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RRB_seal_150pxEmployers 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, 2014. 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 2014 to career rail employees was $3,180 a month, and for all retired rail employees the average was $2,535. The average age retirement benefit being paid under Social Security was nearly $1,305 a month. Spouse benefits averaged $945 a month under railroad retirement compared to $635 under Social Security.

The Railroad Retirement Act also provides supplemental railroad retirement annuities of between $23 and $43 a month, which are payable to employees who retire directly from the rail industry with 25 or more years of service.

2. Are the benefits awarded to recent retirees generally greater than the benefits payable to those who retired years ago?

Yes, because recent awards are based on higher average earnings. Age annuities awarded to career railroad employees retiring at the end of fiscal year 2014 averaged about $3,710 a month while monthly benefits awarded to workers retiring at full retirement age under Social Security averaged nearly $1,815. If spouse benefits are added, the combined benefits for the employee and spouse would total $5,135 under railroad retirement coverage, compared to $2,720 under Social Security. Adding a supplemental annuity to the railroad family’s benefit increases average total benefits for current career rail retirees to nearly $5,170 a month.

3. How much are the disability benefits currently awarded?

Disabled railroad workers retiring directly from the railroad industry at the end of fiscal year 2014 were awarded almost $2,870 a month on the average while awards for disabled workers under Social Security averaged over $1,235.

While both the Railroad Retirement and Social Security Acts provide benefits to workers who are totally disabled for any regular work, the Railroad Retirement Act also provides disability benefits specifically for employees who are disabled for work in their regular railroad occupation. Employees may be eligible for such an occupational disability annuity at age 60 with 10 years of service, or at any age with 20 years of service.

4. Can railroaders receive benefits at earlier ages than workers under Social Security?

Railroad employees with 30 or more years of creditable service are eligible for regular annuities based on age and service the first full month they are age 60, and rail employees with less than 30 years of creditable service are eligible for regular annuities based on age and service the first full month they are age 62.

No early retirement reduction applies if a rail employee retires at age 60 or older with 30 years of service and his or her retirement is after 2001, or if the employee retired before 2002 at age 62 or older with 30 years of service.

Early retirement reductions are otherwise applied to annuities awarded before full retirement age, the age at which an employee can receive full benefits with no reduction for early retirement. This ranges from age 65 for those born before 1938 to age 67 for those born in 1960 or later, the same as under Social Security.

Under Social Security, a worker cannot begin receiving retirement benefits based on age until age 62, regardless of how long he or she worked, and Social Security retirement benefits are reduced for retirement prior to full retirement age regardless of years of coverage.

5. Does Social Security offer any benefits that are not available under railroad retirement?

Social Security does pay certain types of benefits that are not available under railroad retirement. For example, Social Security provides children’s benefits when an employee is disabled, retired or deceased. Under current law, the Railroad Retirement Act only provides children’s benefits if the employee is deceased.

However, the Railroad Retirement Act includes a special minimum guaranty provision that ensures that railroad families will not receive less in monthly benefits than they would have if railroad earnings were covered by Social Security rather than railroad retirement laws. This guaranty is intended to cover situations in which one or more members of a family would otherwise be eligible for a type of Social Security benefit that is not provided under the Railroad Retirement Act. Therefore, if a retired rail employee has children who would otherwise be eligible for a benefit under Social Security, the employee’s annuity can be increased to reflect what Social Security would pay the family.

6. How much are monthly benefits for survivors under railroad retirement and Social Security?

Survivor benefits are generally higher if payable by the RRB rather than Social Security. At the end of fiscal year 2014, the average annuity being paid to all aged and disabled widow(er)s was $1,515 a month, compared to $1,220 under Social Security.

Benefits awarded by the RRB at the end of fiscal year 2014 to aged and disabled widow(er)s of railroaders averaged more than $1,990 a month, compared to almost $1,170 under Social Security .

The annuities being paid at the end of fiscal year 2014 to widowed mothers/fathers averaged $1,800 a month and children’s annuities averaged $1,025, compared to $920 and $815 a month for widowed mothers/fathers and children, respectively, under Social Security.

Those awarded at the end of fiscal year 2014 averaged $1,925 a month for widowed mothers/fathers and $1,425 a month for children under railroad retirement, compared to $885 and $805 for widowed mothers/fathers and children, respectively, under Social Security.

7. How do railroad retirement and Social Security lump-sum death benefit provisions differ?

Both the railroad retirement and Social Security systems provide a lump-sum death benefit. The railroad retirement lump-sum benefit is generally payable only if survivor annuities are not immediately due upon an employee’s death. The Social Security lump-sum benefit may be payable regardless of whether monthly benefits are also due. Both railroad retirement and Social Security provide a lump-sum benefit of $255. However, if a railroad employee completed 10 years of creditable railroad service before 1975, the average railroad retirement lump-sum benefit payable is $1,005. Also, if an employee had less than 10 years of service, but had at least 5 years of such service after 1995, he or she would have to have had an insured status under Social Security law (counting both railroad retirement and Social Security credits) in order for the $255 lump-sum benefit to be payable.

The Social Security lump sum is generally only payable to the widow(er) living with the employee at the time of death. Under railroad retirement, if the employee had 10 years of service before 1975, and was not survived by a living-with widow(er), the lump sum may be paid to the funeral home or the payer of the funeral expenses.

8. How do railroad retirement and Social Security payroll taxes c
ompare?

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 $118,500 in 2015, 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 2015, the Tier II tax rate on earnings up to $88,200 is 4.9 percent for employees and 13.1 percent for employers.

9. How much are regular railroad retirement taxes for an employee earning $118,500 in 2015 compared to Social Security taxes?

The maximum amount of regular railroad retirement taxes that an employee earning $118,500 can pay in 2015 is $13,387.05, compared to $9,065.25 under Social Security. For railroad employers, the maximum annual regular retirement taxes on an employee earning $118,500 are $20,619.45, compared to $9,065.25 under Social Security. Employees earning over $118,500, and their employers, will pay more in retirement taxes than the above amounts because the Medicare hospital insurance tax is applied to all earnings.

RRB_seal_150pxMonthly benefits may be payable under the Railroad Retirement Act to the surviving widow(er), children, and certain other dependents of a railroad employee if the employee was “insured” under that act at the time of death. Lump-sum death benefits may also be payable to qualified survivors in some cases.

The following questions and answers describe the survivor benefits payable by the Railroad Retirement Board (RRB) and the eligibility requirements for these benefits.

1. What are the general service requirements for railroad retirement survivor benefits?

With the exception of one type of lump-sum death benefit, eligibility for survivor benefits depends on whether or not a deceased employee was “insured” under the Railroad Retirement Act. An employee is insured if he or she has at least 120 months (10 years) of railroad service, or 60 months (5 years) performed after 1995, and a “current connection” with the railroad industry as of the month the annuity begins or the month of death, whichever occurs first.

Generally, an employee who worked for a railroad in at least 12 months in the 30 months immediately preceding the month his or her railroad retirement annuity begins will meet the current connection requirement. If an employee dies before retirement, railroad service in at least 12 months in the 30 months before the month of death will meet the current connection requirement for the purpose of paying survivor benefits.

If an employee does not qualify on this basis, but has 12 months of service in an earlier 30-month period, he or she may still meet the current connection requirement. This alternative generally applies if the employee did not have any regular employment outside the railroad industry after the end of the last 30-month period which included 12 months of railroad service and before the month the annuity begins or the date of death.

Full or part-time work for a nonrailroad employer in the interval between the end of the last 30-month period including 12 months of railroad service and the beginning date of an employee’s annuity, or the month of death if earlier, can break a current connection.

Self-employment in an unincorporated business will not break a current connection; however, self-employment can break a current connection if the business is incorporated.

Working for certain U.S. Government agencies – Department of Transportation, National Transportation Safety Board, Surface Transportation Board, Transportation Security Administration, National Mediation Board, Railroad Retirement Board – will not break a current connection. State employment with the Alaska Railroad, so long as that railroad remains an entity of the State of Alaska, will not break a current connection. Also, railroad service in Canada for a Canadian railroad will neither break nor preserve a current connection.

A current connection can also be maintained, for purposes of supplemental and survivor annuities, if the employee completed 25 years of railroad service, was involuntarily terminated without fault from his or her last job in the rail industry on or after Oct. 1, 1975, and did not thereafter decline an offer of employment in the same class or craft in the rail industry, regardless of the distance to the new position.

Once a current connection is established at the time the railroad retirement annuity begins, an employee never loses it no matter what kind of work is performed thereafter.

2. What if these service requirements are not met?

If a deceased employee did not have an insured status, jurisdiction of any survivor benefits payable is transferred to the Social Security Administration and survivor benefits are paid by that agency instead of the RRB. Regardless of which agency has jurisdiction, the deceased employee’s railroad retirement and social security credits will be combined for benefit computation purposes.

3. What are the age and other eligibility requirements for widow(er)s?

Widow(er)s’ benefits are payable at age 60 or over. They are payable at any age if the widow(er) is caring for an unmarried child of the deceased employee under age 18 or a disabled child of any age who became permanently disabled before age 22. Widow(er)s’ benefits are also payable at ages 50-59 if the widow(er) is totally and permanently disabled and unable to work in any regular employment. The disability must have begun within 7 years after the employee’s death or within seven years after the termination of an annuity based on caring for a child of the deceased employee. In most cases, a 5-month waiting period is required after the onset of disability before disability payments can begin.

Generally, the widow(er) must have been married to the employee for at least nine months prior to death, unless she or he was the natural parent of their child, the employee’s death was accidental or while on active duty in the U.S. Armed Forces, the widow(er) was potentially entitled to certain railroad retirement or social security benefits in the month before the month of marriage, or the marriage was postponed due to State restrictions on the employee’s prior marriage and divorce due to mental incompetence or similar incapacity.

4. Can surviving divorced spouses and remarried widow(er)s also qualify for benefits?

Survivor benefits may also be payable to a surviving divorced spouse or remarried widow(er). Benefits are limited to the amount social security would pay and therefore are less than the amount of the survivor annuity otherwise payable by the RRB. However, a former spouse may be paid a court-ordered partition amount.

A surviving divorced spouse may qualify if she or he was married to the employee for at least 10 years, and is age 60 or older (age 50 if disabled). A surviving divorced spouse who is unmarried can qualify at any age if caring for the employee’s child and the child is under age 16 or disabled, in which case the 10-year marriage requirement does not apply. A widow(er) or surviving divorced spouse who remarries after age 60, or a disabled widow(er) or disabled surviving divorced spouse who remarries after age 50 may also receive the portion of a survivor annuity equivalent to a social security benefit (Tier I); however, remarriage prior to age 60 (or age 50 if disabled) would not prevent eligibility if that remarriage ended. Such social security level benefits may also be paid to a younger widow(er) or surviving divorced spouse caring for the employee’s child who is under age 16 or disabled, if the remarriage is to a person entitled to railroad retirement or social security benefits or the remarriage ends.

5. When are survivor benefits payable to children and other dependents?

Monthly survivor benefits are payable to an unmarried child under age 18, and to an unmarried child age 18 in full-time attendance at an elementary or secondary school, or in approved homeschooling, until the student attains age 19 or the end of the school term in progress when the student attains age 19. In most cases where a student attains age 19 during the school term, benefits are limited to the two months following the month age 19 is attained. These benefits will be terminated earlier if the student marries, graduates or ceases full-time attendance. An unmarried disabled child over age 18 may qualify if the child became totally and permanently disabled before age 22. An unmarried dependent grandchild meeting any of the requirements described above for a child may also qualify if both the grandchild’s parents are deceased or disabled.

Monthly survivor benefits are also payable to a surviving parent at age 60 who was dependent on
the employee for at least half of the parent’s support. If the employee was also survived by a widow(er), surviving divorced spouse or child who could ever qualify for an annuity, the parent’s annuity is limited to the amount that Social Security would pay (Tier I).

6. How are railroad retirement widow(er)s’ benefits computed?

The Tier I amount of a two-tier survivor benefit is based on the deceased employee’s combined railroad retirement and social security earnings credits, and is computed using social security formulas. In general, the survivor Tier I amount is equal to the amount of survivor benefits that would have been payable under social security.

December 2001 legislation established an “initial minimum amount” which yields, in effect, a widow(er)’s Tier II benefit equal to the Tier II benefit the employee would have received at the time of the award of the widow(er)’s annuity, minus any applicable age reduction.

However, such a Tier II benefit will not receive annual cost-of-living increases until such time as the widow(er)’s annuity, as computed under prior law with all interim cost-of-living increases otherwise payable, exceeds the widow(er)’s annuity as computed under the initial minimum amount formula.

The average annuity awarded to widow(er)s in fiscal year 2014, excluding remarried widow(er)s and surviving divorced spouses, was $1,976 a month. Children received $1,294 a month, on the average. Total family benefits for widow(er)s with children averaged $3,771 a month. The average annuity awarded to remarried widow(er)s or surviving divorced spouses in fiscal year 2014 was $1,104 a month.

A widow(er) who received a spouse annuity from the RRB is guaranteed that the amount of any widow(er)’s benefit payable will never be less than the annuity she or he was receiving as a spouse in the month before the employee died.

7. Are survivor benefits subject to any reduction for early retirement or disability retirement?

A widow(er), surviving divorced spouse or remarried widow(er) whose annuity begins at full retirement age or later receives the full Tier I amount unless the deceased employee received an annuity that was reduced for early retirement. The eligibility age for a full widow(er)’s annuity is gradually rising from age 65 to age 67. The maximum age reductions will range from 17.1 percent to 20.36 percent, depending on the widow(er)’s date of birth. For a surviving divorced spouse or remarried widow(er), the maximum age reduction is 28.5 percent. For a disabled widow(er), disabled surviving divorced spouse or disabled remarried widow(er), the maximum reduction is 28.5 percent, even if the annuity begins at age 50.

8. Are these benefits subject to offset for the receipt of other benefits?

Under the Railroad Retirement Act, the Tier I portion of a survivor annuity is subject to reduction if any social security benefits are also payable, even if the social security benefit is based on the survivor’s own earnings. This reduction follows the principles of social security law which, in effect, limit payment to the highest of any two or more benefits payable to an individual at one time.

The Tier I portion of a widow(er)’s annuity may also be reduced for the receipt of any Federal, State or local government pension based on the widow(er)’s own earnings. The reduction generally does not apply if the employment on which the public pension is based was covered under the Social Security Act throughout the last 60 months of public employment. However, most military service pensions and payments from the Department of Veterans Affairs will not cause a reduction. For those subject to the public pension reduction, the Tier I reduction is equal to 2/3 of the amount of the public pension.

A survivor annuitant should notify the RRB promptly if she or he becomes entitled to any such benefits.

9. What if a widow(er) was also a railroad employee and is eligible for a railroad retirement employee annuity as well as monthly survivor benefits?

If both the widow(er) and the deceased employee started railroad employment after 1974, the survivor annuity payable to the widow(er) is reduced by the amount of the employee annuity.

If either the deceased employee or the survivor annuitant had some service before 1975 but had not completed 120 months of railroad service before 1975, the 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 employee annuity.

A special guaranty applies if either the deceased employee or the survivor annuitant completed 120 months of railroad service before 1975. In effect, the widow, or dependent widower, would receive both an employee annuity and a survivor benefit, without a full dual benefit reduction.

10. What types of lump-sum death benefits are payable under the Railroad Retirement Act?

A lump-sum death benefit is payable to certain survivors of an employee with 10 or more years of railroad service, or less than 10 years if at least five years were after 1995, and a current connection with the railroad industry if there is no survivor immediately eligible for a monthly annuity upon the employee’s death.

If the employee did not have 10 years of service before 1975, the lump sum is limited to $255 and is payable only to the widow(er) living in the same household as the employee at the time of the employee’s death.

If the employee had less than 10 years of service but had five years after 1995, he or she must have met social security’s insured status requirements for the lump sum to be payable.

If the employee had 10 years of service before 1975, the lump sum is payable to the living-with widow(er). If there is no such widow(er), the lump sum may be paid to the funeral home or the payer of the funeral expenses. These lump sums averaged $1,013 in fiscal year 2014.

The railroad retirement system also provides, under certain conditions, a residual lump-sum death benefit which ensures that a railroad family receives at least as much in benefits as the employee paid in railroad retirement taxes before 1975. This benefit is, in effect, a refund of an employee’s pre-1975 railroad retirement taxes, after subtraction of any benefits previously paid on the basis of the employee’s service. This benefit is seldom payable.

11. How does a person get an estimate of, or apply for, survivor benefits?

Active or retired employees who are concerned about the amount of benefits which would be payable to their survivors may receive estimates from the nearest RRB field office.

Applications for railroad retirement or survivor benefits are generally filed at one of the RRB’s field offices, or with an RRB representative at one of the office’s Customer OutReach Program (CORP) service locations, or by telephone and mail. Persons can contact an office of the RRB by calling toll free at (877) 772-5772 or at www.rrb.gov. Most agency offices are open to the public from 9:00 a.m. to 3:30 p.m. Monday through Friday, except on federal holidays.

RRB_seal_150pxIn addition to the retirement annuities payable to employees, the Railroad Retirement Act, like the Social Security Act, also provides annuities for the 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.

1. How are railroad retirement spouse annuities computed?

Regular railroad retirement annuities are computed under a two-tier formula. The spouse annuity formula is based on certain percentages of the employee’s Tier I and Tier II amounts.

The Tier I portion of an employee’s annuity is based on both railroad retirement credits and any social security credits that the employee also 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 first Tier of a spouse annuity, before any applicable reductions, is 50 percent of the railroad employee’s unreduced Tier I amount. The second Tier amount, before any reductions, is 45 percent 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 2014, excluding divorced spouses, was $1,050 a month, while the average monthly social security spouse benefit was about $614.

Annuities awarded in fiscal year 2014 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 $1,224 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 $1,425 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 and date of retirement and the employee’s years of railroad service. 

If a retired 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.

If a retired employee with less than 30 years of service is age 62, the employee’s spouse is also 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. 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 percent rather than 25 percent by the year 2022. However, the Tier II portion of a spouse annuity will not be reduced beyond 25 percent if the employee had any creditable railroad service before Aug. 12, 1983.

4. What if the spouse is caring for a child of the retired employee?

A spouse of an employee 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?

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. However, entitlement to a surviving divorced spouse, surviving divorced young mother (father), or remarried widow(er) annuity does not waive the one-year marriage requirement.

6. Can the same-sex spouse of a railroad employee file for a railroad retirement spouse annuity? 

On June 26, 2013, the Supreme Court found Section 3 of the Defense of Marriage Act, which prevented the Federal government from recognizing marriages of same-sex couples, to be unconstitutional. As a result, the Railroad Retirement Board (RRB) now accepts applications for benefits from those eligible spouses in same-sex marriages.

Applicants should be aware that the Railroad Retirement Act requires that in determining whether an applicant is the spouse of the railroad employee, the RRB must use the rules for determining relationship for benefit entitlement purposes under the Social Security Act. In general, that Act requires that the Social Security Administration refer to State law. Accordingly, the RRB will determine whether an applicant is a spouse under the same conditions as the Social Security Administration.

7. Are spouse annuities subject to offset for the receipt of other benefits?

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 orthe 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 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, if the employee was first eligible for a railroad retirement annuity and a federal, state or local government pension after 1985, 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 noncovered service pension, the spouse Tier I amount is 50 percent 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 benefi
t otherwise payable to a spouse, they do not affect the Tier II benefit potentially payable to that spouse.

8. Under what conditions can the divorced spouse of a rail employee receive a spouse annuity?

A spouse annuity may also 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 2 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. The amount of a divorced spouse’s annuity is, in effect, equal to what social security would pay in the same situation and therefore less than the amount of the spouse annuity otherwise payable (Tier I only). The average divorced spouse annuity awarded in fiscal year 2014 was $624.

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 are both railroad employees?

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. 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.

11. Are railroad retirement annuities subject to garnishment or property settlements?

Certain percentages of any railroad retirement annuity (employee, spouse or survivor) may be subject to legal process (i.e., garnishment) to enforce an obligation for child support and/or alimony payments.

Also, a court-ordered partition 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 62.

Employee Tier II benefits, vested dual benefits and supplemental annuities are subject to court-ordered property settlements in proceedings related to divorce, annulment or legal separation. Tier I benefits are not subject to property settlements.

12. How can a person get more information about railroad retirement spouse annuities?

For more information and/or a benefit estimate, contact an office of the RRB by calling toll free at (877) 772-5772. Most RRB offices are open to the public from 9 a.m. to 3:30 p.m., Monday through Friday, except on Federal holidays. Visit the agency’s website at www.rrb.gov.

RRB_seal_150pxThe amounts of compensation subject to railroad retirement Tier I and Tier II payroll taxes will increase in 2015, with the Tier I tax rates remaining the same while Tier II tax rates will increase for both railroad employers and employees. Also, railroad unemployment insurance contribution rates paid by employers will include a surcharge of 1.5 percent in 2015.

Tier I and Medicare Tax –The railroad retirement Tier I payroll tax rate on covered rail employers and employees for the year 2015 remains at 7.65 percent. The railroad retirement Tier I tax rate is the same as the social security tax, and for withholding and reporting purposes is divided into 6.20 percent for retirement and 1.45 percent for Medicare hospital insurance. The maximum amount of an employee’s earnings subject to the 6.20 percent rate increases from $117,000 to $118,500 in 2015, but there is no maximum on earnings subject to the 1.45 percent Medicare rate.

An additional Medicare payroll tax of 0.9 percent applies to an individual’s income exceeding $200,000 or $250,000 for a married couple filing a joint tax return. While employers will begin withholding the additional Medicare tax as soon as an individual’s wages exceed the $200,000 threshold, the final amount owed or refunded will be calculated as part of the individual’s Federal income tax return.

Tier II Tax – The railroad retirement Tier II tax rate on employees will be 4.9 percent in 2015, and the employers’ rate will be 13.1 percent. The rates in 2014 for employees and employers were 4.4 percent and 12.6 percent, respectively. The maximum amount of earnings subject to railroad retirement Tier II taxes will increase from $87,000 to $88,200 in 2015. Since 2004, Tier II tax rates are based on an average account benefits ratio reflecting railroad retirement fund levels. Depending on this ratio, the Tier II tax rate for employees can be between 0 percent and 4.9 percent, while the Tier II rate for employers can range between 8.2 percent and 22.1 percent.

Unemployment Insurance Contributions – Employers, but not employees, pay railroad unemployment insurance contributions, which are experience-rated by employer. The Railroad Unemployment Insurance Act also provides for a surcharge in the event the Railroad Unemployment Insurance Account balance falls below an indexed threshold amount. The accrual balance of the Railroad Unemployment Insurance Account was $140.8 million on June 30, 2014. Since the balance is less than the indexed threshold of $141.2 million, a 1.5 percent surcharge will be added to the basic contribution rates for 2015, but will not increase the maximum 12 percent rate. There was no surcharge in 2014 or 2013, although a surcharge of 1.5 percent applied in 2012.

As a result, the unemployment insurance contribution rates (including the 1.5 percent surcharge) on railroad employers in 2015 will range from the minimum rate of 2.15 percent to the maximum of 12 percent on monthly compensation up to $1,455, an increase from $1,440 in 2014.

In 2015, the minimum rate of 2.15 percent will apply to 77 percent of covered employers, with 8 percent paying the maximum rate of 12 percent.

During the year, new employers will pay an unemployment insurance contribution rate of 4.09 percent, which represents the average rate paid by all employers in the period 2011-2013.

RRB_seal_150pxRailroad retirement annuitants subject to earnings restrictions can earn more in 2015 without having their benefits reduced as a result of increases in earnings limits indexed to average national wage increases.

Like Social Security benefits, some railroad retirement benefit payments are subject to deductions if an annuitant’s earnings exceed certain exempt amounts. These earnings restrictions apply to those who have not attained full social security retirement age. For employee and spouse annuitants, full retirement age ranges from age 65 for those born before 1938 to age 67 for those born in 1960 or later. For survivor annuitants, full retirement age ranges from age 65 for those born before 1940 to age 67 for those born in 1962 or later.

For those under full retirement age throughout 2015, the exempt earnings amount rises to $15,720 from $15,480 in 2014. For beneficiaries attaining full retirement age in 2015, the exempt earnings amount, for the months before the month full retirement age is attained, rises to $41,880 in 2015 from $41,400 in 2014.

For those under full retirement age, the earnings deduction is $1 in benefits for every $2 of earnings over the exempt amount. For those attaining full retirement age in 2015, the deduction is $1 for every $3 of earnings over the exempt amount in the months before the month full retirement age is attained.

When applicable, these earnings deductions are assessed on the tier I and vested dual benefit portions of railroad retirement employee and spouse annuities, and the Tier I, Tier II, and vested dual benefit portions of survivor benefits.

All earnings received for services rendered, plus any net earnings from self-employment, are considered when assessing deductions for earnings. Interest, dividends, certain rental income, or income from stocks, bonds, or other investments are not considered earnings for this purpose.

Retired employees and spouses, regardless of age, who work for their last pre-retirement non-railroad employer are also subject to an additional earnings deduction, in their tier II and supplemental benefits, of $1 for every $2 in earnings up to a maximum reduction of 50 percent. This earnings restriction does not change from year to year and does not allow for an exempt amount.

A spouse benefit is subject to reduction not only for the spouse’s earnings, but also for the earnings of the employee, regardless of whether the earnings are from service for the last pre-retirement non-railroad employer or other post-retirement employment.

Special work restrictions continue to be applicable to disability annuitants in 2015. The monthly disability earnings limit increases to $850 in 2015 from $840 in 2014.

Regardless of age and/or earnings, no railroad retirement annuity is payable for any month in which an annuitant (retired employee, spouse or survivor) works for a railroad employer or railroad union.

RRB_seal_150pxMost 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.

RRB_seal_150pxThe standard Medicare Part B monthly premium will be $104.90 in 2015, the same amount as in 2014.

Some beneficiaries will continue to pay higher premiums based on their modified adjusted gross income, but these amounts are also remaining the same as in 2014. The monthly premiums that include income-related adjustments for 2015 will be $146.90, $209.80, $272.70, or $335.70, depending on the extent to which an individual beneficiary’s modified adjusted gross income exceeds $85,000 (or $170,000 for a married couple). The highest premium rate applies to beneficiaries whose incomes exceed $214,000 (or $428,000 for a married couple). The Centers for Medicare and Medicaid Services estimates that less than five percent of Medicare beneficiaries pay the larger income-adjusted premiums.

Beneficiaries in Medicare Part D prescription drug coverage plans pay premiums that vary from plan to plan. Beginning in 2011, the Affordable Care Act required Part D beneficiaries whose modified adjusted gross income exceeds the same income thresholds that apply to Part B premiums to also pay a monthly adjustment amount. In 2015, the adjustment amount ranges from $12.30 to $70.80.

The Railroad Retirement Board withholds Part B premiums from benefit payments it processes. The agency can also withhold Part C and D premiums from benefit payments if an individual submits a request to his or her Part C or D insurance plan. The RRB will also begin withholding Part D income-related adjustment amounts from benefit payments in January 2015.

The following tables (click here) show the income-related Part B premium adjustments for 2015. The Social Security Administration is responsible for all income-related monthly adjustment amount determinations. To make the determinations, SSA uses the most recent tax return information available from the Internal Revenue Service. For 2015, that will usually be the beneficiary’s 2013 tax return information. If that information is not available, SSA will use information from the 2012 tax return.

Those railroad retirement and social security Medicare beneficiaries affected by the 2015 Part B and D income-related premiums will receive a notice from SSA by December 2014. The notice will include an explanation of the circumstances where a beneficiary may request a new determination. Persons who have questions or would like to request a new determination should contact SSA after receiving their notice.

Additional information about Medicare coverage, including specific benefits and deductibles, can be found at www.medicare.gov.

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Barrows

President Barack Obama announced Oct. 8 his intent to nominate Walter A. Barrows to a second term as the labor member to the U.S. Railroad Retirement Board. His nomination must be confirmed by the U.S. Senate.

Obama first nominated Barrows as the board’s labor member in 2011. His appointment was confirmed by the Senate on Sept. 26, 2011, and he was sworn into office on Oct. 7.

Prior to his service with the RRB, Barrows served as Secretary-Treasurer of the Brotherhood of Railroad Signalmen from 1999 to 2011. From 2004 to 2011, he also served as a labor trustee overseeing the National Railroad Retirement Investment Trust Fund.

Following the nomination of Barrows and several others to key administration posts, Obama said, “These men and women bring extraordinary dedication to their roles and will serve the American people well. I look forward to working with them in the months and years to come.”

Barrows, 56, is a native of Ohio. He started his railroad career with the Norfolk & Western Railway in 1974, holding numerous positions within the railroad’s signal department. Before being elected BRS secretary-treasurer, he served the union in a variety of local and national offices, including general chairman for the Norfolk Southern General Committee and as a Grand Lodge trustee.

He currently resides in Front Royal, Va, with his wife, Linda. They have three grown children.

Headquartered in Chicago, the RRB provides retirement, survivor, disability, unemployment and sickness benefit payments totaling almost $11 billion a year to railroad workers and their families under the Railroad Retirement and Unemployment Insurance Acts.

The agency is managed by a three-member Board comprised of a representative of rail labor, a representative of rail carriers, and a member representing the general public who serves as chairman. Barrows’ appointment was unanimously supported by 12 different international and national unions which represent employees in the rail industry.

RRB_seal_150pxThe Railroad Retirement Board (RRB) is required by law to submit annual financial reports to Congress on the financial condition of the railroad retirement system and the railroad unemployment insurance system. These reports must also include recommendations for any financing changes which may be advisable in order to ensure the solvency of the systems. In June, the RRB submitted its 2014 reports on the railroad retirement and railroad unemployment insurance systems.

The following questions and answers summarize the findings of these reports.

1. What were the assets of the railroad retirement and railroad unemployment insurance systems last year?

As of Sept. 30, 2013, total railroad retirement system assets, comprising assets managed by the National Railroad Retirement Investment Trust and the railroad retirement system accounts at the Treasury, equaled $26.7 billion. The trust was established by the Railroad Retirement and Survivors’ Improvement Act of 2001 to manage and invest railroad retirement assets. The cash balance of the railroad unemployment insurance system was $192.5 million at the end of fiscal year 2013.

2. What was the conclusion of the 2014 report on the financial condition of the railroad retirement system?

The overall conclusion was that, barring a sudden, unanticipated, large decrease in railroad employment or substantial investment losses, the railroad retirement system will experience no cash-flow problems during the next 25 years. The long-term stability of the system, however, is still uncertain. Under the current financing structure, actual levels of railroad employment and investment return over the coming years will largely determine whether corrective action is necessary.

3. What methods were used in forecasting the financial condition of the railroad retirement system?

The 2014 report projected the various components of income and outgo of the railroad retirement system under three employment assumptions, intended to provide an optimistic, moderate and pessimistic outlook, for the 25 calendar years 2014-2038. The projections of these components were combined and the investment income calculated to produce the projected balances in the railroad retirement accounts at the end of each projection year.

Projecting income and outgo under optimistic, moderate and pessimistic employment assumptions, the valuation indicated no cash-flow problems occur throughout the 25-year projection period under any of the assumptions.

4. How do the results of the 2014 report compare with those of the 2013 report?

The projected tier II tax rates for each calendar year are either the same or lower than in last year’s report. (Railroad retirement payroll taxes, like railroad retirement benefits, are calculated on a two-tier basis.) The projected combined account balances are higher at the end of each year.

The favorable comparison with last year was due to overall favorable economic and employment experience, with the largest impacts resulting from employment exceeding the RRB’s projections and actual investment return of approximately 16 percent exceeding the expected investment return of seven percent in calendar year 2013.

5. Did the 2014 report on the financial condition of the railroad retirement system recommend any railroad retirement payroll tax rate changes?

The report did not recommend any change in the rate of tax imposed by current law on employers and employees.

6. What were the findings of the 2014 report on the financial condition of the railroad unemployment insurance system?

The RRB’s 2014 railroad unemployment insurance financial report was also generally favorable. Even as maximum benefit rates increase 41 percent (from $68 to $96) from 2013 to 2024, experience-based contribution rates are expected to keep the unemployment insurance system solvent. Unemployment levels are the single most significant factor affecting the financial status of the railroad unemployment insurance system. However, the system’s experience-rating provisions, which adjust contribution rates for changing benefit levels, and its surcharge trigger for maintaining a minimum balance, help to ensure financial stability in the advent of adverse economic conditions.

Under experience-rating provisions, each employer’s contribution rate is determined by the RRB on the basis of benefit payments made to the railroad’s employees. Even under the report’s most pessimistic assumption, the average employer contribution rate remains well below the maximum throughout the projection period.

While no surcharge is in effect in calendar year 2014, this year’s report predicts a 1.5 percent surcharge in calendar years 2015 and 2016. A surcharge of 1.5 percent is also likely in calendar year 2017.

7. What methods were used to evaluate the financial condition of the railroad unemployment insurance system?

The economic and employment assumptions used in the unemployment insurance report corresponded to those used in the 2014 report on the financial condition of the retirement system. Projections were made for various components of income and outgo under each of the three employment assumptions, but for the period 2014-2024, rather than a 25-year period.

8. Did the 2014 report on the railroad unemployment insurance system recommend any financing changes to the system?

No financing changes were recommended at this time by the report.

 

RRB_seal_150pxAdditional locations have now been added to the U.S. Railroad Retirement Board’s (RRB) schedule of Pre-Retirement Seminars for railroad employees and their spouses.

Designed for railroad employees and spouses planning to retire within five years or less, the seminars will familiarize attendees with the retirement benefits available to them, and also guide them through the application process. The program is sponsored by the RRB’s Office of the Labor Member, and began earlier this year on a pilot basis with seminars held in several locations. Additional seminars, to be held from 8:30 a.m. to 12:30 p.m., have been announced for the following dates and at the following locations:

  • Oct. 3: Moorhead Federal Building, 1000 Liberty Ave., Room 1310, Pittsburgh, PA 15222.
  • Oct. 9: Jerome Hill Theater (1st floor), 180 E. 5th St., St. Paul, MN 55101.
  • Oct. 31: Richard Bolling Federal Building, 601 E. 12th St., Cafeteria Conference Room (ground floor), Kansas City, MO 64106.

Persons wishing to attend are asked to print and complete a registration form, which is available by visiting the RRB’s website at www.rrb.gov, and selecting the Office of the Labor Member’s Educational Materials link in the Spotlight section of the homepage. Seminar space is limited and registration is being accepted on a first-come, first-served basis. Completed forms should be mailed or faxed to the RRB office listed on the form as soon as possible.

Individuals who have not previously submitted documents required when filing a railroad retirement annuity application, such as proofs of age, marriage, or military service, are encouraged to bring this material (original documents or certified copies required) to the seminar. Attendees should also bring along an additional copy of each item to leave with the RRB field personnel leading the seminars.

Those unable to attend the seminars but still seeking pre-retirement information should contact the RRB. Individual retirement counseling is available in person at an agency field office, or by phone by contacting the RRB toll-free at (877) 772-5772.