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. Although railroad employment has declined significantly from the historical high in the 1940s, the chart below shows that employment has been fluctuating in recent years.
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 nongovernmental assets, adjustments in the payroll tax rates paid by employers and employees, and the repeal of a supplemental annuity work-hour tax.
Table 9. -- Average railroad employment, 2005-2015
