The information on this page was provided to
the RRB by the National Railroad Retirement Investment Trust
What is the National Railroad Retirement Investment Trust?
The National Railroad Retirement Investment Trust (NRRIT, or "the Trust") was
established by the Railroad Retirement and Survivors' Improvement Act of 2001
(the "Act"). The sole purpose of the Trust is to manage and invest Railroad
Retirement assets. The Trust is a tax-exempt entity independent from the federal
government. It is domiciled in and subject to the laws of the District of
When did the Trust begin operations?
As provided for in the Act, the Trust began its work on February 1, 2002.
What authority does the Trust have?
The Act authorizes the Trust to invest the assets of the Railroad Retirement
Account in a diversified investment portfolio in the same manner as those of
private sector retirement plans. Prior to the Act, investment of Railroad
Retirement Account assets was limited to U.S. government securities. In
addition, to carry out its mandate, the Trust's Board of Trustees ("Board") is
authorized to make rules to govern its operations, to employ professional staff,
and to contract with outside advisors to provide legal, accounting, investment
advisory or other services necessary for the proper administration of the Trust.
Administrative expenses of the Trust are paid out of Trust assets.
What is the relationship between the Railroad Retirement Board ("RRB") and the
The Trust and the RRB are separate entities. The RRB remains a federal agency
and continues to have full responsibility for administering the railroad
retirement program, including eligibility determinations and the calculation of
beneficiary payments. The Trust has no powers or authority over the
administration of benefits under Railroad Retirement. Under the Act, the Trust
is required to act solely in the interest of the RRB, and through it, the
participants and beneficiaries of the programs funded under the Railroad
Retirement Act. The Act does not delegate any authority to the RRB with respect
to day-to-day activities of the Trust, but the Act does provide that the RRB may
bring a civil action to enjoin any act or practice of the Trust that violates
the provisions of the Act or to enforce any provision of the Act.
How is the Trust's Board of Trustees chosen?
The Board is comprised of seven Trustees, three selected by railroad
labor unions and three by railroad companies. The seventh Trustee is an
independent Trustee selected by the other six Trustees.
The Trustees' terms are for three years and are staggered. The Act provides
that on the initial Board, one each of the Labor and Management members would be
selected for three year terms, one each for two year terms, and one each for a
one year term. Thereafter, all terms are three years. The independent Trustee's
initial and succeeding terms are three years.
Who are the Current Trustees?
As of February 1, 2012, The Trustees selected by the rail labor unions are:
George Francisco, Jr., President Emeritus, National Conference of Firemen and
Oilers - SEIU; Joel Parker, Special Assistant to the President and International
Vice President, Transportation Communications Union (TCU/IAM); and William C.
Walpert, National Secretary-Treasurer, Brotherhood of Locomotive Engineers and
The Trustees selected by the railroad carriers are: Mary S. Jones, Vice
President and Treasurer, Union Pacific Corporation; Richard G. Patsy, Assistant
Vice President Pensions & Investments, CSX Corporation; and C. Alec Vincent,
Assistant Vice President Finance and Treasurer, Burlington Northern Santa Fe
The Independent Trustee is William F. Quinn, chairman and founder of American
What obligations do the Trustees' have?
Under the Act, the Trustees are required to discharge their duties solely in the
interest of the RRB, and through it, the participants and beneficiaries of the
programs funded under the Railroad Retirement Act. The Trustees are subject to
fiduciary rules similar to those required by ERISA (the Employee Retirement
Income Security Act).
Is the Trust required to make any reports?
Yes. Under the Act, the financial statements of the Trust are required to be
audited annually by an independent public accountant. In addition, the Trust
must submit an annual management report to Congress on its operations, including
a statement of financial position, statement of cash flows, a statement on
internal accounting and administrative control systems, the independent
auditor's report, and any other information necessary to inform Congress about
the operations and financial condition of the Trust. A copy of the annual report
must also be submitted to the President, the RRB, and the Director of the Office
of Management and Budget.
These reports are posted on the RRB's web page as they are
What part of the Railroad Retirement program's assets is the Trust responsible
The Trust is responsible for investing assets transferred to it from the
Railroad Retirement Account ("RRA"). The RRA funds Railroad Retirement tier 2
benefits (which are similar to a private pension plan) and certain aspects of
tier 1 benefits (which generally are like Social Security) that exceed Social
Security levels. An example of such a benefit is early retirement. The
additional cost of retiring at age 60 instead of the normal tier 1/Social
Security retirement age (currently transitioning from age 65 to 67) is paid from
funds managed by the Trust. The Trust is also responsible for investing assets
transferred to it from the Social Security Equivalent Benefit ("SSEB") Account.
Investment of SSEB Account funds is limited by the Act to U.S. government
Would an extended stock market decline affect the ability of Railroad Retirement
to pay benefits?
Railroad Retirement benefits are a federal entitlement protected by statute. In
addition, the Act relies upon a combination of features to ensure that the
Railroad Retirement Board would be able to meet its obligation to fund benefits
to railroad retirees and their families:
Fund Reserves: The
Act is designed to maintain four to six years' worth of benefits in reserve to
ensure a significant safety margin. (Over most of the 40 years prior to the
Act, the reserve in the RRA had been less than four years.)
Automatic Tax Adjustment:
The tier 2 tax rate on employers and employees is adjusted automatically
pursuant to a statutory schedule that is designed to maintain a fund balance
sufficient to pay between four and six years of benefits. If any tax increases
are necessary, they would be borne primarily by rail employers. The rate for
employees would never rise above 4.9 percent, the employee rate prior to
passage of the Act. Because the tax rate
is adjusted by formula rather than requiring congressional action, timely and
effective tax adjustments are taken in the event of a period of
lower-than-expected investment returns.
The Trust manages Railroad Retirement assets in the same way as private
pension funds, providing the opportunity to earn a higher rate of return in a
diversified portfolio than the six percent annual return that had been
projected for the RRA. Higher investment returns would provide additional
resources to fund benefit payments.
This combination of measures -- ample reserves, automatic tax
adjustments to maintain the level of resources, and improved asset management --
strengthens the ability of Railroad Retirement to continue to meet its benefit
obligations to both current and future retirees.
How does the Trust make decisions on the Investment of Railroad Retirement System Assets
Pursuant to the Act, the Trustees have adopted Investment Guidelines that
address such issues as the diversification of Trust assets into broad asset
classes, such as domestic and international equity, private equity, and
investment grade and high yield bonds. The Guidelines set out the criteria for
investments made by the Trust and are regularly updated to ensure that they are
responsive to the ever-changing investment environment. These Guidelines are
implemented by the Trust's professional staff and outside investment managers
who may be retained by the Trust. Investment performances are rigorously
monitored by the trust's Chief Investment Officer and staff and are subject to
regular oversight by the Board of Trustees.
How does the Trust use
outside investment managers and advisors?
The Act authorizes the Trust to diversify the investment of the assets of the
Railroad Retirement system into asset classes in a manner similar to defined
benefit plans of other U.S. industries. The Act directs the Board of Trustees to
retain (1) independent advisers to assist them in the formulation and adoption
of investment guidelines, and (ii) independent investment managers to invest the
assets of the Trust in a manner consistent with the investment guidelines. Under
the Investment Guidelines adopted by the Trust, no more than 10% of the Trust's
assets may be invested by an individual investment manager. (This limitation
does not apply to assets invested by a manager retained to invest in index
When did the Trust begin making investments in the stock market?
The Trust initiated investment in the stock market in September 2002, making a
series of periodic equity investments over the following six months. Following
this procedure, the Trust achieved its target equity investment allocation in
What is the approximate distribution of NRRIT investments in
equities, bonds and other instruments?
The Trustees retained an independent investment advisory firm to conduct
a comprehensive Asset/Liabilities & Asset Allocation study for the purposes of
determining the most appropriate mix of assets for the Trust. The study analyzed
the projected liabilities of the Trust and long-term expected return, risk, and
the return correlation of various asset classes, as well as the expected return
and risk of various portfolios of these asset classes. Using the guidance
provided by this study, as well as updated analyses periodically performed by
the Trust's investment staff, the Trustees have adopted the asset allocation
policy and target ranges set forth below.
US Fixed Income/Convertibles
Non-US Fixed Income/Convertibles
Global Fixed Income
Global Real Assests
What has been the effect recent years'
market volatility on Railroad Retirement assets?
As noted above, the Railroad Retirement and Survivors' Improvement Act
authorized NRRIT to invest Railroad Retirement assets in a broad range of
government and private securities in the same way as other private pension
funds. The Act also created a safety net in the form of an automatic tax
adjustment – if fund assets drop below the amount needed to pay four years of
benefits, the tax rate is automatically increased to as much as 22.1 percent on
employers and up to 4.9 percent for employees.
During the first six years of NRRIT's operations, Railroad Retirement system
assets experienced substantial growth, resulting in automatic tax cuts for both
employees (from 4.9 to 3.9 percent) and employers (from 13.1 to 12.1 percent) ,
as well as a build-up of a significant financial cushion. Like the assets of
most pension funds, NRRIT assets declined as a result of the general economic
downturn beginning in 2008 and have fluctuated over the last few years due to
market volatility. However, the cushion built up over the previous
years mitigated the impact on the system. As of December 31, 2011, Railroad
Retirement system assets stood at $24.1 billion compared to $20.7 billion at
NRRIT's inception. It should also be noted that since inception, $11.9 billion in
NRRIT earnings have been transferred to the Treasury to pay retirement benefits.
What steps has NRRIT taken in response to
changes in the investment environment?
The NRRIT Board of Trustees, which has three representatives from rail unions,
three from management and an independent trustee, continually monitors the
investment strategies and makes needed adjustments. The Trust's Board and its
investment staff regularly evaluate the performance of the Trust's investment
managers and have taken steps to terminate underperforming managers where
appropriate. In this volatile investment environment, the Trust has also taken
prudent steps to increase its cash position to ensure sufficient liquidity to
meet all Trust and Railroad Retirement Board needs. The Board of Trustees will
continue to manage the assets of the Trust as a patient, long-term investor,
recognizing its responsibilities to the Railroad Retirement system, its workers
and its retirees. As a long-term investor, the Trust expects to benefit from the
long-term recovery of financial markets.
Where can I learn more about the NRRIT activities and performance?
The RRB web site contains the Annual Management Reports of NRRIT as well as the
Trust's Quarterly Updates.. To view and download the report in PDF, you need the
free Acrobat Reader. We recommend using the latest version. These documents
contain more detailed information concerning the operations of NRRIT.