In addition to the retirement annuities payable to railroad employees, the Railroad Retirement Act, like the Social Security Act, also provides annuities for some spouses of retired employees. Payment of a spouse annuity is made directly to the wife or husband of the employee. Divorced spouses may also qualify for benefits.
The following questions and answers describe the benefits payable to spouses and the eligibility requirements. Information regarding divorced spouses begins with question eight.
1. How are Railroad Retirement spouse annuities computed?
Regular Railroad Retirement annuities are computed under a two-tier formula.
The Tier I portion of an employee’s annuity is based on both Railroad Retirement credits and any Social Security credits that the employee earned. Computed using Social Security benefit formulas, an employee’s Tier I benefit approximates the Social Security benefit that would be payable if all of the employee’s work were performed under the Social Security Act.
The Tier II portion of the employee’s annuity is based on Railroad Retirement credits only, and may be compared to the retirement benefits paid over and above Social Security benefits to workers in other industries.
The spouse annuity formula is based on percentages of the employee’s Tier I and Tier II amounts. The first tier of a spouse annuity, before any applicable reductions, is 50% of the railroad employee’s unreduced Tier I amount. The second tier amount, before any reductions, is 45% of the employee’s unreduced Tier II amount.
2. How does a Railroad Retirement spouse annuity compare to a Social Security spouse benefit?
The average annuity awarded to spouses in fiscal year 2020, excluding divorced spouses, was $1,130 a month, while the average monthly Social Security spouse benefit was about $744.
Annuities awarded in fiscal year 2020 to the spouses of employees who were of full retirement age or over and who retired directly from the rail industry with at least 25 years of service averaged $1,410 a month, and the average award to the spouses of employees retiring at age 60 or over with at least 30 years of service was $1,602 a month.
3. What are the age requirements for a Railroad Retirement spouse annuity?
The age requirements for a spouse annuity depend on the employee’s age, date of retirement and years of railroad service.
If a retired employee with 30 or more years of service is age 60 or older, the employee’s spouse is eligible for an annuity the first full month the spouse is age 60. Certain early retirement reductions are applied if the employee first became eligible for an annuity July 1, 1984, or later and retired at ages 60 or 61 before 2002. If the employee was awarded a disability annuity, has attained age 60, and has 30 years of service, the spouse can receive an unreduced annuity the first full month she or he is age 60, regardless of whether the employee annuity began before or after 2002, as long as the spouse’s annuity beginning date is after 2001.
If a retired employee with less than 30 years of service is age 62 or older, the employee’s spouse is eligible for an annuity the first full month the spouse is age 62. Early retirement reductions are applied to the spouse annuity if the spouse retires prior to full retirement age. The full retirement age for a spouse is gradually rising to age 67, just as for an employee, depending on the year of birth. Reduced benefits are still payable at age 62, but the maximum reduction will be 35% rather than 25% by the year 2022. However, the Tier II portion of a spouse annuity will not be reduced beyond 25% if the employee had any creditable railroad service before August 12, 1983.
4. What if the spouse is caring for a child of the retired employee?
A spouse of an employee who is receiving an age and service annuity (or a spouse of a disability annuitant who is otherwise eligible for an age and service annuity) is eligible for a spouse annuity at any age if caring for the employee’s unmarried child, and the child is under age 18 or a disabled child of any age who became disabled before age 22.
5. What are some of the other general eligibility requirements for a Railroad Retirement spouse annuity?
The employee must have been married to the spouse for at least one year, unless the spouse is the natural parent of their child, or the spouse was eligible or potentially eligible for a Railroad Retirement widow(er)’s, parent’s or disabled child’s annuity in the month before marrying the employee or the spouse was previously married to the employee and received a spouse annuity.
6. Can the same-sex spouse of a railroad employee file for a Railroad Retirement spouse annuity?
Yes, if the same-sex spouse meets current spouse annuity eligibility requirements and follows current application procedures.
7. Are spouse annuities subject to offset for the receipt of other benefits?
Yes. The Tier I portion of a spouse annuity is reduced for any Social Security entitlement, regardless of whether the Social Security benefit is based on the spouse’s own earnings, the employee’s earnings or the earnings of another person. This reduction follows principles of Social Security law which, in effect, limit payment to the higher of any two or more benefits payable to an individual at one time.
The Tier I portion of a spouse annuity may also be reduced for receipt of any federal, state or local government pension separately payable to the spouse based on the spouse’s own earnings. The reduction generally does not apply if the employment on which the public service pension is based was covered under the Social Security Act throughout the last 60 months of public employment. 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 not cause a reduction. For spouses subject to a public service pension reduction, the Tier I reduction is equal to 2/3 of the amount of the public service pension.
In addition, there may be a reduction in the employee’s Tier I amount for receipt of a public pension based, in part or in whole, on employment not covered by Social Security or Railroad Retirement after 1956. If the employee’s Tier I benefit is offset for a non-covered service pension, the spouse Tier I amount is 50% of the employee’s Tier I amount after the offset.
The spouse Tier I portion may also be reduced if the employee is under age 65 and is receiving a disability annuity as well as worker’s compensation or public disability benefits.
While these offsets can reduce or even completely wipe out the Tier I benefit otherwise payable to a spouse, they do not affect the Tier II benefit potentially payable to that spouse.
8. How do the eligibility requirements and benefits differ for a divorced spouse?
A divorced spouse annuity may be payable to the divorced wife or husband of a retired employee if their marriage lasted for at least 10 consecutive years, both have attained age 62 for a full month, and the divorced spouse is not currently married. A divorced spouse can receive an annuity even if the employee has not retired, provided they have been divorced for a period of not less than two years, the employee and former spouse are at least age 62, and the employee is fully insured under the Social Security Act using combined railroad and Social Security earnings. Early retirement reductions are applied to the divorced spouse annuity if the divorced spouse retires prior to full retirement age. Full retirement age for a divorced spouse is gradually rising to age 67, depending on the year of birth.
A divorced spouse is also eligible for an annuity at any age if caring for the employee’s unmarried child, and the child is under age 18, or a disabled child of any age who became disabled before age 22, if the employee is deceased.
Unlike a regular spouse annuity, the divorced spouse annuity is computed under the single-Tier I formula. The amount of a divorced spouse’s annuity is, in effect, equal to what Social Security would pay in the same situation (Tier I only) and therefore less than the amount of the spouse annuity otherwise payable (Tier I and Tier II). The average divorced spouse annuity awarded in fiscal year 2020 was $768.
9. Would the award of an annuity to a divorced spouse affect the monthly annuity rate payable to a retired employee and/or the current spouse?
No. If a divorced spouse becomes entitled to an annuity based on the employee’s railroad service, the award of the divorced spouse’s benefit would not affect the amount of the employee’s annuity, nor would it affect the amount of the Railroad Retirement annuity that may be payable to the current spouse.
10. What if an employee and spouse/divorced spouse are both railroad employees?
If both started railroad employment after 1974, the amount of any spouse or divorced spouse annuity is reduced by the amount of the employee annuity to which the spouse is also entitled. If both the employee and spouse are qualified railroad employees and either had some railroad service before 1975, both can receive separate Railroad Retirement employee and spouse annuities, without a full dual benefit reduction.
11. Are Railroad Retirement annuities subject to garnishment or property settlements?
Yes. Certain percentages of any Railroad Retirement annuity (employee, spouse, divorced spouse or survivor) may be subject to legal process (i.e., garnishment) to enforce an obligation for child support and/or alimony payments.
Employee Tier II benefits and supplemental annuities are subject to court-ordered property divisions in proceedings related to divorce, annulment or legal separation. (Tier I benefits are not subject to property division.) A court-ordered property division payment may be paid even if the employee is not entitled to an annuity provided that the employee has 10 years of railroad service or five years after 1995 and both the employee and former spouse are at least age 62.
12. How can a person get more information about Railroad Retirement spouse and divorced spouse annuities?
Individuals with questions about Railroad Retirement spouse and divorced spouse annuities can send a secure message to their local RRB office by accessing Field Office Locator at RRB.gov and clicking on the link at the bottom of their local office’s page. If a customer needs to talk to an RRB representative, they can call the agency’s toll-free number (1-877-772-5772) between the hours of 9 a.m. and 3 p.m. each weekday, except Federal holidays. However, customers are asked to be patient because of the increase in call volume due to the closure to the public of RRB offices during the COVID-19 pandemic.
Most railroad retirement annuities, like social security benefits, will increase in January 2021 due to a rise in the Consumer Price Index (CPI) from the third quarter of 2019 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 1.3 percent, which is the percentage of the CPI rise. Tier II benefits will go up by 0.4 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 2021, the average regular railroad retirement employee annuity will increase $30 a month to $2,936 and the average of combined benefits for an employee and spouse will increase $42 a month to $4,263. For those aged widow(er)s eligible for an increase, the average annuity will increase $16 a month to $1,453. 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. About 54 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, any cost-of-living increase in that benefit will offset the increased tier I benefit. However, 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 I increase of 1.6 percent in January 2020 and 2.8 percent in January 2019, the latter of which had been the largest in 7 years. The Centers for Medicare and Medicaid Services will announce Medicare Part B premiums for 2021 later this year, and this information will be available then 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 2021.
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, 2018. 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 2018 to career rail employees was $3,525 a month, and for all retired rail employees, the average was $2,815. The average age retirement benefit being paid under Social Security was approximately $1,415 a month. Spouse benefits averaged $1,035 a month under Railroad Retirement compared to $720 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 in fiscal year 2018 averaged about $4,175 a month, while monthly benefits awarded to workers retiring at full retirement age under Social Security averaged nearly $1,915. If spouse benefits are added, the combined benefits for the employee and spouse would total $5,815 under Railroad Retirement coverage, compared to $2,875 under Social Security. Adding a supplemental annuity to the railroad family’s benefit increases average total benefits for current career rail retirees to about $5,850 a month.
3. How much are the disability benefits currently awarded?
Disabled railroad workers retiring directly from the railroad industry in fiscal year 2018 were awarded $3,050 a month on average, while awards for disabled workers under Social Security averaged $1,340.
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. Can the spouse of a railroader receive a benefit at an earlier age than the spouse of a worker under Social Security?
If a retired railroad employee with 30 or more years of service is age 60, the employee’s spouse is also eligible for an annuity the first full month the spouse is age 60.
Certain early retirement reductions are applied if the employee first became eligible for a 60/30 annuity July 1, 1984, or later, and retired at ages 60 or 61 before 2002. If the employee was awarded a disability annuity, has attained age 60 and has 30 years of service, the spouse can receive an unreduced annuity the first full month she or he is age 60, regardless of whether the employee annuity began before or after 2002, as long as the spouse’s annuity beginning date is after 2001.
To qualify for a spouse’s benefit under Social Security, an applicant must be at least age 62, or any age if caring for a child who is entitled to receive benefits based on the applicant’s spouse’s record.
6. 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.
7. 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 2018, the average annuity being paid to all aged and disabled widow(er)s was $1,705 a month, compared to $1,305 under Social Security.
Benefits awarded by the RRB in fiscal year 2018 to aged and disabled widow(er)s of railroaders averaged nearly $2,185 a month, compared to approximately $1,265 under Social Security.
The annuities being paid at the end of fiscal year 2018 to widowed mothers/fathers averaged $1,900 a month and children’s annuities averaged $1,110, compared to $985 and $860 a month for widowed mothers/fathers and children, respectively, under Social Security.
Those awarded in fiscal year 2018 averaged $2,200 a month for widowed mothers/fathers and $1,350 a month for children under Railroad Retirement, compared to $960 and $855 for widowed mothers/fathers and children, respectively, under Social Security.
8. 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 $1,020. 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.
9. 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 $132,900 in 2019, 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 2019, the Tier II tax rate on earnings up to $98,700 is 4.9 percent for employees and 13.1 percent for employers.
10. How much are regular Railroad Retirement taxes for an employee earning $132,900 in 2019 compared to Social Security taxes?
The maximum amount of regular Railroad Retirement taxes that an employee earning $132,900 can pay in 2019 is $15,003.15, compared to $10,166.85 under Social Security. For railroad employers, the maximum annual regular retirement taxes on an employee earning $132,900 are $23,096.55, compared to $10,166.85 under Social Security. Employees earning over $132,900, and their employers, will pay more in retirement taxes than the above amounts because the Medicare hospital insurance tax is applied to all earnings.
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 Act spouse and widow(er)s’ annuities (including divorced spouse, surviving divorced spouse and remarried widow(er)s’ annuities) are subject to reduction when social security benefits or dual railroad retirement annuities are also payable. Such railroad retirement benefits may also be reduced when a spouse or widow(er) is entitled to a public service pension unless certain exemption requirements are met.
Since the payment of railroad retirement spouse or widow(er)s’ annuities can be affected by entitlement to certain other government benefits, such dual entitlement, if not reported to the Railroad Retirement Board (RRB), can result in benefit overpayments which have to be repaid, sometimes with interest and penalties. The following questions and answers describe how payments are adjusted by the RRB for spouse and widow(er) annuitants entitled to public service pensions.
1. For social security or railroad retirement purposes, what is considered a public service pension?
A public service pension is any periodic benefit payment, as well as lump-sum payments made in lieu of periodic payments, based on an individual’s own employment with a Federal, State or local government unit. Some examples are pensions paid to teachers, police officers and civil service personnel on the basis of age or disability. Full salary benefits paid to a retired or resigned judge under the Federal judiciary retirement system are also considered public service pensions.
Most military service pensions and payments from the Department of Veterans Affairs will not cause a reduction. A pension paid by a foreign government or an interstate instrumentality also has no effect on a spouse or widow(er)’s annuity.
2. How is the public service pension reduction applied to railroad retirement spouse or widow(er)s’ annuities?
For spouses and widow(er)s subject to the public service pension reduction, the tier I reduction is, under current law, equal to 2/3 of the amount of the public pension. The amount of the public service pension is the current gross amount, before any deductions for income tax withholding, Medicare premiums, health insurance or other benefits.
3. What is the background of the public service pension reduction in spouse and widow(er)s’ annuities and how does it affect such payments?
The public service pension reduction in social security and railroad retirement spouse and widow(er)s’ benefits was brought about by 1977 social security legislation which also applied to the tier I benefits of railroad retirement spouses and widow(er)s. The tier I portion of a railroad retirement annuity is based on railroad retirement credits and any social security credits an employee has acquired. It is computed under social security formulas and approximates what social security would pay if railroad work were also covered by that system. Tier I benefits are, therefore, reduced in the same manner as social security benefits when certain other benefits are also payable.
4. Are there any provisions that would exempt railroad retirement spouse or widow(er) annuitants from the public service pension offsets?
Generally, in order to be exempt from a public service pension reduction, Federal, State and local government workers must be covered by social security throughout their last 60 months of employment with the pension-paying government entity.
The public pension reduction also does not apply to a spouse or widow(er) who filed for and became entitled to her or his railroad retirement annuity before December 1977, or to a spouse or widow(er) whose public pension is not based on her or his own earnings.
5. Where can more specific information on how these pension offsets affect railroad retirement benefits be obtained?
Persons can contact an RRB field office for information as to how their public service pensions could affect their railroad retirement benefits via the agency’s website, www.rrb.gov, or by calling toll-free at 1-877-772-5772. Most RRB offices are open to the public from 9:00 a.m. to 3:30 p.m., Monday through Friday, except on Federal holidays.
The Railroad Retirement Board (RRB) administers the Railroad Unemployment Insurance Act, which provides two kinds of benefits for qualified railroaders: unemployment benefits for those who become unemployed but are ready, willing and able to work; and sickness benefits for those who are unable to work because of sickness or injury. Sickness benefits are also payable to female rail workers for periods of time when they are unable to work because of pregnancy and childbirth. A new benefit year begins each July 1.
The following questions and answers describe these benefits, their eligibility requirements, and how to claim them.
1. What are the eligibility requirements for railroad unemployment and sickness benefits in July 2014?
To qualify for normal railroad unemployment or sickness benefits, an employee must have had railroad earnings of at least $3,512.50 in calendar year 2013, counting no more than $1,405 for any month. Those who were first employed in the rail industry in 2013 must also have at least five months of creditable railroad service in 2013.
Under certain conditions, employees who do not qualify on the basis of their 2013 earnings may still be able to receive benefits in the new benefit year. Employees with at least 10 years of service (120 or more cumulative months of service) who received normal benefits in the benefit year ending June 30, 2014, may be eligible for extended benefits, and employees with at least 10 years of service (120 or more cumulative months of service) might qualify for accelerated benefits if they have rail earnings of at least $3,600 in 2014, not counting earnings of more than $1,440 a month.
In order to qualify for extended unemployment benefits, a claimant must not have voluntarily quit work without good cause and not have voluntarily retired. To qualify for extended sickness benefits, a claimant must not have voluntarily retired and must be under age 65.
To be eligible for accelerated benefits, a claimant must have 14 or more consecutive days of either unemployment or sickness; not have voluntarily retired or, if claiming unemployment benefits, quit work without good cause; and be under age 65 when claiming sickness benefits.
2. What is the daily benefit rate payable in the new benefit year beginning July 1, 2014?
Almost all employees will qualify for the new maximum daily benefit rate of $70. Benefits are generally payable for the number of days of unemployment or sickness over four in 14-day claim periods, which yields $700 for each two full weeks of unemployment or sickness. Sickness benefits payable for the first 6 months after the month the employee last worked are subject to Tier I railroad retirement payroll taxes, unless benefits are being paid for an on-the-job injury. (Claimants should be aware that as a result of a sequestration order under the Budget Control Act of 2011, the RRB will reduce unemployment and sickness benefits by 7.2 percent through Sept. 30, 2014. As a result, the total maximum amount payable in a 2-week period covering 10 days of unemployment or sickness will drop from $700 to $649.60. The maximum amount payable for sickness benefits subject to Tier I payroll taxes will be $599.91 over two weeks. Future reductions, should they occur, will be calculated based on applicable law.)
3. How long are these benefits payable?
Normal unemployment or sickness benefits are each payable for up to 130 days (26 weeks) in a benefit year. The total amount of each kind of benefit which may be paid in the new benefit year cannot exceed the employee’s railroad earnings in calendar year 2013, counting earnings up to $1,815 per month.
If normal benefits are exhausted, extended benefits are payable for up to 65 days (during 7 consecutive claim periods) to employees with at least 10 years of service (120 or more cumulative service months).
4. What is the waiting-period requirement for unemployment and sickness benefits?
Benefits are normally paid for the number of days of unemployment or sickness over four in 14-day registration periods. Initial sickness claims must also begin with four consecutive days of sickness. However, during the first 14-day claim period in a benefit year, benefits are only payable for each day of unemployment or sickness in excess of seven which, in effect, provides a one-week waiting period. (If an employee has at least five days of unemployment or five days of sickness in a 14-day period, he or she should still file for benefits.) Separate waiting periods are required for unemployment and sickness benefits. However, only one seven-day waiting period is generally required during any period of continuing unemployment or sickness, even if that period continues into a subsequent benefit year.
5. Are there special waiting-period requirements if unemployment is due to a strike?
If a worker is unemployed because of a strike conducted in accordance with the Railway Labor Act, benefits are not payable for days of unemployment during the first 14 days of the strike, but benefits are payable during subsequent 14-day periods.
If a strike is in violation of the Railway Labor Act, unemployment benefits are not payable to employees participating in the strike. However, employees not among those participating in such an illegal strike, but who are unemployed on account of the strike, may receive benefits after the first two weeks of the strike.
While a benefit year waiting period cannot count toward a strike waiting period, the 14-day strike waiting period may count as the benefit year waiting period if a worker subsequently becomes unemployed for reasons other than a strike later in the benefit year.
6. Can employees in train and engine service receive unemployment benefits for days when they are standing by or laying over between scheduled runs?
No, not if they are standing by or laying over between regularly assigned trips or they missed a turn in pool service.
7. Can extra-board employees receive unemployment benefits between jobs?
Yes, but only if the miles and/or hours they actually worked were less than the equivalent of normal full-time work in their class of service during the 14-day claim period. Entitlement to benefits would also depend on the employee’s earnings.
8. How would an employee’s earnings in a claim period affect his or her eligibility for unemployment benefits?
If a claimant’s earnings for days worked, and/or days of vacation or paid leave, in a 14-day registration period are more than a certain indexed amount, no benefits are payable for any days of unemployment in that period. That registration period, however, can be used to satisfy the waiting period.
Earnings include pay from railroad and nonrailroad work, as well as part-time work and self-employment. Earnings also include pay that an employee would have earned except for failure to mark up or report for duty on time, or because he or she missed a turn in pool service or was otherwise not ready or willing to work. For the benefit year that begins July 2014, the amount will be $1,405, which corresponds to the base year monthly compensation amount used in determining eligibility for benefits. Also, even if an earnings test applies on the first claim in a benefit year, this will not prevent the first claim from satisfying the waiting period in a benefit year.
9. How does a person apply for and claim unemployment benefits?
Claimants can file their applications for unemployment benefits, as well as their subsequent biweekly claims, by mail or online.
To apply by mail, claimants must obtain an application from their labor organization, employer, local RRB office or the agency’s website at www.rrb.gov. The completed application should be mailed to the local RRB office as soon as possible and, in any case, must be filed within 30 days of the date on which the claimant became unemployed or the first day for which he or she wishes to claim benefits. Benefits may be lost if the application is filed late.
To file their applications – or their biweekly claims – online, claimants must first establish an RRB online account at www.rrb.gov. Instructions on how to do so are available through the RRB’s website. Employees are encouraged to establish online accounts while still employed so the account is ready if they ever need to apply for these benefits or use other select RRB Internet services. Employees who have already established online accounts do not need to do so again.
The local RRB field office reviews the completed application, whether it was submitted by mail or online, and notifies the claimant’s current railroad employer, and base-year employer, if different. The employer has the right to provide information about the benefit application.
After the RRB office processes the application, biweekly claim forms are mailed to the claimant, and are also available on the RRB’s website, as long as he or she remains unemployed and eligible for benefits. Claim forms should be signed and sent on or after the last day of the claim. This can be done by mail or electronically. The completed claim must be received by an RRB office within 15 days of the end of the claim or the date the claim form was mailed to the claimant or made available online, whichever is later. Claimants must not file both a paper claim and an online claim form for the same period(s).
Only one application needs to be filed during a benefit year, even if a claimant becomes unemployed more than once. However, a claimant must, in such a case, request a claim form from an RRB office within 30 days of the first day for which he or she wants to resume claiming benefits. These claims may then be filed by mail or online.
10. How does a person apply for and claim sickness benefits?
An application for sickness benefits can be obtained from railroad labor organizations, railroad employers, any RRB office or the agency’s website. An application and a doctor’s statement of sickness are required at the beginning of each period of continuing sickness for which benefits are claimed. Claimants should make a special effort to have the doctor’s statement of sickness completed promptly since no claims can be paid without it.
The RRB suggests that employees keep an application on hand for use in claiming sickness benefits, and that family members know where the form is kept and how to use it. If an employee becomes unable to work because of sickness or injury, the employee should complete the application and then have his or her doctor complete the statement of sickness. Employees should note that they must indicate on the application whether they are applying for sickness benefits because they were injured at work or have a work-related illness. They must also indicate whether they have filed or expect to file a lawsuit or claim against a third party for personal injury. If a claimant receives sickness benefits for an injury or illness for which he or she is paid damages, it is important to be aware that the RRB is entitled to reimbursement of either the amount of the benefits paid for the injury or illness, or the net amount of the settlement, after deducting the claimant’s gross medical, hospital, and legal expenses, whichever is less.
If the employee is too sick to complete the application, someone else may do so. In such cases, a family member should also complete Form SI-10, “Statement of Authority to Act for Employee,” which accompanies the statement of sickness.
After completion, the forms should be mailed to the RRB’s headquarters in Chicago by the seventh day of the illness or injury for which benefits are claimed. However, applications received after 10 days but within 30 days of the first day for which an employee wishes to claim benefits are generally considered timely filed if there is a good reason for the delay. After the RRB receives the application and statement of sickness and determines eligibility, biweekly claim forms are mailed to the claimant for completion and return to an RRB field office for processing. The RRB also makes claim forms available for completion online by those employees who establish an online account. The claim forms must be received at the RRB within 30 days of the last day of the claim period, or within 30 days of the date the claim form was mailed to the claimant or made available online, whichever is later. Benefits may be lost if an application or claim is filed late.
Claimants are reminded that while claim forms for sickness benefits can be submitted online, applications and statements of sickness must be returned to the RRB by mail.
11. Is a claimant’s employer notified each time a biweekly claim for unemployment or sickness benefits is filed?
The Railroad Unemployment Insurance Act requires the RRB to notify the claimant’s base-year employer each time a claim for benefits is filed. That employer has the right to submit information relevant to the claim before the RRB makes an initial determination on the claim. In addition, if a claimant’s base-year employer is not his or her current employer, the claimant’s current employer is also notified. The RRB must also notify the claimant’s base-year employer each time benefits are paid to a claimant. The base-year employer may protest the decision to pay benefits. Such a protest does not prevent the timely payment of benefits. However, a claimant may be required to repay benefits if the employer’s protest is ultimately successful.
The RRB also conducts checks with other Federal agencies and all 50 States, as well as the District of Columbia and Puerto Rico, to detect fraudulent benefit claims, and it checks with physicians to verify the accuracy of medical statements supporting sickness benefit claims.
12. How long does it take to receive payment?
Under the RRB’s Customer Service Plan, if a claimant filed an application for unemployment or sickness benefits, the RRB will release a claim form or a denial letter within 10 days of receiving his or her application. If a claim for subsequent biweekly unemployment or sickness benefits is filed, the RRB will certify a payment or release a denial letter within 10 days of the date the RRB receives the claim form. If the claimant is entitled to benefits, benefits will generally be paid within one week of that decision.
However, some claims for benefits may take longer to handle than others if they are more complex, or if an RRB office has to get information from other people or organizations. If this happens, claimants may expect an explanation and an estimate of the time required to make a decision.
Claimants who think an RRB office made the wrong decision about their benefits have the right to ask for review and to appeal. They will be notified of these rights each time an unfavorable decision is made on their claims.
13. How are payments made?
Railroad unemployment and sickness insurance benefits are paid by the U.S. Treasury’s Direct Deposit program. With Direct Deposit, benefit payments are made electronically to an employee’s bank, savings and loan, credit union or other financial institution. New applicants for unemployment and sickness benefits will be asked to provide information needed for Direct Deposit enrollment.
14. How can claimants get more information on railroad unemployment or sickness benefits?
Claimants with questions about unemployment or sickness benefits, or who are seeking information about their claims and benefit payments, can contact an RRB office by calling toll free at (877) 772-5772. Claimants can also access an online service, “View RUIA Account Statement” on the “Benefit Online Services” page at www.rrb.gov, which provides a summary of the unemployment and sickness benefits paid to them. To use this service, claimants must first establish an online account.
Persons can find the address of the RRB office serving their area by calling (877) 772-5772, or by visiting www.rrb.gov. Most RRB offices are open to the public from 9:00 a.m. to 3:30 p.m., Monday through Friday, except on Federal holidays.
The following questions and answers describe the tax statements issued by the Railroad Retirement Board (RRB) each January for federal income tax purposes. Railroad retirement beneficiaries needing information about these statements, or about tax withholding from their benefits, should contact an office of the RRB. For further federal income tax information, railroad retirement beneficiaries should contact the nearest office of the Internal Revenue Service (IRS).
1. How are the annuities paid under the Railroad Retirement Act treated under the federal income tax laws?
A railroad retirement annuity is a single payment comprised of one or more of the following components, depending on the annuitant’s age, the type of annuity being paid, and eligibility requirements: a Social Security Equivalent Benefit (SSEB) portion of Tier I, a Non-Social Security Equivalent Benefit (NSSEB) portion of Tier I, a Tier II benefit, a vested dual benefit, and a supplemental annuity.
In most cases, part of a railroad retirement annuity is treated like a social security benefit for Federal income tax purposes, while other parts of the annuity are treated like private pensions for tax purposes. Consequently, most annuitants are sent two tax statements from the RRB each January, even though they receive only a single annuity payment each month.
2. Which railroad retirement benefits are treated as social security benefits for federal income tax purposes?
The SSEB portion of tier I (the part of a railroad retirement annuity equivalent to a social security benefit based on comparable earnings) is treated for federal income tax purposes the same way as a social security benefit. The amount of these benefits that may be subject to federal income tax, if any, depends on the beneficiary’s income.
If taxable pensions, wages, interest, dividends, and other taxable income, plus tax-exempt interest income, plus half of the amount of the social security equivalent benefit payments exceed:
$25,000 but are less than $34,000 for an individual ($32,000 but are less than $44,000 for a married couple filing jointly), up to 50 percent of these benefits may be considered taxable income.
$34,000 for an individual ($44,000 for a married couple filing jointly), or zero for a married individual who files separately but lived with his or her spouse any part of the year, up to 85 percent of these railroad retirement benefit payments may be taxable income.
3. Which railroad retirement benefits are treated like private pensions for federal income tax purposes?
The NSSEB portion of Tier I, Tier II benefits, vested dual benefits, and supplemental annuities are all treated like private pensions for Federal income tax purposes. In some cases, primarily those in which early retirement benefits are payable to retired employees and spouses between ages 60 and 62, some occupational disability benefits, and other categories of unique RRB entitlements, the entire annuity may be treated like a private pension. This is because social security benefits based on age and service are not payable before age 62, social security disability benefit entitlement requires total disability, and the Social Security Administration does not pay some categories of beneficiaries paid by the RRB.
4. What information is shown on the railroad retirement tax statements sent to annuitants in January?
One statement, Form RRB-1099 for U.S. citizens or residents (or Form RRB-1042S for nonresident aliens), shows the SSEB portion of Tier I or special minimum guaranty payments made during the tax year, the amount of any such benefits that an annuitant may have repaid to the RRB during the tax year, and the net amount of these payments after subtracting the repaid amount. The amount of any offset for workers’ compensation and the amount of federal income tax withheld from these payments are also shown. Illustrations and explanations of items found on Form RRB-1099 and Form RRB-1042S can be found in IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits.
The other statement, Form RRB-1099-R (for both U.S. citizens and nonresident aliens), shows the NSSEB portion of Tier I, Tier II, vested dual benefit, and supplemental annuity paid to the annuitant during the tax year, and may show an employee contribution amount. The NSSEB portion of Tier I along with Tier II are considered contributory pension amounts and are shown as a single combined amount in the Contributory Amount Paid box (Item 4) on the statement. The vested dual benefit and supplemental annuity are considered noncontributory pension amounts and are shown as separate items on the statement. The total gross paid amount shown on Form RRB-1099-R is the sum of the NSSEB portion of Tier I, Tier II, vested dual benefit and supplemental annuity payments. Also shown is the amount of Federal income tax withheld from these payments. The statement also shows the amount of any of these prior year benefits repaid by the annuitant to the RRB during the tax year. This amount is not subtracted from the gross amounts shown because its treatment depends on the years to which the repayment applies and its taxability in those years. To determine the year or years to which the repayment applies, annuitants should contact the RRB. Illustrations and explanations of items found on Form RRB-1099-R can be found in IRS Publication 575, Pension and Annuity Income.
If the annuitant is taxed as a nonresident alien of the United States, Form RRB-1042S and/or Form RRB-1099-R will show the rate of tax withholding (0 percent, 15 percent or 30 percent) and country of residence for income tax purposes. Nonresident aliens may receive more than one set of original tax statement Forms RRB-1042S and/or RRB-1099-R in a tax year if there was a change in the country of residence for income tax purposes, or a change in the rate of income tax applied to annuity payments. Nonresident aliens who resided in the United States for part of a tax year may receive a set of original U.S. citizen tax statement Forms RRB-1099 and/or RRB-1099-R and one or more sets of nonresident alien tax statement Forms RRB-1042S and/or RRB-1099-R.
The total Medicare premiums deducted from the railroad retirement annuity may also be shown on either Form RRB-1099 (Form RRB-1042S for nonresident aliens) or Form RRB-1099-R. Medicare premiums deducted from social security benefits paid by the RRB, paid by a third party, or paid through direct billing are not shown on RRB-issued tax statements.
Copy B and/or Copy 2 of Form RRB-1099-R must be submitted with the annuitant’s tax return. Annuitants should retain copy C of all statements for their records, especially if they may be required to verify their income in connection with other Government programs.
5. What is the significance of the employee contribution amount?
For railroad retirement annuitants, the employee contribution amount is considered the amount of railroad retirement payroll taxes paid by the employee that exceeds the amount that would have been paid in social security taxes if the employee’s railroad service had been covered under the Social Security Act. The employee contribution amount is referred to by the IRS as an employee’s investment, or cost, in the contract. An employee contribution amount is not a payment or income received during the tax year. Only employee and survivor annuitants may have an employee contribution amount shown in Item 3 of their Form RRB-1099-R.
The contributory amount paid (NSSEB portion of Tier I and/or Tier II) is considered income and is reported to the IRS. The contributory amount paid is either fully taxable or partially taxable depending on whether the employee contribution amount has been used to compute a tax-free (nontaxable) portion of the contributory amount paid. If no employee contribution amount is shown on Form RRB-1099-R, then the contributory amount paid is fully taxable.
The use and recovery of the employee contribution amount is important for annuitants since it affects the amount of taxable income to be reported on income tax returns. There is a tax savings advantage in using (recovering) employee contributions since it may reduce the taxability of the contributory amount paid and in turn the amount of taxable income.
Annuitants should refer to IRS Publication 575, Pension and Annuity Income, and Publication 939, General Rule for Pensions and Annuities, for more information concerning the tax treatment of the contributory amount paid (see questions 6 and 7 below) and use of the employee contribution amount.
6. If an employee contribution amount is shown on my Form RRB-1099-R, may I use the entire amount?
The employee contribution amount shown is attributable to the railroad retirement account number. This means that the employee contribution amount must be shared by all eligible annuitants under that same railroad retirement account number.
If an employee contribution amount is shown on your Form RRB-1099-R and your annuity beginning date is July 2, 1986, or later, you may be able to use some or all of the employee contribution amount shown to compute the nontaxable (tax-free) amount of your contributory amount paid. Therefore, your contributory amount paid and total gross paid shown on your Form RRB-1099-R may be partially taxable.
If an employee contribution amount is not shown on your Form RRB-1099-R, you cannot use or share the employee contribution amount. Therefore, your contributory amount paid and total gross paid shown on your Form RRB?1099-R are fully taxable.
When more than one annuitant is or was entitled to a contributory amount paid under the same railroad retirement account number, any eligible annuitants may not use the entire employee contribution amount shown on their Form RRB-1099-R for themselves. They must first determine the amount of the total employee contribution amount they are individually entitled to use. That means determining:
The portion of the total employee contribution amount still potentially available for use, and
The portion of that amount that must be shared by those eligible annuitants currently receiving contributory amounts paid.
For example, a survivor family group consists of a widow and two full-time students. All three annuitants are eligible to use a portion of the employee contribution amount shown on their Forms RRB-1099-R. They must determine the portion of the employee contribution amount they may each use. Question 7 below provides general information on how to calculate this amount. For more specific information, annuitants should refer to IRS Publication 575, Pension and Annuity Income, and Publication 939, General Rule for Pensions and Annuities.
Any change in the total number of eligible annuitants receiving contributory amounts paid will affect the nontaxable amounts of these annuitants. This change is retroactive to the date on which the number of eligible annuitants changed. Any of these changes could potentially affect the taxable amounts reported to the IRS on prior year income tax returns. Annuitants should determine if any change would require them to file original or amended U.S. federal income tax returns for prior tax years. For more specific information, annuitants should refer to IRS Publication 575, Pension and Annuity Income, and Publication 939, General Rule for Pensions and Annuities.
7. How are contributory and noncontributory pension amounts taxed?
Amounts shown on Form RRB-1099-R are treated like private pensions and taxed either as contributory pension amounts or as noncontributory pension amounts. The NSSEB portion of Tier I and Tier II (shown as the contributory amount paid on the statement) are contributory pension amounts. Contributory pension amounts may be fully taxable or partially taxable depending on the presence and use (recovery) of the employee contribution amount. Vested dual benefits and supplemental annuities are considered noncontributory pension amounts. Noncontributory pension amounts are always fully taxable and do not involve the use of the employee contribution amount.
For annuitants with annuity beginning dates before July 2, 1986, the contributory amount paid is fully taxable. These annuitants cannot use the employee contribution amount, even if the amount is shown on Form RRB-1099-R, to compute a nontaxable amount of their contributory amount paid because their employee contribution amount has been fully recovered. Since the contributory amount paid is fully taxable, the total gross pension paid in Item 7 of Form RRB-1099-R is fully taxable.
For annuitants with annuity beginning dates from July 2, 1986, through Dec. 31, 1986, the contributory amount paid may be partially nontaxable for the life of the annuity. These annuitants may be able to use some or all of the employee contribution amount to compute a nontaxable contributory amount paid. Once that nontaxable amount is computed, it does not need to be recomputed and can be used for each tax year unless there is a change in the employee contribution amount, annuity beginning date, date of birth used to determine life expectancy, or the number of eligible annuitants receiving contributory amounts paid. Therefore, the contributory amount paid in Item 4 and the total gross pension paid in Item 7 of Form RRB-1099-R may be partially taxable.
For annuitants with annuity beginning dates effective Jan. 1, 1987, and later, the contributory amount paid may be partially nontaxable for a specified period of time based on life expectancy as determined by IRS actuarial tables. These annuitants may use some or all of the employee contribution amount to compute the nontaxable amount of their contributory amount paid. Once that nontaxable amount is computed, it does not need to be recomputed and can be used for each tax year unless there is a change in the employee contribution amount, annuity beginning date, date of birth used to determine life expectancy, or the number of eligible annuitants receiving contributory amounts paid. Therefore, the contributory amount paid in Item 4 and the total gross pension paid in Item 7 of Form RRB-1099-R may be partially taxable. However, once the specified life expectancy is met, the employee contribution amount is considered fully recovered, and the contributory amount paid and total gross pension paid are both fully taxable.
The contributory amounts paid of disabled employee annuitants under minimum retirement age are fully taxable and these annuitants cannot use the employee contribution amount. Therefore, the contributory amount paid in Item 4 and the total gross pension paid in Item 7 of Form RRB-1099-R are fully taxable. (Minimum retirement age is generally the age at which individuals could retire based on age and service, which is age 60 with 30 or more years of railroad service or age 62 with less than 30 years of railroad service.) However, once the disabled employee annuitant reaches minimum retirement age, the annuitant may use the employee contribution amount shown on Form RRB-1099-R to compute the nontaxable amount of his or her contributory amount paid.
The RRB does not calculate the nontaxable amount of the contributory amount paid for annuitants. Annuitants should contact the IRS or their own tax preparer for assistance in calculating the nontaxable amount of their contributory amount paid. For more information on the tax treatment of the contributory amount paid, vested dual benefits, supplemental annuities, the employee contribution amount, and how to use the IRS actuarial tables, annuitants should refer to IRS Publication 939, General Rule for Pensions and Annuities, and IRS Publication 575, Pension and Annuity Income.
8. Does Form RRB-1099-R show the taxable amount of any contributory railroad retirement benefits or just the total amount of such benefits paid during the tax year?
Form RRB-1099-R shows the total amount of any contributory railroad retirement benefits (NSSEB and tier II) paid during the tax year. The RRB does not calculate the taxable amounts. It is up to the annuitant to determine the taxable and nontaxable (tax-free) amounts of the contributory amount paid using the employee contribution amount.
9. Can an employee contribution amount change?
Yes. The employee contribution amount shown on Form RRB-1099-R is based on the latest railroad service and earnings information available on the RRB’s records. Railroad service and earnings information (and the corresponding employee contribution amount) often changes in the first year after an employee retires from railroad service. That is when the employee’s final railroad service and earnings information is furnished to the RRB by his or her employer. As a result, the employee contribution amount shown on the most recent Form RRB-1099-R may have increased or decreased from a previously-issued Form RRB-1099-R.
Any change in an employee contribution amount is fully retroactive to the railroad retirement annuity beginning date. Therefore, the nontaxable amount of the contributory amount paid should be recomputed. This could affect the taxable amounts reported to the IRS on prior income tax returns. Generally, an increase in the employee contribution amount is advantageous, as it will yield a larger tax-free amount. However, a decrease in the employee contribution amount may be disadvantageous since it may result in an increased tax liability. In any case, annuitants should determine if any change in their employee contribution amount would require them to file original or amended Federal income tax returns for prior tax years.
10. What if a person receives social security as well as railroad retirement benefits?
Railroad retirement annuitants who also received social security benefits during the tax year receive a Form SSA-1099 (or Form SSA-1042S if they are nonresident aliens) from the Social Security Administration. They should add the net social security equivalent or special guaranty amount shown on Form RRB-1099 (or Form RRB-1042S) to the net social security income amount shown on Form SSA-1099 (or Form SSA-1042S) to get the correct total amount of these benefits. They should then enter this total on the Social Security Benefits Worksheet in the instructions for Form 1040 or 1040A to determine if part of their social security and railroad retirement social security equivalent benefits is taxable income.
Additional information on the taxability of these benefits can be found in IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits.
11. Are the residual lump sums, lump-sum death payments or separation allowance lump-sum amounts paid by the RRB subject to federal income tax?
No. These amounts are nontaxable and are not subject to federal income tax. The RRB does not report these amounts on statements.
12. If an annuity was due but unpaid at the time of an annuitant’s death, it may be payable to another person. Would that person be subject to federal income tax on this annuity?
Yes, if the deceased annuitant would have had to pay federal income tax on the benefit. The taxable amount of the annuity is reported to the IRS and on Form RRB-1099 (or Form RRB-1042S) or Form RRB-1099-R, as appropriate, which is sent to the person who received the annuity.
13. Are federal income taxes withheld from railroad retirement annuities?
Yes, and the amounts withheld are shown on the statements issued by the RRB each year. However, an annuitant may request that federal income taxes not be withheld, unless the annuitant is a nonresident alien or a U.S. citizen living outside the 50 States or Washington, D.C.
Annuitants can voluntarily choose to have federal income tax withheld from their SSEB payments. To do so, they must complete IRS Form W-4V, Voluntary Withholding Request, and send it to the RRB. They can choose withholding from their SSEB payments at the following rates: 7 percent, 10 percent, 15 percent, or 25 percent.
Annuitants who are taxed as U.S. citizens and who do not live outside the 50 States or Washington, D.C., and wish to have federal income taxes withheld from their NSSEB and tier II (contributory amount paid), vested dual benefit, and supplemental annuity payments must complete a tax withholding election on Form RRB W-4P, Withholding Certificate For Railroad Retirement Payments, and send it to the RRB. An annuitant is not required to file Form RRB W-4P. If that form is not filed, the RRB will withhold taxes only if the combined portions of the NSSEB and tier II (contributory amount paid), vested dual benefit and supplemental annuity payments are equal to or exceed an annual threshold amount. In that case, the RRB withholds taxes as if the annuitant were married and claiming three allowances.
14. How is tax withholding applied to the railroad retirement benefits of nonresident aliens?
A nonresident alien is a person who is neither a citizen nor a resident of the United States. Under the Internal Revenue Code, nonresident aliens are subject to a 30-percent tax on income from sources within the United States not connected to a U.S. trade or business. The 30-percent rate applies to all annuity payments exceeding social security equivalent payments and to 85 percent of the annuity portion treated as a social security benefit. The Internal Revenue Code also requires the RRB to withhold the tax. The tax can be at a rate lower than 30 percent or can be eliminated entirely if a tax treaty between the United States and the country of residence provides such an exemption, and the nonresident alien completes and sends Form RRB-1001, Nonresident Questionnaire, to the RRB. Form RRB-1001 secures citizenship, residency and tax treaty claim information for nonresident beneficiaries (nonresident aliens or U.S. citizens residing outside the United States).
Form RRB-1001 is sent by the RRB to nonresident aliens every three years to renew the claim for a tax treaty exemption. Failure by a nonresident alien to complete Form RRB-1001 will cause loss of the exemption until the exemption is renewed. Such renewals have no retroactivity. Also, a nonresident alien must include his or her United States taxpayer identifying number on Form RRB-1001. Otherwise, any tax treaty exemption claimed on the form is not valid. The majority of nonresident aliens receiving annuities from the RRB are citizens of Canada, which has a tax treaty with the United States.
If a Canadian citizen claims an exemption under the tax treaty, no tax is withheld from the SSEB portion of Tier I and a tax withholding rate of 15 percent is applied to the benefit portions treated like pension payments.
Additional information concerning the taxation of nonresident aliens can be found in IRS Publication 519, U.S. Tax Guide for Aliens.
15. Are unemployment benefits paid under the Railroad Unemployment Insurance Act subject to federal income tax?
All unemployment benefit payments are subject to federal income tax. Each January, the RRB sends Form 1099-G to individuals, showing the total amount of railroad unemployment benefits paid during the previous year.
16. Are sickness benefits paid by the RRB subject to federal income tax?
Sickness benefits paid by the RRB, except for sickness benefits paid for on-the-job injuries, are subject to federal income tax under the same limitations and conditions that apply to the taxation of sick pay received by workers in other industries. Each January, the RRB sends Form W-2 to affected beneficiaries. This form shows the amount of sickness benefits that each beneficiary should include in his or her taxable income.
17. Does the RRB withhold federal income tax from unemployment and sickness benefits?
The RRB withholds federal income tax from unemployment and sickness benefits only if requested to do so by the beneficiary. A beneficiary can request withholding of 10 percent of his or her unemployment benefits by filing IRS Form W-4V, Voluntary Withholding Request, with the RRB. A beneficiary can request withholding from sickness benefits by filing IRS Form W-4S, Request for Federal Income Tax Withholding from Sick Pay.
18. Are railroad retirement and railroad unemployment and sickness benefits paid by the RRB subject to State income taxes?
The Railroad Retirement and Railroad Unemployment Insurance Acts specifically exempt these benefits from State income taxes.
19. Can a railroad employee claim a tax credit on his or her federal income tax return if the employer withheld excess railroad retirement taxes during the year?
If any one railroad employer withheld more than the annual maximum amount, the employee must ask that employer to refund the excess. It cannot be claimed on the employee’s return.
20. Can a railroad employee working two jobs during the year get a tax credit if excess retirement payroll taxes were withheld by the employers?
Railroad employees who also worked for a nonrailroad social security covered employer in the same year may, under certain circumstances, receive a tax credit equivalent to any excess social security taxes withheld.
Employees who worked for two or more railroads during the year, or who had Tier I taxes withheld from their RRB sickness benefits in addition to their railroad earnings, may be eligible for a tax credit of any excess Tier I or Tier II railroad retirement taxes withheld. The amount of Tier I taxes withheld from sickness benefits paid by the RRB is shown on Form W-2 issued to affected beneficiaries. Employees who had Tier I taxes withheld from their supplemental sickness benefits (benefits paid under an RRB-approved nongovernmental sickness insurance plan, such as a supplemental sickness benefit plan established by a railroad) may also be eligible for a tax credit of any excess Tier I tax.
Such tax credits may be claimed on an employee’s Federal income tax return.
Employees who worked for two or more railroads, received sickness benefits, or had both railroad retirement and social security taxes withheld from their earnings should see IRS Publication 505, Tax Withholding and Estimated Tax, for information on how to figure any excess railroad retirement or social security tax withheld.
BANGOR, Maine – Gerald E. Bailey, 68, of Pittston, Maine pled guilty on Tuesday, April 23 to charges of collecting pension that he was not entitled to.
Bailey retired from Springfield Terminal Railway in 2004 and began receiving his pension payments from the Railroad Retirement Board (RRB). According to an affidavit filed by assistant U.S. attorney Gail Fisk Malone, Bailey returned to work from 2007 to 2010 with the Maine Eastern Railroad.
Bailey was able to avoid detection during that time by using another person’s social security number and name on his time cards. He received pension totaling $83,398 during that time which he was not entitled to.
Once you retire, it is illegal to continue to work and receive funds from the RRB at the same time. Employers are required to report earnings of each employee yearly to the RRB. It is unclear how the RRB detected the fraud.
At sentencing, Bailey could face up to 10 years in prison with three years of parole and fines up to $250,000. Bailey was not a member of the UTU.
“Every Amtrak employee should be placed in a productive position that supports the needs of customer service and managed growth of operations,” UTU National Legislative Director James Stem told Congress Nov. 28.
“Amtrak operating crews are among the most productive workers in that system and our members are ready and eager to work,” he said in testifying before the House Transportation and Infrastructure Committee. “Assign us a train and provide for instructions and where to go, and our members will show up for duty and get Amtrak passengers to their destination safely and on time. We in labor are Amtrak’s partners.”
Stem praised Amtrak’s Next Generation Plan that “provides a road map for improved service and identifies the funding requirements. But for us to succeed, Congress must provide Amtrak with consistent and predicable multi-year funding for modernization and capacity upgrades. Amtrak’s Next Generation Plan for the Northeast Corridor will cut the transit time in half between Washington, D.C.’s Union Station and New York’s Penn Station, as well as between New York and Boston.
“What Amtrak really needs is dramatic increases in capital investments,” Stem said. “Capital spending to increase speeds and upgrade Amtrak’s infrastructure is the ticket to transporting American’s in a cost effective and energy efficient manner.”
Stem reminded lawmakers that “Amtrak also plays a central role in financing Railroad Retirement, which is a self-funding pension, unemployment and disability benefit program that covers almost one million active and retired railroad workers. Changes in the financial treatment of Amtrak, such as significant funding cuts or passenger rail privatization, could jeopardize the solvency of the system.
“Americans want a national intercity rail passenger network, and Amtrak is uniquely able to fill that need. Highways and commercial aviation will not alone meet the nation’s future passenger transportation needs and demands. The coordination of air and rail passenger services should be mandated to free more air slots and provide timely rail services for shorter travel distances.”
Stem also made clear labor’s “full support for the expansion of our freight rail capacity. Amtrak and our freight railroads work together as partners and both have capacity needs that can be mutual goals. We support the expansion of Amtrak services and understand that this expansion must also address the capacity needs of our freight rail partners.”
UTU National Legislative Director James Stem, right, testifies before the House Transportation and Infrastructure Committee Nov. 28 with Amtrak President and CEO Joseph Boardman, left, and Amtrak Inspector General Theodore Alves.
Among the numerous political challenges facing working families is preservation of Railroad Retirement and Social Security, which are both under attack by political conservatives.
As the UTU’s Portland, Ore., regional meeting commenced June 18, the labor member of the Railroad Retirement Board, Walt Barrows (pictured at left) told attendees, “You can be very proud of your leadership and your legislative staff. You have the best legislative team of any union, bar none. [The UTU is] in the forefront of defending our retirement system against those who try to weaken it.”
Echoing those sentiments was Joe Nigro, general president of the Sheet Metal Workers International Association (SMWIA), who said the UTU has “the best political machine” among labor organizations, which is essential in the fight to preserve Railroad Retirement and Social Security.
Nigro said the SMWIA and the UTU – now combined as SMART – “share the goal of achieving power and success to make legislators, other unions and employers look to us for leadership and training.” SMART, he said, is creating “a bigger, better, stronger and members’ oriented union that represents its members aggressively.”
Barrows, a senior officer of the Brotherhood of Railroad Signalman before being nominated by President Obama and confirmed by the Senate to the three-member Railroad Retirement Board to represent the interests of labor, warned that “the trend of attacking and eliminating defined benefit pension plans across the country will continue.
“In the last 30 years, defined benefit plans have been stripped away from most workers,” Barrows said. “We have seen defined benefit plans replaced by tax deferred savings accounts, like 401(k) plans and other less desirable substitutes [and] with the decline of defined benefit plans, far too many Americans cannot retire with any sense of dignity or security.
“Wondering if you will be able to receive a steady income during your retirement years is important to you and your family when you consider retirement,” Barrows said. “Railroad Retirement gives you that assurance. You can rest assured that when you are ready to retire, the Railroad Retirement Board and the Railroad Retirement system will be there for you.
“You would think that the strength and solvency of our system would exempt us from attacks, but our retirement system is never totally safe from attack. A recent House budget resolution [introduced by Rep. Paul Ryan (R-Wis.)] proposed massive changes to our retirement system. While this proposal will not go anywhere this year, it again demonstrates that rail workers must remain vigilant if we expect our retirement system is there for us and for future generations of rail workers.
“Since the establishment of the Railroad Retirement system 76 years ago, labor has fought to protect and preserve these benefits,” Barrows said. “The longevity and stability of our Railroad Retirement is a testament to strength of rail workers standing together. But we all must be vigilant to make sure that our retirement system is there for us and for future generations of rail workers and their families.
“It is now up to us to ensure that our retirement system is there to provide protection and retirement security for future generations,” Barrows said. “So when we hear retirement benefits attacked, and when we hear them referred to as entitlements, remind people that railroad workers are entitled.
“We are entitled,” Barrows said, “because we worked for it. We are entitled because we sacrificed for it. We are entitled because we contributed to it. And we are entitled because the profits enjoyed by the railroad industry came from our blood and sweat. Nobody gave us anything. We earned it.
“And as your member on the Railroad Retirement Board, it is an honor for me to stand here today to tell you that I will fight to protect our retirement system,” Barrows said.
Railroaders should not lose sleep over a rumor that Congress will cut Railroad Retirement benefits.
The rumor began after language was inserted in a budget report by conservative Rep. Paul Ryan (R-Wis.) suggesting the federal deficit could be cut by eliminating certain Railroad Retirement benefits. He did not understand how Railroad Retirement is funded.
The UTU, SMWIA and other rail union legislative departments, along with carriers and the Railroad Retirement Board, immediately contacted congressional offices to remind lawmakers there are no federal funds used to pay Railroad Retirement Tier I benefits. Every penny of Railroad Retirement Tier I benefits is funded by payroll taxes on railroads and their workers.
Thus, there can be no savings to the federal government by tinkering with Railroad Retirement. As National Legislative Director James Stem said, “We are all confident that Rep. Ryan’s unfortunate draft language will disappear from consideration in Congress.”
This reminds us all to be ever vigilant in protecting Railroad Retirement, and the importance of participating in the UTU PAC.
Railroad Retirement, along with Social Security – which covers virtually all other private sector workers – originated with President Franklin Roosevelt’s New Deal during the Great Depression.
Railroad unions gained from Congress a guarantee that Railroad Retirement would never provide less in monthly benefits than Social Security. In fact, Railroad Retirement today pays considerably more than Social Security — the additional cost borne entirely by railroads and their workers.
For Railroad Retirement Tier I, the payroll taxes on employers and workers are the same as for Social Security, but Tier I allows railroaders with at least 30 years of service to retire at age 60 with full benefits for themselves and spouse. The cost of early retirement is funded by Tier II payroll taxes, which also fund additional Railroad Retirement benefits similar to private-sector pension plans where they still exist.
The average Railroad Retirement benefit paid current retirees is some $1,700 more monthly than paid to Social Security recipients, while the Railroad Retirement spouse benefit is some $500 more than paid spouses under Social Security.
Carriers pay the bulk of the additional Railroad Retirement taxes – 12.1 percent on payroll up to $81,900 per employee, while employees pay 3.9 percent on the same earnings. This significant pension benefit is what the railroads rely on to keep our professional workforce on the job until retirement.
For more information on Railroad Retirement, visit the Railroad Retirement Board website by clicking on the following link: https://secure.rrb.gov/
Railroad retirees and current rail workers should not be losing sleep over the much-hyped rumor that Congress is going to abolish Railroad Retirement, cut Railroad Retirement benefits or otherwise do harm to a system supported financially entirely by carriers and labor since its inception during the 1930s.
Recent language in a House Budget Committee report — “Conform Railroad Retirement Tier 1 benefits to Social Security benefits” — suggested an imminent congressional assault on Railroad Retirement by House Republicans.
But as the UTU and SMWIA legislative departments canvassed Capitol Hill, it became clear that the authors, who were drafting a roadmap for future federal spending cuts, did not understand how Railroad Retirement is funded.
UTU National Legislative Director James Stem, SMWIA Director of Government Affairs Jay Potesta, others in rail labor, carriers and the Railroad Retirement Board, began delivering the factual message to congressional offices:
“There are no public funds or general tax revenue used to pay the additional benefits provided by Tier 1 that exceed Social Security benefits. These additional benefits are fully funded by payroll taxes paid by rail labor and the carriers and are held in the Railroad Retirement account. Social Security does not reimburse Railroad Retirement for benefits that are not available under Social Security.”
Thus, there would be no savings to the federal government by tinkering with the Railroad Retirement system.
“Rail labor, carriers and the Railroad Retirement Board will continue delivering that message on Capitol Hill,” Stem said. “We are all confident that when the dust settles, this unfortunate draft language will disappear from consideration in Congress.”