EMPLOYER, EMPLOYEE REPRESENTATIVE, AND EMPLOYEE TIER 2 TAX RATE ADJUSTMENTS.

SEC. 204. EMPLOYER, EMPLOYEE REPRESENTATIVE, AND EMPLOYEE TIER 2 TAX RATE ADJUSTMENTS. (a) Rate of Tax on Employers.—Subsection (b) of section 3221 is amended to read as follows: “(b) Tier 2 Tax.— “(1) In general.—In addition to other taxes, there is hereby imposed on every employer an excise tax, with respect to having individuals in his employ, equal to the applicable percentage of the compensation paid during any calendar year by such employer for services rendered to such employer. “(2) Applicable percentage.—For purposes of paragraph (1), the term ‘applicable percentage’ means— “(A) 15.6 percent in the case of compensation paid during 2002, “(B) 14.2 percent in the case of compensation paid during 2003, and “(C) in the case of compensation paid during any calendar year after 2003, the percentage determined under section 3241 for such calendar year.”. (b) Rate of Tax on Employee Representatives.—Section 3211, as amended by section 203, is amended by striking subsection (a) and inserting the following new subsections: “(a) Tier 1 Tax.—In addition to other taxes, there is hereby imposed on the income of each employee representative a tax equal to the applicable percentage of the compensation received during any calendar year by such employee representative for services rendered by such employee representative. For purposes of the preceding sentence, the term ‘applicable percentage’ means the percentage equal to the sum of the rates of tax in effect under subsections (a) and (b) of section 3101 and subsections (a) and (b) of section 3111 for the calendar year. “(b) Tier 2 Tax.— “(1) In general.—In addition to other taxes, there is hereby imposed on the income of each employee representative a tax equal to the applicable percentage of the compensation received during any calendar year by such employee representatives for services rendered by such employee representative. “(2) Applicable percentage.—For purposes of paragraph (1), the term ‘applicable percentage’ means— “(A) 14.75 percent in the case of compensation received during 2002, “(B) 14.20 percent in the case of compensation received during 2003, and “(C) in the case of compensation received during any calendar year after 2003, the percentage determined under section 3241 for such calendar year.115 STAT. 892 “(c) Cross Reference.— “For application of different contribution bases with respect to the taxes imposed by subsections (a) and (b), see section 3231(e)(2).”. (c) Rate of Tax on Employees.—Subsection (b) of section 3201 is amended to read as follows: “(b) Tier 2 Tax.— “(1) In general.—In addition to other taxes, there is hereby imposed on the income of each employee a tax equal to the applicable percentage of the compensation received during any calendar year by such employee for services rendered by such employee. “(2) Applicable percentage.—For purposes of paragraph (1), the term ‘applicable percentage’ means— “(A) 4.90 percent in the case of compensation received during 2002 or 2003, and “(B) in the case of compensation received during any calendar year after 2003, the percentage determined under section 3241 for such calendar year.”. (d) Determination of Rate.—Chapter 22 is amended by adding at the end the following new subchapter: “Subchapter E—Tier 2 Tax Rate Determination “Sec. 3241. Determination of tier 2 tax rate based on average account benefits ratio. “SEC. 3241. DETERMINATION OF TIER 2 TAX RATE BASED ON AVERAGE ACCOUNT BENEFITS RATIO. “(a) In General.—For purposes of sections 3201(b), 3211(b), and 3221(b), the applicable percentage for any calendar year is the percentage determined in accordance with the table in subsection (b). “(b) Tax Rate Schedule.— “Average account benefits ratio Applicable percentage for sections 3211(b) and 3221(b) Applicable percentage for section 3201(b) At least But less than 2.5 22.1 4.9 2.5 3.0 18.1 4.9 3.0 3.5 15.1 4.9 3.5 4.0 14.1 4.9 4.0 6.1 13.1 4.9 6.1 6.5 12.6 4.4 6.5 7.0 12.1 3.9 7.0 7.5 11.6 3.4 7.5 8.0 11.1 2.9 8.0 8.5 10.1 1.9 8.5 9.0 9.1 0.9 9.0 8.2 0 “(c) Definitions Related to Determination of Rates of Tax.— “(1) Average account benefits ratio.—For purposes of this section, the term ‘average account benefits ratio’ means, with respect to any calendar year, the average determined by the Secretary of the account benefits ratios for the 10 most recent fiscal years ending before such calendar year. If the115 STAT. 893amount determined under the preceding sentence is not a multiple of 0.1, such amount shall be increased to the next highest multiple of 0.1. “(2) Account benefits ratio.—For purposes of this section, the term ‘account benefits ratio’ means, with respect to any fiscal year, the amount determined by the Railroad Retirement Board by dividing the fair market value of the assets in the Railroad Retirement Account and of the National Railroad Retirement Investment Trust (and for years before 2002, the Social Security Equivalent Benefits Account) as of the close of such fiscal year by the total benefits and administrative expenses paid from the Railroad Retirement Account and the National Railroad Retirement Investment Trust during such fiscal year. “(d) Notice.—No later than December 1 of each calendar year, the Secretary shall publish a notice in the Federal Register of the rates of tax determined under this section which are applicable for the following calendar year.”. (e) Conforming Amendments.— (1) Section 24(d)(3)(A)(iii) is amended by striking “section 3211(a)(1)” and inserting “section 3211(a)”. (2) Section 72(r)(2)(B)(i) is amended by striking “3211(a)(2)” and inserting “3211(b)”. (3) Paragraphs (2)(A)(iii)(II) and (4)(A) of section 3231(e) are amended by striking “3211(a)(1)” and inserting “3211(a)”. (4) Section 3231(e)(2)(B)(ii)(I) is amended by striking “3211(a)(2)” and inserting “3211(b)”. (5) The table of subchapters for chapter 22 is amended by adding at the end the following new item: “Subchapter E. Tier 2 tax rate determination.”. (f) Effective Date.—The amendments made by this section shall apply to calendar years beginning after December 31, 2001.