October 21, 1988
To the Congress of the United States:
I hereby submit to the Congress the Annual Report of the Railroad Retirement Board for Fiscal Year 1987, pursuant to the provisions of Section 7(b)(6) of the Railroad Retirement Act, enacted October 16, 1974, and Section 12(1) of the Railroad Unemployment Insurance Act, enacted June 25, 1938.
The Annual Report, which includes a recent actuarial valuation, indicates an improved financial outlook for the rail pension fund, due in part to a 2 percentage point increase in the rail sector contribution rate. The Congress enacted this increase based on an Administration proposal and a recommendation by the Railroad Retirement Board's Chief Actuary. I hope we can continue to work together in the future to protect rail pensioners' benefits.
The Congress also enacted a $370 million taxpayer subsidy for the rail pension fund at the urging of rail sector representatives. Since 1983, over $3.5 billion of Federal funds have been given to the rail pension fund. It is time to put an end to this tap on the taxpayer. Under current law, the subsidy will expire in 1989. I urge the Congress to hold the rail industry to its pledge to fund rail pensions fully without Federal taxpayer support by allowing this subsidy to expire at that time.
The Congress has also asked for a study by a panel of rail sector representatives and independent experts regarding rail pension reform proposals. I urge the panelists, including the rail sector representatives, to adhere to the Congress's wish, as expressed in the charter and in the report language, that the Commission focus on putting rail pensions on a sound long-term track financed solely from rail sector resources and not on palliatives involving new taxpayer subsidies.
The best approach to rail pension reform is to restore the rail pension system to the private sector, where all other private pension plans reside. The Administration recently transmitted to the Congress the Rail Industry Pension Restoration Act of 1988, which would restore control over rail pensions to rail labor and management. The bill would allow labor and management to collectively bargain their pension plan free from inappropriate Federal intrusion. Current retirees' pensions and the earned benefits of current workers would be protected. Over time, rail pensions would be fully funded in advance of retirement like other industry pension plans.
I urge the Congress and the reform commission to consider our privatization proposal, which is a strong first step toward long-term stability for rail pensions.
Ronald Reagan
The White House,
October 21, 1988.