The Railroad Unemployment Insurance and Retirement Improvement Act, based on the recommendations of the Railroad Unemployment Compensation Committee, was included in the Technical and Miscellaneous Revenue Act of 1988, enacted November 10, 1988. The legislation raised the unemployment and sickness daily benefit rate from $25 to $30 retroactively to July 1988 and indexed benefit rates and earnings requirements to national wage levels. The daily benefit rate subsequently rose to $31 in July 1989, $33 in July 1992, and $36 in July 1994. (Legislation enacted in 1996 raised the rate to $42 effective October 9, 1996. By July 2014, the rate had increased to $70. It rises to $72 in July 2015 and remaines $72 in July 2016.) A 2-week waiting period was established and employers were provided the right to appeal claims of their employees after 1989. Also, the amount of subsidiary remuneration from part-time work which unemployment benefit claimants can earn without affecting their benefits was increased from $10 to $15 a day.
Under the indexing provisions of the 1988 amendments, the taxable earnings base in calendar year 1989 increased from $600 to the first $710 of each employee's monthly earnings, and in 2015 is $1,455. For 1989 and 1990, the contribution rate for all employers except certain public commuter railroad was set at 8 percent. Experience-based tax rates were phased in during 1991, with rates ranging from 5.55 percent to 12 percent. In 2015, they range from 2.15 percent (the minimum basic rate of 0.65 percent plus a 1.5 percent surcharge as explained above) to 12 percent. The surcharge does not apply to new employers, who pay 4.09 percent in 2015.
The amendments exempted public commuter railroads covered by the Railroad Unemployment Insurance Act from paying the 8 percent tax in 1989 and 1990; instead they reimbursed the unemployment insurance system for the amount of benefits paid during the year to their employees, plus certain administrative costs. Since 1991, these railroads again pay taxes on the same basis as other railroads.
The 1988 amendments assured repayment of the unemployment system's debt to the retirement system by fixing the loan repayment tax at 4 percent in January 1989, with that rate remaining in force until the debt was fully repaid with interest. And the previous $7,000 annual base for this tax was changed to conform to the indexed monthly taxable compensation base. In June 1993 the $180 million loan balance was repaid in its entirety from cash reserves in the Railroad Unemployment Insurance Account and the loan repayment tax was terminated.
A contingency surtax of 3.5 percent, effective in the event of further borrowing by the Railroad Unemployment Insurance Account, was eliminated in 1991. Instead, a surcharge can be added to employers' unemployment insurance taxes for a calendar year if the balance in the unemployment insurance account on the previous June 30 goes below $100 million (as indexed). The surcharge rate would be 1.5, 2.5 or 3.5 percent depending on the balance in the account. If a 3.5 percent surcharge went into effect for a given year, the maximum rate for any employer would be 12.5 percent rather than 12 percent. A 1.5 percent surcharge is in effect during 2015.
Credits would be provided to employers if a large balance accumulates in the account. If the account balance on the preceding June 30 were above $250 million (as indexed), the excess would be refunded to the employers in the form of a rate reduction for the year through a pooled credit.
The 1988 amendments also require the RRB to make annual financial reports to Congress on the status of the unemployment insurance system. The reports have been favorable.
The Omnibus Budget Reconciliation Act of 1989 revised Federal indexing procedures, which raised the maximum on monthly compensation subject to railroad unemployment insurance taxes and the qualifying earnings requirement. This legislation also revised fiscal year 1990 unemployment and sickness benefit sequestrations under the Gramm/Rudman Act.
1990s.--Under 1991, 1992 and 1993 emergency unemployment compensation legislation providing temporary extended State unemployment benefits, unemployed railroad workers were made eligible for extended benefits, on a temporary basis, regardless of years of service. These temporary extended benefits were made available for specified periods in 1991, 1992, 1993 and 1994 if previous benefit rights were exhausted by certain dates. (Temporary extended unemployment benefits were also provided under legislation enacted in 2009, 2010, 2011, and 2012.)
The Railroad Unemployment Insurance Amendments Act of 1996, signed into law on October 9, 1996, increased the railroad unemployment and sickness insurance daily benefit rate and revised the formula for indexing future benefit rates. It also reduced the waiting period for initial benefit payments and eliminated duplicate waiting periods in continuing periods of unemployment and sickness. In addition, the Act applied an earnings test to claims for unemployment and reduced the duration of extended benefit periods for long-service employees. The Act's provisions were based on joint recommendations to Congress negotiated by rail labor and management in order to update the railroad unemployment insurance system along the lines of State unemployment insurance systems. The following provisions were effective upon the October 9, 1996, enactment date.
The maximum railroad unemployment and sickness insurance daily benefit rate increased to $42 from $36. The formula for indexing future benefit rates was modified so that rates increase more frequently, generally with the start of each new benefit year in July. The daily benefit rate increased to $43 in July 1997, and gradually increased to $70 in July 2014. It rises to $72 in July 2015, and will remain $72 in July 2016.
The law made benefits payable for each day of unemployment or sickness in excess of 7 during an employee's first 14-day registration period in a benefit year. Under prior law, no benefits were payable for the first 14-day claim in a benefit year in order to satisfy a 2-week waiting period requirement. Also, a second waiting period is no longer required when a new benefit year begins during a continuing period of unemployment or sickness.
An earnings test was made applicable to claims for intermittent unemployment. If an employee's earnings for days worked in a 14-day registration period are more than a certain indexed amount, no benefits are payable for any days of unemployment in that period.
The Act also eliminated the second 13-week period of extended benefits for those with 15 or more years of service.
2000s.--Under the Budget Control Act of 2011 and a subsequent sequestration order, railroad unemployment and sickness insurance benefits were reduced by 9.2 percent beginning in March 2013. Based on revised projections of benefit claims and payments, the reduction amount was adjusted to 7.2 percent in October 2013, and 7.3 percent effective October 1, 2014. As this publication went to press, the reduction was to remain in effect through September 30, 2015, the end of the fiscal year. Reductions in future years, should they occur, will be calculated based on applicable law.