September 6, 2010
CHICAGO (Sept. 6)—Even on Labor Day, most of the nation’s media missed one of the biggest stories of the year: 2010 marks the 75th anniversary of the Railroad Retirement System, arguably the most successful pension plan for working people in the nation’s history.
Signed into law by President Franklin D. Roosevelt on August 29, 1935, the Act capped a series of efforts to reform and refinance a series of privately funded railroad retirement plans that had been financially battered by the investment losses of the Great Depression.
On paper, more than three fourths of the nation’s railroad employees were enrolled in a company-sponsored pension plan by 1925.
But 10 years later, with the stock market retaining only a fraction of its 1925 value and the nation struggling with the Great Depression, the securities backing up the railroad pensions had lost so much of their value that railroad workers could not afford to retire. Old workers clung to their jobs, leaving no slots for new hires.
New legislation was enacted in 1934, 1935 and 1937 to supplement the partially dissipated private funds with new federal funds that would enable some of the older employees to retire. The legislation also established the Railroad Retirement Board to administer moneys deposited in the fund from both the federal advance and from employee and industry contributions.
Eleven months after passage of the 1935 Act, the Railroad Retirement Board issued its first annuity checks, allowing older railroaders to start retiring. Amendments to the original Act increased benefits, added survivor benefits and enabled the Railroad Retirement system to receive some of its funding from the Social Security Administration.
During the steep inflation and recessions that occurred in the 1970s, Congress had to revisit the Railroad Retirement Act, and the railroad industry joined with the federal government to buttress its finances so that employees could continue to retire with full benefits. A study commissioned by Congress identified new funding mechanisms that promised to strengthen the system’s finances, and with the cooperation of Congress and the railroad industry reforms were implemented that put the system on a firm financial footing.
Three decades after those reforms took effect, the Railroad Retirement system had become strong enough to support a series of benefit increases set forth in the 2001 Railroad Retirement and Survivors’ Improvement Act. Early-retirement benefits were liberalized for employees with 30 years of service and for their spouses, and a cap on monthly retirement and disability benefits was lifted.
The legislation also created the National Railroad Retirement Investment Trust, which invests Railroad Retirement payments for the best balance between safety and rate of return.
“If you talk to almost any financial or insurance analyst you will learn that the Railroad Retirement System is considered to be among the financially strongest and best-administered pension plans in America,” said UTU Illinois Legislative Director Robert W. Guy.
“And rail labor has been there every step of the way.” Guy said. “From the system’s inception through all of the changes that have impacted the railroad industry and the national economy, the railroad unions have provided a strong voice to protect the benefits of their members, and their families. Day in and day out, Railroad Retirement continues to provide a system that rewards a lifetime of work with a dignified retirement.
“It’s really a shame that more American workers are not covered by a Railroad Retirement-type plan,” Guy said. “Railroad Retirement has survived wars, depressions, recessions and the collapse of much of the U.S. railroad industry prior to deregulation in 1980, and it’s still going strong, providing railroad employees with a secure retirement of the type that’s almost disappeared from the American scene.”