Fighting for the best deal possible

Why the BLE hasn't signed on to the Railroad Retirement agreement

By Edward Dubroski

International President

Much has been said about the recent deal on Railroad Retirement announced by some unions and the National Carriers' Conference Committee (NCCC)... some of it is fact, and some of is fiction. You deserve to know why the BLE has not agreed to the deal, where we stand on the key issues, and how we proposed to move forward.

We are in a position to improve our retirement options in a way the industry has not seen in decades. The Tier II Trust Fund (the railroad industry's pension fund) contains more than six times the amount needed to pay benefits this year. According to Railroad Retirement Board projections - at current tax rates and with conservative employment and investment assumptions - Tier II will be overfunded by a whopping $13 billion by 2037, and an incredible $3 trillion by 2071! In fact, the Board's actuary believes that there is enough surplus in the fund to pay for increased benefits and tax cuts totalling $655 million per year by 2004.

How did the Fund get into this position? By the early 1980s, employment levels in the industry were collapsing, and the graying of the "baby boomers" threatened to bankrupt the system by the end of the century. Legislation was enacted in 1983 that was designed to save Railroad Retirement. The retirement age for a full annuity with 30 years' service was raised from 60 to 62, and the tax rates skyrocketed. The table below shows how the tax rates have increased, according to data published by the Railroad Retirement Board in its Annual Reports:

Year	"Employer Tax"	Employee Tax
1980	9.50%	0.00%
1981	11.75%	2.00%
1984	12.75%	2.75%
1985	13.75%	3.50%
1986	14.75%	4.25%
1989	16.10%	4.90%

In other words, over a 20-year span, the amount diverted from the present to the future rose from 9.5% to 21% of payroll. Almost one-quarter of that amount comes directly from our pockets, in the form of payroll deduction, and we pay the remainder indirectly, through the employer tax. Notice that I said that we pay the full 21%. When the NCCC gives data to the federal government, to Presidential Emergency Boards (PEBs) and to the press, the number it gives is termed "compensation" or "labor cost"... figures that include the value of health and welfare and a host of other benefits, and our retirement package - including the 16.1% "employer tax" the carriers pay.

So, who really pays the bills? The employee tax is easy to figure out; that's money off the top of our checks each pay period. The "employer" tax? If you worked in the railroad industry in the 1980s, you don't need to be reminded of the paltry wage agreements we ate; we're still trying to recover from the concessionary 80s. A major reason those wage settlements were so bad is the fact that the deferred compensation portion (Tier II) of our package grew in size, relative to the current (wage) portion. Something similar happened when PEB 219 recommended incredibly low general wage increases in the early 1990s, because it overestimated the impact of medical inflation on the benefits portion of our overall package. In simpler terms, money that otherwise would have been available for general wage increases had to be diverted in order to save our pension fund; and it wasn't there to put into our pay check.

So, the question is what to do with our annual surplus of $655 million. Historically, Railroad Retirement has not been changed unless there is consensus among labor and management. That means that every one agrees to the change; that also means that the carriers must be treated fairly in dividing up the surplus. But the deal moving toward Capitol Hill was not arrived at by consensus. Worse still, our position is being deliberately misrepresented by some, who seek to take advantage of our preference to resolve this dispute without pointing fingers. These are the facts:

• The BLE is not opposed to 60/30. We do not support stopping at 60/30, when that means giving the carriers $347 million of the $655 million annual surplus.
• The BLE is not trying to kill the proposal. We have been denied participation in the process since late last year. The carriers have refused to discuss our issues and concerns. Every union has the right to bargain for its own members; this right has been denied to us, as a non-consensus deal is being pushed that would change statutory and contractual rights for our members without our consent. We want to be part of a deal we can support.
• The BLE is not holding up much needed relief for widows and widowers. We proposed separating the issue of surviving spouses and legislating immediate relief, because there is no disagreement on this issue. The NCCC would rather hold surviving spouses hostage to drive its 60/30 deal.

According to the NCCC's and Railroad Retirement Board's own figures, an opportunity to substantially improve benefits is unlikely to arise for at least another generation or two, and maybe much longer, because of the tax rate "ratchet" that is part of the proposal. This means that we have one chance - and one chance only - to get it right.

The Railroad Retirement Board has yet to pass judgment on the numbers that will make up the ratchet, and we simply cannot take a position on it until they do. You should know, however, that it is a mechanism designed to adjust tax rates and benefit levels to keep the Tier II Fund balance between four and six times what is needed to pay benefits in any given year. The Fund gets low, taxes go up (or benefits are reduced); the Fund gets high, taxes go down (or benefits are increased).

Under the terms of the announced proposal, it requires a 6.5% surplus just to restore benefits to the 1983 level. Is it realistic to assume that a large enough surplus will accumulate in the future to substantially reduce retirement age further, when there will be a mechanism designed to cut tax rates to prevent an excessive surplus? That's why we have to be absolutely sure we are getting the best deal we can get... and I'm not there, yet!

An actuary we hired is overdue to present us with a preliminary report, which will serve as the basis for further consideration. This work has been held up, in part, because the Railroad Retirement Board data to do precise costing calculations have not been supplied. However, I met with Railroad Retirement Board Labor Member Butch Speakman on February 8, and he committed to me that the Board's actuary will provide the additional calculations that we are seeking in order to further evaluate our options.

Since 1989, 33 BLE members lost the ability to retire at any age, because they perished in accidents. Working hours and conditions have become so intolerable over that period that we are forced to turn to Congress for a day off. The requirements of the job are tremendously stressful, and locomotive engineers wear down quickly. That's why we need Railroad Retirement reform that is tailored to the needs of our membership, just as the Presidents of all the other unions want reform that is tailored to the needs of their memberships.

Those various needs have traditionally been met by the Congress enacting Railroad Retirement reform only when consensus has been reached among labor and management. Consensus is not beyond our grasp, and I believe that we will get there. Maybe the carriers need a little push, and maybe Congress will have to deliver that push.

We can still do the surviving spouse fix right now, or we can roll up our sleeves and get down to business. The NCCC knows I'm ready to work, and so do the other Rail Labor Chiefs... and when the disinformation crowd approaches you on the job, tell them that you know all the facts, too. ·

© 2000 Brotherhood of Locomotive Engineers