The payment of a Railroad Retirement annuity can be affected by entitlement to Social Security benefits, as well as certain other government benefits. Such dual entitlement, if not reported to the Railroad Retirement Board (RRB), can result in benefit overpayments that have to be repaid, sometimes with interest and penalties. The following questions and answers describe how the RRB adjusts Railroad Retirement benefits for annuitants who are also eligible for Social Security benefits and/or other benefit payments.
1. How are dual benefits paid to persons entitled to both Railroad Retirement and Social Security benefits?
If a Railroad Retirement annuitant is also awarded a Social Security benefit, the Social Security Administration determines the amount of the Social Security benefit due, but a combined monthly dual benefit payment should, in most cases, be issued by the RRB after the Railroad Retirement annuity has been reduced by the amount of the Social Security benefit.
2. Why is a Railroad Retirement annuity reduced when a Social Security benefit is also payable?
The Tier I portion of a Railroad Retirement annuity is based on both the Railroad Retirement and Social Security earnings credits acquired by an employee and computed 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 nonrailroad employment, in order to prevent a duplication of benefits based on Social Security-covered earnings.
In addition, following principles of Social Security law which limit payment to the higher of any two or more benefits payable to an individual at one time, the Tier I dual benefit reduction applies to an annuity even if the Social Security benefit is based on the earnings record of someone other than the railroad employee, such as a spouse or former spouse. An annuitant is required to advise the RRB if any benefits are received directly from the Social Security Administration or if those benefits increase (other than for a cost-of-living increase) to avoid a Railroad Retirement benefit overpayment.
The Tier II portion of a Railroad Retirement annuity is based on the railroad employee’s railroad service and earnings alone and is computed under a separate formula. It is not reduced for entitlement to a Social Security benefit.
3. Are there any exceptions to the Railroad Retirement annuity reduction for Social Security benefits?
No. There are no exceptions to the Railroad Retirement annuity reduction for Social Security benefits.
4. Can federal, state or local government pensions also result in dual benefit reductions in an employee’s Railroad Retirement annuity?
Yes. Tier I benefits for employees first eligible for a Railroad Retirement annuity and a federal, state or local government pension after 1985 may be reduced 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 Railroad Retirement or Social Security, such as payments from a non-profit organization or a foreign government or a foreign employer. Usually, an employee’s Tier I benefit will not be reduced by more than 1/2 of his or her pension from noncovered employment. However, if the employee is under age 65 and receiving a disability annuity, the Tier I benefit may be reduced by an added amount if the pension from noncovered employment is a public disability benefit.
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 will not cause a reduction.
5. Can the public service pension reduction apply to spouse or widow(er)s’ benefits?
Yes. The Tier I portion of a spouse’s or widow(er)’s annuity may 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. For spouses and widow(er)s subject to a public service pension reduction, the Tier I reduction is equal to 2/3 of the amount of the public service pension.
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 also not cause a reduction.
6. What dual benefit restrictions apply when both persons in a marriage are railroad employees entitled to Railroad Retirement annuities?
If both parties 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 or divorced spouse is also entitled.
If either party had some railroad service before 1975, the spouse or divorced spouse Tier I amount is reduced by the amount of the railroad employee Tier I to which the spouse or divorced spouse is entitled. The spouse or divorced spouse Tier I amount cannot be reduced below zero. The initial reduction is restored in the spouse Tier II amount. Divorced spouses are not entitled to a Tier II component and are not eligible to have the reduction restored.
In survivor cases, if the widow(er) is entitled to a Railroad Retirement employee annuity and neither the widow(er) nor the deceased employee had any railroad service before 1975, the survivor annuity (Tier I and Tier II) payable to the widow(er) is reduced by the total amount of the widow(er)’s own employee annuity.
If a widow or dependent widower is also a railroad employee annuitant, and either the widow(er) or the deceased employee had 120 months of railroad service before 1975, the Tier I reduction may be partially restored in the survivor Tier II amount.
If either the deceased employee or the widow(er) had some railroad service before 1975 but less than 120 months of service, the widow(er)’s own employee annuity and the Tier II portion of the survivor annuity would be payable to the widow(er). The Tier I portion of the survivor annuity would be payable only to the extent that it exceeds the Tier I portion of the widow(er)’s own employee annuity.
7. Can workers’ compensation or public disability benefits affect Railroad Retirement benefits?
If an employee is receiving a Railroad Retirement 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.
8. How can an annuitant find out if the receipt of any dual benefits affects his or her Railroad Retirement annuity?
If an annuitant becomes entitled to any of the dual benefit payments discussed above, or if there is any question as to whether a dual benefit payment requires a reduction in an annuity, he or she should contact an RRB field office online or by phone. As all of the RRB’s 53 field offices are physically closed to the public until further notice because of the COVID-19 pandemic, customers are encouraged to contact their local office by accessing Field Office Locator at RRB.gov and clicking on Send a Secure Message at the bottom of their local office’s page. Customers who prefer talking to an RRB employee can call the agency’s toll-free number (1-877-772-5772); however, they may experience lengthy wait times due to increased call volume caused by COVID-19-related issues.
Tag: railroad retirement annuities
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.
Most railroad retirement annuities, like Social Security benefits, are scheduled to increase in January 2015 on the basis of the rise in the Consumer Price Index (CPI) from the third quarter of 2013 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 1.7 percent, which is the percentage of the CPI rise. Tier II benefits will increase by 0.6 percent, which is 32.5 percent of the CPI rise. The vested dual benefit payments and supplemental annuities also paid by the Railroad Retirement Board (RRB) are not adjusted for the CPI rise.
In January 2015, the average regular railroad retirement employee annuity will increase $34 a month to $2,537 and the average of combined benefits for an employee and spouse will increase $48 a month to $3,666. For those aged widow(er)s eligible for an increase, the average annuity will increase $20 a month to $1,310. 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 39 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. 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 standard Medicare Part B premium generally deducted from monthly benefits will not increase in 2015, as the Centers for Medicare & Medicaid Services recently announced that it would be the same as the 2014 amount.
In late December the RRB will mail notices to all annuitants providing a breakdown of the annuity rates payable to them in January 2015.