The payment of a Railroad Retirement annuity can be affected by entitlement to Social Security benefits, as well as certain other government benefits. Such dual entitlement, if not reported to the Railroad Retirement Board (RRB), can result in benefit overpayments that have to be repaid, sometimes with interest and penalties. The following questions and answers describe how the RRB adjusts Railroad Retirement benefits for annuitants who are also eligible for Social Security benefits and/or other benefit payments.
1. How are dual benefits paid to persons entitled to both Railroad Retirement and Social Security benefits?
If a Railroad Retirement annuitant is also awarded a Social Security benefit, the Social Security Administration determines the amount of the Social Security benefit due, but a combined monthly dual benefit payment should, in most cases, be issued by the RRB after the Railroad Retirement annuity has been reduced by the amount of the Social Security benefit.
2. Why is a Railroad Retirement annuity reduced when a Social Security benefit is also payable?
The Tier I portion of a Railroad Retirement annuity is based on both the Railroad Retirement and Social Security earnings credits acquired by an employee and computed under Social Security formulas. It approximates what Social Security would pay if railroad work were covered by Social Security. Tier I benefits are, therefore, reduced by the amount of any actual Social Security benefit paid on the basis of nonrailroad employment, in order to prevent a duplication of benefits based on Social Security-covered earnings.
In addition, following principles of Social Security law which limit payment to the higher of any two or more benefits payable to an individual at one time, the Tier I dual benefit reduction applies to an annuity even if the Social Security benefit is based on the earnings record of someone other than the railroad employee, such as a spouse or former spouse. An annuitant is required to advise the RRB if any benefits are received directly from the Social Security Administration or if those benefits increase (other than for a cost-of-living increase) to avoid a Railroad Retirement benefit overpayment.
The Tier II portion of a Railroad Retirement annuity is based on the railroad employee’s railroad service and earnings alone and is computed under a separate formula. It is not reduced for entitlement to a Social Security benefit.
3. Are there any exceptions to the Railroad Retirement annuity reduction for Social Security benefits?
No. There are no exceptions to the Railroad Retirement annuity reduction for Social Security benefits.
4. Can federal, state or local government pensions also result in dual benefit reductions in an employee’s Railroad Retirement annuity?
Yes. Tier I benefits for employees first eligible for a Railroad Retirement annuity and a federal, state or local government pension after 1985 may be reduced for receipt of a public pension based, in part or in whole, on employment not covered by Social Security or Railroad Retirement after 1956. This may also apply to certain other payments not covered by Railroad Retirement or Social Security, such as payments from a non-profit organization or a foreign government or a foreign employer. Usually, an employee’s Tier I benefit will not be reduced by more than 1/2 of his or her pension from noncovered employment. However, if the employee is under age 65 and receiving a disability annuity, the Tier I benefit may be reduced by an added amount if the pension from noncovered employment is a public disability benefit.
Military service pensions, payments by the Department of Veterans Affairs, or certain benefits payable by a foreign government as a result of a totalization agreement between that government and the United States will not cause a reduction.
5. Can the public service pension reduction apply to spouse or widow(er)s’ benefits?
Yes. The Tier I portion of a spouse’s or widow(er)’s annuity may be reduced for receipt of any federal, state or local government pension separately payable to the spouse or widow(er) based on her or his own earnings. For spouses and widow(er)s subject to a public service pension reduction, the Tier I reduction is equal to 2/3 of the amount of the public service pension.
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 also not cause a reduction.
6. What dual benefit restrictions apply when both persons in a marriage are railroad employees entitled to Railroad Retirement annuities?
If both parties 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 or divorced spouse is also entitled.
If either party had some railroad service before 1975, the spouse or divorced spouse Tier I amount is reduced by the amount of the railroad employee Tier I to which the spouse or divorced spouse is entitled. The spouse or divorced spouse Tier I amount cannot be reduced below zero. The initial reduction is restored in the spouse Tier II amount. Divorced spouses are not entitled to a Tier II component and are not eligible to have the reduction restored.
In survivor cases, if the widow(er) is entitled to a Railroad Retirement employee annuity and neither the widow(er) nor the deceased employee had any railroad service before 1975, the survivor annuity (Tier I and Tier II) payable to the widow(er) is reduced by the total amount of the widow(er)’s own employee annuity.
If a widow or dependent widower is also a railroad employee annuitant, and either the widow(er) or the deceased employee had 120 months of railroad service before 1975, the Tier I reduction may be partially restored in the survivor Tier II amount.
If either the deceased employee or the widow(er) had some railroad service before 1975 but less than 120 months of service, the widow(er)’s own employee annuity and the Tier II portion of the survivor annuity would be payable to the widow(er). The Tier I portion of the survivor annuity would be payable only to the extent that it exceeds the Tier I portion of the widow(er)’s own employee annuity.
7. Can workers’ compensation or public disability benefits affect Railroad Retirement benefits?
If an employee is receiving a Railroad Retirement disability annuity, Tier I benefits for the employee and spouse may, under certain circumstances, be reduced for receipt of workers’ compensation or public disability benefits.
8. How can an annuitant find out if the receipt of any dual benefits affects his or her Railroad Retirement annuity?
If an annuitant becomes entitled to any of the dual benefit payments discussed above, or if there is any question as to whether a dual benefit payment requires a reduction in an annuity, he or she should contact an RRB field office online or by phone. As all of the RRB’s 53 field offices are physically closed to the public until further notice because of the COVID-19 pandemic, customers are encouraged to contact their local office by accessing Field Office Locator at RRB.gov and clicking on Send a Secure Message at the bottom of their local office’s page. Customers who prefer talking to an RRB employee can call the agency’s toll-free number (1-877-772-5772); however, they may experience lengthy wait times due to increased call volume caused by COVID-19-related issues.
Tag: Social Security
Employers and employees covered by the Railroad Retirement Act pay higher retirement taxes than those covered by the Social Security Act. As a result, Railroad Retirement benefits are higher than Social Security benefits, especially for “career” employees (those 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, 2020. 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 2020 to career rail employees was $3,735 a month, and for all retired rail employees the average was $2,985. The average age retirement benefit being paid under Social Security was approximately $1,505 a month. Spouse benefits averaged $1,090 a month under Railroad Retirement compared to $765 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 with railroad service prior to October 1981 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 in fiscal year 2020 averaged about $4,370 a month while monthly benefits awarded to workers retiring at full retirement age under Social Security averaged nearly $2,070. If spouse benefits are added, the combined benefits for the employee and spouse would total $6,115 under Railroad Retirement coverage, compared to $3,105 under Social Security. Adding a supplemental annuity to the railroad family’s benefit increases average total benefits for current career rail retirees to about $6,135 a month.
3. How much are the disability benefits currently awarded?
Disabled railroad workers retiring directly from the railroad industry in fiscal year 2020 were awarded $3,160 a month on average while awards for disabled workers under Social Security averaged $1,415.
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). Full retirement age is age 66 for those born 1943 through 1954 and is gradually rising 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. Can the spouse of a railroader receive a benefit at an earlier age than the spouse of a worker under Social Security?
If a retired railroad employee with 30 or more years of service is age 60, the employee’s spouse is also eligible for an annuity the first full month the spouse is age 60. The spouse of a worker under Social Security is not eligible for a spouse benefit based on age until both the worker and the spouse are at least age 62. Regardless of age, the spouses of workers under both retirement systems are eligible if the worker is retired and the spouse is caring for a qualifying child.
6. 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, whereas the RRB only pays 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.
7. 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 2020, the average annuity being paid to all aged and disabled widow(er)s was $1,825 a month, compared to $1,380 under Social Security.
Benefits awarded by the RRB in fiscal year 2020 to aged and disabled widow(er)s of railroaders averaged about $2,340 a month, compared to approximately $1,355 under Social Security.
The annuities being paid at the end of fiscal year 2020 to widowed mothers/fathers averaged $1,990 a month and children’s annuities averaged $1,195, compared to $1,030 and $900 a month for widowed mothers/fathers and children, respectively, under Social Security.
Those awarded in fiscal year 2020 averaged $1,780 a month for widowed mothers/fathers and $1,545 a month for children under Railroad Retirement, compared to $1,015 and $905 for widowed mothers/fathers and children, respectively, under Social Security.
8. 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 $1,030. 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.
9. How do Railroad Retirement and Social Security payroll taxes compare?
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%, consisting of 6.20% for retirement on earnings up to $142,800 in 2021, and 1.45% for Medicare hospital insurance on all earnings. An additional 0.9% in Medicare taxes (2.35% 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 2021, the Tier II tax rate on earnings up to $106,200 is 4.9% for employees and 13.1% for employers.
10. How much are regular Railroad Retirement taxes for an employee earning $142,800 in 2021 compared to Social Security taxes?
The maximum amount of regular Railroad Retirement taxes that an employee earning $142,800 can pay in 2021 is $16,128, compared to $10,924.20 under Social Security. For railroad employers, the maximum annual regular retirement taxes on an employee earning $142,800 are $24,836.40, compared to $10,924.20 under Social Security. Employees earning over $142,800 and their employers will pay more in retirement taxes than the above amounts because the Medicare hospital insurance tax is applied to all earnings.
Retirees, and those planning retirement, should be aware of the Railroad Retirement laws and rules 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.
Although the Railroad Retirement Board (RRB) participates in information exchanges with other federal agencies to identify unreported work and earnings to protect the integrity of its programs, annuitants are obligated to report post-retirement work and earnings. It is important to note that if annuitants fail to report post-retirement work and earnings, the Board may assess overpayments and fines. In some circumstances, law enforcement may consider the annuitant to have committed 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 or disabled employee, regardless of age, works for an employer covered under the Railroad Retirement Act. This includes work for labor organizations. This is true even if the retired or disabled employee performed service for one day 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 always considered railroad work and, therefore, no annuity is payable for any month in which such activity occurs.
No spouse annuity is payable in any month in which the employee’s annuity is not payable, or for any month the spouse, regardless of age, works for an employer covered under the Railroad Retirement Act. A divorced spouse annuity is not payable for any month in which the divorced 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 2 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 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 paid to employees, spouses and divorced 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 deductions do not apply to those who have attained full Social Security retirement age.
Full retirement age for employees and spouses is age 66 for those born from 1943 through 1954 and gradually increases to age 67 for those born in 1960 or later. Full retirement age for survivor annuitants ranges from age 66 for those born from 1945 through 1956 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). Also, special restrictions apply to disability annuitants (see Questions 5 and 6).
2. What are the current exempt earnings amounts for those non-disability annuitants subject to earnings limitations?
For those under full retirement age throughout 2020, the exempt earnings amount rises to $18,240 from $17,640 in 2019. For beneficiaries attaining full retirement age in 2020, the exempt earnings amount rises to $48,600 from $46,920 in 2019 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 2020, the deduction is $1 for every $3 of earnings over the exempt amount in the months before the month full retirement age is attained.
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?
Retired employees and spouses, regardless of age, who work for their last pre-retirement non-railroad employer are also subject to an earnings deduction in their Tier II and Railroad Retirement supplemental annuity benefits, if applicable, of $1 for every $2 in earnings up 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 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. An annuity paid to a divorced spouse may continue despite the employee’s work activity. However, the employee’s non-railroad earnings over the annual earnings exempt amount may reduce a divorced spouse benefit.
5. How do post-retirement work activity and earnings affect disability annuities?
Any work performed by a disabled annuitant — whether for payment or not — may be considered an indication of recovery from disability and must be reported promptly. Failure to report such work activity timely could result in overpaid annuities, which must be repaid, as well as severe financial penalties.
In addition, a disability annuity is not payable for any month in 2020 in which the disabled employee annuitant earns more than $990 ($950 in 2019) 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 $15,900 in 2020, which is $3,525 over the 2020 annual limit of $12,375. Dividing $3,525 by $990 yields 3.56. As .56 is more than one-half, the annuitant would lose 4 months of benefits.
These disability work restrictions apply until the disabled employee annuitant attains full retirement age which, as stated earlier, ranges from age 66 to age 67, depending on the year of birth. These work restrictions apply even if the annuitant has 30 years of railroad service. Also, a disabled employee annuitant who works for his or her last pre-retirement non-railroad employer would be subject to the additional earnings deduction that applies in these cases.
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 (see Question 2) 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 work activity 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 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 which 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 people get more information about these Railroad Retirement work restrictions and earnings limitations?
More information is available by contacting an RRB field office. Field Office Locator at RRB.gov provides access to every field office’s street address and other information, and the option to email an office using the Send a Secure Message feature.
The agency’s toll-free number, 1-877-772-5772, offers a menu of service options, including being transferred to an office to speak with a representative, leave a message, or find the address of a local field office.
The agency also maintains a TTY number, 312-751-4701, to accommodate those with hearing or speech impairments. Most RRB offices are open to the public on weekdays from 9 a.m. to 3:30 p.m., except on Wednesdays when offices are open from 9 a.m. to noon. RRB offices are closed on federal holidays.
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, 2018. 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 2018 to career rail employees was $3,525 a month, and for all retired rail employees, the average was $2,815. The average age retirement benefit being paid under Social Security was approximately $1,415 a month. Spouse benefits averaged $1,035 a month under Railroad Retirement compared to $720 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 in fiscal year 2018 averaged about $4,175 a month, while monthly benefits awarded to workers retiring at full retirement age under Social Security averaged nearly $1,915. If spouse benefits are added, the combined benefits for the employee and spouse would total $5,815 under Railroad Retirement coverage, compared to $2,875 under Social Security. Adding a supplemental annuity to the railroad family’s benefit increases average total benefits for current career rail retirees to about $5,850 a month.
3. How much are the disability benefits currently awarded?
Disabled railroad workers retiring directly from the railroad industry in fiscal year 2018 were awarded $3,050 a month on average, while awards for disabled workers under Social Security averaged $1,340.
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. Can the spouse of a railroader receive a benefit at an earlier age than the spouse of a worker under Social Security?
If a retired railroad employee with 30 or more years of service is age 60, the employee’s spouse is also eligible for an annuity the first full month the spouse is age 60.
Certain early retirement reductions are applied if the employee first became eligible for a 60/30 annuity July 1, 1984, or later, and retired at ages 60 or 61 before 2002. If the employee was awarded a disability annuity, has attained age 60 and has 30 years of service, the spouse can receive an unreduced annuity the first full month she or he is age 60, regardless of whether the employee annuity began before or after 2002, as long as the spouse’s annuity beginning date is after 2001.
To qualify for a spouse’s benefit under Social Security, an applicant must be at least age 62, or any age if caring for a child who is entitled to receive benefits based on the applicant’s spouse’s record.
6. 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.
7. 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 2018, the average annuity being paid to all aged and disabled widow(er)s was $1,705 a month, compared to $1,305 under Social Security.
Benefits awarded by the RRB in fiscal year 2018 to aged and disabled widow(er)s of railroaders averaged nearly $2,185 a month, compared to approximately $1,265 under Social Security.
The annuities being paid at the end of fiscal year 2018 to widowed mothers/fathers averaged $1,900 a month and children’s annuities averaged $1,110, compared to $985 and $860 a month for widowed mothers/fathers and children, respectively, under Social Security.
Those awarded in fiscal year 2018 averaged $2,200 a month for widowed mothers/fathers and $1,350 a month for children under Railroad Retirement, compared to $960 and $855 for widowed mothers/fathers and children, respectively, under Social Security.
8. 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 $1,020. 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.
9. How do Railroad Retirement and Social Security payroll taxes compare?
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 $132,900 in 2019, 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 2019, the Tier II tax rate on earnings up to $98,700 is 4.9 percent for employees and 13.1 percent for employers.
10. How much are regular Railroad Retirement taxes for an employee earning $132,900 in 2019 compared to Social Security taxes?
The maximum amount of regular Railroad Retirement taxes that an employee earning $132,900 can pay in 2019 is $15,003.15, compared to $10,166.85 under Social Security. For railroad employers, the maximum annual regular retirement taxes on an employee earning $132,900 are $23,096.55, compared to $10,166.85 under Social Security. Employees earning over $132,900, and their employers, will pay more in retirement taxes than the above amounts because the Medicare hospital insurance tax is applied to all earnings.
Social Security and Supplemental Security Income (SSI) benefits for more than 67 million Americans will increase 2.8 percent in 2019, announced the Social Security Administration (SSA).
The 2.8 percent cost-of-living adjustment (COLA) will begin with benefits payable to more than 62 million Social Security beneficiaries in January 2019. Increased payments to more than 8 million SSI beneficiaries will begin on December 31, 2018. (Note: some people receive both Social Security and SSI benefits). The Social Security Act ties the annual COLA to the increase in the Consumer Price Index as determined by the Department of Labor’s Bureau of Labor Statistics.
Some other adjustments that take effect in January of each year are based on the increase in average wages. Based on that increase, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $132,900 from $128,400.
Social Security and SSI beneficiaries are normally notified by mail in early December about their new benefit amount. This year, for the first time, most people who receive Social Security payments will be able to view their COLA notice online through their mySocial Security account. People may create or access their my Social Security account online at www.socialsecurity.gov/myaccount.
Information about Medicare changes for 2019, when announced, will be available at www.medicare.gov. For Social Security beneficiaries receiving Medicare, Social Security will not be able to compute their new benefit amount until after the Medicare premium amounts for 2019 are announced. Final 2019 benefit amounts will be communicated to beneficiaries in December through the mailed COLA notice and my Social SecurityMessage Center.
The Social Security Act provides for how the COLA is calculated. To read more, please visit www.socialsecurity.gov/cola.
Click here for a fact sheet showing the effect of the various automatic adjustments.
The Social Security Board of Trustees released its annual report on the long-term financial status of the Social Security trust funds. The combined asset reserves of the Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI), or OASDI, trust funds are projected to become depleted in 2034, the same as projected last year, with 79 percent of benefits payable at that time.
The OASI trust fund is projected to become depleted in late 2034, as compared to last year’s estimate of early 2035, with 77 percent of benefits payable at that time. The DI trust fund will become depleted in 2032, extended from last year’s estimate of 2028, with 96 percent of benefits still payable.
In the 2018 annual report to Congress, the trustees announced:
- The asset reserves of the combined OASDI trust funds increased by $44 billion in 2017 to a total of $2.89 trillion.
- The total annual cost of the program is projected to exceed total annual income in 2018 for the first time since 1982, and remain higher throughout the 75-year projection period. As a result, asset reserves are expected to decline during 2018. Social Security’s cost has exceeded its non-interest income since 2010.
- The year when the combined trust fund reserves are projected to become depleted, if Congress does not act before then, is 2034 – the same as projected last year. At that time, there will be sufficient income coming in to pay 79 percent of scheduled benefits.
“The trustees’ projected depletion date of the combined Social Security trust funds has not changed, and slightly more than three-fourths of benefits would still be payable after depletion,” said Nancy A. Berryhill, acting commissioner of Social Security. “But the fact remains that Congress can keep Social Security strong by taking action to ensure the future of the program.”
Other highlights of the trustees’ report include:
- Total income, including interest, to the combined OASDI trust funds amounted to $997 billion in 2017 ($874 billion from net payroll tax contributions, $38 billion from taxation of benefits and $85 billion in interest).
- Total expenditures from the combined OASDI trust funds amounted to more than $952 billion in 2017.
- Social Security paid benefits of more than $941 billion in 2017. There were about 62 million beneficiaries at the end of the calendar year.
- The projected actuarial deficit over the 75-year long-range period is 2.84 percent of taxable payroll – slightly larger than the 2.83 percent projected in last year’s report.
- During 2017, an estimated 174 million people had earnings covered by Social Security and paid payroll taxes.
- The cost of $6.5 billion to administer the Social Security program in 2017 was a very low 0.7 percent of total expenditures.
- The combined trust fund asset reserves earned interest at an effective annual rate of 3.0 percent in 2017.
The board of trustees usually comprises six members. Four serve by virtue of their positions with the federal government: Steven T. Mnuchin, secretary of the treasury and managing trustee; Nancy A. Berryhill, acting commissioner of Social Security; Alex M. Azar II, secretary of health and human services; and R. Alexander Acosta, secretary of labor. The two public trustee positions are currently vacant.
View the 2018 trustees report at www.socialsecurity.gov/OACT/TR/2018/.
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, 2014. They also show the differences in age requirements and payroll taxes under the two systems.
1. How do the average monthly railroad retirement and Social Security benefits paid to retired employees and spouses compare?
The average age annuity being paid by the Railroad Retirement Board (RRB) at the end of fiscal year 2014 to career rail employees was $3,180 a month, and for all retired rail employees the average was $2,535. The average age retirement benefit being paid under Social Security was nearly $1,305 a month. Spouse benefits averaged $945 a month under railroad retirement compared to $635 under Social Security.
The Railroad Retirement Act also provides supplemental railroad retirement annuities of between $23 and $43 a month, which are payable to employees who retire directly from the rail industry with 25 or more years of service.
2. Are the benefits awarded to recent retirees generally greater than the benefits payable to those who retired years ago?
Yes, because recent awards are based on higher average earnings. Age annuities awarded to career railroad employees retiring at the end of fiscal year 2014 averaged about $3,710 a month while monthly benefits awarded to workers retiring at full retirement age under Social Security averaged nearly $1,815. If spouse benefits are added, the combined benefits for the employee and spouse would total $5,135 under railroad retirement coverage, compared to $2,720 under Social Security. Adding a supplemental annuity to the railroad family’s benefit increases average total benefits for current career rail retirees to nearly $5,170 a month.
3. How much are the disability benefits currently awarded?
Disabled railroad workers retiring directly from the railroad industry at the end of fiscal year 2014 were awarded almost $2,870 a month on the average while awards for disabled workers under Social Security averaged over $1,235.
While both the Railroad Retirement and Social Security Acts provide benefits to workers who are totally disabled for any regular work, the Railroad Retirement Act also provides disability benefits specifically for employees who are disabled for work in their regular railroad occupation. Employees may be eligible for such an occupational disability annuity at age 60 with 10 years of service, or at any age with 20 years of service.
4. Can railroaders receive benefits at earlier ages than workers under Social Security?
Railroad employees with 30 or more years of creditable service are eligible for regular annuities based on age and service the first full month they are age 60, and rail employees with less than 30 years of creditable service are eligible for regular annuities based on age and service the first full month they are age 62.
No early retirement reduction applies if a rail employee retires at age 60 or older with 30 years of service and his or her retirement is after 2001, or if the employee retired before 2002 at age 62 or older with 30 years of service.
Early retirement reductions are otherwise applied to annuities awarded before full retirement age, the age at which an employee can receive full benefits with no reduction for early retirement. This ranges from age 65 for those born before 1938 to age 67 for those born in 1960 or later, the same as under Social Security.
Under Social Security, a worker cannot begin receiving retirement benefits based on age until age 62, regardless of how long he or she worked, and Social Security retirement benefits are reduced for retirement prior to full retirement age regardless of years of coverage.
5. Does Social Security offer any benefits that are not available under railroad retirement?
Social Security does pay certain types of benefits that are not available under railroad retirement. For example, Social Security provides children’s benefits when an employee is disabled, retired or deceased. Under current law, the Railroad Retirement Act only provides children’s benefits if the employee is deceased.
However, the Railroad Retirement Act includes a special minimum guaranty provision that ensures that railroad families will not receive less in monthly benefits than they would have if railroad earnings were covered by Social Security rather than railroad retirement laws. This guaranty is intended to cover situations in which one or more members of a family would otherwise be eligible for a type of Social Security benefit that is not provided under the Railroad Retirement Act. Therefore, if a retired rail employee has children who would otherwise be eligible for a benefit under Social Security, the employee’s annuity can be increased to reflect what Social Security would pay the family.
6. How much are monthly benefits for survivors under railroad retirement and Social Security?
Survivor benefits are generally higher if payable by the RRB rather than Social Security. At the end of fiscal year 2014, the average annuity being paid to all aged and disabled widow(er)s was $1,515 a month, compared to $1,220 under Social Security.
Benefits awarded by the RRB at the end of fiscal year 2014 to aged and disabled widow(er)s of railroaders averaged more than $1,990 a month, compared to almost $1,170 under Social Security .
The annuities being paid at the end of fiscal year 2014 to widowed mothers/fathers averaged $1,800 a month and children’s annuities averaged $1,025, compared to $920 and $815 a month for widowed mothers/fathers and children, respectively, under Social Security.
Those awarded at the end of fiscal year 2014 averaged $1,925 a month for widowed mothers/fathers and $1,425 a month for children under railroad retirement, compared to $885 and $805 for widowed mothers/fathers and children, respectively, under Social Security.
7. How do railroad retirement and Social Security lump-sum death benefit provisions differ?
Both the railroad retirement and Social Security systems provide a lump-sum death benefit. The railroad retirement lump-sum benefit is generally payable only if survivor annuities are not immediately due upon an employee’s death. The Social Security lump-sum benefit may be payable regardless of whether monthly benefits are also due. Both railroad retirement and Social Security provide a lump-sum benefit of $255. However, if a railroad employee completed 10 years of creditable railroad service before 1975, the average railroad retirement lump-sum benefit payable is $1,005. Also, if an employee had less than 10 years of service, but had at least 5 years of such service after 1995, he or she would have to have had an insured status under Social Security law (counting both railroad retirement and Social Security credits) in order for the $255 lump-sum benefit to be payable.
The Social Security lump sum is generally only payable to the widow(er) living with the employee at the time of death. Under railroad retirement, if the employee had 10 years of service before 1975, and was not survived by a living-with widow(er), the lump sum may be paid to the funeral home or the payer of the funeral expenses.
8. How do railroad retirement and Social Security payroll taxes c
ompare?
Railroad retirement payroll taxes, like railroad retirement benefits, are calculated on a two-tier basis. Rail employees and employers pay Tier I taxes at the same rate as Social Security taxes, 7.65 percent, consisting of 6.20 percent for retirement on earnings up to $118,500 in 2015, and 1.45 percent for Medicare hospital insurance on all earnings. An additional 0.9 percent in Medicare taxes (2.35 percent in total) will be withheld from employees on earnings above $200,000.
In addition, rail employees and employers both pay Tier II taxes which are used to finance railroad retirement benefit payments over and above Social Security levels.
In 2015, the Tier II tax rate on earnings up to $88,200 is 4.9 percent for employees and 13.1 percent for employers.
9. How much are regular railroad retirement taxes for an employee earning $118,500 in 2015 compared to Social Security taxes?
The maximum amount of regular railroad retirement taxes that an employee earning $118,500 can pay in 2015 is $13,387.05, compared to $9,065.25 under Social Security. For railroad employers, the maximum annual regular retirement taxes on an employee earning $118,500 are $20,619.45, compared to $9,065.25 under Social Security. Employees earning over $118,500, and their employers, will pay more in retirement taxes than the above amounts because the Medicare hospital insurance tax is applied to all earnings.
Monthly Social Security and Supplemental Security Income (SSI) benefits for nearly 64 million Americans will increase 1.7 percent in 2015, the Social Security Administration announced today.
The 1.7 percent cost-of-living adjustment (COLA) will begin with benefits that more than 58 million Social Security beneficiaries receive in January 2015. Increased payments to more than 8 million SSI beneficiaries will begin on December 31, 2014. The Social Security Act ties the annual COLA to the increase in the Consumer Price Index as determined by the Department of Labor’s Bureau of Labor Statistics.
Some other changes that take effect in January of each year are based on the increase in average wages. Based on that increase, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $118,500 from $117,000. Of the estimated 168 million workers who will pay Social Security taxes in 2015, about 10 million will pay higher taxes because of the increase in the taxable maximum.
Information about Medicare changes for 2015 is available at www.Medicare.gov.
The Social Security Act provides for how the COLA is calculated. To read more, please visit www.socialsecurity.gov/cola.
WASHINGTON – Even as millions of baby boomers approach retirement, the Social Security Administration has been closing dozens of field offices, forcing more and more seniors to seek help online instead of in person, according to a congressional report being released Wednesday.
The agency blames budget constraints.
Read the complete story at the Associated Press.
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.