SMART UnionUnion Pacific Corp. says in a court filing that it and employees overpaid federal railroad retirement taxes by $74.8 million, and that refunds are in order for both the company and workers.
The Omaha-based freight railroad made its case in a civil complaint filed this week in U.S. District Court in Omaha. The complaint names the U.S. government and seeks $44.2 million in refunds to the railroad and $30.6 million to workers who also overpaid via payroll withholding.
Read more from Omaha.com.
The Railroad Retirement Board (RRB) is required by law to submit annual financial reports to Congress on the financial condition of the railroad retirement system and the railroad unemployment insurance system. These reports must also include recommendations for any financing changes which may be advisable in order to ensure the solvency of the systems. In June, the RRB submitted its 2014 reports on the railroad retirement and railroad unemployment insurance systems.
The following questions and answers summarize the findings of these reports.
1. What were the assets of the railroad retirement and railroad unemployment insurance systems last year?
As of Sept. 30, 2013, total railroad retirement system assets, comprising assets managed by the National Railroad Retirement Investment Trust and the railroad retirement system accounts at the Treasury, equaled $26.7 billion. The trust was established by the Railroad Retirement and Survivors’ Improvement Act of 2001 to manage and invest railroad retirement assets. The cash balance of the railroad unemployment insurance system was $192.5 million at the end of fiscal year 2013.
2. What was the conclusion of the 2014 report on the financial condition of the railroad retirement system?
The overall conclusion was that, barring a sudden, unanticipated, large decrease in railroad employment or substantial investment losses, the railroad retirement system will experience no cash-flow problems during the next 25 years. The long-term stability of the system, however, is still uncertain. Under the current financing structure, actual levels of railroad employment and investment return over the coming years will largely determine whether corrective action is necessary.
3. What methods were used in forecasting the financial condition of the railroad retirement system?
The 2014 report projected the various components of income and outgo of the railroad retirement system under three employment assumptions, intended to provide an optimistic, moderate and pessimistic outlook, for the 25 calendar years 2014-2038. The projections of these components were combined and the investment income calculated to produce the projected balances in the railroad retirement accounts at the end of each projection year.
Projecting income and outgo under optimistic, moderate and pessimistic employment assumptions, the valuation indicated no cash-flow problems occur throughout the 25-year projection period under any of the assumptions.
4. How do the results of the 2014 report compare with those of the 2013 report?
The projected tier II tax rates for each calendar year are either the same or lower than in last year’s report. (Railroad retirement payroll taxes, like railroad retirement benefits, are calculated on a two-tier basis.) The projected combined account balances are higher at the end of each year.
The favorable comparison with last year was due to overall favorable economic and employment experience, with the largest impacts resulting from employment exceeding the RRB’s projections and actual investment return of approximately 16 percent exceeding the expected investment return of seven percent in calendar year 2013.
5. Did the 2014 report on the financial condition of the railroad retirement system recommend any railroad retirement payroll tax rate changes?
The report did not recommend any change in the rate of tax imposed by current law on employers and employees.
6. What were the findings of the 2014 report on the financial condition of the railroad unemployment insurance system?
The RRB’s 2014 railroad unemployment insurance financial report was also generally favorable. Even as maximum benefit rates increase 41 percent (from $68 to $96) from 2013 to 2024, experience-based contribution rates are expected to keep the unemployment insurance system solvent. Unemployment levels are the single most significant factor affecting the financial status of the railroad unemployment insurance system. However, the system’s experience-rating provisions, which adjust contribution rates for changing benefit levels, and its surcharge trigger for maintaining a minimum balance, help to ensure financial stability in the advent of adverse economic conditions.
Under experience-rating provisions, each employer’s contribution rate is determined by the RRB on the basis of benefit payments made to the railroad’s employees. Even under the report’s most pessimistic assumption, the average employer contribution rate remains well below the maximum throughout the projection period.
While no surcharge is in effect in calendar year 2014, this year’s report predicts a 1.5 percent surcharge in calendar years 2015 and 2016. A surcharge of 1.5 percent is also likely in calendar year 2017.
7. What methods were used to evaluate the financial condition of the railroad unemployment insurance system?
The economic and employment assumptions used in the unemployment insurance report corresponded to those used in the 2014 report on the financial condition of the retirement system. Projections were made for various components of income and outgo under each of the three employment assumptions, but for the period 2014-2024, rather than a 25-year period.
8. Did the 2014 report on the railroad unemployment insurance system recommend any financing changes to the system?
No financing changes were recommended at this time by the report.
Additional locations have now been added to the U.S. Railroad Retirement Board’s (RRB) schedule of Pre-Retirement Seminars for railroad employees and their spouses.
Designed for railroad employees and spouses planning to retire within five years or less, the seminars will familiarize attendees with the retirement benefits available to them, and also guide them through the application process. The program is sponsored by the RRB’s Office of the Labor Member, and began earlier this year on a pilot basis with seminars held in several locations. Additional seminars, to be held from 8:30 a.m. to 12:30 p.m., have been announced for the following dates and at the following locations:
Persons wishing to attend are asked to print and complete a registration form, which is available by visiting the RRB’s website at www.rrb.gov, and selecting the Office of the Labor Member’s Educational Materials link in the Spotlight section of the homepage. Seminar space is limited and registration is being accepted on a first-come, first-served basis. Completed forms should be mailed or faxed to the RRB office listed on the form as soon as possible.
Individuals who have not previously submitted documents required when filing a railroad retirement annuity application, such as proofs of age, marriage, or military service, are encouraged to bring this material (original documents or certified copies required) to the seminar. Attendees should also bring along an additional copy of each item to leave with the RRB field personnel leading the seminars.
Those unable to attend the seminars but still seeking pre-retirement information should contact the RRB. Individual retirement counseling is available in person at an agency field office, or by phone by contacting the RRB toll-free at (877) 772-5772.
A new benefit year under the Railroad Unemployment Insurance Act begins July 1, 2014. The maximum daily benefit rate payable for claims under this Act increases to $70 in the new benefit year. Benefits are normally paid for the number of days of unemployment or sickness over four in 14-day registration periods, so maximum benefits for biweekly claims would total $700.
However, as a result of a sequestration order under the Budget Control Act of 2011, the U.S. Railroad Retirement Board (RRB) will reduce unemployment and sickness benefits by 7.2 percent through Sept. 30, 2014. Future reductions, should they occur, will be calculated based on applicable law.
For this reason, at the start of the new benefit year the maximum amount of benefits payable in a two-week period will be $649.60. In addition, sickness benefits paid for other than on-the-job injuries are reduced for regular Tier I payroll taxes of 7.65 percent. Coupled with the 7.2-percent reduction, the maximum amount payable on these sickness benefits will be $599.91 over two weeks.
During the first 14-day claim period in a benefit year, benefits are payable for each day of unemployment or sickness in excess of seven, rather than four, which, in effect, provides a one-week waiting period. Initial sickness claims must also begin with four consecutive days of sickness. However, only one waiting period is required during any period of continuing unemployment or sickness, even if that period continues into a subsequent benefit year. Claimants already on the rolls will, therefore, normally not be required to serve another waiting period because of the onset of the new benefit year.
To qualify for normal railroad unemployment or sickness benefits in the benefit year beginning July 1, 2014, an employee must have had railroad earnings of at least $3,512.50 in calendar year 2013, counting no more than $1,405 for any month. Those who were first employed in the rail industry in 2013 must also have at least five months of creditable railroad service in that year.
Under certain conditions, employees with at least 10 years of service who do not qualify in the new benefit year on the basis of their 2013 earnings may still be able to receive benefits after June 30, 2014. For example, such employees who received normal benefits in the benefit year ending June 30, 2014, might still be eligible for extended benefits. In addition, 10-year employees may be eligible for accelerated benefits if they have rail earnings of at least $3,600 in 2014, not counting earnings of more than $1,440 a month.
Application forms for unemployment and sickness benefits may be obtained from railroad employers, railroad labor organizations, any RRB office, or the agency’s website at www.rrb.gov. Also, as an alternative to applying for unemployment benefits through the mail, rail workers can file applications and subsequent claims for unemployment benefits online. Similarly, they can file claims for sickness benefits online, although the original application must still be submitted by mail. Employees can also access information about their individual railroad unemployment insurance account statements online. These account statements provide a summary of the unemployment and sickness benefits paid under the Railroad Unemployment Insurance Act to rail employees.
To access these online services, employees must first establish an RRB Internet Services account. Instructions for establishing an online account can be found in the “Benefit Online Services Login” section on the www.rrb.gov home page. For security purposes, first-time users must apply for a Password Request Code (PRC). The agency automatically mails a PRC to any employee who files a paper application for unemployment or sickness benefits. If an individual has not received a PRC, they can request one by clicking the appropriate box on the home page. They will then receive the PRC by mail at their home address in about 10 days.
Claimants with questions about unemployment or sickness benefits should contact an RRB office by calling toll free at (877) 772-5772. Claimants can also find the address of the RRB office servicing their area and get information about their claims and benefit payments by calling this toll-free number. 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. Field office locations can also be found online at www.rrb.gov.
Persons claiming retirement, disability, survivor, unemployment or sickness benefits from the Railroad Retirement Board (RRB) have the right to appeal unfavorable determinations on their claims. The following questions and answers describe the appeals process for persons whose claims under the Railroad Retirement Act or Railroad Unemployment Insurance Act are denied, or who are dissatisfied with decisions on their claims.
1. How does a person initiate a review of an unfavorable decision on a claim and what are the time limits?
For all claims under the Railroad Retirement and Railroad Unemployment Insurance Acts there is a three-stage review and appeals process within the RRB.
An individual dissatisfied with the initial decision on his or her claim may first request reconsideration from the RRB unit which issued that decision. An individual has 60 days from the date on which notice of the initial decision is mailed to the claimant to file a written request for reconsideration. This step is mandatory before an appeal may be filed with the RRB’s Bureau of Hearings and Appeals.
In cases involving overpayments, an individual has the right to request waiver of recovery and also a personal conference. In order for recovery of the overpayment to be deferred while a waiver request is pending, the waiver request must be in writing and filed within 60 days from the date on which notice of the overpayment was mailed to the beneficiary. A request for waiver received after 60 days will be considered but will not defer collection of the overpayment, and any amount of the overpayment recovered prior to the date on which the waiver request is filed will not be subject to waiver.
2. What are the second and third stages of the appeals process and their time limits?
If dissatisfied with the reconsideration or waiver decision on a retirement, disability, survivor, unemployment or sickness claim, a person may appeal to the RRB’s Bureau of Hearings and Appeals, which is independent of those units responsible for initial and reconsideration decisions. An appellant has 60 days from the date on which notice of the reconsideration or waiver decision notice is mailed to the claimant to file this appeal. This appeal must be filed using RRB Form HA-1, which may be obtained from the RRB’s field offices or the agency’s website, www.rrb.gov. The Bureau of Hearings and Appeals may, if necessary, further investigate the case and obtain reports through the RRB’s field representatives, designated medical examiners, and others who may be in a position to furnish information pertinent to the appellant’s claim. If the appeal involves questions of fact, the appellant has the right to an oral hearing before a hearings officer. In cases where an in-person hearing is held, it may be conducted in the RRB office closest to the appellant’s home. In some cases, video conferencing or phone hearings are held.
If not satisfied with the Bureau of Hearings and Appeals’ decision, an appellant may further appeal to the three-member Board, which heads the agency, within 60 days from the date on which notice of the Bureau of Hearings and Appeals’ decision is mailed to the appellant. The three-member Board ordinarily will not accept additional evidence or conduct a hearing.
3. What are the criteria applied to requests for waivers of retirement, disability, or survivor benefit overpayments, and unemployment or sickness benefit overpayments?
A person’s obligation to repay any erroneous benefit payments may be waived only if the following conditions are met:
(1) The person was not at fault in causing the overpayment; and (2) recovery of the overpayment would cause financial hardship to the extent that he or she would not be able to meet ordinary and necessary living expenses, or recovery would be against equity or good conscience. “Against equity or good conscience” is defined in the regulations of the RRB as meaning that the claimant has, by reliance on the payments made to him or her, or on notice that payment would be made, relinquished a significant and valuable right or changed his or her position to his or her substantial detriment.
In cases involving unemployment or sickness benefits, there is an additional requirement that the overpayment must be more than 10 times the current maximum daily benefit rate.
Persons requesting waiver may be asked to complete a financial statement on a form provided by the RRB.
4. What happens if a person’s appeal is not filed within the prescribed time limit?
Failure to request reconsideration or to file an appeal within the allocated time period will result in forfeiture of further appeal rights, unless there is good cause for the delay. Some examples of good cause include: serious illness; a death or serious illness in the appellant’s immediate family; destruction of important or relevant records; failure to be notified of a decision; an unusual or unavoidable circumstance which demonstrated that the appellant could not have known of the need for timely filing or which prevented the appellant from filing in a timely manner; or the claimant thought that his or her representative had requested reconsideration or appeal. If good cause is not established, further appeal is forfeited, except that the appellant may contest the determination that the request for reconsideration or appeal was not filed timely.
5. Are there avenues of appeal beyond the RRB?
Appellants dissatisfied with the three-member Board’s final decision may then file a petition with the appropriate U.S. Court of Appeals to review the Board’s decision. In cases involving retirement, disability or survivor claims, the petition for review must be filed within one year after notice of the three-member Board’s decision has been mailed to the appellant. In cases involving claims for unemployment or sickness benefits, the petition for review must be filed within 90 days of the Board’s decision notice.
6. Can employers contest the claims of their employees for unemployment and sickness benefits?
When an employer is a party to the claim for benefits, that employer may protest the payment of benefits, but such protests do not prevent the timely payment of benefits. However, an employee may be required to repay benefits if his or her employer’s protest is ultimately successful. The employer also has the right to appeal an unfavorable decision to the RRB’s Bureau of Hearings and Appeals.
7. Where can a person obtain retirement, disability, survivor, unemployment or sickness benefit appeals forms and assistance in completing the forms?
Requests for reconsideration of an initial decision must be in writing, but do not have to be on any specific form. The appropriate form for waiver of recovery of a benefit overpayment is ordinarily enclosed with the overpayment notice. As stated earlier, RRB Form HA-1, which must be used to appeal to the Bureau of Hearings and Appeals and the three-member Board, is available from the RRB’s Bureau of Hearings and Appeals, 844 North Rush Street, Chicago, Illinois 60611-2092, or online at www.rrb.gov. This form can also be obtained from any RRB field office, as can assistance in filing a request for review at each of the administrative levels.
Persons wishing to contact an RRB field office can call the RRB’s toll-free phone number at 1-877-772-5772. Claimants can also find the address of the RRB office serving their area by calling this toll-free number. 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. Field office locations can also be found by visiting www.rrb.gov.
Each year, the U.S. Railroad Retirement Board (RRB) prepares a “Certificate of Service Months and Compensation” (Form BA-6) for every railroad employee who had creditable railroad compensation in the previous calendar year. The RRB will mail the forms to employees during the first half of June. While every effort has been made to maintain current addresses for all active railroad employees, anyone with compensation reported in 2013 who has not received Form BA-6 by July 1, or needs a replacement, should contact the nearest RRB field office by calling the agency’s toll-free number (877) 772-5772.
Form BA-6 provides employees with a record of their railroad retirement service and compensation, and the information shown is used to determine whether an employee qualifies for benefits and the amount of those benefits. It is important that employees review their Form BA-6 to see whether their own records of service months and creditable compensation agree with the figures shown on the form.
In checking the 2013 compensation total, employees should be aware that only annual earnings up to $113,700 were creditable for railroad retirement purposes in that year, and that $113,700 is the maximum amount shown on the form. To assist employees in reviewing their service credits, the form also shows service credited on a month-by-month basis for 2012, 2011, and 2010, when the creditable compensation maximum was $110,100 for 2012 and $106,800 for both 2011 and 2010. The form also identifies the employer(s) reporting the employee’s 2013 service and compensation.
Besides the months of service reported by employers, Form BA-6 shows the number of any additional service months deemed by the RRB. Deemed service months may be credited under certain conditions for an employee who did not work in all 12 months of the year, but had creditable Tier II earnings exceeding monthly prorations of the creditable Tier II earnings maximum for the year. However, the total of reported and deemed service months may never exceed 12 in a calendar year, and no service months, reported or deemed, can be credited after retirement, severance, resignation, discharge, or death.
Form BA-6 shows the number of months of verified military service creditable as service under the Railroad Retirement Act, if the service was previously reported to the RRB. Employees are encouraged to submit proofs of age and/or military service in advance of their actual retirement.
Filing these proofs with the RRB in advance will streamline the benefit application process and prevent payment delays.
For employees who received separation or severance payments, the section of the form designated “Taxable Amount” shows the amounts reported by employers of any separation allowance or severance payments that were subject to railroad retirement Tier II taxes. This information is shown on the form because a lump sum, approximating part or all of the Tier II taxes deducted from such payments made after 1984 which did not provide additional Tier II credits, may be payable by the RRB upon retirement to qualified employees or to survivors if the employee dies before retirement. The amount of an allowance included in an employee’s regular compensation is shown under “Compensation Amount.”
Form BA-6 also shows, in the section designated “Employee Contributions,” the cumulative amount of Tier II railroad retirement payroll taxes paid by the employee over and above Tier I social security equivalent payroll taxes. While the RRB does not collect or maintain payroll tax information, the agency computes this amount from its compensation records in order to advise retired employees of their payroll tax contributions for federal income tax purposes.
Employees should check their name, address, birth date and sex shown at the top of the form. If the form shows the birth date as 99-9999 and the gender code is “U” (for unknown), it means the RRB is verifying his or her social security number with the Social Security Administration. Otherwise, if the personal identifying information is incorrect or incomplete (generally a case where the employee’s surname has more than 10 letters and the form shows only the first 10 letters) or the address is not correct, the employee should contact an RRB field office. The field office can then correct the RRB’s records. This is important in order to prevent identity or security-related problems that could arise if the employee wants to use certain Internet services available on the RRB’s website at www.rrb.gov.
Employees may view their railroad retirement service and compensation records; get annuity estimates; apply for or claim railroad unemployment benefits; claim sickness benefits; and access their railroad unemployment insurance account statements through the RRB’s website. To use these online services, an employee must set up an RRB Internet Services account. Instructions for establishing an online account can be found in the “Benefit Online Services Login” section on the home page. For security purposes, first-time users must enter a Password Request Code (PRC). The agency mails a PRC to any employee who files a paper application for unemployment or sickness benefits. If an individual has not received a PRC, they can request one by clicking the appropriate box on the home page. They will then receive the PRC by mail at their home address in about 10 days.
Employees can also request that printouts of their individual railroad retirement records of service months and compensation be mailed to them. A PIN/Password is not required to use this service. It can be accessed by visiting www.rrb.gov, moving the cursor over the “Beneficiaries & RR Employees” category and then clicking on “Request Service & Compensation History.”
If the employee’s name was incomplete on Form BA-6, and he or she has not yet contacted an RRB field office to correct it, the employee should enter his or her first and middle initials and his or her surname just as it appears on the Form BA-6 or a previously furnished printout of service and compensation, along with the other requested information, in order to submit an online request.
Any other discrepancies in Form BA-6 should be reported promptly in writing to: Protest Unit-CESC, U.S. Railroad Retirement Board, 844 North Rush Street, Chicago, IL 60611-2092. The employee must include his or her social security number in the letter. Form BA-6 also explains what other documentation and information should be provided. The law limits to four years the period during which corrections to service and compensation amounts can be made.
For most employees, the address of the RRB office serving their area is provided on the form along with the RRB’s nationwide toll-free number (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.
President Obama has appointed Steven J. Anthony to be the management member of the U.S. Railroad Retirement Board. His appointment was confirmed by the Senate on April 9, and he was sworn into office on May 8. Mr. Anthony’s term will expire in August 2018.
Anthony succeeds Jerome F. Kever, who had served as the management member since August 1992. Kever’s tenure of more than 21 years made him the longest serving board member in the agency’s history.
Anthony, 65, has more than 36 years of experience in the railroad industry. Prior to his appointment, he served as the senior general counsel of the Norfolk Southern Corporation from 2007 to 2012. Previously, he was a Washington representative for Norfolk Southern from 1997 to 2007, and also served as a general attorney at the company from 1981 until 1997.
Before joining Norfolk Southern, Anthony was the secretary and general counsel of the Illinois Terminal Railroad from 1978 to 1981, having joined the company as a general attorney in 1976.
Anthony earned a Bachelor of Science degree in business administration from the University of Missouri (1971) and a Juris Doctor degree from the University of Tulsa (1974). A native of Missouri, Anthony currently resides in Florida. He is a widower and the father of two adult sons.
Headquartered in Chicago, the Railroad Retirement Board provides retirement, survivor, disability, unemployment and sickness benefit payments totaling over $11 billion a year to railroad workers and their families under the Railroad Retirement and Unemployment Insurance Acts.
The agency is managed by a three-member Board comprised of a representative of rail labor, a representative of rail carriers, and a member representing the general public who serves as chairman. Anthony’s appointment was recommended by the Association of American Railroads and the American Short Line and Regional Railroad Association.
Retirees, and those planning retirement, should be aware of the railroad retirement laws governing benefit payments to annuitants who work after retirement.
The following questions and answers describe these railroad retirement work restrictions and earnings limitations on post-retirement employment, and how these rules can affect retirees engaging in self-employment. To protect the integrity of its programs, the Railroad Retirement Board (RRB) participates in information exchanges with other Federal agencies to identify unreported work and earnings. It is important to note that failure to report post-retirement work and earnings may result in overpayments, fines and, in some circumstances, may be considered fraud subject to criminal and civil penalties.
1. What are the basic railroad retirement work restrictions and earnings limitations that apply to post-retirement work?
Neither a regular railroad retirement annuity (whether based on age and service or on disability) nor a supplemental annuity is payable for any month in which a retired employee, regardless of age, works for an employer covered under the Railroad Retirement Act, including labor organizations. This is true even if only one day’s service is performed during the month and includes local lodge compensation totaling $25 or more for any calendar month. Regardless of the amount of salary, work by a local lodge or division secretary collecting insurance premiums is considered railroad work and, therefore, no annuity is payable for any month in which such activity occurs.
A spouse annuity is not payable for any month in which the employee’s annuity is not payable, or for any month in which the spouse, regardless of age, works for an employer covered under the Railroad Retirement Act. (A divorced spouse can receive an annuity even if the employee has not retired, provided they have been divorced for at least two years, the employee and divorced spouse are at least age 62, and the employee is fully insured under the Social Security Act using combined railroad and social security earnings. A court-ordered partition payment may be paid even if the employee is not entitled to an annuity provided that the employee has at least 10 years of railroad service, or five years after 1995, and both the employee and former spouse are 62.) A survivor annuity is not payable for any month the survivor works for an employer covered under the Railroad Retirement Act, regardless of the survivor’s age.
Also, like social security benefits, railroad retirement Tier I benefits 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 deductions do not apply to those who have attained full social security retirement age. Full retirement age for employees and spouses ranges from age 65 for those born before 1938 to age 67 for those born in 1960 or later. Full retirement age for survivor annuitants ranges from age 65 for those born before 1940 to age 67 for those born in 1962 or later. Deductions for all annuitants, however, remain in effect for the months before the month of full retirement age during the calendar year of attainment. (The attainment of full retirement age does not mean an annuitant can return to work for an employer covered under the Railroad Retirement Act. As explained above, no annuity is payable for any month in which the annuitant works for a railroad employer, regardless of the annuitant’s age).
Additional deductions are assessed for retired employees and spouses who work for their last pre-retirement non-railroad employer (see question 3 below). Also, special restrictions apply to disability annuitants (see questions 5 and 6 below).
2. What are the current exempt earnings amounts for those non-disability annuitants subject to earnings limitations?
For those under full retirement age throughout 2014, the exempt earnings amount is $15,480. For beneficiaries attaining full retirement age in 2014, the exempt earnings amount is $41,400 for the months before the month full retirement age is attained.
For those under full retirement age throughout the year, the earnings deduction is $1 in benefits for every $2 of earnings over the exempt amount. For those attaining full retirement age in 2014, the deduction is $1 for every $3 of earnings over the exempt amount in the months before the month full retirement age is attained.
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 generally considered earnings for this purpose.
3. What are the additional deductions applied to the annuities of retired employees and spouses working for their last pre-retirement non-railroad employer?
Such employment will reduce Tier II benefits and supplemental annuity payments, which are not otherwise subject to earnings deductions, by $1 for each $2 of earnings received subject to a maximum reduction of 50 percent. The deductions in the Tier II benefits and supplemental annuities of individuals who work for pre-retirement non-railroad employers apply even if earnings do not exceed the Tier I exempt earnings limits. Also, while Tier I and vested dual benefit earnings deductions stop when an annuitant attains full retirement age, these Tier II and supplemental annuity deductions continue to apply after the attainment of full retirement age. Work that begins on the same day as the annuity beginning date is not last pre-retirement non-railroad employment.
4. Can a retired employee’s earnings also reduce a spouse’s benefit?
A spouse benefit is subject to reductions 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.
5. What are the special earnings restrictions applied to disabled employee annuitants?
A disability annuity is not payable for any month in 2014 in which the disabled employee annuitant earns more than $840 in any employment or net self-employment, exclusive of disability-related work expenses. If a disabled employee annuitant’s earnings in a year (after deduction of disability-related work expenses) exceed the annual limit, the annuity is not payable for the number of months derived by dividing the amount by which those earnings exceed the annual limit by the amount of the monthly limit. Any resulting fraction of a month equal to or greater than one-half (0.5) is rounded up, increasing the number of months in which the annuity is not payable by one. For example, a disabled employee annuitant earns $14,550 in 2014, which is $4,050 over the 2014 annual limit of $10,500. Dividing $4,050 by $840 yields 4.82. As .82 is more than one-half, the annuitant would lose 5 months of benefits.
These disability work restrictions cease upon a disabled employee annuitant’s attainment of full retirement age (age 65-67). This transition is effective no earlier than full retirement age even if the annuitant had 30 years of service. Earnings deductions continue to apply to those working for their last pre-retirement non-railroad employer.
If a disabled employee annuitant works before full retirement age, this may also raise a question about the possibility of that individual’s recovery from disability, regardless of the amount of earnings. Consequently, any earnings must be reported promptly to avoid o
verpayments, which are recoverable by the RRB and may also include significant penalties.
6. Do the special earnings restrictions listed in question 5 apply to disabled widow(er) and disabled child annuitants?
The earnings restrictions listed in question 5 do not apply to disabled widow(er)s under age 60 or to disabled children. However, the annuity of an unmarried disabled widow(er) technically becomes an age annuity when the widow(er) attains age 60. Therefore, regular annual earnings restrictions apply beginning with the month the widow(er) attains age 60 and ending with the month before the month the widow(er) attains full retirement age.
All earnings in the year age 60 is attained are considered in determining excess earnings for that year. However, work deductions may apply only beginning with the month the widow(er) attains age 60.
Also, if a disabled widow(er) works before full retirement age, this may also raise a question about the possibility of that individual’s recovery from disability, regardless of the amount of earnings. Therefore, any earnings must be reported promptly to avoid overpayments, which are recoverable by the RRB and may also include significant penalties.
7. A railroad retirement employee annuitant is thinking of becoming a self-employed contractor or consultant, and might be providing services for a railroad or last pre-retirement non-railroad employer. How would this affect his or her railroad retirement annuity?
It depends on whether or not the RRB considers the annuitant to be truly engaging in self-employed contracting or consulting, or whether the agency considers him or her to be functioning as an employee, and if so, who the RRB considers to be the actual employer for railroad retirement purposes.
If a retiree is considered to be functioning as a self-employed contractor or consultant, his or her annuity is subject to Tier I and vested dual benefit earnings deductions for net self-employment earnings.
However, if a retiree is considered to be functioning as an employee of a railroad or railroad labor organization, rather than as a self-employed contractor or consultant, the retiree’s annuity would be subject to suspension. If the retiree is considered the employee of a non-railroad employer, the retiree’s annuity would be subject to earnings deductions for non-railroad wages, and to additional deductions if he or she is considered to be working for a last pre-retirement non-railroad employer.
RRB determinations on contracting or consulting services take into account multiple factors that could be evaluated differently depending on the circumstances of the individual situation. Since no single rule covers every case, anyone requiring a determination as to whether contractor or consultant service is valid self-employment should contact the RRB for a determination well in advance of making a commitment so as to be sure of the effect on benefit payments.
8. How can individuals get more information about these railroad retirement work restrictions and earnings limitations?
Claimants with questions about railroad retirement work restrictions and earnings limitations should contact an RRB office by calling toll-free at 1-877-772-5772. Claimants can also find the address of the RRB office serving their area and get information about their claims and benefit payments by calling this toll-free number. 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. Field office locations can also be found by visiting www.rrb.gov.
The federal Medicare program provides hospital and medical insurance protection for railroad retirement annuitants and their families, just as it does for social security beneficiaries. Medicare has the following parts:
The following questions and answers provide basic information on Medicare eligibility and coverage, as well as other information on the Medicare program.
1. Who is eligible for Medicare?
All railroad retirement beneficiaries age 65 or over and other persons who are directly or potentially eligible for railroad retirement benefits are covered by the program. 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.
Coverage before age 65 is available for disabled employee annuitants who have been entitled to monthly benefits based on total disability for at least 24 months and have a disability insured status under social security law. There is no 24-month waiting period for those who have ALS (Amyotrophic Lateral Sclerosis), also known as Lou Gehrig’s disease.
If entitled to monthly benefits based on an occupational disability, and the individual has been granted a disability freeze, he or she is eligible for Medicare starting with the 30th month after the freeze date or, if later, the 25th month after he or she became entitled to monthly benefits. If receiving benefits due to occupational disability and the person has not been granted a disability freeze, he or she is generally eligible for Medicare at age 65. (The standards for a disability freeze determination follow social security law and are comparable to the medical criteria a person must meet to be granted a total disability.)
Under certain conditions, spouses, divorced spouses, surviving divorced spouses, widow(er)s, or a dependent parent may be eligible for Medicare hospital insurance based on an employee’s work record when the spouse, etc., turns age 65. Also, disabled widow(er)s under age 65, disabled surviving divorced spouses under age 65, and disabled children may be eligible for Medicare, usually after a 24-month waiting period.
Medicare coverage at any age on the basis of permanent kidney failure requiring hemodialysis or receipt of a kidney transplant is also available to employee annuitants, employees who have not retired but meet certain minimum service requirements, spouses, and dependent children. The Social Security Administration has jurisdiction of Medicare in these cases. Therefore, a social security office should be contacted for information on coverage for kidney disease.
2. How do persons enroll in Medicare?
If a retired employee, or a family member, is receiving a railroad retirement annuity, enrollment for both Medicare Part A and Part B is generally automatic and coverage begins when the person reaches age 65. For beneficiaries who are totally and permanently disabled, both Medicare Part A and Part B start automatically with the 30th month after the beneficiary became disabled or, if later, the 25th month after the beneficiary became entitled to monthly benefits. Even though enrollment is automatic, an individual may decline Part B; this does not prevent him or her from applying for Part B at a later date. However, premiums may be higher if enrollment is delayed. (See question 5 for more information on delayed enrollment.)
If an individual is eligible for, but not receiving an annuity, he or she should contact the nearest Railroad Retirement Board (RRB) office before attaining age 65 and apply for both Part A and Part B. (This does not mean that the individual must retire, if presently working.) The best time to apply is during the 3 months before the month in which the individual reaches age 65. He or she will then have both Part A and Part B protection beginning with the month age 65 is reached. If the individual does not enroll for Part B in the 3 months before attaining age 65, he or she can enroll in the month age 65 is reached, or during the 3 months that follow, but there will be a delay of 1 to 3 months before Part B is effective. Individuals who do not enroll during this “initial enrollment period” may sign up in any “general enrollment period” (Jan. 1 – March 31 each year). Coverage for such individuals begins July 1 of the year of enrollment.
3. Are there costs associated with Medicare Part A (hospital insurance)?
Yes. While individuals don’t have to pay a premium to receive Medicare Part A, recipients of Part A benefits are billed by the hospital for a deductible amount ($1,216 in 2014), as well as any coinsurance amount due and any non-covered services. The remainder of the bill from the hospital, as well as bills for services in skilled nursing facilities or home health visits, is sent to Medicare to pay its share.
4. What are the costs associated with Medicare Part B (medical insurance)?
Anyone eligible for Medicare hospital insurance (Part A) can enroll in Medicare medical insurance (Part B) by paying a monthly premium. The standard premium is $104.90 in 2014. Monthly premiums for some beneficiaries are greater, depending on a beneficiary’s or married couple’s modified adjusted gross income. The income-related Part B premiums for 2014 are $146.90, $209.80, $272.70, or $335.70, depending on the extent to which an individual beneficiary’s modified adjusted gross income exceeds $85,000 ($170,000 for a married couple), with the highest premium rates only paid by beneficiaries whose modified adjusted gross incomes are over $214,000 ($428,000 for a married couple).
There is also an annual deductible ($147 in 2014) for Part B services.
Palmetto GBA, a subsidiary of Blue Cross and Blue Shield, generally processes claims for Part B benefits filed on behalf of railroad retirement beneficiaries in the Original Medicare Plan (the traditional fee-for-service Medicare plan). An individual in the Original Medicare Plan should have his or her hospital, doctor, or other health care provider submit Part B claims directly to:
Palmetto GBA
Railroad Medicare Part B Office
P.O. Box 10066
Augusta, GA 30999-0001
Contact Palmetto GBA at (800) 833-4455 or visit www.palmettogba.com/medicare.
Persons with questions about Part B claims under the Original Medicare Plan can contact Palmetto GBA as notated above.
5. Can Medicare Part B premiums increase for delayed enrollment?
Yes. Premiums for Part B are increased 10 percent for each 12-month period the individual could have been, but was not, enrolled. However, individu
als age 65 or older who wait to enroll in Part B because they have group health plan coverage based on their own or their spouse’s current employment may not have to pay higher premiums because they may be eligible for “special enrollment periods.” The same special enrollment period rules apply to disabled individuals, except that the group health insurance may be based on the current employment of the individual, his or her spouse, or a family member.
Individuals deciding when to enroll in Medicare Part B must consider how this will affect eligibility for health insurance policies which supplement Medicare coverage. These include “Medigap” insurance and prescription drug coverage, and are explained in the answers to questions 6 through 8.
6. What is Medigap insurance?
Many private insurance companies sell insurance, called “Medigap” for short, that helps pay for services not covered by the Original Medicare Plan. Policies may cover deductibles, coinsurance, copayments, health care outside the United States and more. Generally, individuals need Medicare Part A and Part B to enroll, and a monthly premium is charged. When someone first enrolls in Medicare Part B at age 65 or older, he or she has a six-month “Medigap open enrollment period.” During this period, an insurance company cannot deny coverage, place conditions on a policy, or charge more for a policy because of past or present health problems.
7. Do Medicare beneficiaries have choices available for receiving health care services?
Yes. Under the Original Medicare Plan, the fee-for-service Medicare plan that is available nationwide, a beneficiary can see any doctor or provider who accepts Medicare and is accepting new Medicare patients.
However, a beneficiary may opt to choose a Medicare Advantage Plan (Part C) instead. These plans are managed by Medicare-approved private insurance companies. Medicare Advantage Plans combine Medicare Part A and Part B coverage, and are available in most areas of the country. An individual must have Medicare Part A and Part B to join a Medicare Advantage Plan, and must live in the plan’s service area. Medicare Advantage Plan choices include regional preferred provider organizations (PPOs), health maintenance organizations (HMOs), private fee-for-service plans and others. A PPO is a plan under which a beneficiary uses doctors, hospitals, and providers belonging to a network; beneficiaries can use doctors, hospitals, and providers outside the network for an additional cost. Under a Medicare Advantage Plan, a beneficiary may pay lower copayments and receive extra benefits. Most plans also include Medicare prescription drug coverage (Part D).
8. How do Medicare prescription drug plans work?
Medicare contracts with private companies to offer beneficiaries voluntary prescription drug coverage through a variety of options, with different covered prescriptions and different costs. Beneficiaries pay a monthly premium (averaging about $32 in 2014), a yearly deductible (up to $310 in 2014) and part of the cost of prescriptions. Those with limited income and resources may qualify for help in paying some prescription drug costs.
The Affordable Care Act requires some Part D beneficiaries to also pay a monthly adjustment amount, depending on a beneficiary’s or married couple’s modified adjusted gross income. The Part D income-related monthly adjustment amounts in 2014 are $12.10, $31.10, $50.20, or $69.30, depending on the extent to which an individual beneficiary’s modified adjusted gross income exceeds $85,000 ($170,000 for a married couple), with the highest amounts only paid by beneficiaries whose incomes are over $214,000 ($428,000 for a married couple).
To enroll, individuals must have Medicare Part A and live in the prescription drug benefit plan’s service area. Beneficiaries can join during the period that starts 3 months before the month their Medicare coverage starts and ends 3 months after that month. There may be a higher premium if an individual doesn’t join a Medicare drug plan when first eligible. In most cases, there is no automatic enrollment to get a Medicare prescription drug plan. Individuals enrolled in Medicare Advantage Plans will generally get their prescription drug coverage through their plan.
9. Where can I get more information about the Medicare program?
Railroad retirement beneficiaries should contact the RRB toll-free at (877) 772-5772 for general information on their Medicare coverage.
More detailed information on Medicare’s benefits, costs, and health care options is available from the Center for Medicare & Medicaid Services (CMS) publication Medicare & You, which is mailed to Medicare beneficiary households each fall and to new Medicare beneficiaries when they become eligible for coverage. Medicare & You and other publications are also available by visiting Medicare’s website, www.medicare.gov, or by calling the Medicare toll-free number, 1-800-MEDICARE (1-800-633-4227).
Employers and employees covered by the Railroad Retirement Act pay higher retirement taxes than those covered by the Social Security Act, so that railroad retirement benefits remain higher than social security benefits, especially for “career” employees who have 30 or more years of service.
The following questions and answers show the differences in railroad retirement and social security benefits payable at the close of the fiscal year ending Sept. 30, 2013. They also show the differences in age requirements and payroll taxes under the two systems.
1. How do the average monthly railroad retirement and social security benefits paid to retired employees and spouses compare?
The average age annuity being paid by the Railroad Retirement Board (RRB) at the end of fiscal year 2013 to career rail employees was $3,080 a month, and for all retired rail employees the average was $2,450. The average age retirement benefit being paid under social security was over $1,270 a month. Spouse benefits averaged $915 a month under railroad retirement compared to $615 under social security.
The Railroad Retirement Act also provides supplemental railroad retirement annuities of between $23 and $43 a month, which are payable to employees who retire directly from the rail industry with 25 or more years of service.
2. Are the benefits awarded to recent retirees generally greater than the benefits payable to those who retired years ago?
Yes, because recent awards are based on higher average earnings. Age annuities awarded to career railroad employees retiring at the end of fiscal year 2013 averaged about $3,625 a month while monthly benefits awarded to workers retiring at full retirement age under social security averaged nearly $1,765. If spouse benefits are added, the combined benefits for the employee and spouse would total $4,985 under railroad retirement coverage, compared to $2,645 under social security. Adding a supplemental annuity to the railroad family’s benefit increases average total benefits for current career rail retirees to over $5,015 a month.
3. How much are the disability benefits currently awarded?
Disabled railroad workers retiring directly from the railroad industry at the end of fiscal year 2013 were awarded almost $2,885 a month on the average while awards for disabled workers under social security averaged approximately $1,210.
While both the Railroad Retirement and Social Security Acts provide benefits to workers who are totally disabled for any regular work, the Railroad Retirement Act also provides disability benefits specifically for employees who are disabled for work in their regular railroad occupation. Employees may be eligible for such an occupational disability annuity at age 60 with 10 years of service, or at any age with 20 years of service.
4. Can railroaders receive benefits at earlier ages than workers under social security?
Railroad employees with 30 or more years of creditable service are eligible for regular annuities based on age and service the first full month they are age 60, and rail employees with less than 30 years of creditable service are eligible for regular annuities based on age and service the first full month they are age 62.
No early retirement reduction applies if a rail employee retires at age 60 or older with 30 years of service and his or her retirement is after 2001, or if the employee retired before 2002 at age 62 or older with 30 years of service.
Early retirement reductions are otherwise applied to annuities awarded before full retirement age, the age at which an employee can receive full benefits with no reduction for early retirement. This ranges from age 65 for those born before 1938 to age 67 for those born in 1960 or later, the same as under social security.
Under social security, a worker cannot begin receiving retirement benefits based on age until age 62, regardless of how long he or she worked, and social security retirement benefits are reduced for retirement prior to full retirement age regardless of years of coverage.
5. Does social security offer any benefits that are not available under railroad retirement?
Social security does pay certain types of benefits that are not available under railroad retirement. For example, social security provides children’s benefits when an employee is disabled, retired or deceased. Under current law, the Railroad Retirement Act only provides children’s benefits if the employee is deceased.
However, the Railroad Retirement Act includes a special minimum guaranty provision which ensures that railroad families will not receive less in monthly benefits than they would have if railroad earnings were covered by social security rather than railroad retirement laws. This guaranty is intended to cover situations in which one or more members of a family would otherwise be eligible for a type of social security benefit that is not provided under the Railroad Retirement Act. Therefore, if a retired rail employee has children who would otherwise be eligible for a benefit under social security, the employee’s annuity can be increased to reflect what social security would pay the family.
6. How much are monthly benefits for survivors under railroad retirement and social security?
Survivor benefits are generally higher if payable by the RRB rather than social security. At the end of fiscal year 2013, the average annuity being paid to all aged and disabled widow(er)s was $1,465 a month, compared to $1,190 under social security.
Benefits awarded by the RRB at the end of fiscal year 2013 to aged and disabled widow(er)s of railroaders averaged nearly $1,925 a month, compared to almost $945 under social security.
The annuities being paid at the end of fiscal year 2013 to widowed mothers/fathers averaged $1,755 a month and children’s annuities averaged $1,005, compared to $905 and $800 a month for widowed mothers/fathers and children, respectively, under social security.
Those awarded at the end of fiscal year 2013 averaged $2,765 a month for widowed mothers/fathers and $1,380 a month for children under railroad retirement, compared to $880 and $790 for widowed mothers/fathers and children, respectively, under social security.
7. How do railroad retirement and social security lump-sum death benefit provisions differ?
Both the railroad retirement and social security systems provide a lump-sum death benefit. The railroad retirement lump-sum benefit is generally payable only if survivor annuities are not immediately due upon an employee’s death. The social security lump-sum benefit may be payable regardless of whether monthly benefits are also due. Both railroad retirement and social security provide a lump-sum benefit of $255. However, if a railroad employee completed 10 years of creditable railroad service before 1975, the average railroad retirement lump-sum benefit payable is $1,005. Also, if an employee had less than 10 years of service, but had at least 5 years of such service after 1995, he or she would have to have had an insured status under social security law (counting both railroad retirement and social security credits) in order for the $255 lump-sum benefit to be payable.
The social security lump sum is generally only payable to the widow(er) living with the employee at the time of death. Under railroad retirement, if the employee had 10 years of service before 1975, and was not survived by a living-with widow(er), the lump sum may be paid to the funeral home or the payer of the funeral expenses.
8. How do railroad retirement and social security payroll taxes c
ompare?
Railroad retirement payroll taxes, like railroad retirement benefits, are calculated on a two-tier basis. Rail employees and employers pay Tier I taxes at the same rate as social security taxes, 7.65 percent, consisting of 6.20 percent for retirement on earnings up to $117,000 in 2014, and 1.45 percent for Medicare hospital insurance on all earnings. An additional 0.9 percent in Medicare taxes (2.35 percent in total) will be withheld from employees on earnings above $200,000.
In addition, rail employees and employers both pay Tier II taxes which are used to finance railroad retirement benefit payments over and above social security levels.
In 2014, the Tier II tax rate on earnings up to $87,000 is 4.4 percent for employees and 12.6 percent for employers.
9. How much are regular railroad retirement taxes for an employee earning $117,000 in 2014 compared to social security taxes?
The maximum amount of regular railroad retirement taxes that an employee earning $117,000 can pay in 2014 is $12,778.50, compared to $8,950.50 under social security. For railroad employers, the maximum annual regular retirement taxes on an employee earning $117,000 are $19,912.50, compared to $8,950.50 under social security. Employees earning over $117,000, and their employers, will pay more in retirement taxes than the above amounts because the Medicare hospital insurance tax is applied to all earnings.