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Reforming the Railroad Retirement System

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Document pages: 29 pages

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.

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