Reforming the Railroad Retirement System

Publication Date: June 2013

Publisher: Center for Retirement Research at Boston College

Author(s): Steven A. Sass

Research Area: Labor

Keywords: Railroad retirement system; pay-as-you-go ; public pensions

Type: Report

Coverage: United States

Abstract:

The government’s Railroad Retirement program is a clear anomaly in the U.S. economic landscape. The program taxes employers and workers in a specific private-sector industry to provide pensions to workers in that industry. Like Social Security, Railroad Retirement had been funded on a pay-as-you-go basis, with Trust Fund assets invested in government bonds. In the 1990s, however, the carriers and unions developed a proposal for reforming the program that involved investing Railroad Retirement assets in equities, similar to private-sector pension funds. Despite opposition in Washington from those who feared it would create a precedent for investing Social Security assets in equities, Congress enacted the industry proposal in 2001.