History and Purpose
of the National Railroad Retirement Investment Trust
In December 2001, Congress passed the Railroad Retirement and Survivors'
Improvement Act ("the Act") creating the National Railroad Retirement Investment
Trust ("the Trust"). The Trust is a tax-exempt entity independent from the
federal government whose sole purpose is to manage and invest railroad
retirement system assets.
Under the Act, the Trust is authorized to invest the assets transferred from the
Railroad Retirement Account in a diversified investment portfolio in the same
manner as those of private sector retirement plans, including stocks, bonds and
other investments. Previously, investments were limited to U.S. government
securities. Earnings from the Trust's investments help fund benefit payments. To
carry out its mandate, the Trust's Board of Trustees is authorized to adopt
rules to govern its operations, employ professional staff, and contract with
outside advisors to provide legal, accounting, investment advisory or other
services necessary for the proper administration of the Trust.
As provided by the Act, the Trust began its work in February 2002. Initially,
the Trust focused on building a management team and establishing procedures and
guidelines for the investment of railroad retirement system assets. In September
2002, the Treasury began transferring railroad retirement system assets
available for investment to the Trust. The majority of these transfers were
completed by March 2003.
The Board of Trustees
The Trust's Board is comprised of seven Trustees, three of whom are 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. As of June 2012, the members of the Board are
Trustees selected by the rail labor unions:
George Francisco, Jr., President Emeritus of the 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 Trainmen.
Trustees selected by the railroad carriers: Mary S. Jones, Vice
President and Treasurer, Union Pacific Corporation; Richard G. Patsy, Assistant
Vice President Pensions and 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
Under the Act, the Trustees are required to discharge their duties solely in the
interest of the Railroad Retirement Board (RRB), and through it, the
participants and beneficiaries in the railroad retirement system.
Railroad Retirement System's Assets Managed
by the Trust
The Trust is responsible for investing assets transferred to it from the RRB.
The Trust funds railroad retirement tier 2 benefits (which are similar to a
private defined benefit pension plan), supplemental annuities, 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 providing full retirement benefits to 30-year service
employees at age 60 instead of the normal tier 1/social security retirement age
(currently transitioning from 65 to 67) is paid from funds managed by the Trust.
How the Trust Makes 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, 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 carefully
monitored by the Trust's Chief Investment Officer and staff and are subject to
regular oversight by the Board of Trustees.
After experiencing substantial growth during the first six years of the Trust's
operations, railroad retirement system assets, like the assets of most pension
funds, declined as a result of the general economic downturn beginning in 2008.
As of December 31, 2011, railroad retirement system assets stood at $24.1
billion compared to $20.7 billon at the Trust's inception. In addition, since
its inception the Trust has transferred an additional $11.9 billion in earnings
to the Treasury for making benefit payments to participants in the railroad
Relationship between the RRB and the Trust
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 system, including eligibility determinations and the calculation of
beneficiary payments. The Trust has no powers or authority over the
administration of railroad retirement benefits. Although the RRB does not have
authority with respect to day-to-day activities of the Trust, the RRB may bring
legal action to enforce any provision of the Act in the event it should ever
Additional Information about the Trust
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. These reports, as well as quarterly updates on
Trust activities, are posted on the RRB's website (www.rrb.gov).