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Captain Stiles - 2 February 18, 1949 7 per cent after 1946. This amount corresponds roughly to the taxes paid by the employee plus an allowance for interest. From this amount, all retirement and death benefits that have been paid are subtracted; the residue is paid as the final benefit. Through December, 1948, the Board has paid some 4000 residual benefits mainly to individuals not entitled to deferred annuities. The payments were largely to adult children, brothers and sisters, widows who had remarried, and widows and children of uninsured employees. They include, however, 443 widows and one parent who had made the irrevocable election required under the Act, to receive the residual benefit, instead of deferred annuities at age 65. In every case the residual benefit was smaller than the present value of the deferred annuity which was waived. On the average the present values of the deferred annuities were over three times the residual benefit. The present value of the deferred annuities, assuming that the widow or parent had already reached age 65, would have been five times the residual benefit on the average. The election in favor of a residual payment may be even more adverse if, as is likely, the surrendered survivor annuities would have been increased by Amendments to the Act. On the basis of experience thus far I should say that the net result of the Railroad Retirement amendment has been extremely unfortunate. The worst feature would in substantial measure be eliminated if the final settlement for the survivors of an employee (pilot, of course, in the case of a pilot's system) were not given the choice of taking a present lump sum in place of the right to a deferred annuity. In the amendment enclosed this would be accomplished by omission of the language enclosed in the brackets. Judging by the railroad experience the amendment, including the part inside the brackets, might not be extremely expensive because apparently the widows will sacrifice enough to off-set, in substantial part at least, the cost for others. Without any such off-set I would estimate that the cost of the amendment would run to 0.5 to 0.6 per cent of the payroll in total, that is 16.0 to 16.1 per cent. (This is a little lower than I recalled this afternoon.) I make the refund 8.25 to allow for some interest. If this charge is made in the bill, the taxes in Title II should be changed to 8.05 per cent instead of 7.75. I am checking over the questions and answers and will have suggestions for revisions by the middle of next week. Sincerely Murray Murray M. Latimer Enclosure c/c Capt. Foster Capt. Gitt
