Prepared by Public Affairs 312-751-4777
The Railroad Retirement Board (RRB) is required by law to submit
annual financial reports and triennial actuarial valuations to Congress on the
financial condition of the railroad retirement system, as well as annual
financial reports on the railroad unemployment insurance system. These reports
must also include recommendations for any financing changes which may be
advisable in order to ensure the solvency of the systems. In June, the RRB
submitted its 25th Actuarial Valuation of the railroad retirement system's
assets and liabilities, and its financial report on the railroad unemployment
The following questions and answers summarize the findings of these reports.
1. What were the assets of the railroad
retirement and railroad unemployment insurance systems last year?
As of September 30, 2011, total railroad retirement system assets, comprising
assets managed by the National Railroad Retirement Investment Trust and the
railroad retirement system accounts at the Treasury, equaled $23.6 billion. The
Trust was established by the Railroad Retirement and Survivors' Improvement Act
of 2001 to manage and invest railroad retirement assets. The cash balance of the
railroad unemployment insurance system was $58.7 million at the end of fiscal
2. What was the conclusion of the 25th
Actuarial Valuation of the financial condition of the railroad retirement
The conclusion was that, barring a sudden, unanticipated, large drop in railroad
employment or substantial investment losses, the railroad retirement system will
experience no cash-flow problems during the next 23 years. The long-term
stability of the system, however, is not assured. Under the current financing
structure, actual levels of railroad employment and investment return over the
coming years will determine whether additional corrective action is necessary.
3. What methods were used in forecasting the
financial condition of the railroad retirement system?
The valuation projected the various components of income and outgo of the
railroad retirement system under three employment assumptions, intended to
provide an optimistic, moderate and pessimistic outlook, for the 75 calendar
years 2011-2085. The projections of these components were combined and the
investment income calculated to produce the projected balances in the railroad
retirement accounts at the end of each projection year.
Projecting income and outgo under optimistic, moderate and pessimistic
employment assumptions, the valuation indicated no cash-flow problems occur
throughout the 75-year projection period under the optimistic and moderate
assumptions. Cash-flow problems do occur under the pessimistic assumption, but
not until 23 years from now in 2035.
4. How do the results of the 25th Actuarial
Valuation compare with financial reports of previous years, including the 24th
The 24th Actuarial Valuation, issued in 2009, addressed railroad retirement
financing for the 75 calendar years 2008-2082 and concluded that cash-flow
problems arose only under the pessimistic assumption, and then not until 2031.
The 2010 financial report addressed the 25 calendar years 2010-2034 and
indicated that cash-flow problems occur in 2033, but only under the pessimistic
The 2011 report, covering the 25 calendar years 2011-2035, also indicated
cash-flow problems occur only under the pessimistic assumption, but not until
5. Did the 25th Actuarial Valuation of the
railroad retirement system recommend any railroad retirement payroll tax rate
The report did not recommend any change in the rate of tax imposed by current
law on employers and employees.
6. What were the findings of the 2012 report
on the financial condition of the railroad unemployment insurance system?
The RRB's 2012 railroad unemployment insurance financial report was also
generally favorable. Even as maximum benefit rates increase 44 percent (from $66
to $95) from 2011 to 2022, experience-based contribution rates are expected to
keep the unemployment insurance system solvent, except for small, short-term
cash flow problems in fiscal year 2015 under the pessimistic assumption.
However, projections show quick repayment of any loans by the end of fiscal year
Unemployment levels are the single most significant factor affecting the
financial status of the railroad unemployment insurance system. However, the
system's experience-rating provisions, which adjust contribution rates for
changing benefit levels, and its surcharge trigger for maintaining a minimum
balance help to ensure financial stability in the advent of adverse economic
Under experience-rating provisions, each employer's contribution rate is
determined by the RRB on the basis of benefit payments made to the railroad's
employees. Even under the report's most pessimistic assumption, the average
employer contribution rate remains well below the maximum throughout the
While a 1.5 percent surcharge is in effect in calendar year 2012, the report
predicts no surcharge in calendar years 2013 and 2014. A surcharge of 1.5
percent is likely in calendar year 2015.
7. What methods were used to evaluate the
financial condition of the railroad unemployment insurance system?
The economic and employment assumptions used in the unemployment insurance
report corresponded to those used in the 25th Actuarial Valuation of the
retirement system. Projections were made for various components of income and
outgo under each of the three employment assumptions, but for the period
2012-2022, rather than a 75-year period.
8. Did the 2012 report on the railroad
unemployment insurance system recommend any financing changes to the system?
No financing changes were recommended at this time by the report.
|The RRB's 2012
financial reports on the retirement and unemployment insurance systems are
available in their entirety on the agency's website at www.rrb.gov.
Information on the National Railroad Retirement Investment Trust,
including its quarterly and annual reports, is also available on the site.