The amounts of compensation subject to Railroad Retirement Tier I and Tier II payroll taxes will go up in 2023, while the tax rates on employers and employees will stay the same. In addition, unemployment insurance contribution rates paid by railroad employers will include a surcharge of 1.5%, down from 3.5% in 2022, due to an improved employment outlook since the beginning of the pandemic.
Tier I and Medicare Tax — The Railroad Retirement Tier I payroll tax rate on covered rail employers and employees for 2023 remains at 7.65%. 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% for retirement and 1.45% for Medicare hospital insurance. The maximum amount of an employee’s earnings subject to the 6.20% rate increases from $147,000 to $160,200 in 2023, with no maximum on earnings subject to the 1.45% Medicare rate.
An additional Medicare payroll tax of 0.9% 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 rates in 2023 will remain at 4.9% for employees and 13.1% for employers. The maximum amount of earnings subject to Railroad Retirement Tier II taxes in 2023 will increase from $109,200 to $118,800. 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% and 4.9%, while the Tier II rate for employers can range between 8.2% and 22.1%.
Unemployment Insurance Contributions — Employers, but not employees, pay railroad unemployment insurance contributions, which are experience-rated by employer. The Railroad Unemployment Insurance Act (RUIA) 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 $112.7 million on June 30, 2022. Since the balance was below the indexed $100 million threshold (currently $137.9 million), but above the $50 million indexed threshold (currently $67.0 million), this results in a 1.5% surcharge in 2023. There was a surcharge of 3.5% in 2022 and 2.5% in 2021.
As a result, the unemployment insurance contribution rates on railroad employers in 2023 will range from the minimum rate of 2.15% to the maximum of 12.0% on monthly compensation up to $1,895, an increase from $1,755 in 2022.
In 2023, the minimum rate of 2.15% will apply to 80% of covered employers, with 6% paying the maximum rate of 12.0%. New employers will pay an unemployment insurance contribution rate of 2.82%, which represents the average rate paid by all employers in the period 2019-2021.
Tax Type
Rate – Employee
Rate – Employer
Annual Taxable Maximum
Annual Tax Amount Employer
Tier 1 – Medicare*
1.45%
1.45%
No Maximum
No Maximum
Tier 1 – Railroad Retirement
6.20%
6.20%
$160,200.00
$9,932.40
Tier 2 – Railroad Retirement
4.90%
13.10%
$118,800.00
$15,562.80
Total
12.55%
20.75%
$25,495.20
*Additional Medicare Tax: Employees will pay an additional 0.9% Medicare Tax on earnings above $200,000 (for those who file an individual return) or $250,000 (for those who file a joint return). This additional Medicare tax rate is not reflected in the tax rates shown above.
Note: Tier 1 Medicare and Tier 1 Railroad Retirement tax rates are equivalent to Social Security tax rates set for 2023. Tier 2 Railroad Retirement tax rates do not apply to employees subject to Social Security.
Below are PDFs of various releases from the RRB on 2023 tax rates:
Many railroad employees have served in the Armed Forces of the United States. Under certain conditions, their military service may be creditable as railroad service under the Railroad Retirement Act (RRA).
The following questions and answers provide information on how military service may be credited toward Railroad Retirement benefits.
1. Under what conditions can military service be credited as railroad service?
The intent behind the crediting of military service under the RRA is to prevent career railroad employees from losing retirement credits while performing active-duty military service during a war or national emergency period. Therefore, to be creditable as compensation under the RRA, service in the U.S. Armed Forces must be preceded by railroad service in the same or preceding calendar year. With the exceptions noted later, the employee must also have entered military service when the United States was at war or in a state of national emergency, or have served in the armed forces involuntarily. Military service is involuntary when an employee is required by law, such as Selective Service System conscription or troop call-up from a reserve unit, to leave railroad service to perform active duty military service.
Only active-duty military service is creditable under the RRA. A person is considered to have been on active duty while commissioned, or enrolled, in the active service of the Armed Forces of the United States (including the U.S. Coast Guard), or while ordered to federal active duty from any reserve component of the uniformed armed forces.
2. What are some examples of creditable service performed by a member of a reserve component, such as the Army Reserve?
Any military service a reservist is required to perform as a result of a call-up to active duty, such as during a partial mobilization, is creditable under the RRA, so long as the military service is preceded by railroad service in the same or preceding year.
Annual training duty as a member of a reserve component of a uniformed service is also considered active duty and may be creditable, provided the railroad employee service requirement is met. The period of active duty for training also includes authorized travel time to and from any such training duty. However, weekend alone or evening reserve duty is not creditable.
Active duty in a state National Guard or state Air National Guard unit may be creditable only while the reservist was called to federal active duty by Congress or the president of the United States. Emergency call-up of the National Guard by a governor for riot or flood control would not be creditable.
3. What are the dates of the war or national emergency periods?
The war or national emergency periods are:
August 2, 1990, to date as yet undetermined.
December 16, 1950, through September 14, 1978.
September 8, 1939, through June 14, 1948.
If military service began during a war or national emergency period, any active duty service the employee was required to continue in beyond the end of the war or national emergency is creditable, except that voluntary service extending beyond September 14, 1978, is not creditable.
Railroad workers who voluntarily served in the armed forces between June 15, 1948, and December 15, 1950, when there was no declared national state of emergency, can be given Railroad Retirement credit for their military service if they:
performed railroad service in the year they entered or the year before they entered military service, and;
returned to rail service in the year their military service ended, or in the following year, and;
had no intervening nonrailroad employment.
4. How can military service be used to increase benefits paid by the Railroad Retirement Board (RRB)?
Railroad Retirement annuities are based on length of service and earnings. If military service is creditable as railroad service, a person will receive additional compensation credits for each month of creditable military service and railroad service credit for each active military service month not already credited by actual railroad service.
Creditable military service may be used in addition to regular railroad service to meet certain service requirements, such as the basic 10-year or 5-year service requirements for a regular annuity, the 20-year requirement for an occupational disability annuity before age 60, the 25-year requirement for a supplemental annuity, or the 30-year requirement for early retirement benefits.
5. Can United States Merchant Marine service be creditable for Railroad Retirement purposes?
No. Service with the Merchant Marine or civilian employment with the Department of Defense is not creditable, even if performed in wartime.
6. Are Railroad Retirement annuities based in part on military service credits reduced if other benefits, such as military service pensions or payments from the Department of Veterans Affairs, are also payable on the basis of the same military service?
No. While Railroad Retirement employee annuities are subject to reductions for dual entitlement to Social Security benefits and, under certain conditions, federal, state or local government pensions, as well as certain other payments, Railroad Retirement employee annuities are always exempt from reduction for military service pensions or payments by the Department of Veterans Affairs.
7. Are the unemployment and sickness benefits payable by the RRB affected if an employee is also receiving a military service pension?
Yes. The unemployment and sickness benefits payable by the RRB are affected if a claimant is also receiving a military service pension. However, payments made by the Department of Veterans Affairs will not affect railroad unemployment or sickness benefits.
When a claimant is receiving a military service pension or benefits under any social insurance law for days in which he or she is entitled to benefits under the Railroad Unemployment Insurance Act, railroad unemployment or sickness benefits are payable only to the extent to which they exceed the other payments for those days. In many cases, the amount of a military service pension precludes the payment of unemployment or sickness benefits by the RRB. Examples of other such social insurance payments are firefighters’ and police pensions, or certain workers’ compensation payments. Claimants should report all such payments promptly to avoid having to refund benefits later.
8. Can proof of military service be filed in advance of retirement?
Yes. Railroad employees are encouraged to file their military service proofs well before retirement to expedite the annuity application process and avoid delays caused by inadequate proofs. Proofs can be mailed to an employee’s local RRB field office, or placed in the secure lockboxes/door slots outside of an RRB field office’s doors. (Lockboxes and door slots are checked daily.) Employee information will be recorded and stored electronically until an employee retires. All evidence brought or mailed to an RRB office will be handled carefully and returned promptly.
If employees do not have an official record of their military service, their local RRB office will explain how to get acceptable evidence.
9. How can an employee get more information about the crediting of his or her military service by the RRB?
More information is available by visiting the RRB’s website, RRB.gov, or by calling an RRB office toll-free at 1-877-772-5772. Persons can find the address of the RRB office servicing their area by calling the agency’s toll-free number or by clicking on the Field Office Locator tab at RRB.gov. RRB field offices currently offer limited in-person service by appointment. To schedule an appointment, call 1-877-772-5772. Individuals should bring a photo ID when visiting a field office, and, depending on guidance from the Centers for Disease Control and Prevention for the county in which the field office is located, may be required to wear an appropriate face mask. In such circumstances, if visitors do not have a mask, one will be provided for them.
Railroad Retirement annuitants subject to earnings restrictions can earn more in 2023 without having their benefits reduced due to increased 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 varies depending on an individual’s year of birth, and is age 67 for those born after 1959. For survivor annuitants, full retirement age also varies, and is age 67 for those born after 1961.
For those under full retirement age throughout 2023, the exempt earnings amount rises to $21,240 from $19,560 in 2022. For beneficiaries attaining full retirement age in 2023, the exempt earnings amount, for the months before the month full retirement age is attained, increases to $56,520 in 2023 from $51,960 in 2022.
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 2023, 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 portion of Railroad Retirement employee and spouse annuities, and the Tier I and Tier II 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%. 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 2023. The monthly disability earnings limit increases to $1,150 in 2023 from $1,050 in 2022.
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.
Most Railroad Retirement annuities, like Social Security benefits, will increase in January 2023 due to a rise in the Consumer Price Index (CPI) from the third quarter of 2021 to the corresponding period of the current year.
Cost-of-living increases are calculated in both the Tier I and Tier II portion of a Railroad Retirement annuity. Tier I benefits, like Social Security benefits, will increase by 8.7%, which is the percentage of the CPI rise. This is the largest increase since 1981, when it was 11.2%.
Tier II benefits will go up by 2.8%, which is 32.5% of the CPI increase. Vested dual benefit payments and supplemental annuities also paid by the Railroad Retirement Board (RRB) are not adjusted for the CPI change.
In January 2023, the average regular Railroad Retirement employee annuity will increase $215 a month to $3,344 and the average of combined benefits for an employee and spouse will increase $304 a month to $4,838. For those aged widow(er)s eligible for an increase, the average annuity will increase $120 a month to $1,691.
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 49% of the widow(er)s on the RRB’s rolls are being paid under the 2001 law.
If a Railroad Retirement or survivor annuitant also receives a Social Security or other government benefit, such as a public service pension, any cost-of-living increase in that benefit will offset the increased Tier I benefit. However, Tier II cost-of-living increases are not reduced by increases in other government benefits. If a widow(er) whose annuity is being paid under the 2001 law is also entitled to an increased government benefit, her or his Railroad Retirement survivor annuity may decrease.
In late December the RRB will mail notices to all annuitants providing a breakdown of the annuity rates payable to them in January 2023.
Effective April 25, 2022, the U.S. Railroad Retirement Board (RRB) is offering in-person appointments at its nationwide network of 53 field offices.
Individuals can schedule appointments by calling the agency’s toll-free telephone number, (877) 772-5772, and speaking to a representative. If they experience a lengthy wait time on this call, they may be given the option of receiving a return call, although this feature is not available at all times due to large call volume. RRB representatives are available between 9 a.m. and 3 p.m. each weekday, except for Federal holidays. For planning purposes, please note that the agency’s busiest times are early in the week and during the first part of each month.
Customers can also reach out to individual offices by mail or fax, as well as by sending a secure message using the link on each field office’s web page at RRB.gov. Using the “Field Office Locator” tab at the top of the home page allows someone to access each office’s web page and contact information.
While most business with the RRB does not require in-person service, but can be handled by telephone or in writing, the agency has also added secure lockboxes or door slots at the office entrances for customer convenience. These can be used if someone needs to quickly drop off documents without needing to communicate with a representative and will be checked on a daily basis.
Other options for obtaining services 24 hours a day without the need to talk to an agency representative include the automated menus available through the toll-free number and the myRRB system on the agency website. The following services are accessible through these avenues.
Duplicate most recent tax statement (1099, 1099-R);
General benefit information;
Unemployment/sickness benefit application/claim status and payment information; and
RRB field office addresses.
For certain automated phone services, an individual’s social security number and/or railroad retirement claim number are required. In addition, for certain unemployment or sickness application/claim information, a person must provide their social security number and the benefit PIN printed on the back of the provided claim form.
Railroad employees who have established a myRRB account can login and complete the following actions:
Apply for and claim unemployment benefits;
Claim sickness benefits;
Check the status of their unemployment or sickness benefit claims;
View their railroad service and compensation history; and
Get an estimate of retirement benefits.
RRB offices have been closed to the public since March 16, 2020, three days after the coronavirus pandemic was declared a national emergency. Since that time, services have been limited to telephone and electronic communication, with agency employees continuing to process benefit applications and incoming mail.
While railroad employees with less than 30 years of service may retire at age 62, their railroad retirement benefits are subject to early retirement (“age”) reductions if they retire before attaining their full retirement age.
The following questions and answers explain how full retirement age is determined, and how age reductions are applied to railroad retirement annuities.
1. How is full retirement age for a railroad employee with less than 30 years of service determined?
Full retirement age – the earliest age at which someone can begin receiving railroad retirement benefits that are not reduced for early retirement – is determined by the year a person was born. It has gradually increased since the year 2000, as a result of amendments to the Social Security Act which impacted railroad retirement annuitants and social security beneficiaries. Full retirement age for a railroad employee with less than 30 years of service is age 66 for those born in 1943 through 1954, and gradually increases to age 67 for those born in 1960, or later. (A chart listing employee birth years and the corresponding full retirement age is included in the answer to Question 2.)
2. Does the increase in full retirement age affect the computation of benefits reduced for early retirement?
Yes. The early retirement annuity reduction percentages applied to annuities awarded before full retirement age have increased. For employees retiring between age 62 and full retirement age with less than 30 years of service, the maximum reduction is 30% in 2022. Prior to 2000, the maximum reduction was 20%.
Age reduction percentages are applied separately to the tier I and tier II benefits of a railroad retirement annuity. The age reduction percentage is computed using the following formula: 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 (if any). This has resulted in the gradual increase in the annuity reduction percentage at age 62 to 30% for an employee, now that the full retirement age of age 67 is in effect. (See chart below.) However, if an employee had creditable railroad service before August 12, 1983, the retirement age for tier II purposes is age 65, and the tier II benefit will not be reduced beyond 20%.
The following chart shows the gradual increase in full retirement age and the corresponding increase in the age reduction percentages applied to the applicable employee annuities.
Employee Retires with Less than 30 Years of Service
Year of Birth*
Full Retirement Age**
Annuity Reduction at Age 62
1937 or earlier
65
20.00%
1938
65 and 2 months
20.833%
1939
65 and 4 months
21.667%
1940
65 and 6 months
22.50%
1941
65 and 8 months
23.333%
1942
65 and 10 months
24.167%
1943 through 1954
66
25.00%
1955
66 and 2 months
25.833%
1956
66 and 4 months
26.667%
1957
66 and 6 months
27.50%
1958
66 and 8 months
28.333%
1959
66 and 10 months
29.167%
1960 or later
67
30.00%
* 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 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.
3. What are some examples of how age reductions are applied to the annuities of employees with less than 30 years of service who retire before attaining full retirement age?
Consider an employee who was born on March 2, 1960, and retired in 2022 at the age of 62. Assume this employee was eligible for monthly tier I and tier II benefits, before age reductions, of $1,800 and $1,200, respectively, for a total monthly annuity of $3,000.
Upon retirement at age 62, the employee’s tier I benefit and tier II benefit was reduced by 30.00%, the maximum age reduction applicable in 2022. This yielded a tier I amount of $1,260 and a tier II amount of $840, for a total monthly annuity of $2,100. However, if the employee had railroad service before August 12, 1983, the tier II amount would be subject to a maximum reduction of only 20%, providing a tier II amount of $960, and a total monthly annuity of $2,220.
As a second example, if the same employee had been born on March 2, 1959, and retired in 2022 at the age of 63, the employee’s tier I benefit and tier II benefit would be reduced by 24.167%. This would yield a tier I amount of $1,364.99 and a tier II amount of $910, for a total monthly annuity of $2,274.99. However, if the employee had railroad service before August 12, 1983, the tier II amount would be subject to a maximum reduction of only 20%, providing a tier II amount of $960, and a total monthly annuity of $2,324.99.
4. How are railroad retirement spouse benefits affected by these requirements?
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. However, early retirement reductions are applied to the spouse annuity if the spouse retires prior to her or his full retirement age.
Beginning in 2000, full retirement age for a spouse gradually began to rise to age 67, just as for an employee, depending on the spouse’s year of birth. While reduced spouse benefits are still payable at age 62, the maximum age reduction is 35% in 2022.
As with employee annuities, age reduction percentages are applied separately to the tier I and tier II benefits of a spouse annuity. However, the tier I reduction is 1/144 for each of the first 36 months the spouse is under full retirement age when her or his annuity begins, and 1/240 for each additional month (if any). This has resulted in a gradual increase in the annuity reduction percentage at age 62 to 35% for a spouse, now that the age 67 retirement age is in effect. (See chart below.) However, if an employee had any creditable railroad service prior to August 12, 1983, the spouse retirement age for tier II purposes is age 65 and the maximum age reduction percentage applied to tier II would only be 25%. Age reductions are not applied to spouse annuities based on the spouse’s caring for the employee’s child.
The following chart shows the gradual increase in full retirement age and the corresponding increase in the age reduction percentages applied to the applicable spouse annuities.
Spouse Age Reductions
Year of Birth*
Full Retirement Age**
Annuity Reduction at Age 62
1937 or earlier
65
25.00%
1938
65 and 2 months
25.833%
1939
65 and 4 months
26.667%
1940
65 and 6 months
27.50%
1941
65 and 8 months
28.333%
1942
65 and 10 months
29.167%
1943 through 1954
66
30.00%
1955
66 and 2 months
30.833%
1956
66 and 4 months
31.667%
1957
66 and 6 months
32.50%
1958
66 and 8 months
33.333%
1959
66 and 10 months
34.167%
1960 or later
67
35.00%
* A person attains a given age the day before her or his birthday. Consequently, someone born on January 1 is considered to have attained her or his 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.
5. What are some examples of how age reductions are applied to the annuities of the spouses of employees with less than 30 years of service whose spouses retire before full retirement age?
Consider the spouse of a railroader with less than 30 years of service, none of it prior to August 12, 1983, who was born on April 2, 1960, and is retiring in 2022 at age 62, with monthly tier I and tier II benefits, before any reductions for age, of $700 and $300, respectively, for a total monthly benefit of $1,000.
Upon retirement at age 62, the spouse’s tier I benefit and tier II benefit would be reduced by 35.00%, the maximum age reduction applicable in 2022. This would yield a tier I amount of $455 and a tier II amount of $195 for a total monthly annuity of $650. However, if the employee had any rail service before August 12, 1983, the tier II benefit would be subject to a maximum reduction of only 25%, providing a tier II amount of $225, and a total monthly annuity of $680.
As a second example, if the same spouse had been born on April 2, 1959, and retires in 2022 at age 63, the spouse’s tier I benefit and tier II benefit would be reduced by 29.167%. This would yield a tier I amount of $495.83 and a tier II amount of $212.50, for a total monthly annuity of $708.33. However, if the employee had any rail service before August 12, 1983, the tier II benefit would be subject to a maximum reduction of only 25%, providing a tier II amount of $225, and a total monthly annuity of $720.83.
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 railroad service, but who have five years of service after 1995. Such employees may qualify for a tier I benefit before retirement age based on total 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 to full retirement age affect survivor benefits?
Yes. The eligibility age for a full widow(er)’s annuity has gradually risen, and is 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 his or her widow(er), surviving divorced spouse or remarried widow(er).) For widow(ers) who retire before attaining their full retirement age, the maximum age reduction percentages will vary, depending on the widow(er)’s date of birth, and is 20.36% for those born in 1962, or later. 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%. For a disabled widow(er), disabled surviving divorced spouse or disabled remarried widow(er), the maximum reduction is also 28.5%, 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, railroad retirement 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 benefits paid to employees and spouses, and tier I and tier II 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, which, like other employees, is determined by the year they were born. 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 age reductions?
Individuals with questions about railroad retirement age reductions can send a secure message to their local RRB office by accessing Field Office Locator at RRB.gov and clicking on the link at the bottom of their local office’s page. If a customer needs to talk to an RRB representative, they can call the agency’s toll-free number (1-877-772-5772) between the hours of 9 a.m. and 3 p.m. each weekday, except on federal holidays. However, customers are asked to be patient because of the increase in call volume due to the closure to the public of RRB offices during the COVID-19 pandemic.
Certain portions of a Railroad Retirement annuity are treated differently for federal income tax purposes. The following questions and answers explain these differences and address the importance of individuals establishing accurate tax withholding from their annuities. Certain beneficiaries, including those retiring at age 60 with at least 30 years of service, and some occupational disability annuitants, need to pay close attention to changes in tax withholding when they turn age 62.
1. How are annuities paid under the Railroad Retirement Act treated under federal income tax laws?
A Railroad Retirement annuity is a single payment comprised of one or more of the following components, depending on the annuitant’s age, the type of annuity being paid, and eligibility requirements: a Social Security Equivalent Benefit (SSEB) portion of Tier I, a non-Social Security Equivalent Benefit (NSSEB) portion of Tier I, a Tier II benefit and a supplemental annuity.
In most cases, part of a Railroad Retirement annuity is treated like a Social Security benefit for federal income tax purposes while other parts of the annuity are treated like private pensions for tax purposes. Consequently, most annuitants who are U.S. citizens or residents are sent two tax statements from the Railroad Retirement Board (RRB) each January, even though they receive only a single annuity payment each month. While non–resident aliens also receive a single monthly annuity payment from the RRB, they are only sent one tax statement from the RRB.
2. What information is shown on the Railroad Retirement tax statements sent to annuitants in January?
One tax statement, Form RRB-1099 (only sent to U.S. citizens or residents), shows the SSEB portion of Tier I or special minimum guaranty payments made during the tax year, the amount of any such benefits that an annuitant may have repaid to the RRB during the tax year, and the net amount of these payments after subtracting the repaid amount. The amount of any offset for workers’ compensation and the amount of federal income tax withheld from these payments are also shown.
The other tax statement, Form RRB-1099-R (also only sent to U.S. citizens or residents), shows the NSSEB portion of Tier I, Tier II and supplemental annuity paid to the annuitant during the tax year, and may show an employee contribution amount. The NSSEB portion of Tier I along with Tier II are considered contributory pension amounts and are shown as a single combined amount in the Contributory Amount Paid box (Item 4) on the statement. The supplemental annuity is considered a noncontributory pension amount and is shown as a separate item on the statement.
Non–resident aliens are sent one tax statement, Form RRB-1042S, which shows the information included on both Form RRB-1099 and Form RRB-1099-R.
3. Can annuitants request federal income tax withholding from their benefit payments?
Yes. Annuitants may request that federal income tax be withheld from their annuity payments. To add or change federal income taxes withheld from SSEB payments, an annuitant must complete Internal Revenue Service (IRS) Form W-4V, Voluntary Withholding Request, and send it to the RRB. To add or change the amount of federal taxes withheld from NSSEB payments, annuitants must file Form RRB W-4P, Withholding Certificate for Railroad Retirement Payments, (available at the RRB’s website, RRB.gov) and send it to the RRB. If an annuitant does not file a Form RRB W-4P with the RRB and the taxable annuity components exceed the IRS minimum mandatory withholding amount, taxes will automatically be withheld as if the annuitant were married and claiming three allowances. Railroad Retirement benefits are not taxable by any state, so state tax withholding from Railroad Retirement payments is not possible. Annuitants that wish to add or change federal tax withholding from their annuity payments may contact an RRB field office for assistance. While the RRB may provide the necessary forms for withholding, it is the annuitant’s responsibility to determine how much federal income tax withholding is needed. Annuitants are encouraged to discuss the amount of withholding needed with a tax adviser or the IRS.
4. Which Railroad Retirement benefits are treated like Social Security benefits for federal income tax purposes?
The SSEB portion of Tier I – the part of a Railroad Retirement annuity equivalent to a Social Security benefit based on comparable earnings and included on Form RRB-1099 (or Form RRB-1042S for nonresident aliens) – must be reported on an individual’s federal income tax return, and is treated for tax purposes the same way as a Social Security benefit. The amount of these benefits that may be subject to federal income tax, if any, depends on the beneficiary’s income. (To determine if any amount of the SSEB portion is taxable, please refer to IRS publication 915, Social Security and Equivalent Railroad Retirement Benefits.) If part of the SSEB is taxable, how much is taxable depends on the total amount of a beneficiary’s benefits and other income. Usually, the higher that total amount, the greater the taxable part of a beneficiary’s benefit.
5. Which Railroad Retirement benefits are treated like private pensions for federal income tax purposes?
The NSSEB portion of Tier I, Tier II benefits, and supplemental annuities – which are included on Form RRB-1099-R (or Form RRB-1042S for nonresident aliens) – are all treated like private pensions for federal income tax purposes. In some cases, primarily those in which early retirement benefits are payable to retired employees and spouses between ages 60 and 62, some occupational disability benefits, and other categories of unique RRB entitlements, the entire annuity may be treated like a private pension. This is because Social Security benefits based on age and service are not payable before age 62, Social Security disability benefit entitlement requires total disability, and the Social Security Administration does not pay some categories of beneficiaries paid by the RRB.
6. How are 60/30 annuity payments taxed?
A railroad employee with 30 or more years of creditable rail service is eligible for a regular annuity based on age and service the first full month he or she is age 60. The employee’s spouse is also eligible for an annuity the first full month he or she is age 60. These “60/30” annuity payments are taxed as follows:
60/30 annuity payments before the employee or spouse is age 62:All benefits paid to an employee before age 62 are considered NSSEB and are fully taxable and reported on Form RRB-1099-R (or Form RRB-1042S for nonresident aliens). This includes all Tier I and Tier II benefits and any supplemental annuity that might be payable. Spouse benefits are also fully taxable and reported on Form RRB-1099-R (or Form RRB-1042S for nonresident aliens) until both the employee and spouse are age 62.
60/30 annuity payments after the employee is age 62: Once the employee turns age 62, part of the Tier I benefit is still considered NSSEB, but some is now considered SSEB because equivalent Social Security benefits are payable at age 62. Since these equivalent Social Security benefits paid at age 62 would be reduced for early retirement, while 60/30 benefits are not reduced, the RRB computes the portion of the Tier I benefit comparable to that payable under Social Security, and reports the SSEB amount on Form RRB-1099 (or Form RRB-1042S for nonresident aliens). The SSEB portion of spouse benefits is calculated the same way, except the employee and spouse must both be at least 62 for spouse benefits to be considered SSEB.
WARNING for 60/30 annuitants who begin receiving annuities before age 62:As noted previously, when the employee turns age 62 (or the spouse turns age 62, provided the employee is also at least age 62) the taxability of Tier I benefits changes from all private pension-equivalent benefits to a split between SSEB and NSSEB portions. For many annuitants, this means that the tax withholding in place will automatically decrease, and sometimes this change is significant. This is because any Form RRB W-4P on file with the RRB will not consider the SSEB portion of Tier I in the withholding calculation. In many cases, the SSEB portion will be subject to taxation because of the total amount of the annuitant’s income, and the decrease in withholding may result in an insufficient amount of taxes being withheld. Notices are released to annuitants advising of the change in the withholding amount, and they are encouraged to discuss the issue with a tax adviser or the IRS to determine the correct amount of withholding for them. Annuitants often need to file a new tax withholding election form with the RRB to increase withholding following this change, otherwise they may face a larger tax liability than expected when filing federal income tax returns the following year.
7. Are occupational disability annuitants subject to the same change in tax withholding at age 62?
Those occupational disability annuitants not qualified for a period of disability (also known as a “Disability Freeze”) as defined under the Social Security Act will similarly see the taxability of Tier I benefits change at age 62.
8. Where can an annuitant find more information about the taxability of Railroad Retirement annuities?
The amounts of compensation subject to Railroad Retirement Tier I and Tier II payroll taxes will increase in 2022, while the tax rates on employers and employees will stay the same. In addition, unemployment insurance contribution rates paid by railroad employers will include a surcharge of 3.5 percent, reflecting increased unemployment claims due to the pandemic.
Tier I and Medicare tax — The Railroad Retirement Tier I payroll tax rate on covered rail employers and employees for 2022 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 6.2 percent for retirement and 1.45 percent for Medicare hospital insurance. The maximum amount of an employee’s earnings subject to the 6.2 percent rate increases from $142,800 to $147,000 in 2022, with 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 rates in 2022 will remain at 4.9 percent for employees and 13.1 percent for employers. The maximum amount of earnings subject to Railroad Retirement Tier II taxes in 2022 will increase from $106,200 to $109,200. 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 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 negative $46.2 million on June 30, 2021. Since the balance was below zero, this triggered the 3.5 percent surcharge in 2022. There was a surcharge of 2.5 percent in 2021, with no surcharge imposed in 2020.
As a result, the unemployment insurance contribution rates on railroad employers in 2022 will range from the minimum rate of 4.15 percent to the maximum of 12.5 percent on monthly compensation up to $1,755, an increase from $1,710 in 2021.
In 2022, the minimum rate of 4.15 percent will apply to 79 percent of covered employers, with 7 percent paying the maximum rate of 12.5 percent. New employers will pay an unemployment insurance contribution rate of 2.62 percent, which represents the average rate paid by all employers in the period 2018-2020.
The Centers for Medicare & Medicaid Services (CMS) has announced that the standard monthly Part B premium will be $170.10 in 2022, an increase of $21.60 from $148.50 in 2021. Some Medicare beneficiaries may pay less than this amount because, by law, Part B premiums for current enrollees cannot increase by more than the amount of the cost-of-living adjustment for Social Security (Railroad Retirement Tier I) benefits.
Since the cost-of-living adjustment is 5.9% in 2022, some Medicare beneficiaries may see an increase in their Part B premiums but still pay less than $170.10. The standard premium amount will also apply to new enrollees in the program. However, certain beneficiaries will continue to pay higher premiums based on their modified adjusted gross income.
The monthly Part B premiums that include income-related adjustments for 2022 will range from $238.10 to $578.30, depending on the extent to which an individual beneficiary’s modified adjusted gross income exceeds $91,000 (or $182,000 for a married couple). The highest rate applies to beneficiaries whose incomes exceed $500,000 (or $750,000 for a married couple). CMS estimates that about 7% of Medicare beneficiaries pay the income-adjusted premiums.
Beneficiaries in Medicare Part D prescription drug coverage plans pay premiums that vary from plan to plan. Part D beneficiaries whose modified adjusted gross income exceeds the same income thresholds that apply to Part B premiums also pay a monthly adjustment amount. In 2022, the adjustment amount ranges from $12.40 to $77.90.
The Railroad Retirement Board withholds Part B premiums, Part B income-related adjustments and Part D income-related adjustments 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 following tables show the income-related Part B premium adjustments for 2022. The Social Security Administration (SSA) 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 2022, that will usually be the beneficiary’s 2020 tax return information. If that information is not available, SSA will use information from the 2019 tax return.
Railroad Retirement and Social Security Medicare beneficiaries affected by the 2022 Part B and D income-related premiums will receive a notice from SSA by the end of the year. The notice will include an explanation of the circumstances when 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.
2022 Part B Premiums
Beneficiaries who file an individual tax return with income:
Beneficiaries who file a joint tax return with income:
Income– related monthly adjustment amount
Total monthly Part B premium amount
Less than or equal to $91,000
Less than or equal to $182,000
$0.00
$170.10
Greater than $91,000 and less than or equal to $114,000
Greater than $182,000 and less than or equal to $228,000
$59.40
$238.10
Greater than $114,000 and less than or equal to $142,000
Greater than $228,000 and less than or equal to $284,000
$148.50
$340.20
Greater than $142,000 and less than or equal to $170,000
Greater than $284,000 and less than or equal to $340,000
$237.60
$442.30
Greater than $170,000 and less than $500,000
Greater than $340,000 and less than $750,000
$326.70
$554.30
$500,000 and above
$750,000 and above
$356.40
$578.30
The monthly premium rates paid by beneficiaries who are married, but file a separate return from their spouses and who lived with their spouses at some time during the taxable year, are different. Those rates are as follows:
Beneficiaries who are married, but file a separate tax return, with income:
Income-related monthly adjustment amount
Total monthly Part B premium amount
Less than or equal to $91,000
$0.00
$170.10
Greater than $91,000 and less than or equal to $409,000
In addition to the retirement annuities payable to railroad employees, the Railroad Retirement Act, like the Social Security Act, also provides annuities for some spouses of retired employees. Payment of a spouse annuity is made directly to the wife or husband of the employee. Divorced spouses may also qualify for benefits. The following questions and answers describe the benefits payable to spouses and the eligibility requirements. Information regarding divorced spouses begins with question eight. 1. How are Railroad Retirement spouse annuities computed? Regular Railroad Retirement annuities are computed under a two-tier formula. The Tier I portion of an employee’s annuity is based on both Railroad Retirement credits and any Social Security credits that the employee earned. Computed using Social Security benefit formulas, an employee’s Tier I benefit approximates the Social Security benefit that would be payable if all of the employee’s work were performed under the Social Security Act. The Tier II portion of the employee’s annuity is based on Railroad Retirement credits only, and may be compared to the retirement benefits paid over and above Social Security benefits to workers in other industries. The spouse annuity formula is based on percentages of the employee’s Tier I and Tier II amounts. The first tier of a spouse annuity, before any applicable reductions, is 50% of the railroad employee’s unreduced Tier I amount. The second tier amount, before any reductions, is 45% of the employee’s unreduced Tier II amount. 2. How does a Railroad Retirement spouse annuity compare to a Social Security spouse benefit? The average annuity awarded to spouses in fiscal year 2020, excluding divorced spouses, was $1,130 a month, while the average monthly Social Security spouse benefit was about $744. Annuities awarded in fiscal year 2020 to the spouses of employees who were of full retirement age or over and who retired directly from the rail industry with at least 25 years of service averaged $1,410 a month, and the average award to the spouses of employees retiring at age 60 or over with at least 30 years of service was $1,602 a month. 3. What are the age requirements for a Railroad Retirement spouse annuity? The age requirements for a spouse annuity depend on the employee’s age, date of retirement and years of railroad service. If a retired employee with 30 or more years of service is age 60 or older, the employee’s spouse is eligible for an annuity the first full month the spouse is age 60. Certain early retirement reductions are applied if the employee first became eligible for an annuity July 1, 1984, or later and retired at ages 60 or 61 before 2002. If the employee was awarded a disability annuity, has attained age 60, and has 30 years of service, the spouse can receive an unreduced annuity the first full month she or he is age 60, regardless of whether the employee annuity began before or after 2002, as long as the spouse’s annuity beginning date is after 2001. If a retired employee with less than 30 years of service is age 62 or older, the employee’s spouse is eligible for an annuity the first full month the spouse is age 62. Early retirement reductions are applied to the spouse annuity if the spouse retires prior to full retirement age. The full retirement age for a spouse is gradually rising to age 67, just as for an employee, depending on the year of birth. Reduced benefits are still payable at age 62, but the maximum reduction will be 35% rather than 25% by the year 2022. However, the Tier II portion of a spouse annuity will not be reduced beyond 25% if the employee had any creditable railroad service before August 12, 1983. 4. What if the spouse is caring for a child of the retired employee? A spouse of an employee who is receiving an age and service annuity (or a spouse of a disability annuitant who is otherwise eligible for an age and service annuity) is eligible for a spouse annuity at any age if caring for the employee’s unmarried child, and the child is under age 18 or a disabled child of any age who became disabled before age 22. 5. What are some of the other general eligibility requirements for a Railroad Retirement spouse annuity? The employee must have been married to the spouse for at least one year, unless the spouse is the natural parent of their child, or the spouse was eligible or potentially eligible for a Railroad Retirement widow(er)’s, parent’s or disabled child’s annuity in the month before marrying the employee or the spouse was previously married to the employee and received a spouse annuity. 6. Can the same-sex spouse of a railroad employee file for a Railroad Retirement spouse annuity? Yes, if the same-sex spouse meets current spouse annuity eligibility requirements and follows current application procedures. 7. Are spouse annuities subject to offset for the receipt of other benefits? Yes. The Tier I portion of a spouse annuity is reduced for any Social Security entitlement, regardless of whether the Social Security benefit is based on the spouse’s own earnings, the employee’s earnings or the earnings of another person. This reduction follows principles of Social Security law which, in effect, limit payment to the higher of any two or more benefits payable to an individual at one time. The Tier I portion of a spouse annuity may also be reduced for receipt of any federal, state or local government pension separately payable to the spouse based on the spouse’s own earnings. The reduction generally does not apply if the employment on which the public service pension is based was covered under the Social Security Act throughout the last 60 months of public employment. Most military service pensions and payments from the Department of Veterans Affairs will not cause a reduction. Pensions paid by a foreign government or interstate instrumentality will not cause a reduction. For spouses subject to a public service pension reduction, the Tier I reduction is equal to 2/3 of the amount of the public service pension. In addition, there may be a reduction in the employee’s Tier I amount for receipt of a public pension based, in part or in whole, on employment not covered by Social Security or Railroad Retirement after 1956. If the employee’s Tier I benefit is offset for a non-covered service pension, the spouse Tier I amount is 50% of the employee’s Tier I amount after the offset. The spouse Tier I portion may also be reduced if the employee is under age 65 and is receiving a disability annuity as well as worker’s compensation or public disability benefits. While these offsets can reduce or even completely wipe out the Tier I benefit otherwise payable to a spouse, they do not affect the Tier II benefit potentially payable to that spouse. 8. How do the eligibility requirements and benefits differ for a divorced spouse? A divorced spouse annuity may be payable to the divorced wife or husband of a retired employee if their marriage lasted for at least 10 consecutive years, both have attained age 62 for a full month, and the divorced spouse is not currently married. A divorced spouse can receive an annuity even if the employee has not retired, provided they have been divorced for a period of not less than two years, the employee and former spouse are at least age 62, and the employee is fully insured under the Social Security Act using combined railroad and Social Security earnings. Early retirement reductions are applied to the divorced spouse annuity if the divorced spouse retires prior to full retirement age. Full retirement age for a divorced spouse is gradually rising to age 67, depending on the year of birth. A divorced spouse is also eligible for an annuity at any age if caring for the employee’s unmarried child, and the child is under age 18, or a disabled child of any age who became disabled before age 22, if the employee is deceased. Unlike a regular spouse annuity, the divorced spouse annuity is computed under the single-Tier I formula. The amount of a divorced spouse’s annuity is, in effect, equal to what Social Security would pay in the same situation (Tier I only) and therefore less than the amount of the spouse annuity otherwise payable (Tier I and Tier II). The average divorced spouse annuity awarded in fiscal year 2020 was $768. 9. Would the award of an annuity to a divorced spouse affect the monthly annuity rate payable to a retired employee and/or the current spouse? No. If a divorced spouse becomes entitled to an annuity based on the employee’s railroad service, the award of the divorced spouse’s benefit would not affect the amount of the employee’s annuity, nor would it affect the amount of the Railroad Retirement annuity that may be payable to the current spouse. 10. What if an employee and spouse/divorced spouse are both railroad employees? If both started railroad employment after 1974, the amount of any spouse or divorced spouse annuity is reduced by the amount of the employee annuity to which the spouse is also entitled. If both the employee and spouse are qualified railroad employees and either had some railroad service before 1975, both can receive separate Railroad Retirement employee and spouse annuities, without a full dual benefit reduction. 11. Are Railroad Retirement annuities subject to garnishment or property settlements? Yes. Certain percentages of any Railroad Retirement annuity (employee, spouse, divorced spouse or survivor) may be subject to legal process (i.e., garnishment) to enforce an obligation for child support and/or alimony payments. Employee Tier II benefits and supplemental annuities are subject to court-ordered property divisions in proceedings related to divorce, annulment or legal separation. (Tier I benefits are not subject to property division.) A court-ordered property division payment may be paid even if the employee is not entitled to an annuity provided that the employee has 10 years of railroad service or five years after 1995 and both the employee and former spouse are at least age 62. 12. How can a person get more information about Railroad Retirement spouse and divorced spouse annuities? Individuals with questions about Railroad Retirement spouse and divorced spouse annuities can send a secure message to their local RRB office by accessing Field Office Locator at RRB.gov and clicking on the link at the bottom of their local office’s page. If a customer needs to talk to an RRB representative, they can call the agency’s toll-free number (1-877-772-5772) between the hours of 9 a.m. and 3 p.m. each weekday, except Federal holidays. However, customers are asked to be patient because of the increase in call volume due to the closure to the public of RRB offices during the COVID-19 pandemic.
In addition to the retirement annuities payable to railroad employees, the Railroad Retirement Act, like the Social Security Act, also provides annuities for some spouses of retired employees. Payment of a spouse annuity is made directly to the wife or husband of the employee. Divorced spouses may also qualify for benefits.