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Barrows

WASHINGTON – A former secretary-treasurer of the Brotherhood of Railroad Signalmen – Walt Barrows – is the new labor member of the Railroad Retirement Board following his Senate confirmation Sept. 27. He succeeds Butch Speakman, who chose to retire.

Barrows began his railroad career as a signalman with Norfolk & Western Railway (now part of Norfolk Southern) in 1974. Since 2004 – while holding his signalmen post — he has been the labor trustee of the National Railroad Retirement Investment Trust, a position earlier held by former UTU General Secretary and Treasurer Dan Johnson.

Separately, Democrat Harry Hoglander and Republican Thomas Beck are awaiting Senate action on their White House nominations to the National Mediation Board (NMB).

Hoglander, educated as an attorney, was nominated to a fourth three-year term to expire in June 2014. Before joining the NMB, he was a legislative aide to Rep. John Tierney (D-Mass.), where he focused on aviation and rail issues. Previously, Hoglander retired as an Air Force fighter pilot, a Trans World Airlines pilot and executive vice president of the Air Line Pilots Association.

Beck, who would succeed Republican Elizabeth Dougherty (for a three-year term expiring in 2013), currently is a Senate-confirmed member of the Federal Labor Relations Authority (FLRA), which administers labor-management relations for non-Postal Service federal employees. Previously, he was an attorney practicing labor and employment law. Beck also teaches, on a part-time basis, courses in legislation and public policy at George Mason University in Virginia.

The third member of the NMB is Democrat Linda Puchala, who was confirmed to her first three-year term in May 2009.

The Railroad Retirement Board will begin June 1 to withhold from benefits checks premiums for Medicare Part C (Medicare Advantage plans) and Medicare Part D (prescription drug plans).

Withholding is voluntary, and beneficiaries should contact their plans to request withholding by the Railroad Retirement Board of these premiums from their monthly benefits payments.

Part C and Part D premiums vary according to the plan and provider.

Note that a new federal law requires some Part D beneficiaries also to pay an additional monthly adjustment amount, depending on a beneficiary’s or married couple’s modified adjusted gross income.

While the RRB will be able to deduct the regular Part D premiums for individuals who elect to have them withheld from their benefits payments, Part D enrollees subject to the monthly adjustment amount will continue to receive a bill for that portion as the Railroad Retirement Board says it is unable to deduct those amounts from benefits at this time.

The Part D income-related monthly adjustment amounts are $12, $31.10, $50.10 or $69.10, depending on the extent to which an individual beneficiary’s modified adjusted gross income exceeds $85,000, or a married couple’s income exceeds $170,000. The Social Security Administration determines if a monthly adjustment amount is due, based upon the most recent tax return information available from the IRS.

The Railroad Retirement Board also reminds Medicare beneficiaries that the annual enrollment period for Part C and Part D coverage will be between Oct. 15 and Dec. 7 this year, rather than Nov. 15 through Dec. 31, as it was in previous years. Changes and enrollments made during this period will still be effective Jan. 1, 2012.

The Railroad Retirement Board will mail to railroad workers in June their annual Certificate of Service Months and Compensation (Form BA-6), showing creditable railroad service and compensation for 2010.

If you do not receive this Form BA-6 by July 1, or if you find the information to be incorrect or incomplete, contact your nearest Railroad Retirement Board field office by calling the RRB’s toll-free hotline at (877) 772-5772.

In checking the 2010 compensation total, be aware that only annual earnings up to $106,800 were creditable for Railroad Retirement purposes in that year. That is the annual maximum on which Railroad Retirement Tier I taxes are paid and for which income is credited for Railroad Retirement benefits calculations.

Form BA-6 also shows the number of months of verified military service creditable as service under the Railroad Retirement Act.

The Railroad Retirement Board reports it has adjusted benefits — effective with February benefits checks — for more than 140,000 beneficiaries to reflect new federal income tax withholding rates.

The new rates comply with provisions of the congressionally passed Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010.

The new rates apply to withholding from the non-Social Security equivalent portion of Tier I, Tier II, vested dual benefits, and supplemental annuity payments, and will remain in use for the remainder of 2011.

The Railroad Retirement Board says that in the absence of a request not to withhold federal income tax or to withhold the tax at specific amounts, the board will withhold taxes only if the combined portions of the non-Social Security equivalent portion of Tier I, Tier II, vested dual benefit, and supplemental annuity payments are equal to or greater than an annual threshold amount.

In that case, the RRB withholds taxes as if the annuitant were married and claiming three allowances.

The annual threshold amount for 2011 is $1,587.99. The threshold amount for 2010 was $2,063.51.

Annuitants can use form RRB W-4P (Withholding Certificate for Railroad Retirement Payments) to request:

  • No federal taxes be withheld from their Railroad Retirement payments
  • Federal taxes be withheld based on the marital status and the number of allowances they wish to claim
  • An additional amount be withheld from Railroad Retirement payments

Form RRB W-4P may be downloaded at www.rrb.gov by clicking on “Benefit Forms and Publications,” and then clicking on “Income Tax.”

Annuitants who have questions regarding their tax liability should contact the nearest office of the IRS or visit www.irs.gov.

Rail workers may now file biweekly claims for railroad sickness benefits directly online with the Railroad Retirement Board.

The agency said rail workers may now access this online service at www.rrb.gov by clicking on “Benefit Online Services.”

The RRB implemented a similar system for unemployment benefits in 2004.

First-time users must request a password request code (PRC), which they will receive by regular mail within 10 days. Those who have already established online accounts do not need to do so again.

Railroad employees who miss work due to illness or injury will still have to file a paper form that serves as their initial application for sickness benefits. Once the application is received, they will continue to receive paper-based claim forms, generally for specific 2-week periods, by regular mail.

However, they now have the option of filing the claims online in order to expedite processing and payment.

The Railroad Retirement Board has confirmed for rail workers what the Social Security Administration already has told Social Security recipients: There will be no increase in benefits in 2011.

The reason is there was no increase in the Consumer Price Index (CPI) from the third quarter of 2009 to the corresponding period of the current year.

Additionally, and because the CPI did not rise, Railroad Retirement and Social Security beneficiaries will not see an increase in 2011 in the earnings limitation that triggers benefits cuts if they continue working while receiving benefits.

For those under full retirement age throughout 2011, the exempt earnings amount remains at $14,160. For beneficiaries attaining full retirement age in 2011, the exempt earnings amount, for the months before the month full retirement age is attained, remains at $37,680 in 2011.

For employee and spouse annuitants, full retirement age ranges from age 65 for those born before 1938 to age 67 for those born in 1960 or later. For survivor annuitants, full retirement age ranges from age 65 for those born before 1940 to age 67 for those born in 1962 or later.

Special work restrictions continue to be applicable to disability annuitants. In 2011, the monthly disability earnings limit will also stay at the previous year’s amount of $780.

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

The Department of Health and Human Services has not yet announced if there will be Medicare premium changes for 2011. Information about Medicare changes for 2011, when available, may be found at www.medicare.gov.

The Railroad Retirement Board’s policy is that every annuitant has the right to manage his or her own benefits. However, when physical or mental impairments make a railroad retirement annuitant incapable of properly handling benefit payments, or where the Railroad Retirement Board (RRB) determines that the interests of the annuitant so require, the RRB can appoint a representative payee to act on the annuitant’s behalf. A representative payee may be either a person or an organization selected by the RRB to receive benefits on behalf of an annuitant.

The following questions and answers provide information for family members, or others, who may have to act on behalf of an annuitant.

1. Does the RRB have legal authority to appoint a representative payee for an annuitant?

The Railroad Retirement Act gives the RRB authority to determine whether direct payment of benefits, or payment to a representative payee, will best serve an annuitant’s interest. The RRB can appoint a representative payee regardless of whether there has been a legal finding of incompetence or commitment and, depending on the circumstances in a particular case, the RRB can select someone other than the individual’s legal representative to be the representative payee.

2. What if a person has been given power of attorney by a beneficiary?

Power of attorney is a legal process where one person grants another the authority to transact certain business on his or her behalf; but the RRB, like the Social Security Administration, does not recognize power of attorney for purposes of managing benefit payments for a beneficiary. For this purpose, the RRB uses the position of representative payee.

3. Why doesn’t the RRB recognize power of attorney?

The Railroad Retirement Act protects a person’s right to receive benefits directly and to use them as he or she sees fit by prohibiting the assignment of benefits. Power of attorney creates an assignment-like situation that is contrary to the protections given by this law. The Act likewise gives the RRB exclusive jurisdiction in determining whether to appoint a representative payee for an annuitant. If the RRB recognized power of attorney, it would be deferring to a designation made by someone outside of the agency and would, in effect, be abdicating its responsibility to the annuitant.

Also, events often occur which may affect an annuitant’s eligibility for benefits. The responsibility for reporting these events to the RRB is placed, by law, directly on the annuitant or the annuitant’s representative payee. When benefits are accepted, the annuitant or his or her payee attests to a continued eligibility for such benefits. And if payments are misused, they can be recouped from the payee. This is not true with power of attorney.

4. How are these representative payees selected?

Generally, the RRB’s local field offices determine the need for a representative payee and interview potential payees. The field office also advises the payee of his or her duties, monitors the payee, investigates any allegations of misuse of funds, and changes the method of payment, or the payee, when appropriate.

The RRB provides 15 days’ advance notice to an annuitant of its intent to appoint a representative payee, and the name of the payee, in order to allow the annuitant a period of time in which to contest the appointment.

5. What are the primary duties and responsibilities of a representative payee?

The payee must give first consideration to the annuitant’s day-to-day needs. This includes paying for food, shelter, clothing, medical care and miscellaneous personal needs. Beyond day-to-day needs, railroad retirement benefits may be used for other expenses.

The payee is also responsible for reporting events to the RRB that affect the individual’s annuity, and is required to account for the funds received on behalf of the annuitant.

In addition, since railroad retirement benefits are subject to Federal income tax, a representative payee is responsible for delivering the benefit information statements issued each year by the RRB to the person handling the annuitant’s tax matters.

Periodically, the payee will be asked to complete a report which includes questions regarding how much of the railroad retirement benefits available during the year were used for the support of the beneficiary, how much of the benefits were saved, and how the savings were invested. In order to complete the questionnaire correctly, a payee must keep current records of the railroad retirement benefits received and how the benefits were used. The records should be retained for four years.

6. What are a representative payee’s primary responsibilities for an annuitant’s Medicare coverage?

When an annuitant requires covered medical services, the payee must have the annuitant’s Medicare card available. The payee must also keep records of the services received and the expenses incurred or paid, just as for any other usage of railroad retirement benefits.

7. What if an annuitant is confined to an institution?

When annuitants are in a nursing home, hospital or other institution, their railroad retirement benefit payments should be used to meet the charges for their current maintenance. Current maintenance includes the usual charges the institution makes for providing care and services.

The payee should use the benefit payments to aid in the annuitant’s possible recovery or release from the institution, or to improve his or her living conditions while confined. Payments may be used to provide such items as clothing, personal grooming supplies, transportation of relatives to visit the patient, trial visits to relatives, medical and dental care, and reading materials and hobby supplies.

8. How should railroad retirement benefits not immediately required to meet an annuitant’s needs be handled?

Benefit payments which will not be needed in the near future must be saved or invested unless they are needed for the support of the annuitant’s legally dependent spouse or child, or to pay creditors under certain circumstances. It is recommended that conserved funds be held in interest-bearing accounts. Preferred investments are Federally-insured or state-insured accounts at financial institutions and obligations of, or those backed by, the Federal Government, such as U.S. Savings Bonds.

Funds should not be kept in the home, where they may be lost or stolen, nor can they be mingled with the payee’s own funds or other funds.

9. How can a person get more information about being appointed as a representative payee, or whether the use of railroad retirement benefits for a particular purpose would be proper?

More information is available by visiting the agency’s web site, www.rrb.gov, or by calling an RRB office toll-free at (877) 772-5772. Persons can find the address of the RRB office servicing their area by calling the RRB’s toll-free number or at www.rrb.gov.

(The preceding release was issued by the Railroad Retirement Board on September 8, 2010.)

The Railroad Retirement Board (RRB) is required by law to submit annual 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 2010 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 September 30, 2009, 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 $24.6 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 $47.6 million at the end of fiscal year 2009.

2. What was the conclusion of the 2010 report on the financial condition of the railroad retirement system?

The conclusion was that, barring a sudden, unanticipated, large drop in railroad employment or substantial investment losses, the railroad retirement system will experience no cash-flow problems during the next 23 years. The long-term stability of the system, however, is not assured. Under the current financing structure, actual levels of railroad employment and investment return over the coming years will determine whether additional corrective action is necessary.

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

The valuation projected the various components of income and outgo of the railroad retirement system under three employment assumptions, intended to provide an optimistic, intermediate and pessimistic outlook, respectively, for the 25 calendar years 2010-2034. 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, intermediate and pessimistic employment assumptions, the valuation indicated no cash-flow problems occur throughout the 25-year projection period under the optimistic and intermediate assumptions. Cash-flow problems do occur under the pessimistic assumption but not until 2033, 23 years from now.

4. How do the results of the 2010 report compare with those of the 2009 report?

The projected combined account balances are higher through calendar year 2025 under each employment assumption than in last year’s report. Under the optimistic and intermediate employment assumptions, the account balances are lower at the end of the current projection period due to lower taxes in some earlier years.

The favorable comparison with last year was largely due to actual investment return of approximately 24.3 percent exceeding the expected investment return of 7.5 percent in calendar year 2009, and to a lesser extent due to a lower estimated cost-of-living adjustment for 2011 in this year’s report. This was offset by lower projected employment and a lower estimated wage increase for 2009 in this year’s report.

5. Did the 2010 report on 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. The absence of projected cash-flow problems for at least 23 years under each employment assumption indicated that an immediate increase in the tax rate schedule is not required.

6. What were the findings of the 2010 report on the financial condition of the railroad unemployment insurance system?

The RRB’s 2010 railroad unemployment insurance financial report was also generally favorable. Even as maximum benefit rates increase 39 percent (from $64 to $89) from 2009 to 2020, experience-based contribution rates are expected to keep the unemployment insurance system solvent, except for short-term cash-flow problems in 2010 and 2011 under all assumptions. However, projections show a quick repayment of any loans even under the most pessimistic assumption.

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. The report predicted that, even under the most pessimistic assumption, the average employer contribution rate remains well below the maximum throughout the projection period.

The report also predicted that the 1.5 percent surcharge in effect in calendar year 2010 will be followed by either a 2.5 percent surcharge under an optimistic assumption or a 3.5 percent surcharge under the intermediate or pessimistic assumptions for calendar year 2011. Under all assumptions, a 2.5 percent surcharge is predicted for calendar year 2012. A surcharge of 1.5 percent for calendar year 2013 is likely only under the pessimistic assumption.

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 report on the retirement system. Projections were made for various components of income and outgo under each of three employment assumptions, but for the 11 fiscal years 2010-2020, rather than a 25-year period.

8. Did the 2010 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.

(The preceding release was issued by the Railroad Retirement Board on August 17, 2010.)

Paper checks may be a thing of the past for U.S. Railroad Retirement Board (RRB) beneficiaries who still receive them, under a recent initiative announced by the Department of the Treasury, according to the Railroad Retirement Board.

One part of the Treasury initiative would eliminate the vast majority of paper checks for federal benefit payments over the next 3 years. New recipients of federal benefits would receive such payments by electronic means starting March 1, 2011. Individuals already on the benefit rolls as of that date could continue to receive paper checks until March 1, 2013.

The most common form of electronic payment for Railroad Retirement, Social Security and veterans benefits is through Direct Deposit, in which the amount is automatically transferred to an individual’s bank account. The RRB currently pays approximately 90 percent of its benefits by Direct Deposit, which is greater than the government-wide average of about 85 percent.

However, a significant number of beneficiaries who receive paper checks do not have bank accounts. As a result, the new initiative will use Treasury’s Direct Express debit card to pay these individuals. The amount of the government benefits will be loaded onto the card, which can then be used like an ordinary debit card.

Currently, individuals applying for federal benefits can obtain a waiver from electronic payment by certifying that they do not have a bank account or that it would otherwise impose a hardship. Under the Treasury proposal, agencies would still be able to grant waivers, but in very limited cases. Examples include payment to individuals living in foreign countries, certain disaster or military situations, and non-recurring, one-time payments.

While it only costs 10.5 cents to issue an electronic payment, it costs the government $1.03 to issue a paper check. By shifting the 136 million federal benefit checks issued in a year to electronic payment, the government will save about $125 million in processing costs and more than 2 million pounds of paper.

In addition to cost considerations, electronic payment has the added benefit of providing a faster, more secure means of payment. Electronic payments are credited to the recipient’s account the day the payment is due, and there is no opportunity for the payment to be lost in the mail, stolen or forged. The debit cards, which currently carry a MasterCard logo, also allow the holder to avoid paying fees for check-cashing services. The primary benefit of these cards is that recipients will be able to use them to purchase goods and services at the point of sale or obtain cash through a nationwide network of automated teller machines.

Treasury published proposed regulations to implement this initiative in the Federal Register on June 17, 2010, with comments accepted until August 16, 2010. Additional information on the initiative is also available on Treasury’s web site, www.godirect.gov.

Railroad retirement benefits are subject to reduction if an employee with less than 30 years of service retires before attaining full retirement age. While employees with less than 30 years of service may still retire at age 62, the age at which full retirement benefits are payable has been gradually increasing since the year 2000, the same as for social security.

The following questions and answers explain how these early retirement age reductions are applied to railroad retirement annuities.

1. What is the full retirement age for employees with less than 30 years of service and is it the same for all employees?

Full retirement age, the earliest age at which a person can begin receiving railroad retirement or social security benefits without any reduction for early retirement, ranges from age 65 for those born before 1938 to age 67 for those born in 1960 or later, the same as for social security.

2. How are the changes in the maximum age reduction being phased in?

Since 2000, the age requirements for some unreduced railroad retirement benefits have been rising just like the social security requirements. For employees with less than 30 years of service and their spouses, full retirement age increases from 65 to 66, and from 66 to 67, at the rate of two months per year over two separate six-year periods. This also affects how reduced benefits are computed for early retirement.

The gradual increase in full retirement age from age 65 to age 66 affects those people who were born in the years 1938 through 1942. The full retirement age will remain age 66 for people born in the years 1943 through 1954. The gradual increase in full retirement age from age 66 to age 67 affects those who were born in the years 1955 through 1959. For people who were born in 1960 or later the full retirement age will be age 67.

3. How does this affect the early retirement age reductions applied to the annuities of those who retire before full retirement age?

The early retirement annuity reductions applied to annuities awarded before full retirement age are increasing. For employees retiring between age 62 and full retirement age with less than 30 years of service, the maximum reduction will be 30 percent by the year 2022. Prior to 2000, the maximum reduction was 20 percent.

Age reductions are applied separately to the tier I and tier II components of an annuity. The tier I reduction is 1/180 for each of the first 36 months the employee is under full retirement age when his or her annuity begins and 1/240 for each additional month. This will result in a gradual increase in the reduction at age 62 to 30 percent for an employee once the age 67 retirement age is in effect.

These same reductions apply to the tier II component of the annuity. However, if an employee had any creditable railroad service before August 12, 1983, the retirement age for tier II purposes will remain 65, and the tier II benefit will not be reduced beyond 20 percent.

The following chart shows how the gradual increase in full retirement age will affect employees.

Employee retires with less than 30 years of service:

  • If the employee was born in 1937* or earlier, his or her full retirement age** is 65 and the maximum annuity reduction at age 62 is 20 percent.
  • If the employee was born in 1938*, his or her full retirement age** is 65 years and 2 months and the maximum annuity reduction at age 62 is 20.833 percent.
  • If the employee was born in 1939*, his or her full retirement age** is 65 and 4 months and the maximum annuity reduction at age 62 is 21.667 percent.
  • If the employee was born in 1940*, his or her full retirement age** is 65 and 6 months and the maximum annuity reduction at age 62 is 22.50 percent.
  • If the employee was born in 1941*, his or her full retirement age** is 65 and 8 months and the maximum annuity reduction at age 62 is 23.333 percent.
  • If the employee was born in 1942*, his or her full retirement age** is 65 and 10 months and the maximum annuity reduction at age 62 is 24.167 percent.
  • If the employee was born in 1943 through 1954*, his or her full retirement age** is 66 and the maximum annuity reduction at age 62 is 25 percent.
  • If the employee was born in 1955*, his or her full retirement age** is 66 and 2 months and the maximum annuity reduction at age 62 is 25.833 percent.
  • If the employee was born in 1956*, his or her full retirement age** is 66 and 4 months and the maximum annuity reduction at age 62 is 26.667 percent.
  • If the employee was born in 1957*, his or her full retirement age** is 66 and 6 months and the maximum annuity reduction at age 62 is 27.50 percent.
  • If the employee was born in 1958*, his or her full retirement age** is 66 and 8 months and the maximum annuity reduction at age 62 is 28.333 percent.
  • If the employee was born in 1959*, his or her full retirement age** is 66 and 10 months and the maximum annuity reduction at age 62 is 29.167 percent.
  • If the employee was born in 1960* or later, his or her full retirement age** is 67 and the maximum annuity reduction at age 62 is 30 percent.

*A person attains a given age the day before his or her birthday. Consequently, someone born on Jan. 1 is considered to have attained his or her given age on December 31 of the previous year.

**If an employee has less than 10 years of railroad service and is already entitled to an age-reduced social security benefit, the tier I reduction is based on the reduction applicable on the beginning date of the social security benefit, even if the employee is already of full retirement age on the beginning date of the railroad retirement annuity.

4. What are some examples of how this will affect the amounts payable to employees retiring before full retirement age with less than 30 years of service?

Take the example of an employee born on June 2, 1950, who retires in 2012 at the age of 62. In terms of today’s dollars and current benefit levels, not counting future increases in creditable earnings, assume this employee is eligible for monthly tier I and tier II benefits, before age reductions, of $1,200 and $800, respectively, for a total monthly benefit of $2,000.

Upon retirement at age 62, the employee’s tier I benefit would be reduced by 25 percent, the maximum age reduction applicable in 2012. This would yield a tier I monthly benefit of $900; the employee’s tier II benefit would also be reduced by 25 percent, providing a tier II amount of $600 and a total monthly rate of $1,500. However, if the employee had any rail service before Aug. 12, 1983, the tier II benefit would be subject to a maximum reduction of only 20 percent, providing a tier II amount of $640, and a total monthly rate of $1,540. As a second example, take an employee born on June 2, 1960, and also eligible for monthly tier I and tier II benefits, before age reductions, of $1,200 and $800, respectively, for a total monthly benefit of $2,000. This employee retires in 2022 at age 62 with no service before Aug. 12, 1983. Consequently, a 30 percent reduction is applied to both the tier I and tier II benefits and the net total annuity would be $1,400.

5. How are railroad retirement spouse benefits affected by this change?

If an employee retiring 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. Beginning in the year 2000, full retirement age for a spouse gradually began to rise to age 67, just as for an employee, depending on the year of birth. While reduced spouse benefits are still payable at age 62, the maximum reduction will be 35 percent by the year 2022. However, if an employee had any creditable rail service prior to Aug. 12, 1983, the increased age
reduction is applied only to the spouse’s tier I benefit. The maximum reduction in tier II, in this case, would only be 25 percent, as under prior law.

Take for an example the spouse of a railroader with less than 30 years of service, none of it prior to Aug. 12, 1983, who was born on April 2, 1960, and is retiring in 2022 at age 62, with a spouse annuity, in terms of today’s dollars and current benefit payments and before any reductions for age, of $1,000 a month. With the maximum reduction of 35 percent applicable in 2022, her net monthly benefit would be $650.

As a second example, if the same spouse had been born on April 2, 1948, and was retiring in 2010 at age 62, with the maximum age reduction of 30 percent, her net monthly benefit would be $700.

The following chart shows how this will affect the spouses of railroad employees if the employee retires with less than 30 years of service.

Spouse Age Reductions

  • If the employee retires with less than 30 years of service and the employee’s spouse was born in 1937* or earlier, the spouse’s full retirement age** is 65 and the spouse’s maximum annuity reduction at age 62 is 25 percent.
  • If the spouse was born in 1938*, the spouse’s full retirement age** is 65 years and 2 months and the spouse’s maximum annuity reduction at age 62 is 25.833 percent.
  • If the spouse was born in 1939*, her or his full retirement age** is 65 and 4 months and the maximum annuity reduction at age 62 is 26.667 percent.
  • If the spouse was born in 1940*, her or his full retirement age** is 65 and 6 months and the maximum annuity reduction at age 62 is 27.50 percent.
  • If the spouse was born in 1941*, her or his full retirement age** is 65 and 8 months and the maximum annuity reduction at age 62 is 28.333 percent.
  • If the spouse was born in 1942*, her or his full retirement age** is 65 and 10 months and the maximum annuity reduction at age 62 is 29.167 percent.
  • If the spouse was born in 1943 through 1954*, her or his full retirement age** is 66 and the maximum annuity reduction at age 62 is 30 percent.
  • If the spouse was born in 1955*, her or his full retirement age** is 66 and 2 months and the maximum annuity reduction at age 62 is 30.833 percent.
  • If the spouse was born in 1956*, her or his full retirement age** is 66 and 4 months and the maximum annuity reduction at age 62 is 31.667 percent.
  • If the spouse was born in 1957*, her or his full retirement age** is 66 and 6 months and the maximum annuity reduction at age 62 is 32.50 percent.
  • If the spouse was born in 1958*, her or his full retirement age** is 66 and 8 months and the maximum annuity reduction at age 62 is 33.333 percent.
  • If the spouse was born in 1959*, her or his full retirement age** is 66 and 10 months and the maximum annuity reduction at age 62 is 34.167 percent.
  • If the spouse was born in 1960* or later, her or his full retirement age** is 67 and the maximum annuity reduction at age 62 is 35 percent.

*A person attains a given age the day before his or her birthday. Consequently, someone born on January 1 is considered to have attained his or her given age on December 31 of the previous year.

**If the employee has less than 10 years of railroad service and the spouse is already entitled to an age-reduced social security benefit, the age reduction in her or his tier I will be based on the age reduction applicable on the beginning date of the spouse’s social security benefit, even if the spouse is already of full retirement age on the beginning date of her or his railroad retirement annuity.

6. Are age reductions applied to employee disability annuities?

Employee annuities based on disability are not subject to age reductions except for employees with less than 10 years of service, but who have 5 years of service after 1995. Such employees may qualify for a tier I benefit before retirement age based on total and permanent disability, but only if they have a disability insured status (also called a “disability freeze”) under Social Security Act rules, counting both railroad retirement and social security-covered earnings. Unlike with a 10-year employee, a tier II benefit is not payable in these disability cases until the employee attains age 62. And, the employee’s tier II benefit will be reduced for early retirement in the same manner as the tier II benefit of an employee who retired at age 62 with less than 30 years of service.

7. Do these changes also affect survivor benefits?

Yes. The eligibility age for a full widow(er)’s annuity is also gradually rising from age 65 for those born before 1940 to age 67 for those born in 1962 or later. A widow(er), surviving divorced spouse or remarried widow(er) whose annuity begins at full retirement age or later will generally receive an annuity unreduced for early retirement. However, if the deceased employee received an annuity that was reduced for early retirement, a reduction would be applied to the tier I amount payable to the widow(er), surviving divorced spouse or remarried widow(er). The maximum age reductions will range from 17.1 percent to 20.36 percent, depending on the widow(er)’s date of birth. (These age reductions apply to both tier I and tier II.) 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 also 28.5 percent, even if the annuity begins at age 50.

8. Does the increase in full retirement age affect the age at which a person becomes eligible for Medicare benefits?

No. Although the age requirements for some unreduced railroad retirement benefits have risen just like the social security requirements, beneficiaries are still eligible for Medicare at age 65.

9. Do these increases in full retirement age also apply to the earnings limitations and work deductions governing benefit payments to annuitants who work after retirement?

Like social security benefits, railroad retirement tier I and vested dual benefits paid to employees and spouses, and tier I, tier II, and vested dual benefits paid to survivors are subject to deductions if an annuitant’s earnings exceed certain exempt amounts. These earnings limitations and work deductions apply to all age and service annuitants and spouses under full retirement age regardless of the employee’s years of service. Although employees retiring at age 60 with 30 years of service have no age reduction, these earnings limitations and work deductions still apply until they reach their full retirement age. These earnings limitations also apply to survivor annuitants, with the exception of disabled widow(er)s under age 60 and disabled children.

Likewise, while special earnings restrictions apply to employees entitled to disability annuities, these disability earnings restrictions cease upon a disabled employee annuitant’s attainment of full retirement age. This transition is effective no earlier than full retirement age even if the annuitant had 30 years of railroad service.

The additional deductions applied to the annuities of retired employees and spouses who work for their last pre-retirement nonrailroad employer continue to apply after the attainment of full retirement age.

10. How can individuals get more information about railroad retirement annuities and their eligibility requirements?

Employees should contact a field office of the RRB by calling toll-free 1-877-772-5772 or via the RRB’s web site at 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 preceding release was issued by the Railroad Retirement Board on June 16, 2010.)