The financial condition of the railroad retirement system is closely related to the size of the railroad work force. This is because, as mentioned previously, payroll taxes on covered employers and their employees are the primary source of income to the system. Clearly, a large labor force will generate more revenue for the system than a small labor force. Railroad employment has declined over the years and a drop in employment necessitated the strong corrective action taken in the 1981 and 1983 amendments. In the absence of these amendments, substantial reductions in payments would have been required.
The omnibus budget legislation enacted December 22, 1987, increased railroad retirement payroll tax rates in January 1988 by a total of 2 percent, and it provided for revenues from Federal income taxes on certain railroad retirement benefits to be transferred to the railroad retirement system for an additional year, fiscal year 1989. Subsequent legislation extended these income tax transfers on a permanent basis.
Legislation in 2001 provided for the investment of railroad retirement funds in non-governmental assets, adjustments in the payroll tax rates paid by employers and employees, and the repeal of a supplemental annuity work-hour tax.
The RRB's 26th triennial actuarial valuation, submitted to Congress in June 2015, contained generally favorable information concerning railroad retirement financing. It concluded that, barring a sudden, unanticipated, large decrease in railroad employment or substantial investment losses, the railroad retirement system will experience no cash-flow problems during the next 32 years. Cash-flow problems arise only under the most pessimistic employment assumptions, and then not until 2047. However, the report also indicated that the long-term stability of the system is not assured. Under its current financing structure, actual levels of railroad employment and investment return over the coming years will determine whether corrective action is necessary. The report did not recommend any change in the rate of tax imposed by current law on employers and employees.
As of September 30, 2014, 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 approximately $28 billion.