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Facts about the National Railroad Retirement Investment Trust |
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RRB Form IB-7 (6-08) |
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History
and Purpose of the National Railroad Retirement Investment Trust
In December 2001, Congress passed the Railroad Retirement and Survivors'
Improvement Act (“the Act") creating the National Railroad Retirement Investment
Trust ("the Trust"). The Trust is a tax-exempt entity independent from the
federal government whose sole purpose is to manage and invest Railroad
Retirement System assets.
Under the Act, the Trust is authorized to invest the assets transferred from the
Railroad Retirement Account (“RRA”) in a diversified investment portfolio in the
same manner as those of private sector retirement plans, including stocks, bonds
and other investments. Previously, investments were limited to U.S. government
securities. Earnings from the Trust’s investments help fund benefit payments. To
carry out its mandate, the Trust's Board of Trustees ("the Board") is authorized
to adopt rules to govern its operations, employ professional staff, and contract
with outside advisors to provide legal, accounting, investment advisory or other
services necessary for the proper administration of the Trust.
As provided by the Act, the Trust began its work on February 1, 2002. Initially,
the Trust focused on building a management team and establishing procedures and
guidelines for the investment of Railroad Retirement System assets. In September
2002, the Treasury began transferring Railroad Retirement System assets
available for investment to the Trust. The majority of these transfers were
completed by March 2003.
The
Board of Trustees
The Trust’s Board is comprised of seven Trustees, three of whom are selected by
railroad labor unions and three by railroad companies. The seventh Trustee is an
independent Trustee selected by the other six Trustees. The Trustees' terms are
for three years and are staggered. For 2008, the members of the Board are as
follows:
Trustees selected by the rail labor unions:
Walter A. Barrows, Secretary - Treasurer, Brotherhood of Railroad Signalmen
(Chair);
George Francisco, Jr., President of the National Conference of Firemen and
Oilers - SEIU; and Joel Parker, Special Assistant to the President and International
Vice President, Transportation Communications Union.
Trustees selected by the railroad carriers:
Bernie Gutschewski, Vice President - Taxes, Union Pacific Corporation; Linda Hurt, Vice President
- Investor Relations, Burlington Northern Santa Fe Corporation; and William H. Sparrow, CSX Corporation
(Retired).
The Independent Trustee is John MacMurray, a pension fund professional with more
than 30 years of experience in the investment management field.
Under the Act, the Trustees are required to discharge their duties solely in the
interest of the Railroad Retirement Board (“RRB”), and through it, the
participants and beneficiaries in the Railroad Retirement System.
Railroad
Retirement System's Assets Managed by the Trust
The Trust is responsible for investing assets transferred to it from the RRB.
The Trust funds Railroad Retirement tier 2 benefits (which are similar to a
private defined benefit pension plan), supplemental annuities, and certain
aspects of tier 1 benefits (which generally are like Social Security) that
exceed Social Security levels. An example of such a benefit is early retirement.
The additional cost of providing full retirement benefits to 30-year service
employees at age 60 instead of the normal tier 1/Social Security retirement age
(currently transitioning from age 65 to 67) is paid from funds managed by the
Trust.
How
the Trust Makes Decisions on the Investment of Railroad Retirement System Assets
Pursuant to the Act, the Trustees have adopted Investment Guidelines that
address such issues as the diversification of Trust assets into broad asset
classes. These include US equity, non-US equity, private equity, investment
grade bonds and high yield bonds. The Guidelines set out the criteria for
investments made by the Trust and are regularly updated to ensure that they are
responsive to the ever-changing investment environment. The Trust employs a
staff of investment professionals to direct and oversee the investment of
Railroad Retirement System assets pursuant to the Guidelines. Catherine A.
Lynch, CFA, serves as the Trust’s Chief Executive Officer and Chief Investment
Officer. Since joining the Trust in 2003, she has served as Senior Investment
Officer and, most recently, as interim Chief Executive Officer/Chief Investment
Officer. Prior to joining the Trust, Ms. Lynch was at The George Washington
University where she was responsible for managing the University’s endowment.
Investment Performance
Railroad Retirement System assets have increased substantially under the Trust's
management. By December 31, 2007, the $21.3 billion that had been transferred to
the Trust for investment had grown to $32.0 billion. In addition to this
balance, the Trust also transferred an additional $5.2 billion in earnings back
to the Treasury for making benefit payments to participants in the Railroad
Retirement System.
Relationship between
the RRB and the Trust
The Trust and the RRB are separate entities. The RRB remains a federal agency
and continues to have full responsibility for administering the Railroad
Retirement System, including eligibility determinations and the calculation of
beneficiary payments. The Trust has no powers or authority over the
administration of Railroad Retirement benefits. Although the RRB does not have
authority with respect to day-to-day activities of the Trust, the RRB may bring
legal action to enforce any provision of the Act in the event it should ever
become necessary.
Additional Information
about the Trust
Under the Act, the financial statements of the Trust are required to be audited
annually by an independent public accountant. In addition, the Trust must submit
an annual management report to Congress on its operations, including a statement
of financial position, statement of cash flows, a statement on internal
accounting and administrative control systems, the independent auditor's report,
and any other information necessary to inform Congress about the operations and
financial condition of the Trust. View the management reports, as well as
Quarterly Updates on
Trust activities. |
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