United States Railroad Retirement Board v. Fritz

In 1974, Congress passed the Railroad Retirement Act that fundamentally restructured the railroad retirement system. Under the previous system established by statute in 1937, a person who worked for both railroad and non-railroad employers and who qualified for railroad retirement benefits and social security benefits received not only benefits under both systems, but also an accompanying “windfall” benefit. This payment of windfall benefits severely threatened the railroad retirement system with bankruptcy. Congress thus passed the 1974 Act to eliminate future accruals of these benefits. However, the Act also included a grandfather provision which expressly preserved windfall benefits for some classes of employees. The practical effect of the grandfather provision was that an individual who, as of the changeover date for the legislation, was not retired and had ten years of railroad employment and sufficient non-railroad employment to qualify for social security benefits, was eligible for the full windfall amount if he worked for or had a current connection with the railroad in 1974. However, an un-retired individual with twenty-four years of railroad service and sufficient non-railroad service to qualify for social security benefits was not eligible for a full windfall amount unless he worked for or had a current connection with the railroad as of 1974 or a later retirement date. Additionally, an employee with ten years of railroad employment who qualified for social security benefits only after leaving the railroad industry would 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. Fritz (plaintiff) was a railroad employee that fell into the last category in that he was not eligible for dual benefits when he retired from the railroad but later became eligible when he acquired social security benefits. He brought suit in federal district court against the United States Railroad Retirement Board (defendant), seeking to recover part of his reduced windfall benefit on the grounds that the Railroad Retirement Act violated the Fifth Amendment of the Constitution. The district court held for Fritz, and the United States Railroad Retirement Board appealed to the United States Supreme Court.