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Mr. LATIMER. It will be due, I think, on the 31st of July. But at that time there will be 6 full months due, so that it is expected that $65,000,000 will be received on the 31st of July rather than $32,500,000.

Mr. WOODRUM. And the amount for administrative expenses for 1938 provided for in the independent office appropriation bill is sufficient to carry you through the year, so far as you know?

Mr. LATIMER. That is difficult to say. There were several changes in the Retirement Act, as it was passed which will add to the administrative expense that was contemplated at the time our last budget was presented. Among other things there was added to the previous coverage of the bill the local lodges and divisions of the national labor organizations. There are about 20,000 of those, which means that for a relatively small coverage there was added to our contact work with the employers about 20 times the amount of our previous contact work. That may involve some additional expense.

Mr. WOODRUM. Will you put in the record a brief statement showing a comparison of the Railroad Retirement Act as recently passed with the act as it was before?

Mr. LATIMER. With special emphasis on the administrative expenses?

Mr. LATIMER. Yes, sir; I will be glad to put that in the record.
(The statement above referred to is as follows:)



There are a number of changes affected in the railroad retirement system by the Railroad Retirement Act of 1937. Some of these changes will add to the immediate administrative burden of the Railroad Retirement Board, while others will reduce the volume of work or simplify the processes. But while the total tasks of the Board will, in the long run, be made lighter, the accomplishment of this end requires the performance of certain new functions at the beginning, so that the immediate effect of the changes is to increase the work of the Board as compared with what has hitherto been contemplated.

For convenience, the description of the changes have been divided into four parts: (1) The increase in the coverage of employers and employees; (2) changes in requirements for the receipt of benefits; (3) records; (4) other changes.

1. Increase in coverage of employers and employees.—(a) The Railroad Retirement Act of 1937 includes as employers railroad labor organizations, national in scope, organized in accordance with the provisions of the Railway Labor Act, their State and national legislative committees, their general committees, insurance departments, and local lodges and divisions organized pursuant to the constitution and by-laws of such organizations. The subordinate units of the national organizations are each separate employers under the act. The number of such subordinate units may run to some 20,000. It will be necessary for every employer to maintain a reporting relationship to the Board. Apart from this group of employers, the total number of other employers will probably not exceed 2,000. The previous act did not include as employers either the labor organizations or any of their subdivisions.

(b) The new act will include as employees persons employed by American railroads wherever they may be. Specifically, this brings within the coverage of the act several thousand such employees in Canada with respect to whom periodic reports will be required, adding to the volume of work of the Board.

(c) Under the present act, employees include, among others, persons who were on furlough or leave of absence, subject to call for service and ready and willing to serve. Many railroad employees, most of them old, comply with all parts of this definition, except that because of permanent and total physical disability, they are not now and never will be ready to serve. The 1937 act qualifies such persons as employees. No exact count of the numbers of such persons is available, but probably from six to eight thousand become qualified for immediate

annuities with the passage of the act and thus constitute a load on our claim service which did not hitherto exist.

2. Certain requirements for the receipt of benefits have been changed in such a way as to increase the volume of work to be performed by the Board.-(a) Under the 1935 act, in addition to age and service qualification, the only additional requirement was that a person be retired from the railroad industry. Under the 1937 act, in addition to retiring from the railroad industry, a person must also cease such compensated employment as he may have at the time the annuity begins to accrue; and annuity will cease in any month during which a person returns to such employment. This change, while reducing benefit expenditures, will require the creation of additional administrative machinery for enforcement.

(b) Under the 1935 act emplovees under the normal retirement age, having more than 30 years of service, may qualify for full annuity if they have been retired by a carrier, after the date of enactment, by reason of mental or physical disability. Under the 1937 act such persons may qualify for full annuity only if they are permanently and totally disabled for regular employment for hire. This change, also, will reduce payments for benefits but will place upon the Board the duty of the initial determination of the existence of a disability of the specified character. This will involve, in each case, a detailed medical examination and perhaps, in border-line cases and in cases of dispute, additional special examinations. Moreover, continuation of the annuity until age 65 is contingent upon the continuation of the disability of self, involving periodic medical examination. In order to meet the duties under the act, the Board will require a disability rating board in Washington, and will need the services of physicians, presumably on a part-time fee basis in most other parts of the country. Arrangements can be made for such examinations by physicians and surgeons attached to other governmental agencies, but this will involve a cost to this Board.

(c) In addition to the provisions in the present act, the new act makes eligible for annuity, employees who are 60 years of age or over and who are totally and permanently disabled for regular employment for hire. The medical procedure referred to in the preceding paragraph will be required here also.

(d) Under the present act, employees are eligible for annuity on a reduced basis upon the completion of 30 years of service and the attainment of age 50 and 1 month. Annuities are now available under reduced basis after 30 years of service, only if employees attain the age of 60. This will reduce the immediate annuity load only slightly because, since the reductions in the annuities have been rather large for ages under 60, there has been relatively slight incentive to retire.

(e) Under the new act a new benefit will be payable in respect to every employee who receives wages after January 1, 1937, and who dies before his annuity begins, or after the annuity begins if the total amount of annuity paid is less than the amount of death benefit at the time of retirement. Under the 1935 act the number of deaths for which benefits would be payable would not exceed 2,000 per annum for the next year or two. Under the new act the number of such deaths will approximate 15,000. In addition, during the next year there will probably be about 1,000 death cases to be adjudicated under the 1935 act. In connection with the new death benefit the act gives employees the privilege of nominating a beneficiary. The Board must therefore make arrangements to give to each of the million and a half employees, as soon as possible, the opportunity of making such a designation. This will be a considerable task during the next year, but it will mean considerable savings in the long run.

(j) Under the 1935 act employees may elect, at the time of making application for annuity, to receive a lower annuity for themselves and provide an annuity for & surviving spouse, following their own death. Under the new act elections of this character must be made before January 1, 1938, or 5 years prior to retirement, unless proof of health of the employee, satisfactory to the Board is produced. In order to enable employees to safeguard their rights, the Board must give to some 150,000 employees the opportunity to make an election before January 1, 1938. While this again involves an increased immediate burden, it will produce a considerable saving by the elimination of adverse selection.

(9) The 1937 act provides for the payment, to persons on the pension or gratuity rolls of employers by reason of their employment, of pensions hitherto paid by such employers. The bulk of the work required for this transfer has been accomplished in the 1937 fiscal year. Because of the short time intervening between the passage of the new act and July 1, 1937, when the first payments will be made, it will be necessary to review and check a number of tentative

decisions which were made. The task of setting up final and permanent records for some 40,000 such pensions must also be done in the fiscal year 1938.

(h) The new act provides for a minimum annuity to be calculated in such a manner as to make somewhat more complex the process of adjudication.

3. Records to be compiled.-(a) Under the 1933 act, wage records for March 1, 1936, were to be a factor in the determination of annuities. Under the new act, the current record collection needs to begin only with January 1, 1937. While this will reduce the work of the Board somewhat, such reduction will be more theoretical than real for the immediate future. Appropriations hitherto made, were not sufficient to make possible the compilation of current wage records. The budget for the 1938 fiscal year presupposed that costs would be incurred only in respect of records for that year. The beginning of the fiscal year finds the Board faced with the necessity of collecting and compiling records for the 6 months preceding the beginning of the year. The 1938 budget also presupposed the purchase of all the equipment required to set up wage records and the meeting of all expenses involved in the assignment to count the number of railroad employees. Appropriations hitherto available did not permit the Board to meet either of these items of expense.

(6) Under the agreement between the railroad labor organizations and managements which underlies the 1937 act, employers will furnish most of the information required to adjudicate claims. For some time, however, it will be necessary for the Board to maintain a field staff to familiarize employers with the reporting requirements and to examine reports before they are forwarded to Washington. This task, when added to that of securing beneficiary designations and optional annuity elections, means that there will be no immediate reduction in the work of the Board, but rather an increase over that contemplated in the 1938 Budget.

4. Other changes bearing on administrative expenses.---(a) The 1935 act authorized the appropriation of amounts necessary to carry out the terms of the act. This has been interpreted to mean that there would be appropriated in each year, for annuity payments, only the amounts required to make such payments currently. The 1937 act creates an account to which premiums on an actuarial basis will be appropriated, thus providing a reserve. While the estimate of current payments requires considerable amount of actuarial work, the calculation of premiums will be in more complex operation and a somewhat larger staff will be required. An actuarial advisory committee is also created, two members of which will receive compensation from the Board.

(6) The act provides that returns of employee compensation made with the Board should be under oath, and shall be conclusive as to amount of compensation to the employee, unless errors are called to the attention of the Board within 4 years after the returns are required to be made. In order to protect employees against error, it will be necessary to transmit annual statements to them as to amount of compensation recorded by the Board. This provision will, like certain others, undoubtedly produce savings over a period of time, by reducing the number of disputed claims, but it will entail an immediate increase in expenses of operation.

(c) The act of 1937 removes certain penalties for remaining in service after the age of 70, or unless a continued-service agreement was filed after the age of 65. Removal of these penalties will probably result in an advance in the average age of retirement and over the next several years, a reduction in the total number of annuity claims to be adjudicated. Some decrease may be anticipated for the next fiscal year, but probably not more than enough to offset the claims of persons who will qualify for annuity under the new act, but who could not so qualify under the 1935 act.

(d) Under the 1935 act it has been necessary to determine the precise date on which each carrier became subject to the Interstate Commerce Act and whether or not it was continuously subject thereafter. In the future, in respect to companies who were carriers on enactment date, such determinations will not be necessary. However, the large increase in the number of employers will more than offset any saving in this item.

(Note.---The following testimony held in connection with, and the appropriation discussed herein carried in, H. J. Res. 433 (Public Res. 50.)

MONDAY, JUNE 28, 1937.





Mr. WOODRUM. We have before us in House Document No. 276 an estimate from the Bureau of the Budget for the expenses of the Civilian Conservation Corps for the fiscal year 1938, amounting to $350,000,000.

Mr. McEntee, we will be glad to have your statement in regard to this estimate.

Mr. McENTEE. If I may, I will make a general statement on this estimate, and will then be glad to answer any questions the committee may desire to ask.

Of this amount of $350,000,000 requested, $306,000 is for the Office of the Director. That is $111,000 more than the amount used in 1937. The reason for that increase is that the new bill places considerably more responsibility on the Director's Office, necessitating a larger personnel.

Mr. Bacon. Briefly, what are those new duties imposed by the new act?

Mr. McENTEE. I will come to that. This increase for the director's office is more apparent than real, because some of this personnel will undoubtedly be transferred from other departments. However, the new act places considerable responsibility on the director, which will necessitate the employment of some additional engineers, some technicians, and so forth.

Mr. BACON. Briefly, what are the new and additional responsibilities placed on the Director?

Mr. McENTEE, Formerly, the Director was simply responsible for coordinating the operations of the corps, and the Executive orders operated to place some of the responsibility on various other agencies. This new act places the responsibility entirely upon the Director.

. Mr. Woodrum. Right at this point in your testimony, will you give us that provision of the law.

Mr. McENTEE. The new law provides that The Director shall have complete and final authority in the functioning of the Corps, including the allotment of funds to cooperating Federal Departments and agencies, subject to such rules and regulations as may be prescribed by the President in accordance with the provisions of this Act.


Mr. WOODRUM When you come to revise your testimony, insert in the record at this point å statement showing the principal points of difference between the new act and the existing law. I do not want you to put in the entire new act, but just insert a brief statement showing what changes were made in the old law, and showing how those changes affect the organization and the expense of it.

Mr. McENTEE. I will be glad to do that. (The statement requested is as follows:)




PROVISIONS OF ACT OF MARCH 31, 1933 Section 1: Establishes the Civilian For the purpose of relieving distress Conservation Corps for the purpose of and unemployment, and in order to providing employment and vocational provide for the restoration of the countraining for youthful citizens who are try's depleted natural resources and the unemployed and in need of employ- advancement of a program of useful ment, also for war veterans and Indians, public works, authorizes the President through the performance of useful pub- to provide for employing citizens who lic work in connection with the con- are unemployed in the construction, servation and development of the maintenance, and carrying on of works natural resources of the United States, of a public nature. its Territories and insular possessions. Permits general educational and vocational training. Limits life of corps to 3 years after July 1, 1937.

Section 2: Authorizes the President, by and with the advice and consent of the Senate, to appoint a Director at a salary of $10,000 per annum, and who is vested with complete and final authority in the functioning of the corps, including allotment of funds to cooperating Federal departments and agencies, subject to such rules and regulations as may be prescribed by the President, in accordance with the provisions of this act.

Section 3: Authorizes Director to pro- Authorizes the construction, maintevide for the employment of the corps nance, and carrying on of works of a and facilities on works of public interest public nature in connection with the or utility for the protection, restoration, forestation of lands belonging to the regeneration, improvement, develop- United States or to the several States ment, utilization, maintenance, or enjoy- which are suitable for timber producment of the natural resources of lands tion, the prevention of forest fires, and waters and their products, includ- floods and soil erosion, plant pest and ing, forests. fish, and wildlife on lands disease control, the construction, mainor interests in lands (including historical tenance, or repair of paths, trails, or archeological sites) belonging to or and fire lanes in the national parks under the jurisdiction or control of the and national forests, and such other United States, its Territories and work on the public domain, National insular possessions, and the several and State, and Government reservaStates:

tions incidental to or necessary in connection with any projects of the character enumerated, as the President may determine to be desirable.

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