APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF INDIANA
No. 79-870 Argued: October 6, 1980 --- Decided: December 9, 1980
JUSTICE REHNQUIST delivered the opinion of the Court.
The United States District Court for the Southern District of Indiana held unconstitutional a section of the Railroad Retirement Act of 1974, 88 Stat. 1305, as amended, 45 U.S.C. § 231 et seq., and the United States Railroad Retirement Board has appealed to this Court pursuant to 28 U.S.C. § 1252. We noted probable jurisdiction. 444 U.S. 1069 (1980).
The 1974 Act fundamentally restructured the railroad retirement system. The Act's predecessor statute, adopted in 1937, provided a system of retirement and disability benefits for persons who pursued careers in the railroad industry. Under that statute, a person who worked for both railroad and nonrailroad employers and who qualified for railroad retirement benefits and social security benefits, 42 U.S.C. § 401 et seq., received retirement benefits under both systems and an accompanying "windfall" benefit. [n1] The legislative [p169] history of the 1974 Act shows that the payment of windfall benefits threatened the railroad retirement system with bankruptcy by the year 1981. [n2] Congress therefore determined to place the system on a "sound financial basis" by eliminating future accruals of those benefits. [n3] Congress also enacted [p170] various transitional provisions, including a grandfather provision, § 231b(h), [n4] which expressly preserved windfall benefits for some classes of employees. [p171]
In restructuring the Railroad Retirement Act in 1974, Congress divided employees into various groups. First, those employees who lacked the requisite 10 years of railroad employment to qualify for railroad retirement benefits as of January 1, 1975, the changeover date, would have their retirement benefits computed under the new system and would not receive any windfall benefit. Second, those individuals already retired and already receiving dual benefits as of the changeover date would have their benefits. computed under the old system, and would continue to receive a windfall benefit. [n5] Third, those employees who had qualified for both railroad and social security benefits as of the changeover date, but who had not yet retired as of that date (and thus were [p172] not yet receiving dual benefits), were entitled to windfall benefits if they had (1) performed some railroad service in 1974 or (2) had a "current connection" with the railroad industry as of December 31, 1974, [n6] or (3) completed 25 years of railroad service as of December 31, 1974. 45 U.S.C. § 231b(h)(1). Fourth, those employees who had qualified for railroad benefits as of the changeover date, but lacked a current connection with the railroad industry in 1974 and lacked 25 years of railroad employment, could obtain a lesser amount of windfall benefit if they had qualified for social security benefits as of the year (prior to 1975) they left railroad employment. 45 U.S.C. § 231b(h)(2). [n7]
Thus, an individual who, as of the changeover date, was unretired and had 10 years of railroad employment and sufficient nonrailroad employment to qualify for social security benefits is eligible for the full windfall amount if he worked for the railroad in 1974 or had a current connection with the railroad as of December 31, 1974, or his later retirement date. But an unretired individual with 24 years of railroad service and sufficient nonrailroad service to qualify for social security benefits is not eligible for a full windfall amount unless he worked for the railroad in 1974, or had a current connection with the railroad as of December 31, 1974, or his later retirement date. And an employee with 10 years of railroad employment who qualified for social security benefits only after [p173] leaving the railroad industry will not receive a reduced windfall benefit, while an employee who qualified for social security benefits prior to leaving the railroad industry would receive a reduced benefit. It was with these complicated comparisons that Congress wrestled in 1974.
Appellee and others filed this class action in the United States District Court for the Southern District of Indiana, seeking a declaratory judgment that 45 U.S.C. § 231b(h) is unconstitutional under the Due Process Clause of the Fifth Amendment because it irrationally distinguishes between classes of annuitants. [n8] The District Court eventually certified a class of all persons eligible to retire between January 1, 1975, and January 31, 1977, who were permanently insured under the Social Security Act as of December 31, 1974, but who were not eligible to receive any "windfall component" because they had left the railroad industry before 1974, had no "current connection" with it at the end of 1974, and had less than 25 years of railroad service. [n9] Appellee contended below that it was irrational for Congress to have drawn a distinction between employees who had more than 10 years but less than 25 years of railroad employment simply on the basis of whether they had a "current connection" with the [p174] railroad industry as of the changeover date or as of the date of retirement.
The District Court agreed with appellee that a differentiation based solely on whether an employee was "active" in the railroad business as of 1974 was not "rationally related" to the congressional purposes of insuring the solvency of the railroad retirement system and protecting vested benefits. We disagree, and reverse.
The initial issue presented by this case is the appropriate standard of judicial review to be applied when social and economic legislation enacted by Congress is challenged as being violative of the Fifth Amendment to the United States Constitution. There is no claim here that Congress has taken property in violation of the Fifth Amendment, since railroad benefits, like social security benefits, are not contractual, and may be altered or even eliminated at any time. Hisquierdo v. Hisquierdo, 439 U.S. 572, 575 (1979); Flemming v. Nestor, 363 U.S. 603, 608-611 (1960). And because the distinctions drawn in § 231b(h) do not burden fundamental constitutional rights or create "suspect" classifications, such as race or national origin, we may put cases involving judicial review of such claims to one side. San Antonio Independent School District v. Rodriguez, 411 U.S. 1 (1973); Vance v. Bradley, 440 U.S. 93 (1979).
Despite the narrowness of the issue, this Court, in earlier cases, has not been altogether consistent in its pronouncements in this area. In Lindsley v. Natural Carbonic Gas Co., 220 U.S. 61, 78-79 (1911), the Court said that,
[w]hen the classification in such a law is called in question, if any state of facts reasonably can be conceived that would sustain it, the existence of that state of facts at the time that the law was enacted must be assumed.
On the other hand, only nine years later in F. S. Royster Guano Co. v. Virginia, 253 U.S. 412, 415 (1920), the Court said that, for a classification to be valid under the Equal Protection Clause of the Fourteenth [p175] Amendment, it "must rest upon some ground of difference having a fair and substantial relation to the object of the legislation. . . ."
In more recent years, however, the Court, in cases involving social and economic benefits, has consistently refused to invalidate on equal protection grounds legislation which it simply deemed unwise or unartfully drawn.
Thus, in Dandridge v. Williams, 397 U.S. 471 (1970), the Court rejected a claim that Maryland welfare legislation violated the Equal Protection Clause of the Fourteenth Amendment. It said:
In the area of economics and social welfare, a State does not violate the Equal Protection Clause merely because the classifications made by its laws are imperfect. If the classification has some "reasonable basis," it does not offend the Constitution simply because the classification "is not made with mathematical nicety or because, in practice, it results in some inequality.
Lindsley v. Natural Carbonic Gas Co., 220 U.S. 61, 78.
The problems of government are practical ones, and may justify, if they do not require, rough accommodations -- illogical, it may be, and unscientific.'
Metropolis Theatre Co. v. City of Chicago, 228 U.S. 61, 68-70. . . .
. . . [The rational basis standard] is true to the principle that the Fourteenth Amendment gives the federal courts no power to impose upon the States their views of what constitutes wise economic or social policy.
Id. at 485-486. Of like tenor are Vance v. Bradley, supra at 97, and New Orleans v. Dukes, 427 U.S. 297, 303 (1976). Earlier, in Flemming v. Nestor, supra at 611, the Court upheld the constitutionality of a social security eligibility provision, saying:
[I]t is not within our authority to determine whether the Congressional judgment expressed in that Section is sound or equitable, or whether it comports well or ill with [p176] purposes of the Act. . . . The answer to such inquiries must come from Congress, not the courts. Our concern here, as often, is with power, not with wisdom.
And in a case not dissimilar from the present one, in that the State was forced to make a choice which would undoubtedly seem inequitable to some members of a class, we said:
Applying the traditional standard of review under [the Equal Protection Clause], we cannot say that Texas' decision to provide somewhat lower welfare benefits for [Aid to Families with Dependent Children] recipients is invidious or irrational. Since budgetary constraints do not allow the payment of the full standard of need for all welfare recipients, the State may have concluded that the aged and infirm are the least able of the categorical grant recipients to bear the hardships of an inadequate standard of living. While different policy judgments are, of course, possible, it is not irrational for the State to believe that the young are more adaptable than the sick and elderly, especially because the latter have less hope of improving their situation in the years remaining to them. Whether or not one agrees with this state determination, there is nothing in the Constitution that forbids it.
Jefferson v. Hackney, 406 U.S. 535, 549 (1972).
Applying those principles to this case, the plain language of § 231b(h) marks the beginning and end of our inquiry. [n10] [p177] There, Congress determined that some of those who in the past received full windfall benefits would not continue to do so. Because Congress could have eliminated windfall benefits for all classes of employees, it is not constitutionally impermissible for Congress to have drawn lines between groups of employees for the purpose of phasing out those benefits. New Orleans v. Dukes, supra, at 305.
The only remaining question is whether Congress achieved its purpose in a patently arbitrary or irrational way. The classification here is not arbitrary, says appellant, because it is an attempt to protect the relative equities of employees and to provide benefits to career railroad employees. Congress fully protected, for example, the expectations of those employees who had already retired and those unretired employees who had 25 years of railroad employment. Conversely, Congress denied all windfall benefits to those employees who lacked 10 years of railroad employment. Congress additionally provided windfall benefits, in lesser amount, to those employees with 10 years' railroad employment who had qualified for social security benefits at the time they had left railroad employment, [p178] regardless of a current connection with the industry in 1974 or on their retirement date.
Thus, the only eligible former railroad employees denied full windfall benefits are those, like appellee, who had no statutory entitlement to dual benefits at the time they left the railroad industry, but thereafter became eligible for dual benefits when they subsequently qualified for social security benefits. Congress could properly conclude that persons who had actually acquired statutory entitlement to windfall benefits while still employed in the railroad industry had a greater equitable claim to those benefits than the members of appellee's class who were no longer in railroad employment when they became eligible for dual benefits. Furthermore, the "current connection" test is not a patently arbitrary means for determining which employees are "career railroaders," particularly since the test has been used by Congress elsewhere as an eligibility requirement for retirement benefits. [n11] Congress could assume that those who had a current connection with the railroad industry when the Act was passed in 1974, or who returned to the industry before their retirement, were more likely than those who had left the industry prior to 1974, and who never returned, to be among the class of persons who pursue careers in the railroad industry, the class for whom the Railroad Retirement Act was designed. Hisquierdo v. Hisquierdo, 439 U.S. at 573. [p179]
Where, as here, there are plausible reasons for Congress' action, our inquiry is at an end. It is, of course, "constitutionally irrelevant whether this reasoning in fact underlay the legislative decision," Flemming v. Nestor, 363 U.S. at 612, because this Court has never insisted that a legislative body articulate its reasons for enacting a statute. This is particularly true where the legislature must necessarily engage in a process of line-drawing. The
task of classifying persons for . . . benefits . . . inevitably requires that some persons who have an almost equally strong claim to favored treatment be placed on different sides of the line,
Mathews v. Diaz, 426 U.S. 67, 83-84 (1976), and the fact the line might have been drawn differently at some points is a matter for legislative, rather than judicial, consideration.
Finally, we disagree with the District Court's conclusion that Congress was unaware of what it accomplished, or that it was misled by the groups that appeared before it. If this test were applied literally to every member of any legislature that ever voted on a law, there would be very few laws which would survive it. The language of the statute is clear, and we have historically assumed that Congress intended what it enacted. To be sure, appellee lost a political battle in which he had a strong interest, but this is neither the first nor the last time that such a result will occur in the legislative forum. What we have said is enough to dispose of the claims that Congress not only failed to accept appellee's argument as to restructuring in toto, but that such failure denied him equal protection of the laws guaranteed by the Fifth Amendment. [n12] [p180]
For the foregoing reasons, the judgment of the District Court is
1. Under the old Act, as under the new, an employee who worked 10 years in the railroad business qualified for railroad retirement benefits. If the employee also worked outside the railroad industry for a sufficient time to qualify for social security benefits, he qualified for dual benefits. Due to the formula under which those benefits were computed, however, persons who split their employment between railroad and nonrailroad employment received dual benefits in excess of the amount they would have received had they not split their employment. For example, if 10 years of either railroad or nonrailroad employment would produce a monthly benefit of $300, an additional 10 years of the same employment at the same level of creditable compensation would not double that benefit, but would increase it by some lesser amount to say $500. If that 20 years of service had been divided equally between railroad and nonrailroad employment, however, the social security benefit would be $300 and the railroad retirement benefit would also be $300, for a total benefit of $600. The $100 difference in the example constitutes the "windfall" benefit. See generally, S.Rep. No. 93-1163, pp. 2-3 (1974); H.R.Rep. No. 93-1345, pp. 2-3 (1974).
2. The relevant Committee Reports stated:
Resolution of the so called "dual benefit" problem is central both to insuring the fiscal soundness of the railroad retirement system and to establishing equitable retirement benefits for all railroad employees.
S.Rep. No. 93-1163, supra at 11; H.R.Rep. No. 93-1345, supra at 11. The reason for the problem was that a financial interchange agreement entered into in 1951 between the social security and railroad systems caused the entire cost of the windfall benefits to be borne by the railroad system, not the social security system. The annual drain on the railroad system amounted to approximately $450 million per year, and if it were not for "the problem of dual beneficiaries, the railroad retirement system would be almost completely solvent." S.Rep. No. 93-1163, supra at 8; H.R.Rep. No. 93-1345, supra at 7.
3. S.Rep. No. 93-1163, supra at 1; H.R.Rep. No. 93-1345, supra at 1. Congress eliminated future accruals of windfall benefits by establishing a two-tier system for benefits. The first tier is measured by what the social security system would pay on the basis of combined railroad and nonrailroad service, while the second tier is based on railroad service alone. However, both tiers are part of the railroad retirement system, rather than the first tier being placed directly under social security, and the benefits actually paid by social security on the basis of nonrailroad employment are deducted so as to eliminate the windfall benefit.
The Railroad Retirement Act of 1974 had its origins in 1970 when Congress created the Commission on Railroad Retirement to study the actuarial soundness of the railroad retirement system. The Commission submitted its report in 1972, and identified "dual benefits and their attendant windfalls" as a principal cause of the system's financial difficulties. It also found that windfall benefits were inequitable, favoring those employees who split their employment over those employees who spent their entire career in the railroad industry. Report of the Commission on Railroad Retirement, The Railroad Retirement System: Its Coming Crisis, H.R. Doc. No. 92-350 (1972). It therefore recommended that future accruals of windfall benefits be eliminated by the establishment of a two-tier system, somewhat similar to the type of system eventually adopted by Congress. It also recommended that "legally vested rights of railroad workers" be preserved. An employee who was fully insured under both the railroad and social security systems as of the changeover date (i.e., by having at least 10 years of railroad employment and the requisite length of social security employment) was deemed to have "legally vested rights."
Following receipt of the Commission's report, Congress requested members of management, labor, and retirees to form a Joint Labor Management Railroad Retirement Negotiating Committee (hereinafter referred to as the Joint Committee) and submit a report, "tak[ing] into account" the recommendations of the Commission. The Joint Committee outlined its proposals in the form of a letter to Congress, dated April 10, 1974. 120 Cong.Rec. 18391-18392 (1974). Although it agreed with the Commission that future accruals of windfall benefits be eliminated, it differed as to the protection to be afforded those already statutorily entitled to benefits, and recommended the transitional provisions that were eventually adopted by Congress. A bill embodying those principles was drafted and submitted to Congress, where the relevant committees held lengthy hearings and submitted detailed Reports. See S.Rep. No. 93-1163, supra; H.R.Rep. No. 93-1345, supra.
4. Section 3(h) of the Railroad Retirement Act of 1974, 88 Stat. 1323, 45 U.S.C. § 231b(h), provides in pertinent part:
(1) The amount of the annuity . . . of an individual who (A) will have (i) rendered service as an employee to an employer, or as an employee representative, during the calendar year 1974, or (ii) had a current connection with the railroad industry on December 31, 1974, or at the time his annuity under section 2(a)(1) of this Act began to accrue, or (iii) completed twenty-five years of service prior to January 1, 1975, and (b) will have (i) completed ten years of service prior to January 1, 1975, and (ii) been permanently insured under the Society Security Act on December 31, 1974, shall be increased by an amount equal to [the amount of windfall dual benefit he would have received prior to January 1, 1975]. . . .
(2) The amount of the annuity . . . to an individual who (A) will not have met the conditions set forth in subclause (i), (ii), or (iii) of clause( A) of subdivision (1) of this subsection, but (b) will have (i) completed ten years of service prior to January 1, 1975, and (ii) been permanently insured under the Social Security Act as of December 31 of the calendar year prior to 1975 in which he last rendered service as an employee to an employer, or as an employee representative, shall be increased by an amount equal to the amount . . . [of windfall benefit calculated at time he left the railroad service]. . . .
The relevant Committee Reports stated that the most "difficult problem" was the "manner in which dual benefits should be phased out on an equitable basis." S.Rep. No. 93-1163, supra at 11; H.R.Rep. No. 931345, supra at 11.
5. 88 Stat. 1353, see note following 45 U.S.C. § 231. The transition provisions in Title II of the bill are not included in the United States Code. The windfall amount for retired employees is preserved by §§ 204(a)(3) and (4) of the Act.
6. The term "current connection" is defined in 45 U.S.C. § 231(o) to mean, in general, employment in the railroad industry in 12 of the preceding 30 calendar months.
7. The amount of the "windfall component" is greater under subsection (1) than under subsection (2) of 45 U.S.C. § 231b(h). The former consists of benefits computed on the basis of social security service through December 31, 1974, while the latter is computed on the basis of social security service only through the year in which the individual left the railroad industry. The difference corresponds to the different dates by which the retired employee must have been permanently insured under the Social Security Act in order to be eligible for any windfall benefit.
the Fifth Amendment contains no equal protection clause, it does forbid discrimination that is "so unjustifiable as to be violative of due process."
Schneider v. Rusk, 377 U.S. 163, 168 (1964). Thus, if a federal statute is valid under the equal protection component of the Fifth Amendment, it is perforce valid under the Due Process Clause of that Amendment. Richardson v. Belcher, 404 U.S. 78, 81 (1971).
9. It is somewhat unclear precisely who is and is not within the class certified by the District Court. By its terms, the class certified by the District Court would appear to include those employees who qualified for reduced windfall benefits under § 231b(h)(2) by reason of their qualifying for social security benefits as of the year they left the railroad industry. It appears, however, that the District Court intended to include in the class only those, like appellee Fritz, who subsequently qualified for social security benefits and who are therefore ineligible for even the reduced windfall benefit.
10. This opinion and JUSTICE BRENNAN's dissent cite a number of equal protection cases, including Lindsley v. Natural Carbonic Gas Co., 220 U.S. 61 (1911); F. S. Royster Guano Co. v. Virginia, 253 U.S. 412 (1920); Morey v. Doud, 354 U.S. 457 (1957); Flemming v. Nestor, 363 U.S. 603 (1960); Massachusetts Board of Retirement v. Murgia, 427 U.S. 307 (1976); New Orleans v. Dukes, 427 U.S. 297 (1976); Johnson v. Robison, 415 U.S. 361 (1974); United States Dept. of Agriculture v. Moreno, 413 U.S. 528 (1973); United States Dept. of Agriculture v. Murry, 413 U.S. 508 (1973); Weinberger v. Wiesenfeld, 420 U.S. 636 (1975); and James v. Strange, 407 U.S. 128 (1972). The most arrogant legal scholar would not claim that all of these cases applied a uniform or consistent test under equal protection principles. And, realistically speaking, we can be no more certain that this opinion will remain undisturbed than were those who joined the opinion in Lindsley, supra, Royster Guano Co., supra, or any of the other cases referred to in this opinion and in the dissenting opinion. But like our predecessors and our successors, we are obliged to apply the equal protection component of the Fifth Amendment as we believe the Constitution requires, and, in so doing, we have no hesitation in asserting, contrary to the dissent, that where social or economic regulations are involved Dandridge v. Williams, 397 U.S. 471 (1970), and Jefferson v. Hackney, 406 U.S. 535 (1972), together with this case, state the proper application of the test. The comments in the dissenting opinion about the proper cases for which to look for the correct statement of the equal protection rational basis standard, and about which cases limit earlier cases, are just that: comments in a dissenting opinion
11. The "current connection" test has been used since 1946 as an eligibility requirement for both occupational disability and survivor annuities, 45 U.S.C. §§ 231a(a)(1)(iv), 231a(d)(1) (ch. 709, §§ 203, 205, 213, 60 Stat. 726-735), and it has been used since 1966 in determining eligibility for a supplemental annuity. 45 U.S.C. § 231a(b)(1). (Pub.L. 89-699, § 1, 80 Stat. 1073.)
Appellee contends that the "current connection" test is impermissible because it draws a distinction not on the duration of employment, but rather on the time of employment. But this Court has clearly held that Congress may condition eligibility for benefits such as these on the character as well as the duration of an employee's ties to an industry. Mathews v. Diaz, 426 U.S. 67, 83 (1976).
12. As we have recently stated:
The Constitution presumes that, absent some reason to infer antipathy, even improvident decisions will eventually be rectified by the democratic process, and that judicial intervention is generally unwarranted no matter how unwisely we may think a political branch has acted.
Vance v. Bradley, 440 U.S. 93, 97 (1979) (footnote omitted) .