The Railroad Retirement Board has announced the locations and dates of their informational conferences for Spring 2016. All conference registrations begin at 8:00 a.m., with the programs beginning at 8:30 a.m. and ending at 12:15 p.m. These informational conferences are beneficial to newly elected officers, retirees, those planning to retire and spouses. Click here to view a list of conference dates and locations.
Tag: RRB
Every three years, the Railroad Retirement Board’s Chief Actuary conducts a study of the longevity of its annuitants, as part of a valuation of future revenues and benefit payments. The following questions and answers summarize the results of the most recent longevity study.
1. What were the study’s findings on the life expectancy of retired male railroaders?
The most recent data reflected a continued improvement in longevity. Using data through 2012, the study indicated that, on the average, a male railroader retiring at age 60 can be expected to live another 22.4 years, or approximately 269 months. Studies done three, six and nine years ago indicated life expectancies of 21.9, 21.3 and 20.7 years, respectively, for this category of beneficiary. The study also indicated that a male railroader retiring at age 62 can be expected to live another 20.7 years (248 months), while the previous three studies indicated life expectancies of 20.1, 19.6, and 19 years, respectively. A male railroader retiring at age 65 can be expected to live another 18.2 years (approximately 218 months). The previous studies indicated life expectancies of 17.7, 17.1, and 16.6 years, respectively, for this category of beneficiary.
2. How did these life expectancy figures compare to those of disabled annuitants?
As would be expected, disabled annuitants have a shorter average life expectancy than those who retire based on age. At age 60, a disabled railroader has an average life expectancy of 17.7 years, or 4.7 years less than a nondisabled male annuitant of the same age. Studies done three, six and nine years ago indicated life expectancies of 17.2, 16.4 and 15.8 years, respectively, for this category of beneficiary. Nonetheless, the difference in life expectancy at age 60 between disabled annuitants and annuitants who retire based on age has remained relatively stable, ranging between 4.7 and 5 years.
3. Are women still living longer than men?
In general, women still live longer than men. This is shown both in the Railroad Retirement Board’s life expectancy studies of male and female annuitants and by other studies of the general United States population.
For example, at age 60 a retired female railroader is expected on the average to live 25.6 years, 3.2 years longer than a retired male railroader of the same age; and at age 65, a retired female railroader is expected on the average to live 21.1 years, 2.9 years longer than her male counterpart. Spouses and widows age 65 have average life expectancies of 21.2 years and 19 years, respectively.
4. Can individuals use life expectancy figures to predict how long they will live?
Life expectancy figures are averages for large groups of people. Any particular individual’s lifetime may be much longer or shorter than the life expectancy of his or her age and group.
According to the study, from a group of 1,000 retired male employees at age 65, 930 will live at least 5 years, 820 at least 10 years, 655 at least 15 years, and 445 at least 20 years. Of female age annuitants at age 65, 590 will be alive 20 years later.
5. Where can I access the Railroad Retirement Board’s longevity study?
The entire longevity study is available on the agency’s website at www.rrb.gov.
The Railroad Retirement Board (RRB) released its annual tax rates, Thursday, Dec. 3, 2015, for the upcoming 2016 year.
The Tier II tax rates are determined annually from a tax rate schedule based on an average account benefits ratio reflecting railroad retirement fund levels. Employer tax rates can range from 8.2 percent to 22.1 percent. Employee tax rates can range from 0 percent to 4.9 percent.
Experience Rating
In October 2015, each employer was sent a notice of their 2015 Railroad Unemployment Insurance Act (RUIA) contribution rate. If you have not received your notice, please contact the Quality Reporting Service Center.
Retirement and Survivor Benefits
Exempt Amounts for Annual Earnings Test for Less Than Full Retirement Age Annuitants: In 2016, the annual exempt amount for less than full retirement age annuitants is $15,720. The monthly exempt amount for the first year of retirement in 2016 is $1,310.
Exempt Amounts for Annual Earnings Test for Full Retirement Age Annuitants: In 2016, the annual exempt amount for full retirement age annuitants is $41,880. The monthly exempt amount for the first year of retirement in 2016 is $3,490.
No cost-of-living Increase: Annuitants will not receive a cost-of-living increase in 2016.
Unemployment and Sickness Benefits
Maximum Daily Benefit Rate: Under the Railroad Unemployment Insurance Act (RUIA), the maximum daily benefit rate is equal to 5 percent of the monthly RUIA compensation base, rounded down to the nearest multiple of $1.00. For days of unemployment and sickness in registration periods beginning on and after July 1, 2016, the maximum daily rate is $72.00. The maximum rate for registration periods beginning on or after July 1, 2017, is $72.00.
Monthly Compensation Base: The monthly compensation base under the Railroad Unemployment Insurance Act for calendar year 2016 is $1,455.
Qualifying Base Year Compensation: The amount of base year compensation required in 2016 to qualify for benefits in the benefit year beginning July 1, 2016, is $3,637.50.
Compensation of $3,637.50 is also the amount of creditable compensation required to end a voluntary leaving of work disqualification period in months in calendar year 2016. In addition, remuneration earned in calendar year 2016 from employment covered under the Act cannot be considered subsidiary remuneration if the employee’s base year earnings are less than $3,673.50.
Maximum Benefits: The monthly amount of base year 2016 compensation that can be counted in determining the maximum amount of normal benefits payable to an employee in the benefit year beginning July 1, 2017, is $1,879.
Maximum Monthly Compensation Base and the Earnings Test: For unemployment registration periods beginning July 1, 2017 and later, no benefits are payable for which the total amount of an employee’s earnings and other remuneration from railroad and non-railroad work for days in the period exceeds the monthly compensation amount of $1,455.
The 2016 railroad retirement tax rates and maximum compensation bases are as follows:
| Tax Type | Tax Rate | Earnings Base |
| Employee Medicare* | 1.45% | No limit |
| Employer Medicare* | 1.45% | No limit |
| Employee Tier I | 6.20% | $118,500 |
| Employer Tier I | 6.20% | $118,500 |
| Employee Tier II | 4.90% | $88,200 |
| Employer Tier II | 13.10% | $88,200 |
*Additional Medicare Tax: Employees will pay an additional 0.9 percent Medicare tax on earnings above $200,000 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: Medicare and Tier 1 Railroad Retirement tax rates are equivalent to Social Security tax rates set for 2016. Tier 2 Railroad Retirement tax rates do not apply to employees subject to Social Security.
The Centers for Medicare & Medicaid Services has announced that the standard monthly Part B premium will be $121.80 in 2016. However, most Medicare beneficiaries will not see an increase in their monthly Part B premiums because of a “hold harmless” provision in the law. Under that provision, Part B premiums cannot increase for current enrollees if there is no cost-of-living increase in social security benefits.
As a result, those individuals will continue to pay a monthly premium of $104.90, the same amount as in 2015. About 70 percent of Medicare beneficiaries will not see their Part B premiums increase due to this provision. However, the higher premium amount will apply to new enrollees in the program, and certain beneficiaries will continue to pay higher premiums based on their modified adjusted gross income.
The monthly premiums that include income-related adjustments for 2016 will be $170.50, $243.60, $316.70, or $389.80, depending on the extent to which an individual beneficiary’s modified adjusted gross income exceeds $85,000 (or $170,000 for a married couple). The highest rate applies to beneficiaries whose incomes exceed $214,000 (or $428,000 for a married couple). The Centers for Medicare & Medicaid Services estimates that less than 5 percent of Medicare beneficiaries pay the larger income-adjusted premiums.
Beneficiaries in Medicare Part D prescription drug coverage plans pay premiums that vary from plan to plan. Beginning in 2011, the Affordable Care Act required Part D beneficiaries whose modified adjusted gross income exceeds the same income thresholds that apply to Part B premiums to also pay a monthly adjustment amount. In 2016, the adjustment amount ranges from $12.70 to $72.90.
The Railroad Retirement Board (RRB) withholds Part B premiums from benefit payments it processes. The agency can also withhold Part C and D premiums from benefit payments if an individual submits a request to his or her Part C or D insurance plan.
The following tables (click here) show the income-related Part B premium adjustments for 2016. 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 2016, that will usually be the beneficiary’s 2014 tax return information. If that information is not available, SSA will use information from the 2013 tax return.
Those railroad retirement and social security Medicare beneficiaries affected by the 2016 Part B and D income-related premiums will receive a notice from SSA by December 2015. The notice will include an explanation of the circumstances where a beneficiary may request a new determination. Persons who have questions or would like to request a new determination should contact SSA after receiving their notice.
Additional information about Medicare coverage, including specific benefits and deductibles, can be found at www.medicare.gov.
Chicago – The railroad retirement system will experience no cash-flow problems during the next 32 years; barring a sudden, unanticipated, large drop in railroad employment or substantial investment losses, according to the U.S. Railroad Retirement Board (RRB) in its report to the President and Congress.
The news gets better. This 32-year estimate is based on the most pessimistic of three scenarios considered by the Actuarial Advisory Committee. The other two projections, described as “optimistic” and “moderate,” both suggest there will be no cash-flow problems for a 75-year projection period.
The advisory committee has further recommended that no change be made in the rate of tax imposed on employers and employees, and no diversion of taxes be made from the Railroad Retirement Account to the Railroad Unemployment Insurance Account.
“The long-term stability of the system, however, is not assured,” said the RRB’s Chief Actuary Frank J. Buzzi. “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.”
As of Dec. 31, 2013, the combined RRB accounts totaled more than $26.5 billion. In comparison, the 25th actuarial valuation forecasted stability over the next 23 years, and Sept. 30, 2011, assets totaling $23.6 billion.
More about this report:
Section 15(g) of the Railroad Retirement Act of 1974 requires that the RRB, at intervals not longer than three years, estimate the liabilities created by the act and include the estimate in its annual report. Section 22 of the Act requires that the board submit to the President and the Congress, by July 1 of each year, a report containing a five-year projection of the revenues to and payments from the Railroad Retirement Account. The Railroad Solvency Act of 1983 requires that the board submit to the Congress, by July 1 of each year, a report on the actuarial status of the retirement system.
The full 104-page report can be found here: http://www.rrb.gov/pdf/act/valuation.pdf.
Railroad retirement annuities, like social security benefits, will not increase in January 2016 as there was no increase in the Consumer Price Index (CPI) from the third quarter of last year to the corresponding period of the current year.
Also, because there is no cost-of-living adjustment (COLA), social security law prohibits an increase in the amounts social security and railroad retirement beneficiaries subject to earnings restrictions can earn in 2016 without having their benefits reduced.
For those under full retirement age throughout 2016, the exempt earnings amount remains at $15,720. For beneficiaries attaining full retirement age in 2016, the exempt earnings amount, for the months before the month full retirement age is attained, remains at $41,880 in 2016.
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 2016, the monthly disability earnings limit will increase to $880, up from $850 in 2015.
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 Centers for Medicare & Medicaid Services has not yet announced Medicare Part B premium changes for 2016. The law includes a “hold harmless” provision that provides the Medicare Part B premium will not increase for most current enrollees if there is no cost-of-living adjustment to social security benefits. However, this does not apply to new Medicare enrollees or certain high-income Medicare beneficiaries.
Information about Medicare premiums for 2016, when available, will be found at www.medicare.gov.
Railroad retirement beneficiaries are reminded that receipt of a private railroad pension may reduce the amount of a supplemental annuity payable by the Railroad Retirement Board (RRB). The following questions and answers provide information on this subject, as well as how distributions from a 401(k) plan affect supplemental annuities, and whether railroad employee contributions to 401(k) plans are subject to railroad retirement payroll taxes.
1. What are the eligibility requirements for a supplemental annuity?
Individuals receiving a railroad retirement age and service, or disability annuity, can be paid a monthly supplemental annuity at age 60, if the employee has at least 30 years of creditable railroad service, or at age 65 with at least 25 years of service. (Disabled annuitants under full retirement age, which ranges from age 65 to 67, depending on the year of birth, must relinquish employment rights in order for a supplemental annuity to be paid by the RRB.) A “current connection” with the railroad industry is also required, as is at least one month of creditable rail service before October 1981. The maximum monthly supplemental annuity rate is $43.
2. What effect does the receipt of a private railroad pension have on the payment of a supplemental annuity?
If a retired employee also receives a private pension funded entirely or in part by a railroad employer, the supplemental annuity is permanently reduced by the amount of the monthly pension benefit that is based on the railroad employer’s contributions. However, if the employer reduces the pension for the employee’s entitlement to a supplemental annuity, the amount by which the pension is reduced is restored to the supplemental annuity (but does not raise it over the $43 maximum). There is no reduction for a pension paid by a railroad labor organization.
3. What if an employee elects to receive the pension in a lump-sum payment instead of as a monthly benefit?
If a retired employee elects to receive his or her pension in a lump-sum payment instead of as a monthly benefit, the supplemental annuity is reduced in the same way as it would be if the employee was receiving the monthly benefit. If the lump sum is paid in installments, the installment payments are not considered monthly benefit payments, but part of the single, lump-sum payment.
4. Does the receipt of a 401(k) plan distribution reduce the amount of a supplemental annuity?
No. In Legal Opinion L-2014-2, issued January 13, 2014, the RRB’s General Counsel determined that 401(k) plans should not be considered supplemental pension plans as defined by the Railroad Retirement Act and, therefore, employee supplemental annuities should not be reduced due to the receipt of 401 (k) distributions.
In accordance with the legal opinion, the RRB removed the 401(k) distribution reduction from the supplemental annuities of affected beneficiaries effective January 1, 2014, or the supplemental annuity beginning date, whichever date is later. Refunds of the amounts previously deducted for the 401(k) distribution reduction (beginning on the applicable date above) were issued to those beneficiaries in July 2015.
5. Are employee contributions to a 401(k) plan subject to railroad retirement Tier I and Tier II payroll taxes?
Yes. Federal budget legislation enacted in 1989 and effective January 1, 1990, provided that employee contributions to 401(k) plans are subject to railroad retirement payroll taxes and brought the treatment of 401(k) plans under railroad retirement law into conformity with the treatment of such plans under social security law. Consequently, employee contributions to a 401(k) plan are also treated as creditable compensation for railroad retirement benefit purposes. For example, an employee earning $40,000 a year, but who has 10 percent of his earnings deferred under a 401(k) plan, would have only $36,000 reported to the IRS as earnings subject to Federal income tax. However, the entire $40,000 would be subject to railroad retirement payroll taxes and therefore creditable as compensation under the Railroad Retirement Act.
6. How can a person get more information about the effect of private rail pensions and 401(k) plan payments on supplemental annuities?
Persons can contact an RRB field office for more information via the agency’s website, www.rrb.gov, or by calling toll-free at 1-877-772-5772. Most RRB offices are open to the public from 9:00 a.m. to 3:30 p.m., Monday through Friday, except on Federal holidays.
Railroad retirement beneficiaries are reminded that receipt of a private railroad pension may reduce the amount of a supplemental annuity payable by the Railroad Retirement Board (RRB). The following questions and answers provide information on this subject, as well as how distributions from a 401(k) plan affect supplemental annuities, and whether railroad employee contributions to 401(k) plans are subject to railroad retirement payroll taxes.
1. What are the eligibility requirements for a supplemental annuity?
Individuals receiving a railroad retirement age and service, or disability annuity, can be paid a monthly supplemental annuity at age 60, if the employee has at least 30 years of creditable railroad service, or at age 65 with at least 25 years of service. (Disabled annuitants under full retirement age, which ranges from age 65 to 67, depending on the year of birth, must relinquish employment rights in order for a supplemental annuity to be paid by the RRB.) A “current connection” with the railroad industry is also required, as is at least one month of creditable rail service before October 1981. The maximum monthly supplemental annuity rate is $43.
2. What effect does the receipt of a private railroad pension have on the payment of a supplemental annuity?
If a retired employee also receives a private pension funded entirely or in part by a railroad employer, the supplemental annuity is permanently reduced by the amount of the monthly pension benefit that is based on the railroad employer’s contributions. However, if the employer reduces the pension for the employee’s entitlement to a supplemental annuity, the amount by which the pension is reduced is restored to the supplemental annuity (but does not raise it over the $43 maximum). There is no reduction for a pension paid by a railroad labor organization.
3. What if an employee elects to receive the pension in a lump-sum payment instead of as a monthly benefit?
If a retired employee elects to receive his or her pension in a lump-sum payment instead of as a monthly benefit, the supplemental annuity is reduced in the same way as it would be if the employee was receiving the monthly benefit. If the lump sum is paid in installments, the installment payments are not considered monthly benefit payments, but part of the single, lump-sum payment.
4. Does the receipt of a 401(k) plan distribution reduce the amount of a supplemental annuity?
No. In Legal Opinion L-2014-2, issued January 13, 2014, the RRB’s General Counsel determined that 401(k) plans should not be considered supplemental pension plans as defined by the Railroad Retirement Act and, therefore, employee supplemental annuities should not be reduced due to the receipt of 401 (k) distributions.
In accordance with the legal opinion, the RRB removed the 401(k) distribution reduction from the supplemental annuities of affected beneficiaries effective January 1, 2014, or the supplemental annuity beginning date, whichever date is later. Refunds of the amounts previously deducted for the 401(k) distribution reduction (beginning on the applicable date above) were issued to those beneficiaries in July 2015.
5. Are employee contributions to a 401(k) plan subject to railroad retirement Tier I and Tier II payroll taxes?
Yes. Federal budget legislation enacted in 1989 and effective January 1, 1990, provided that employee contributions to 401(k) plans are subject to railroad retirement payroll taxes and brought the treatment of 401(k) plans under railroad retirement law into conformity with the treatment of such plans under social security law. Consequently, employee contributions to a 401(k) plan are also treated as creditable compensation for railroad retirement benefit purposes. For example, an employee earning $40,000 a year, but who has 10 percent of his earnings deferred under a 401(k) plan, would have only $36,000 reported to the IRS as earnings subject to Federal income tax. However, the entire $40,000 would be subject to railroad retirement payroll taxes and therefore creditable as compensation under the Railroad Retirement Act.
6. How can a person get more information about the effect of private rail pensions and 401(k) plan payments on supplemental annuities?
Persons can contact an RRB field office for more information via the agency’s website, www.rrb.gov, or by calling toll-free at 1-877-772-5772. Most RRB offices are open to the public from 9:00 a.m. to 3:30 p.m., Monday through Friday, except on Federal holidays.
Beginning October 1, 2015, the U.S. Railroad Retirement Board (RRB) will reduce railroad unemployment and sickness insurance benefits by 6.8 percent, down from the current 7.3 percent reduction, due to federal budget cuts required by law.
The adjusted reduction amount is based on revised projections of benefit claims and payments under the Railroad Unemployment Insurance Act. It will remain in effect through September 30, 2016, the end of the fiscal year. Reductions in future fiscal years, should they occur, will be calculated based on applicable law.
The daily benefit rate is $72, so the 6.8 percent reduction in railroad unemployment and sickness benefits will reduce the maximum amount payable in a two-week period with 10 days of unemployment from $720.00 to $671.04.
Certain railroad sickness benefits are also subject to regular tier I railroad retirement taxes, resulting in a further reduction of 7.65 percent. Applying the 6.8 percent reduction to these sickness benefits will result in a maximum two-week total of $619.71.
These reductions are required under the Budget Control Act of 2011 and a subsequent sequestration order to implement the mandated cuts. The law exempts social security benefits, as well as railroad retirement, survivor and disability benefits paid by the RRB, from sequestration.
When sequestration first took effect in March 2013, railroad unemployment and sickness benefits were subject to a 9.2 percent reduction. Under the law’s requirements, this amount was then adjusted to 7.2 percent in October 2013, and 7.3 percent in October 2014.
In fiscal year 2014, the RRB paid $11.9 billion in retirement and survivor benefits to about 562,000 beneficiaries, and net unemployment-sickness benefits of $84.4 million to nearly 25,000 claimants.
Beginning in 2002, a significant portion of the assets of the Railroad Retirement Board (RRB) has been invested in private stocks, bonds, and other investments. Prior to the Railroad Retirement and Survivors’ Improvement Act of 2001, P.L. 107-90, surplus railroad retirement assets could only be invested in U.S. government securities— just as the Social Security trust funds must be invested. The 2001 act established the National Railroad Retirement Investment Trust (NRRIT; hereinafter, the Trust) to manage and invest part of the RRB’s assets in the same way that the assets of private-sector and most state and local government pension plans are invested. The remainder of RRB’s assets continues to be invested solely in U.S. government securities.
Congress structured the Trust to ensure independence of investment decisions and limit political interference. It also aimed to increase railroad retirement system funding, add enhanced benefits, potentially reduce taxes, and protect system financing in case of market downturns. The Trust’s assets are invested in a diversified portfolio, both to minimize investment risk and to avoid disproportionate influence over an industry or firm. Since the Trust is a nongovernmental agency, it is not subject to the same oversight as federal agencies. However, the act requires an annual management report to Congress.
The Trust’s investments have generally followed the markets’ recent performance. From FY2003 to FY2014, the Trust’s annual returns averaged 8.7 percent, just slightly above the expectations of the bill’s drafters, who assumed nominal annual returns of 8.0 percent. The economic downturn did not spare the Trust, which lost 19.1 percent in FY2008, 0.7 percent in FY2009, and 0.1% in FY2011. However, the Trust exceeded its own strategic policy benchmarks in FY2012, FY2013, and in FY2014 with a FY2014 rate of return of 10.2 percent. As the Trust’s investment portfolio diversified over time, its administrative expenses steadily increased, to 36 basis points in FY2011, but fell to 29 basis points in FY2013 and remain low when compared with other mutual funds.
The Trust is designed to maintain four to six years’ worth of benefits in case of lower-than-expected returns. To maintain this balance, the tier II tax rates are set to automatically adjust as needed. This tax adjustment does not require congressional action. The tier II tax rates increased in 2013 and again in 2014.
Read the full report from the House Ways and Means Committee here.