Railroad Retirement benefit recipients who have a qualifying child and didn’t file a 2018 or 2019 tax return have a limited window to register to have $500 per eligible child added automatically to their soon-to-be-received $1,200 COVID-19 payment, the Internal Revenue Service said Monday.
A quick trip to a special non-filer tool on IRS.gov by noon Eastern time, Wednesday, April 22, may help put all of their eligible Economic Income Payment into a single payment, the agency said in a news release.
“We want to ‘Plus $500’ these recipients with children so they can get their maximum Economic Impact Payment of $1,200 plus $500 for each eligible child as quickly as possible,” said IRS Commissioner Chuck Rettig. “They’ll get $1,200 automatically, but they need to act quickly and register at IRS.gov to get the extra $500 per child added to their payment. These groups don’t normally have a return filing obligation and may not realize they qualify for a larger payment. We’re asking people and organizations throughout the country to share this information widely and help the IRS with the Plus $500 Push.”
If the Wednesday deadline is missed, RRB beneficiaries who don’t normally file a tax return and do not register with the IRS by April 22, will still be eligible to receive the separate payment of $500 per qualifying child. Their payment at this time will be $1,200 and, by law, the additional $500 per eligible child amount would be paid in association with a return filing for tax year 2020. They will not be eligible to use the Non-Filer tool to add eligible children once their $1,200 payment has been issued, the IRS said.
Rights to benefits under the Railroad Retirement Act also carry responsibilities for reporting events that may affect the payment of these benefits to the employee or to members of the employee’s family. If these events are not reported, benefit overpayments can occur that have to be repaid, sometimes with interest and penalties.
Events that can affect the payment of a Railroad Retirement annuity and result in overpayments if not promptly reported include:
entitlement to Social Security or certain other benefits, and changes in the amount of such benefit payments;
post-retirement work activity and the receipt of earnings by age and service annuitants;
post-retirement work activity, whether earnings are received or not, by disability annuitants;
the death of an annuitant;
a change in marital status;
a child leaving the care of a spouse or widow(er);
a student ceasing full-time school attendance.
The following questions and answers describe how these events affect Railroad Retirement benefits and what should be done to prevent overpayments.
How can the awarding of Social Security benefits result in a Railroad Retirement annuity overpayment?
The Tier I portion of a Railroad Retirement annuity is based on both the Railroad Retirement and Social Security credits acquired by an employee and figured under Social Security formulas. It approximates what Social Security would pay if railroad work were covered by Social Security. Tier I benefits are, therefore, reduced by the amount of any actual Social Security benefit paid on the basis of non-railroad employment, in order to prevent a duplication of benefits based on the same earnings.
The Tier I dual benefit reduction also applies to the annuity of an employee qualified for Social Security benefits on the earnings record of another person, such as a spouse. And, the Tier I portion of a spouse, divorced spouse or survivor annuity is reduced for any Social Security entitlement, even if the Social Security benefit is based on the spouse’s, divorced spouse’s or survivor’s own earnings. These reductions follow principles of Social Security law which limit payment to the higher of any two or more benefits payable to an individual at one time.
If a Railroad Retirement annuitant is also awarded a Social Security benefit, in most cases a combined monthly dual benefit payment will be issued by the Railroad Retirement Board (RRB). The Social Security Administration determines the amount of the Social Security benefit due, and the RRB determines the amount of the Railroad Retirement annuity due. (As stated above, the Tier I portion of a Railroad Eetirement annuity is reduced by the amount of the Social Security benefit due.)
A person should notify the RRB when he or she files for Social Security benefits. If the Social Security Administration begins paying benefits directly to a Railroad Retirement annuitant without the RRB’s knowledge, a Tier I overpayment will occur. This frequently happens when a railroad employee’s spouse or widow(er) is awarded Social Security benefits not based on the employee’s earnings.
Also, annuitants who are receiving their Social Security benefits directly from the Social Security Administration must notify the RRB if their Social Security benefits are subsequently increased for any reason other than annual cost-of-living increases, such as a recomputation to reflect post-retirement earnings. As such recomputations are usually retroactive, they can result in substantial Tier I overpayments.
While Social Security benefit information is provided to the RRB as a result of routine information exchanges between the RRB and the Social Security Administration, it will generally not be provided in time to avoid such a benefit overpayment.
What other types of benefit payments, besides Social Security benefits, require dual benefit reductions in a Railroad Retirement annuity?
For employees first eligible for a Railroad Retirement annuity and a federal, state or local government pension after 1985, there may be a reduction in Tier I for receipt of a public pension based, in part or in whole, on employment not covered by Social Security or Railroad Retirement after 1956. This may also apply to certain other payments not covered by Social Security, such as payments from a non-profit organization or from a foreign government or a foreign employer. However, it does not include military service pensions, payments by the Department of Veterans Affairs or certain benefits payable by a foreign government as a result of a totalization agreement between that government and the United States.
The Tier I portion of a spouse or widow(er)’s annuity may also be reduced for receipt of any federal, state or local government pension separately payable to the spouse or widow(er) based on her or his own earnings. The reduction generally does not apply if the employment on which the public pension is based was covered under the Social Security Act throughout the last 60 months of public employment. In addition, most military service pensions and payments from the Department of Veterans Affairs will not cause a reduction. Pensions paid by a foreign government or interstate instrumentality will also not cause a reduction.
If an employee is receiving a disability annuity, Tier I benefits for the employee and spouse may, under certain circumstances, be reduced for receipt of workers’ compensation or public disability benefits.
If annuitants become entitled to any of the above payments, they should promptly notify the RRB. If there is any question as to whether a payment requires a reduction in an annuity, an RRB field office should be contacted.
Can post-retirement work activity and earnings cause Railroad Retirement overpayments?
Unreported post-retirement work activity and earnings in non-railroad employment (including self-employment) are a major cause of overpayments in Railroad Retirement annuities. Like Social Security benefits, Railroad Retirement Tier I benefits paid to employees and spouses, plus Tier I and Tier II benefits paid to survivors, are subject to deductions if post-retirement earnings exceed certain exempt amounts, which increase annually. (For information on how post-retirement work activity and earnings affect disability annuitants, please see Question 4.)
These earnings deductions do not apply to those who have attained full Social Security retirement age. Under the Social Security Act, full retirement age for employees and spouses is age 66 for those born from 1943 through 1954 and gradually increases to age 67 for those born in 1960 or later. Full retirement age for survivor annuitants ranges from age 66 for those born from 1945 through 1956 to age 67 for those born in 1962 or later.
For those under full retirement age throughout 2019, the exempt earnings amount is $17,640. For beneficiaries attaining full retirement age in 2019, the exempt earnings amount is $46,920 for the months before the month full retirement age is attained. Prior to the calendar year in which full retirement age is attained, the earnings deduction is $1 in benefits for every $2 of earnings over the exempt amount. For those attaining full retirement age during a calendar year, the deduction is $1 for every $3 of earnings over the exempt amount in the months before the month full retirement age is attained.
Annuitants who work after retirement and expect that their earnings for a year will be more than the annual exempt amount must promptly notify the nearest RRB field office and furnish an estimate of their expected earnings. This way their annuities can be adjusted to take the excess earnings into consideration and prevent an overpayment. Annuitants whose original estimate changes significantly during the year, either upwards or downwards, should also notify the RRB.
Retired employees and spouses, regardless of age, who work for their last pre-retirement non-railroad employer are also subject to an earnings deduction in their Tier II and Railroad Retirement supplemental annuity benefits, if applicable, of $1 for every $2 in earnings up to a maximum reduction of the lesser of 50 percent of the earnings or Tier II and supplemental benefits combined. This earnings restriction does not change from year to year and does not allow for an exempt amount. Retired employees and spouses should therefore promptly notify the RRB if they return to employment for their last pre-retirement non-railroad employer or if the amount of their earnings from such employment changes.
A spouse benefit is subject to reductions not only for the spouse’s earnings, but also for the earnings of the employee, regardless of whether the earnings are from service for the last pre-retirement non-railroad employer or any other post-retirement employment. An annuity paid to a divorced spouse may continue despite the employee’s work activity. However, the employee’s non-railroad earnings over the annual earnings exempt amount may reduce a divorced spouse benefit.
How do post-retirement work activity and earnings affect disability annuities?
Any work performed by a disabled annuitant — whether for payment or not — may be considered an indication of recovery from disability and therefore must be reported promptly to avoid potential overpayments.
In addition, special restrictions limiting earnings to $950 per month in 2019, exclusive of disability-related work expenses, apply to disabled Railroad Retirement employee annuitants. These disability work restrictions apply until the disabled employee annuitant attains full retirement age which, as stated earlier, ranges from age 66 to age 67, depending on the year of birth. These work restrictions apply even if the annuitant has 30 years of railroad service. Also, a disabled employee annuitant who works for his or her last pre-retirement non-railroad employer would be subject to the additional earnings deduction that applies in these cases.
What effect does railroad work have on an annuity?
No Railroad Retirement annuity is payable for any month in which an employee, spouse or survivor annuitant performs compensated service for a railroad or railroad union. This includes local lodge compensation for more than $24.99 in a calendar month, and work by a local lodge or division secretary collecting insurance premiums, regardless of the amount of salary.
What should be done when a Railroad Retirement annuitant dies?
The RRB should be notified immediately upon the death of any retirement or survivor annuitant. Payment of a Railroad Retirement annuity stops upon an annuitant’s death and the annuity is not payable for any day in the month of death. This is true regardless of how late in the month death occurs and there is no provision for prorating such a payment. Any payments received after the annuitant’s death must be returned. The sooner the RRB is notified, the less chance there is of payments continuing and an overpayment accruing. The RRB would also determine whether any survivor benefits due are payable by the RRB or the Social Security Administration.
What are some other events that can affect payments to auxiliary beneficiaries, such as spouses, divorced spouses and widow(er)s?
A spouse or divorced spouse must immediately notify the RRB if the railroad employee upon whose service the annuity is based dies. A spouse must notify the RRB if her or his marriage to the railroad employee ends in divorce or annulment and a widow(er) or divorced spouse must notify the RRB if she or he remarries.
Also, benefits paid to spouses, widow(er)s and surviving divorced spouses that are based on the beneficiary caring for the employee’s unmarried child are normally terminated by the RRB when the child attains age 18 (age 16 for a surviving divorced spouse) or if a disabled child over age 18 (age 16 for a surviving divorced spouse) recovers from the disability. Therefore, the RRB must be notified if the child leaves the beneficiary’s care or marries.
Benefits are also payable to an unmarried child age 18 in full-time attendance at an elementary or secondary school or in approved home schooling until the student attains age 19 or the end of the school term in progress when the student attains age 19. (In most cases where a student attains age 19 during the school term, benefits are limited to the two months following the month age 19 is attained.) These benefits will be terminated earlier if the student marries, graduates or ceases full-time attendance. Therefore, the RRB must be notified promptly to prevent an overpayment.
Can an annuitant contest a decision that he or she has been overpaid?
Annuitants who believe a decision regarding a benefit overpayment is incorrect may ask for reconsideration and/or waiver of the overpayment. If not satisfied with the result of the initial review, the annuitant may appeal to the RRB’s Bureau of Hearings and Appeals. Further appeals can be carried to the three-member board itself and beyond the board to federal courts.
Annuitants are told about these appeal rights any time a decision is made regarding a benefit overpayment.
How can an annuitant find out if an event might affect his or her Railroad Retirement benefit payments?
Individuals should contact an RRB field office to determine if an event will affect their benefit payments. In any situation, the best rule is “If in doubt, report.” A Field Office Locator at RRB.gov provides easy access to every field office webpage where the street address and other service information is posted, as well as the option to email an office directly using the feature labeled Send a Secure Message. The agency’s toll-free number, 1-877-772-5772, is equipped with an automated menu offering a variety of service options, including being transferred to an office to speak with a representative, leave a message or find the address of a local field office. The agency also maintains a TTY number, 312-751-4701, to accommodate those with hearing or speech impairments. Most RRB offices are open to the public on weekdays from 9 a.m. to 3:30 p.m., except on Wednesdays when offices are open from 9 a.m. to noon. RRB offices are closed on federal holidays.
Railroad employees frequently ask the Railroad Retirement Board (RRB) how the acceptance of a buyout from a railroad employer affects their future eligibility for benefits under the Railroad Retirement and Railroad Unemployment Insurance Acts. The following questions and answers provide information on this subject.
1. Would leaving railroad work and accepting a buyout mean that an employee forfeits any future entitlement to an annuity under the Railroad Retirement Act?
As long as an employee has acquired at least 10 years (120 months) of creditable rail service, or 5 years (60 months) of creditable service if such service was performed after 1995, he or she would still be eligible for a regular railroad retirement annuity upon reaching retirement age, or, if totally disabled, for an annuity before retirement age, regardless of whether or not a buyout was ever accepted.
However, if a person permanently leaves railroad employment before attaining retirement age, the employee may not be able to meet the requirements for certain other benefits, particularly the current connection requirement for annuities based on occupational, rather than total, disability and for supplemental annuities paid by the RRB to career employees.
In addition, if an employee does not have a current connection, the Social Security Administration, rather than the RRB, would have jurisdiction of any survivor benefits that become payable on the basis of the employee’s combined railroad retirement and social security covered earnings. The survivor benefits payable by the RRB are generally greater than those paid by the Social Security Administration.
2. How are buyout payments treated under the Railroad Retirement and Railroad Unemployment Insurance Acts?
Buyout payments that result from the abolishment of an employee’s job are creditable as compensation under the Railroad Retirement and Railroad Unemployment Insurance Acts. While the actual names of these employer payments may vary, the treatment given them by the RRB will depend upon whether the employee relinquished or retained his or her job rights. If the employee relinquishes job rights to obtain the compensation, the RRB considers the payment a separation allowance. This compensation is credited to either the month last worked or, if later, the month in which the employee relinquishes his or her employment relationship. While all compensation subject to tier I payroll taxes is considered in the computation of a railroad retirement annuity, no additional service months can be credited after the month in which rights are relinquished.
The RRB considers the buyout payment a dismissal allowance, even though the employer might designate the payment as a separation allowance, if the employee retains job rights and receives monthly payments credited to the months for which they are allocated under the dismissal allowance agreement. This is true even if the employee relinquishes job rights after the end of the period for which a monthly dismissal allowance was paid. However, supplemental unemployment or sickness benefits paid under an RRB-approved nongovernmental plan by a railroad or third party are not considered compensation for railroad retirement purposes.
3. Suppose an employee is given a choice between (1) accepting a separation allowance, relinquishing job rights and having the payment he or she receives credited to one month or (2) accepting a dismissal allowance, retaining job rights and having the payment credited to the months for which it is allocated. What are some of the railroad retirement considerations the employee should keep in mind?
Individual factors such as an employee’s age and service should be considered.
For example, if an employee is already eligible to begin receiving a railroad retirement annuity, he or she may find it advantageous to relinquish job rights, accept a separation allowance, and have the annuity begin on the earliest date allowed by law. Any periodic payments made after that date would not preclude payment of the annuity because the employee has relinquished job rights.
On the other hand, some younger employees may find it more advantageous to retain job rights and accept monthly compensation payments under a dismissal allowance if these payments would allow them to acquire 120 months of creditable rail service (or 60 months of creditable rail service if such service was performed after 1995) and establish future eligibility for a railroad retirement annuity. Also, additional service months might allow a long-service employee to acquire 30 years of service, which is required for early retirement at age 60, or 25 years of rail service, which is required for supplemental annuities paid by the RRB. Establishing 25 years of service could also aid an employee in maintaining a current connection under the Railroad Retirement Act.
4. How would acquiring 25 years of railroad service assist an employee in maintaining a current connection?
The current connection requirement is normally met if the employee has railroad service in at least 12 of the last 30 consecutive months before retirement or death. If an employee does not qualify on this basis but has 12 months of service in an earlier 30-month period, he or she may still meet the requirement if the employee does not work outside the railroad industry in the interval following the 30-month period and the employee’s retirement, or death if that occurs earlier. Nonrailroad employment in that interval will likely break the employee’s current connection.
However, a current connection can be maintained for purposes of supplemental and survivor annuities, but not occupational disability annuities, if the employee completed 25 years of railroad service, was involuntarily terminated without fault from his or her last job in the railroad industry, and did not thereafter decline an offer of employment in the same class or craft in the railroad industry, regardless of the distance to the new position. If all of these requirements are met, an employee’s current connection may not be broken, even if the employee works in regular nonrailroad employment after the 30-month period and before retirement or death. This exception to the normal current connection requirements became effective October 1, 1981, but only for employees still living on that date who left the rail industry on or after October 1, 1975, or who were on leave of absence, on furlough, or absent due to injury on October 1, 1975.
5. Would the acceptance of a buyout have any effect on determining whether an employee could maintain a current connection under the exception provision?
In cases where an employee has no option to remain in the service of his or her employer, the termination of the employment is considered involuntary, regardless of whether the employee does or does not receive a separation or dismissal allowance.
However, an employee who chooses a separation allowance instead of keeping his or her seniority rights to railroad employment would, for railroad retirement purposes, generally be considered to have voluntarily terminated railroad service, and, consequently, would not maintain a current connection under the exception provision.
6. An employee with 25 years of service is offered a buyout with the option of either taking payment in a single lump sum, or receiving monthly payments until retirement age. Could the method of payment affect the employee’s current connection under the exception provision?
If the employee had the choice to remain in employer service and voluntarilyrelinquished job rights prior to accepting the payments, his or her current connection would not be maintained under the exception provision, regardless of which payment option is chosen. Therefore, nonrailroad work after the 30-month period and before retirement, or the employee’s death if earlier, could break the employee’s current connection. Such an employee could only meet the current connection requirement under the normal procedures.
7. Is it always advantageous to maintain a current connection?
While a current connection is generally advantageous for railroad retirement purposes, the costs of maintaining a current connection could outweigh its value, depending on individual circumstances. There may be other financial or personal factors involved besides railroad retirement eligibility and/or the preservation of a current connection, and these will vary from individual to individual.
8. Are separation and dismissal allowances subject to railroad retirement payroll taxes?
Under the Railroad Retirement Tax Act, which is administered by the Internal Revenue Service, payments of compensation, including most buyouts, are subject to tier I, tier II and Medicare taxes on earnings up to the annual maximum earnings bases in effect when the compensation is paid. This is true whether payment is made in a lump sum or on a periodic basis.
To the extent that a separation allowance does not yield additional tier II railroad retirement service credits, a lump sum, approximating part or all of the railroad retirement tier II payroll taxes deducted from the separation allowance, will be paid upon retirement to employees meeting minimum service requirements or their survivors. This lump sum applies to separation allowances made after 1984.
If an employee receives a dismissal allowance, he or she receives service credits for the tier II taxes deducted from the dismissal allowance payments. Consequently, such a lump sum would not be payable.
If an employee has an option about how a buyout is to be distributed, he or she should consider the impact of both payroll taxes and income tax on the payments. Employees with questions in this regard should contact the payroll department of their railroad employer and/or the Internal Revenue Service.
9. Would an employee be able to receive unemployment or sickness benefits paid by the RRB after accepting a separation allowance?
An employee who accepts a separation allowance cannot receive unemployment or sickness benefits for roughly the period of time it would have taken to earn the amount of the allowance at his or her straight-time rate of pay. This is true regardless of whether the allowance is paid in a lump sum or installments. For example, if an employee’s salary was $3,000 a month without overtime pay and the allowance was $12,000, he or she would be disqualified from receiving benefits for approximately four months.
10. Can an employee receive unemployment benefits after his or her separation allowance disqualification period has ended?
An employee who has not obtained new employment by the end of the disqualification period and is still actively seeking work may be eligible for unemployment benefits at that time. The employee must meet all the usual eligibility requirements, including the availability for work requirement. An employee can establish his or her availability for work by demonstrating a willingness to work and making significant efforts to obtain work. In judging the employee’s willingness to work, the RRB considers, among other factors, the reason the employee accepted the separation allowance and the extent of his or her work-seeking efforts during the disqualification period.
11. How would the acceptance of a dismissal allowance affect an employee’s eligibility for unemployment and sickness benefits?
Payments made under a dismissal allowance would be considered remuneration under the Railroad Unemployment Insurance Act and the employee would not be eligible for unemployment or sickness benefits during the period the dismissal allowance is being paid. The employee may, of course, be eligible for benefits after the end of this period if he or she is still actively seeking work or is unable to work because of illness or injury.
12. Where can employees get more specific information on how benefits payable by the RRB are affected by a buyout?
Employees can get more information online or by phone. Field Office Locator at RRB.gov provides easy access to every field office webpage where the street address and other service information is posted, as well as the option to email an office directly using the feature labeled ‘Send a Secure Message’. The agency’s toll-free number, 1-877-772-5772, is equipped with an automated menu offering a variety of service options, including being transferred to an office to speak with a representative, leave a message, or find the address of a local field office. The agency also maintains a TTY number, 312-751-4701, to accommodate those with hearing or speech impairments. Most RRB offices are open to the public on weekdays from 9:00 a.m. to 3:30 p.m., except on Wednesdays when offices are open from 9:00 a.m. to 12:00 p.m. RRB offices are closed on federal holidays.
Most railroad retirement annuities, like social security benefits, will increase in January 2019 due to a rise in the Consumer Price Index (CPI) from the third quarter of 2017 to the corresponding period of the current year.
Cost-of-living increases are calculated in both the tier I and tier II benefits included in a railroad retirement annuity. Tier I benefits, like social security benefits, will increase by 2.8 percent, which is the percentage of the CPI rise. Tier II benefits will go up by 0.9 percent, which is 32.5 percent of the CPI increase. Vested dual benefit payments and supplemental annuities also paid by the Railroad Retirement Board (RRB) are not adjusted for the CPI change.
In January 2019, the average regular railroad retirement employee annuity will increase $60 a month to $2,808 and the average of combined benefits for an employee and spouse will increase $86 a month to $4,078. For those aged widow(er)s eligible for an increase, the average annuity will increase $34 a month to $1,398. However, widow(er)s whose annuities are being paid under the Railroad Retirement and Survivors’ Improvement Act of 2001 will not receive annual cost-of-living adjustments until their annuity amount is exceeded by the amount that would have been paid under prior law, counting all interim cost-of-living increases otherwise payable. Some 52 percent of the widow(er)s on the RRB’s rolls are being paid under the 2001 law.
If a railroad retirement or survivor annuitant also receives a social security or other government benefit, such as a public service pension, the increased tier I benefit is reduced by the increased government benefit. Tier II cost-of-living increases are not reduced by increases in other government benefits. If a widow(er) whose annuity is being paid under the 2001 law is also entitled to an increased government benefit, her or his railroad retirement survivor annuity may decrease.
However, the total amount of the combined railroad retirement widow(er)’s annuity and other government benefits will not be less than the total payable before the cost-of-living increase and any increase in Medicare premium deductions.
The cost-of-living increase follows a tier 1 increase of 2.0 percent in January 2018, which had been the largest in 6 years. The Centers for Medicare and Medicaid Services recently announced the Medicare Part B premiums for 2019, and this information is available at www.medicare.gov.
In late December the RRB will mail notices to all annuitants providing a breakdown of the annuity rates payable to them in January 2019.
The Seattle Times reports that a Seattle man who took advantage of the Railroad Retirement disability program for decades will receive prison time and have to pay back double the more than $177,000 he took.
Paul LaMarche, 67, claimed disability in 1988 and began receiving RRB annuities, the paper reported.
The paper said that inspectors from the RRB, along with the Coast Guard, began an investigation and found that LaMarche had started a charter boat service and claimed no disability on forms submitted to the Coast Guard to establish that business.
In addition, pictures and videos surfaced of LaMarche doing physical activities, such as paddleboard yoga, to promote his boating business, the paper reported.
He was sentenced to nine months in prison and ordered to pay back $354,738.
Under the Railroad Retirement Act, a “current connection with the railroad industry” is one of the eligibility requirements for occupational disability annuities and is one of the factors that determines whether the Railroad Retirement Board (RRB) or the Social Security Administration has jurisdiction over the payment of monthly benefits to survivors of a railroad employee. It is also one of the eligibility requirements for supplemental annuities.
The following questions and answers describe the current connection requirement and the ways the requirement can be met.
1.How is a current connection determined under the Railroad Retirement Act?
To meet the current connection requirement, an employee must generally have been credited with railroad service in at least 12 months of the 30 months immediately preceding the month his or her railroad retirement annuity begins. If the employee died before retirement, railroad service in at least 12 months in the 30 months before the month of death will meet the current connection requirement for the purpose of paying survivor benefits.
However, if an employee does not qualify on this basis, but has 12 months of service in an earlier 30-month period, he or she may still meet the current connection requirement. This alternative generally applies if the employee did not have any regular employment outside the railroad industry after the end of the last 30-month period which included 12 months of railroad service, and before the month the annuity begins or the date of death.
Once a current connection is established at the time the railroad retirement annuity begins, an employee never loses it, no matter what kind of work is performed thereafter.
2.Can nonrailroad work before retirement break a former railroad employee’s current connection?
Yes. Full or part-time work for a nonrailroad employer in the interval between the end of the last
30-month period including 12 months of railroad service and the month an employee’s annuity begins, or the month of death if earlier, can break a current connection, even where the earnings are minimal.
Self-employment in an unincorporated business will not break a current connection. However, if the business is incorporated the individual is considered to be an employee of the corporation, and such self-employment can break a current connection.
Federal employment with the Department of Transportation, National Transportation Safety Board, Surface Transportation Board, National Mediation Board, Railroad Retirement Board or Transportation Security Administration will not break a current connection. State employment with the Alaska Railroad, as long as that railroad remains an entity of the State of Alaska, will not break a current connection. Also, railroad service in Canada for a Canadian railroad will neither break nor preserve a current connection.
3.Are there any exceptions to these normal procedures for determining a current connection?
A current connection can also be maintained, for purposes of survivor and supplemental annuities, but not for an occupational disability annuity, if the employee completed 25 years of railroad service, was involuntarily terminated without fault from his or her last job in the railroad industry, and did not thereafter decline an offer of employment in the same class or craft in the railroad industry regardless of the distance to the new position.
If all of these requirements are met, an employee’s current connection may not be broken, even if the employee works in regular nonrailroad employment after the 30-month period and before retirement or death. This exception to the normal current connection requirement became effective October 1, 1981, but only for employees still living on that date who left the rail industry on or after October 1, 1975, or who were on leave of absence, on furlough or absent due to injury on October 1, 1975.
4.Would the acceptance of a buy-out have any effect on determining whether an employee could maintain a current connection under this exception provision?
Generally, in cases where an employee has no option to remain in the service of his or her railroad employer, the termination of the employment is considered involuntary, regardless of whether the employee does or does not receive a buy-out.
However, if an employee has the choice of either accepting a position in the same class or craft in the railroad industry or termination with a buy-out, accepting the buy-out is a part of his or her voluntary termination, and the employee would not maintain a current connection under the exception provision.
5.An employee with 25 years of service is offered a buy-out with the option of either taking payment in a single lump sum or of receiving monthly payments until retirement age. Could the method of payment affect the employee’s current connection under the exception provision?
The employee must always relinquish job rights in order to accept the buy-out, regardless of whether it is paid in a lump sum or in monthly payments. Neither payment option would extend the 30-month period. The determining factor for the exception provision to apply when a buy-out is paid is not the payment option. It is whether or not the employee stopped working involuntarily.
An employee considering accepting a buy-out should also be aware that if he or she relinquishes job rights to accept the buy-out, the compensation cannot be used to credit additional service months beyond the month in which the employee severed his or her employment relation, regardless of whether payment is made in a lump sum or on a periodic basis.
6.What if the buy-out agreement allows the employee to retain job rights and receive monthly payments until retirement age?
The RRB considers the buy-out to be a dismissal allowance. When a monthly dismissal allowance is paid, the employee retains job rights, at least until the end of the period covered by the dismissal allowance. If the period covered by the dismissal allowance continues up to the beginning date of the railroad retirement annuity, railroad service months would be credited to those months. These railroad service months would provide at least 12 railroad service months in the 30 months immediately before the annuity beginning date and maintain a regular current connection. They will also increase the number of railroad service months used in the calculation of the railroad retirement annuity.
7.Could the exception provision apply in cases where an employee has 25 years of railroad retirement coverage and a company reorganization results in the employee’s job being placed under social security coverage?
The exception provision has been considered applicable by the RRB in cases where a 25-year employee’s last job in the railroad industry changed from railroad retirement coverage to social security coverage and the employee had, in effect, no choice available to remain in railroad-retirement-covered service. Such 25-year employees have been deemed to have a current connection for purposes of survivor and supplemental annuities.
8.Where can a person get more specific information on the current connection requirement?
More information is available by visiting the RRB’s website, RRB.gov,or by calling an RRB office toll-free at 1-877-772-5772. Persons can also find the address of the RRB office servicing their area by calling the toll-free number, or by clicking on the Field Office Locator tab at RRB.gov. Most RRB offices are open to the public on weekdays from 9:00 a.m. to 3:30 p.m., except on Wednesdays when offices are open from 9:00 a.m. to 12:00 p.m. RRB offices are closed on Federal holidays.
The chief actuary of the Railroad Retirement Board (RRB) said in his triennial report that the railroad retirement fund will remain solvent with no cash flow problems for nearly three decades, barring any unforeseen drops in rail worker employment over that time.
The positive forecast led the reviewers to conclude that the RRB payroll tax structure should remain unchanged at present, yet they also warned that future job losses could jeopardize the system in years to come.
“The long-term stability of the system, however, is not assured,” Chief Actuary Frank J. Buzzi and his staff wrote. “Under the current financing structure, actual levels of railroad employment and investment return over the coming years will determine whether additional corrective action is necessary.”
Chief Actuary Frank Buzzi and his staff said in the report, submitted by RRB in mid-June to President Donald Trump, Vice President Michael Pence and Speaker of the House Paul Ryan, that cash flow for rail retirement appears stable until 2047.
“The conclusion is that, barring a sudden, unanticipated, large drop in railroad employment of substantial investment losses, the railroad retirement system will experience no cash flow problems during the next 29 years.” Frank Buzzi and his staff wrote.
The review assumed three scenarios for passenger and freight railroad employment from 2017 and the years after and projected the status of the system out to 2091.
Scenario 1 (optimistic): Average railroad employment starts at 223,000, with passenger employment steady at 48,000 workers and a constant annual decline in freight rail employment of 0.5 percent for 25 years at a reducing rate over the next 25 years and then remaining level thereafter.
Scenario 2 (moderate): Average railroad employment starts at 223,000, with passenger employment steady at 48,000 with a constant annual decline in freight rail employment of 2 percent for 25 years, at a reducing rate over the next 25 years, and remain level thereafter.
Scenario 3 (pessimistic): Average railroad employment starts at 223,000, with a decline of 500 workers per year in passenger employment until it stabilizes at 40,000; freight employment would decline at a constant annual rate of 3.5 percent for 25 years, then at a reducing rate over the next 25 years, and remain level thereafter.
Only in the third scenario, with the loss of 122,000 workers over the 29 years, did the railroad retirement system run into cash troubles in 2047.
Held constant in the review were variables such as earnings (3.6 percent), cost-of-living increases (2.6 percent) and investment returns (7 percent). Also kept constant were non-economic factors such as mortality, disability, retirements and withdrawal.
SMART Transportation Division National Legislative Director John Risch addressed the National Association of Retired and Veteran Railway Employees (NARVRE) in Council Bluffs, Iowa, on May 21, touching on the current national political climate and the need for retirees to step up to protect what is rightfully theirs amid renewed attacks on unions.
“What is happening in D.C. is what I call ‘an erosion of civility,'” Risch told attendees at NARVRE’s 41st Biennial Convention at the Hilton Garden Inn. “Add to that erosion the closeness of the numbers in each house of Congress, and you have a keen focus on the next election, not a keen focus on what’s right for our country.”
An explosion in deficit spending caused by the tax cuts and spending bills passed by Congress at the end of last year once again has fueled talk by some politicians of cutting so-called entitlements.
Politicians’ eyes see the nest egg of Railroad Retirement — the result of the hard work of current and past railroaders — and would love to dive into that pension plan, Risch told the retirees.
NARVRE, an advocacy group out of Mississippi, has worked to preserve Railroad Retirement benefits for more than 80 years for members of all rail unions.
“When Speaker Paul Ryan and his crew talk about the need to rein in ‘entitlements,’ you need to know that what they want to cut is your Railroad Retirement benefits and reduce your Medicare coverage,” he said. “Something you already paid for, but since the government used the money for things like tax cuts for the railroads, they want to break the agreements that were made with all of us.”
Those attacks should rouse retirees and active workers alike to action, Risch said.
“When the debt and deficit debate starts in earnest, we need NARVRE, and more importantly, NARVRE members to shout out: ‘No to any cuts in our pension, Medicare and Medicaid.’ Our union, of course, will be there, but we can’t do it alone,” Risch said. “Your grassroots response is the only thing that will stop substantial cuts to these vital safety nets.”
Greedy corporate interests also are looking to tear unions down these days. The Janus case pending in the U.S. Supreme Court could kill “union security clauses,” allowing those who don’t pay dues to leech off public unions, he told attendees.
“It’s Janus and public employees today, and the rest of us will be next,” Risch said.
Other threats include the potential of automation to further whittle away railroad jobs and for politicians to eliminate Amtrak in the name of savings. These scenarios would have a catastrophic effect on Railroad Retirement’s sustainability.
But speaking out can help preserve what Risch calls the “crown jewel” that rail workers created.
“It’s not NARVRE or the rail unions that will protect our pension,” he said. “It’s the grassroots efforts of our members and people like all of you in this room — people who demand of their congressional delegation that Amtrak gets the money it needs; who demand that Congress keep their hands off our Railroad Retirement and Medicare,” Risch said.
“The good news is very few Americans are politically active, meaning those that are have far more clout then they should. So I’m calling on each of you to use that clout. Call your elected representatives, attend their town hall meetings and speak out. That’s what’s effective.”
The office of Walter Barrows, the labor member of the Railroad Retirement Board (RRB) announced changes to the board’s 2018 slate of informational meetings in a release distributed Wednesday.
Rail union officials and any interested rail employees within five years of retirement and their spouses are able to register for combined informational conference/pre-retirement seminars this year at the following dates and locations:
• March 23 in Roseville, Calif.;
• May 11 in Altoona, Pa.;
• Sept 21 in Bellevue, Wash.;
• Nov. 16 in Houston;
• Dec. 7 in Jacksonville, Fla.
The RRB still plans separate conferences and seminars at additional locations across the country. The board will post a schedule in the future on the RRB’s website (www.rrb.gov).
RRB field service managers will lead the combined programs and present the various railroad retirement benefits available to employees and their families and informational materials to attendees. The combined programs will close with a separate brief presentation spotlighting railroad unemployment and sickness benefits that will be conducted for those rail officials in attendance only.
More details on the informational programs, including registration forms, dates and exact meeting locations, will be available at www.RRB.gov under either Informational Conference Program or Pre-Retirement Seminars.
Railroad retirement annuities, like social security benefits, will not increase in January 2016 as there was no increase in the Consumer Price Index (CPI) from the third quarter of last year to the corresponding period of the current year.
Also, because there is no cost-of-living adjustment (COLA), social security law prohibits an increase in the amounts social security and railroad retirement beneficiaries subject to earnings restrictions can earn in 2016 without having their benefits reduced.
For those under full retirement age throughout 2016, the exempt earnings amount remains at $15,720. For beneficiaries attaining full retirement age in 2016, the exempt earnings amount, for the months before the month full retirement age is attained, remains at $41,880 in 2016.
For employee and spouse annuitants, full retirement age ranges from age 65 for those born before 1938 to age 67 for those born in 1960 or later. For survivor annuitants, full retirement age ranges from age 65 for those born before 1940 to age 67 for those born in 1962 or later.
Special work restrictions continue to be applicable to disability annuitants. In 2016, the monthly disability earnings limit will increase to $880, up from $850 in 2015.
Regardless of age and/or earnings, no railroad retirement annuity is payable for any month in which an annuitant (retired employee, spouse or survivor) works for a railroad employer or railroad union.
The Centers for Medicare & Medicaid Services has not yet announced Medicare Part B premium changes for 2016. The law includes a “hold harmless” provision that provides the Medicare Part B premium will not increase for most current enrollees if there is no cost-of-living adjustment to social security benefits. However, this does not apply to new Medicare enrollees or certain high-income Medicare beneficiaries.
Information about Medicare premiums for 2016, when available, will be found at www.medicare.gov.
Employers and employees covered by the Railroad Retirement Act pay higher retirement taxes than those covered by the Social Security Act, so that railroad retirement benefits remain higher than social security benefits, especially for “career” employees who have 30 or more years of service.
The following questions and answers show the differences in railroad retirement and social security benefits payable at the close of the fiscal year ending Sept. 30, 2013. They also show the differences in age requirements and payroll taxes under the two systems.
1. How do the average monthly railroad retirement and social security benefits paid to retired employees and spouses compare?
The average age annuity being paid by the Railroad Retirement Board (RRB) at the end of fiscal year 2013 to career rail employees was $3,080 a month, and for all retired rail employees the average was $2,450. The average age retirement benefit being paid under social security was over $1,270 a month. Spouse benefits averaged $915 a month under railroad retirement compared to $615 under social security.
The Railroad Retirement Act also provides supplemental railroad retirement annuities of between $23 and $43 a month, which are payable to employees who retire directly from the rail industry with 25 or more years of service.
2. Are the benefits awarded to recent retirees generally greater than the benefits payable to those who retired years ago?
Yes, because recent awards are based on higher average earnings. Age annuities awarded to career railroad employees retiring at the end of fiscal year 2013 averaged about $3,625 a month while monthly benefits awarded to workers retiring at full retirement age under social security averaged nearly $1,765. If spouse benefits are added, the combined benefits for the employee and spouse would total $4,985 under railroad retirement coverage, compared to $2,645 under social security. Adding a supplemental annuity to the railroad family’s benefit increases average total benefits for current career rail retirees to over $5,015 a month.
3. How much are the disability benefits currently awarded?
Disabled railroad workers retiring directly from the railroad industry at the end of fiscal year 2013 were awarded almost $2,885 a month on the average while awards for disabled workers under social security averaged approximately $1,210.
While both the Railroad Retirement and Social Security Acts provide benefits to workers who are totally disabled for any regular work, the Railroad Retirement Act also provides disability benefits specifically for employees who are disabled for work in their regular railroad occupation. Employees may be eligible for such an occupational disability annuity at age 60 with 10 years of service, or at any age with 20 years of service.
4. Can railroaders receive benefits at earlier ages than workers under social security?
Railroad employees with 30 or more years of creditable service are eligible for regular annuities based on age and service the first full month they are age 60, and rail employees with less than 30 years of creditable service are eligible for regular annuities based on age and service the first full month they are age 62.
No early retirement reduction applies if a rail employee retires at age 60 or older with 30 years of service and his or her retirement is after 2001, or if the employee retired before 2002 at age 62 or older with 30 years of service.
Early retirement reductions are otherwise applied to annuities awarded before full retirement age, the age at which an employee can receive full benefits with no reduction for early retirement. This ranges from age 65 for those born before 1938 to age 67 for those born in 1960 or later, the same as under social security.
Under social security, a worker cannot begin receiving retirement benefits based on age until age 62, regardless of how long he or she worked, and social security retirement benefits are reduced for retirement prior to full retirement age regardless of years of coverage.
5. Does social security offer any benefits that are not available under railroad retirement?
Social security does pay certain types of benefits that are not available under railroad retirement. For example, social security provides children’s benefits when an employee is disabled, retired or deceased. Under current law, the Railroad Retirement Act only provides children’s benefits if the employee is deceased.
However, the Railroad Retirement Act includes a special minimum guaranty provision which ensures that railroad families will not receive less in monthly benefits than they would have if railroad earnings were covered by social security rather than railroad retirement laws. This guaranty is intended to cover situations in which one or more members of a family would otherwise be eligible for a type of social security benefit that is not provided under the Railroad Retirement Act. Therefore, if a retired rail employee has children who would otherwise be eligible for a benefit under social security, the employee’s annuity can be increased to reflect what social security would pay the family.
6. How much are monthly benefits for survivors under railroad retirement and social security?
Survivor benefits are generally higher if payable by the RRB rather than social security. At the end of fiscal year 2013, the average annuity being paid to all aged and disabled widow(er)s was $1,465 a month, compared to $1,190 under social security.
Benefits awarded by the RRB at the end of fiscal year 2013 to aged and disabled widow(er)s of railroaders averaged nearly $1,925 a month, compared to almost $945 under social security.
The annuities being paid at the end of fiscal year 2013 to widowed mothers/fathers averaged $1,755 a month and children’s annuities averaged $1,005, compared to $905 and $800 a month for widowed mothers/fathers and children, respectively, under social security.
Those awarded at the end of fiscal year 2013 averaged $2,765 a month for widowed mothers/fathers and $1,380 a month for children under railroad retirement, compared to $880 and $790 for widowed mothers/fathers and children, respectively, under social security.
7. How do railroad retirement and social security lump-sum death benefit provisions differ?
Both the railroad retirement and social security systems provide a lump-sum death benefit. The railroad retirement lump-sum benefit is generally payable only if survivor annuities are not immediately due upon an employee’s death. The social security lump-sum benefit may be payable regardless of whether monthly benefits are also due. Both railroad retirement and social security provide a lump-sum benefit of $255. However, if a railroad employee completed 10 years of creditable railroad service before 1975, the average railroad retirement lump-sum benefit payable is $1,005. Also, if an employee had less than 10 years of service, but had at least 5 years of such service after 1995, he or she would have to have had an insured status under social security law (counting both railroad retirement and social security credits) in order for the $255 lump-sum benefit to be payable.
The social security lump sum is generally only payable to the widow(er) living with the employee at the time of death. Under railroad retirement, if the employee had 10 years of service before 1975, and was not survived by a living-with widow(er), the lump sum may be paid to the funeral home or the payer of the funeral expenses.
8. How do railroad retirement and social security payroll taxes compare?
Railroad retirement payroll taxes, like railroad retirement benefits, are calculated on a two-tier basis. Rail employees and employers pay Tier I taxes at the same rate as social security taxes, 7.65 percent, consisting of 6.20 percent for retirement on earnings up to $117,000 in 2014, and 1.45 percent for Medicare hospital insurance on all earnings. An additional 0.9 percent in Medicare taxes (2.35 percent in total) will be withheld from employees on earnings above $200,000.
In addition, rail employees and employers both pay Tier II taxes which are used to finance railroad retirement benefit payments over and above social security levels.
In 2014, the Tier II tax rate on earnings up to $87,000 is 4.4 percent for employees and 12.6 percent for employers.
9. How much are regular railroad retirement taxes for an employee earning $117,000 in 2014 compared to social security taxes?
The maximum amount of regular railroad retirement taxes that an employee earning $117,000 can pay in 2014 is $12,778.50, compared to $8,950.50 under social security. For railroad employers, the maximum annual regular retirement taxes on an employee earning $117,000 are $19,912.50, compared to $8,950.50 under social security. Employees earning over $117,000, and their employers, will pay more in retirement taxes than the above amounts because the Medicare hospital insurance tax is applied to all earnings.