S. 4965, Railroad Retirement Board Stability Act

Bill Summary

S. 4965 would establish the Railroad Retirement Board Administrative Account and provide a permanent appropriation within that account for the administrative expenses of the Railroad Retirement Board. The bill would authorize annual transfers to the new account from the railroad retirement accounts and the Railroad Unemployment Insurance Administration Fund according to a formula but would cap the amount of administrative expenses that could be paid from that account. The bill also would establish a technology fund within the new account to modernize legacy benefit-processing systems used by the board.

In addition, S. 4965 would shift the payment of certain Pension Benefit Guaranty Corporation (PBGC) premiums from 2037 into 2036. Finally, the bill would require the Government Accountability Office to report to the Congress on the modernization of the board’s legacy benefit-processing systems.

Estimated Federal Cost

The estimated budgetary effects of S. 4965 are shown in Table 1. The costs of the legislation fall within budget function 600 (income security).

Basis of Estimate

For this estimate, CBO assumes that S. 4965 will be enacted near the beginning of fiscal year 2027.

Background

Under current law, the board may use amounts from the Railroad Unemployment Insurance Administration Fund and the railroad retirement accounts (consisting of the Railroad Retirement Account and the Social Security Equivalent Benefits Account) to pay administrative expenses. Amounts in the Railroad Unemployment Insurance Administration Fund are permanently appropriated; the resulting outlays are classified as direct spending. Annual appropriation acts limit the amount that the board may spend from that fund. In contrast, amounts in the railroad retirement accounts are authorized to be appropriated for administrative expenses but there is no permanent appropriation. Annual appropriation acts provide the board with the authority to spend from the railroad retirement accounts for that purpose; those outlays are classified as discretionary spending.

Direct Spending

CBO estimates that enacting S. 4965 would increase direct spending for the board’s expenses by $1.5 billion and decrease spending for PBGC by $1.9 billion for a net decrease in direct spending of $321 million over the 2026-2036 period (see Table 2).

Railroad Retirement Board Administrative Account. Under the bill, beginning in 2027, annual transfers to the new account from the Railroad Unemployment Insurance Administration Fund and the railroad retirement accounts would equal the lesser of 1.25 percent of railroad retirement and railroad unemployment benefits paid in the prior year, or 0.75 percent of the assets in the National Railroad Retirement Investment Trust, minus unobligated balances in the new administrative account. Beginning in 2032, the percentage applied to prior-year benefit payments would decrease from 1.25 percent to 1.15 percent. CBO expects that the percentage based on prior-year benefit payments would be the lesser amount in every year over the 2027-2036 period.

On that basis, CBO estimates that enacting the bill would result in the transfer of $1.9 billion over that period comprising $1.6 billion from the railroad retirement accounts and $306 million from the Railroad Unemployment Insurance Administration Fund. Those amounts are based on those accounts’ current share of the board’s specified limitation on administrative expenses in appropriation acts. (Of that $1.9 billion, $90 million would be transferred to the Railroad Retirement Technology Fund. The budgetary effects of that transfer are discussed in the next section.) Under the bill, all amounts transferred to the new Railroad Retirement Board Administrative Account could be spent without future appropriation and would thus be recorded in the budget as direct spending.

Under current law, amounts in the railroad retirement accounts are only authorized to be appropriated for administrative expenses and cannot be spent without an appropriation. Because the bill would allow the transferred funds to be spent without further appropriation, CBO estimates that the transfers from the railroad retirement accounts to the new administrative account would increase direct spending by $1.5 billion over the 2027-2036 period.

Because administrative expenses that come from the Railroad Unemployment Insurance Administration Fund are permanently appropriated under current law, CBO attributes no increase in direct spending from transferring those funds to the new account. CBO estimates the transfer would total $306 million over the 2027-2036 period. However, S. 4965 also would permanently cap funding for administrative expenses derived from the Railroad Unemployment Insurance Administration Fund to an amount that is less than the amounts permanently appropriated under current law. On that basis, CBO estimates that enacting that provision would decrease direct spending by $79 million over the 2027-2036 period, relative to current law.

Thus, enacting those provisions would increase direct spending, on net, by $1.4 billion over the 2027-2036 period.

• Railroad Retirement Technology Fund. S. 4965 would establish a technology fund within the Railroad Retirement Board Administrative Account and require transfers to that fund from the administrative account of at least $10 million in 2027 and $20 million in each year from 2028 through 2031. The amounts would be designated for the modernization of legacy benefit-processing systems and would remain available through 2032. CBO estimates that outlays from the technology fund would total $90 million over the 2027-2036 period but would occur more slowly than outlays from the administrative account.
• PBGC Premium Payments. The bill would shift most premium payments that CBO projects single-employer plans will pay to PBGC in 2037 under current law into 2036. Because PBGC has permanent authority to spend amounts in its revolving funds, enacting the provision would not affect budget authority. The premiums are classified in the budget as offsetting collections; that is, as reductions in direct spending. As a result, CBO estimates that enacting the bill would reduce net PBGC outlays by $1.9 billion in 2036 and increase them by the same amount in 2037.

Spending Subject to Appropriation

S. 4965 would strike the current-law authorization of appropriations for administrative expenses from the railroad retirement accounts. In CBO’s baseline, over the 2027-2036 period, $1.2 billion of the board’s discretionary administrative spending is derived from the railroad retirement accounts.

On that basis, CBO estimates that under the bill, spending subject to appropriation would decline by $1.2 billion over the 2027-2036 period (see Table 1). Although the bill also would authorize the appropriation of additional amounts for the new administrative fund as necessary, CBO does not estimate any additional costs for that authorization because the bill would provide more direct spending for the board’s administration than is projected in CBO’s baseline and thus would not be needed through 2036.

S. 4965 also would require the Government Accountability Office to report to the Congress on the modernization of the board’s legacy benefit-processing systems. CBO estimates that those reports would cost less than $500,000 over the 2027-2031 period. Any related spending would be subject to the availability of appropriated funds.

Pay-As-You-Go Considerations

The Statutory Pay-As-You-Go Act of 2010 establishes budget-reporting and enforcement procedures for legislation affecting direct spending or revenues. The net changes in outlays that are subject to those pay-as-you-go procedures are shown in Table 3.

Increase in Long-Term Net Direct Spending and Deficits

CBO estimates that enacting S. 4965 would increase net direct spending by more than $2.5 billion in at least one of the four consecutive 10-year periods beginning in 2037.

CBO estimates that enacting S. 4965 would not increase on‑budget deficits by more than $5 billion in any of the four consecutive 10-year periods beginning in 2037.

Mandates

S. 4965 would impose a private-sector mandate as defined in the Unfunded Mandates Reform Act (UMRA) by shifting the payment of PBGC premiums made by single-employer plans from 2037 to 2036. The cost of the mandate would be the lost time value of the plans’ funds because the payment would occur one month earlier than specified in current law. Based on the amount of the premiums in question, CBO estimates that the cost of the mandate would be less than $10 million in 2036 and would not exceed the annual private-sector threshold established in UMRA ($214 million in 2026, adjusted annually for inflation).

The bill contains no intergovernmental mandate as defined in UMRA.

Estimate Prepared By

Federal Costs: 
Breanna Browne-Pike (for railroad retirement) 
Justin Latus (for railroad unemployment insurance)

Noah Meyerson (for the Pension Benefit Guaranty Corporation)

Mandates: Andrew Laughlin

Estimate Reviewed By

Barry Blom

Chief, Projections Unit

Elizabeth Cove Delisle
Chief, Income Security Cost Estimates Unit

Justin Humphrey
Chief, Finance, Housing, and Education Cost Estimates Unit

Kathleen FitzGerald
Chief, Public and Private Mandates Unit

H. Samuel Papenfuss 
Deputy Director of Budget Analysis

Estimate Approved By