund would save substantially over the years through a reduction in the cost of veterans' pensions. "2 The costs shown in this column for each of the individual proposals have been computed in such a way as to eliminate overlapping cost effects. For example, increasing the aged widow's benefit to 85 percent of her husband's benefit amount would cost less if the minimum benefit had already been increased to $40 than if it had not, since in the former case many widows would get 85 percent of the husband's benefit be cause of the $40 minimum, and would not get an increase when the widow's benefit went to 85 percent. This sort of offsetting or overlapping effect of the proposals has been taken into account and the costs computed in such a way as to make it possible to add them and get the true cost of the total package. Accordingly, it is not possible simply to pull out of the package any given proposal and say that by itself the proposal would increase the level-premium cost of the program by the amount shown, or that the level-premium cost of the package without the proposal would be decreased by the amount shown. "3 It will be noted that this figure is the savings in cost from the increase in the tax and benefit base. "4 This figure is the total saving to Federal, State, and local governments. (The Federal share would be about $20,000,000. This is calculated as approximately 60 percent of the total saving shown, since 60 percent is the approximate Federal share of all public assistance costs.) "ADDENDUM "It is worth noting, by way of overall fiscal perspective, that the OASI system is now underfinanced, actuarially speaking, by 0.20 percent of payroll. If the package described herein were adopted, it would result in reducing this imbalance to 0.17 percent of payroll." STATEMENT OF RAILWAY LABOR EXECUTIVES' ASSOCIATION IN SUPPORT OF HEALTH BENEFITS PROPOSAL TO AMEND H.R. 12580 TO INCLUDE MEDICAL INSURANCE BENEFITS IN TITLE II OF THE SOCIAL SECURITY ACT My name is G. E. Leighty and I submit this statement as chairman of Railway Labor Executives' Association. I am also president of the Order of Railroad Telegraphers, one of the organizations affiliated with Railway Labor Executives' Association. Railway Labor Executives' Association is an association composed of the chief executives of all the standard railway labor organizations. Together these organizations represent virtually all the railway employees in the country, The organizations affiliated with Railway Labor Executives' Association are the following: American Railway Supervisors' Association. American Train Dispatchers' Association. Brotherhood of Locomotive Engineers. Brotherhood of Locomotive Firemen & Enginemen. Brotherhood of Maintenance of Way Employees. Brotherhood of Railroad Trainmen. Brotherhood Railway Carmen of America. Brotherhood of Railway and Steamship Clerks, Freight Handlers, Express and Station Employees. Brotherhood of Sleeping Car Porters. Hotel & Restaurant Employees and Bartenders International Union. International Association of Machinists. International Brotherhood of Boilermakers, Iron Ship Builders, Blacksmiths, Forgers & Helpers. International Brotherhood of Electrical Workers. International Brotherhood of Firemen & Oilers. International Organization Masters, Mates and Pilots of America. Order of Railway Conductors & Brakemen. Railroad Yardmasters of America. Railway Employees' Department, AFL-CIO. Sheet Metal Workers' International Association. The Order of Railroad Telegraphers. As the committee well knows, railroad employees are covered with respect to their age and disability retirement and survivor benefits under the Railroad Retirement Act and are not covered by the old age, survivors, and disability insurance system set up under the Social Security Act. Consequently, railroad employees are not directly affected by the health benefits proposal to amend H.R. 12580 to include medical insurance benefits in title II of the Social Security Act. Under these circumstances the question may well be asked as to what interest railroad employees have in the proposal and this question should be answered at the outset. Our interest stems from a variety of sources: 1. Although we are primarily concerned with conditions directly affecting the employees we represent, as participants in the American labor movement we have an interest in the welfare of all Amreican workers. Standards of living and of well being do not isolate themselves by industries, and such standards when accepted or established for a substantial segment of the working population tend to become measures of the standards to be applied in other segments. 2. All but two of the organizations affiliated with Railway Labor Executives' Association are also affiliated with the AFL-CIO. The AFL-CIO is viogorously supporting the health benefits proposal and we feel that the committee should know that our association joins in that support. 3. Many of the organizations affiliated with Railway Labor Executives' Association represent to varying degrees employees in other industries who are covered by the OASDI system and who are directly affected by the proposal. In some of our organizations this is true of the great preponderance of the membership. 4. The organizations affiliated with Railway Labor Executives' Association and who represent nonoperating employees (nearly three-fourths of all railroad employees) have for some years been wrestling with the problem of making 58387-60-25 hospital, surgical, and medical insurance available to retired employees. We believe that our experience in this respect will be helpful to the committee in evaluating the various possible approaches to the problem. 5. As the ensuing discussion will show, the experience referred to in the preceding paragraph shows that we have not yet succeeded in finding an adequate solution to our problem. Consequently we had concluded that if the Forand bill, H.R. 4700, were given favorable consideration in the House we would seek to have the bill amended to include amendments to the Railroad Retirement Act so as to extend corresponding insurance benefits to beneficiaries under that act. Likewise, although we understand that we cannot ask this committee to consider amendments to the Railroad Retirement Act, it is our hope that if favorable consideration is given to the inclusion of medical insurance benefits in title II of the Social Security Act, as we urge, the same bill may be amended by the Senate to extend corresponding insurance benefits to Railroad Retire ment Act beneficiaries. We have examined the testimony presented to the House Ways and Means Committee on behalf of the AFL-CIO by Mr. Nelson H. Cruikshank and we feel that that testimony thoroughly, conscientiously, and objectively explores the issues involved and points most convincingly to the proper resolution of those issues. No purpose would be served in repeating or paraphrasing that discussion. We concur in it and believe that it demonstrates beyond question that medical insurance benefits should be included in title II of the Social Security Act. In 1954 the organizations representing nonoperating railroad employees negotiated through collective bargaining a nationwide plan for providing hospital, surgical, and medical protection for active employees. Under this plan, on roads where hospital associations were in existence the existing arrangements were adapted to provide the negotiated protection. With respect to the nonhospital association railroads a single national insurance policy was negotiated to provide specified benefits at specified premiums. Under this policy the Travelers Insurance Co. was the primary insurer and reinsured varying percentages of the risk with other qualifying companies desiring to participate. Initially this plan was applicable only to the protection of employees on a 50-50 contributory basis and separate arrangements had to be made to make insurance for dependents available on a voluntary basis at the expense of the employee. Subsequently, however, renegotiations have provided for the employee and dependents benefits to be on a noncontributory basis and the dependents benefits for hospital association roads and nonhospital association roads are now all included in the one insurance policy. The arrangements above summarized deal exclusively with active employees and their dependents. We have at least so far not been able, through collective bargaining, to negotiate for the continuation of any degree of employee or dependent protection after the retirement of the employee. This presented a most serious problem. Prior to the negotiation of the collective bargaining plan many railroad employees participated in individual or group insurance or benefit plans with varying arrangements for continuation or conversion after retire ment. In many instances such protection ceased to be available after the plan covering active employees went into effect. Even if the protection continued to be available an employee who wanted to protect his continuation or conversion privileges upon retirement would generally find it necessary to continue to carry the protection as an active employee, thus incurring the expense of unnecessary duplicate coverage while in active service. To meet this situation as best we could, the organizations negotiated a separate group policy providing benefits available on a voluntary individual premium payment basis for retired and furloughed employees and their dependents (and initially also for dependents of active employees prior to their coverage in the collectively bargained plan). The opportunity was thus made available to all employees covered by the collectively bargained plan while in active service to continue protection upon retirement, on a reduced benefit basis and at their own expense. Where hospital associations are in operation retired employees are generally permitted under varying arrangements to continue protection for themselves, though their dependents are generally not covered. In instances where retired employees on hospital association roads do not have continued hospital association protection available they are eligible upon retirement to be covered by the Travelers policy for both employee and dependents benefits and all employees on such roads are eligible to be covered by dependents benefits. |