Sequestration cuts unemployment, sickness benefits

As a result of recently implemented budget cuts, the U.S. Railroad Retirement Board (RRB) must reduce railroad unemployment and sickness insurance benefits by 9.2 percent.

These reductions stem from a sequestration order which President Obama filed on March 1, 2013, in accordance with the requirements of the Budget Control Act of 2011. The sequestration order sets aside a total of $6 million in funding under the railroad unemployment and sickness insurance program. Given the total amount of spending under the program, a cut of this size made benefit reductions necessary.

The 9.2 percent reduction in railroad unemployment benefits will reduce the maximum daily benefit rate from $66 to just under $60. As a result, the total maximum amount payable in a two-week period covering 10 days of unemployment will drop from $660 to $599.28.

Certain railroad sickness benefits are reduced for regular Tier I railroad retirement taxes of 7.65 percent. Applying the additional 9.2 percent reduction to these benefits will result in a daily benefit rate of $55.34 and a maximum two-week payment of $553.44.

The maximum daily benefit rate will increase to $68 on July 1, 2013. For days of unemployment and sickness after that date, the reduction will result in a maximum daily benefit rate of $61.74 and a maximum two-week payout of $617.44. The maximum daily benefit rate for sickness benefits subject to Tier I payroll taxes will be $57.02, with a maximum two-week total of $570.21.

The total sequestration is actually spread out over nine years. This initial reduction will remain in effect through Sept. 30, 2013. The initial reduction amount is based upon projected claims and benefits and may be adjusted as needed. Congress will subsequently determine the amount of any reductions in future years. In addition, any appropriations subsequently enacted in fiscal year 2013 could also result in changes to the reduction amount.

The law exempts social security benefits, as well as railroad retirement, survivor, and disability benefits paid by the RRB, from sequestration.

In fiscal year 2012, the RRB paid $11.3 billion in retirement and survivor benefits to about 573,000 beneficiaries, and net unemployment-sickness benefits of $89 million to about 26,000 claimants.

The following questions and answers on these reductions were provided by the Railroad Retirement Board:

Q. Why are UI/SI benefits impacted by the sequestration when they are funded by the railroads, not the federal government?

A.  The Budget Control Act of 2011 mandated the reduction and can only be rescinded by the Congress and the President.

Q.   If the sequester issue is resolved, will the reduced portion of the UI/SI benefits be restored?

A.   We cannot answer this question since it would depend on the final legislative agreement passed by Congress and signed by the President. 

Q.  How was the 9.2 percent reduction in unemployment and sickness benefits determined?

A.  The reduction amount of 9.2 percent in the payment of RUIA benefits was determined by law. 

Q.  Will the sequestration have an impact on extended benefits, including the benefits provided for in the American Taxpayer Relief Act of 2012?

A.  Yes, the 9.2 percent reduction applies to both regular/current UI benefits, as well as extended benefits funded thru the American Taxpayer Relief Act of 2012.

Q. When did the reduction in unemployment and sickness benefits begin? 

 A. The reduction of 9.2 percent applies to benefits paid for days beginning March 1, 2013, or later.  For instance, in an unemployment claim for the period 02/24/13 thru 3/9/13, the days 2/24-28 would be paid at the full DBR of $66, while the days 3/1-9 would be paid at the reduced rate.

Q.  How long will the reduction in my unemployment benefits last?

A.  Currently, the reduction for both unemployment and sickness benefits is expected to continue thru Sept. 30, 2013.

Q.  How much will I get paid?

A.  If a claimant’s daily benefit rate is $66.00 and all days are claimed in a 14-day registration period, the gross amount of benefits payable for the claim will be reduced by $60.72 (9.2 percent x $660.00).  Instead of a maximum payment of $660.00 for a full 14-day claim, the maximum payment will be $599.28.  

If the claim is for sickness benefits subject to Tier I railroad retirement taxes, there is a further reduction of 7.65 percent or $45.84.  The maximum payment after Tier I tax withholding will be $553.44.

Q.  Will the sequestration affect the whole UI claim or just parts of it?

A.  The reduction in the amount of unemployment and sickness benefits applies to all days payable beginning March 1.

Q.  Does sequestration affect the payment of my railroad retirement, disability or survivor benefits?

A.  No, any retirement, disability and survivor benefits paid under the Railroad Retirement Act are not affected and will continue to be paid in full.

Q.  Since sickness benefits are being reduced, will this also affect my disability retirement benefits?

A.  No, monthly disability retirement benefits are not affected by sequestration and will continue to be paid in full.

Q.  Will the sequestration affect my retirement benefits even though I have not yet retired?

A.  No. 

Q.  Are any RRB offices going to be closed or operate with reduced hours, especially since it has been rumored SSA offices will going to a four-day work week?

A.  No, all RRB field offices will continue to be open to the public from 9:00 a.m. – 3:30 p.m. Monday-Friday (except for federal holidays.) 

Q.  Does the sequester affect federal workers or the operations of the Railroad Retirement Board?

A.  Most federal agencies will have to furlough employees as a result of sequestration.  The RRB, which has experienced significant staff decreases over the past several years, does not expect, at this time, to furlough its employees.  However, the RRB will not be able to hire sufficient staff to replace those employees who have retired over the past several years.