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Among the numerous political challenges facing working families is preservation of Railroad Retirement and Social Security, which are both under attack by political conservatives.

As the UTU’s Portland, Ore., regional meeting commenced June 18, the labor member of the Railroad Retirement Board, Walt Barrows (pictured at left) told attendees, “You can be very proud of your leadership and your legislative staff. You have the best legislative team of any union, bar none. [The UTU is] in the forefront of defending our retirement system against those who try to weaken it.”

Echoing those sentiments was Joe Nigro, general president of the Sheet Metal Workers International Association (SMWIA), who said the UTU has “the best political machine” among labor organizations, which is essential in the fight to preserve Railroad Retirement and Social Security.

Nigro said the SMWIA and the UTU – now combined as SMART – “share the goal of achieving power and success to make legislators, other unions and employers look to us for leadership and training.” SMART, he said, is creating “a bigger, better, stronger and members’ oriented union that represents its members aggressively.”

Barrows, a senior officer of the Brotherhood of Railroad Signalman before being nominated by President Obama and confirmed by the Senate to the three-member Railroad Retirement Board to represent the interests of labor, warned that “the trend of attacking and eliminating defined benefit pension plans across the country will continue.

“In the last 30 years, defined benefit plans have been stripped away from most workers,” Barrows said. “We have seen defined benefit plans replaced by tax deferred savings accounts, like 401(k) plans and other less desirable substitutes [and] with the decline of defined benefit plans, far too many Americans cannot retire with any sense of dignity or security.

“Wondering if you will be able to receive a steady income during your retirement years is important to you and your family when you consider retirement,” Barrows said. “Railroad Retirement gives you that assurance. You can rest assured that when you are ready to retire, the Railroad Retirement Board and the Railroad Retirement system will be there for you.

“You would think that the strength and solvency of our system would exempt us from attacks, but our retirement system is never totally safe from attack. A recent House budget resolution [introduced by Rep. Paul Ryan (R-Wis.)] proposed massive changes to our retirement system. While this proposal will not go anywhere this year, it again demonstrates that rail workers must remain vigilant if we expect our retirement system is there for us and for future generations of rail workers.

“Since the establishment of the Railroad Retirement system 76 years ago, labor has fought to protect and preserve these benefits,” Barrows said. “The longevity and stability of our Railroad Retirement is a testament to strength of rail workers standing together. But we all must be vigilant to make sure that our retirement system is there for us and for future generations of rail workers and their families.

“It is now up to us to ensure that our retirement system is there to provide protection and retirement security for future generations,” Barrows said. “So when we hear retirement benefits attacked, and when we hear them referred to as entitlements, remind people that railroad workers are entitled. 

“We are entitled,” Barrows said, “because we worked for it. We are entitled because we sacrificed for it. We are entitled because we contributed to it. And we are entitled because the profits enjoyed by the railroad industry came from our blood and sweat. Nobody gave us anything. We earned it.

“And as your member on the Railroad Retirement Board, it is an honor for me to stand here today to tell you that I will fight to protect our retirement system,” Barrows said.

By UTU International President Mike Futhey – 

Railroaders should not lose sleep over a rumor that Congress will cut Railroad Retirement benefits.

The rumor began after language was inserted in a budget report by conservative Rep. Paul Ryan (R-Wis.) suggesting the federal deficit could be cut by eliminating certain Railroad Retirement benefits. He did not understand how Railroad Retirement is funded.

The UTU, SMWIA and other rail union legislative departments, along with carriers and the Railroad Retirement Board, immediately contacted congressional offices to remind lawmakers there are no federal funds used to pay Railroad Retirement Tier I benefits. Every penny of Railroad Retirement Tier I benefits is funded by payroll taxes on railroads and their workers.

Thus, there can be no savings to the federal government by tinkering with Railroad Retirement. As National Legislative Director James Stem said, “We are all confident that Rep. Ryan’s unfortunate draft language will disappear from consideration in Congress.”

This reminds us all to be ever vigilant in protecting Railroad Retirement, and the importance of participating in the UTU PAC.

Railroad Retirement, along with Social Security – which covers virtually all other private sector workers – originated with President Franklin Roosevelt’s New Deal during the Great Depression.

Railroad unions gained from Congress a guarantee that Railroad Retirement would never provide less in monthly benefits than Social Security. In fact, Railroad Retirement today pays considerably more than Social Security — the additional cost borne entirely by railroads and their workers.

For Railroad Retirement Tier I, the payroll taxes on employers and workers are the same as for Social Security, but Tier I allows railroaders with at least 30 years of service to retire at age 60 with full benefits for themselves and spouse. The cost of early retirement is funded by Tier II payroll taxes, which also fund additional Railroad Retirement benefits similar to private-sector pension plans where they still exist.

The average Railroad Retirement benefit paid current retirees is some $1,700 more monthly than paid to Social Security recipients, while the Railroad Retirement spouse benefit is some $500 more than paid spouses under Social Security.

Carriers pay the bulk of the additional Railroad Retirement taxes – 12.1 percent on payroll up to $81,900 per employee, while employees pay 3.9 percent on the same earnings. This significant pension benefit is what the railroads rely on to keep our professional workforce on the job until retirement.

For more information on Railroad Retirement, visit the Railroad Retirement Board website by clicking on the following link: https://secure.rrb.gov/

Retirees receiving Railroad Retirement Tier I or Social Security benefits will see their payments rise by 3.6 percent beginning Jan. 1 – the first increase in those benefit payments in two years.

Increases in Railroad Retirement and Social Security benefits are tied to the Department of Labor’s Consumer Price Index.

For railroad retirees, Tier II payments will rise by 1.2 percent, as the Tier II increases are calculated at 32.5 percent of the Consumer Price Index. Those receiving vested dual benefits payments, phased out in the early 1980s, and supplemental annuities will not see an increase in those payments.

Increases in Medicare Part B premiums will be announced by mid-November.

For railroad retirees who have not attained the full retirement age and are employed while receiving Railroad Retirement benefits, the maximum earnings not subject to a reduction will rise to $14,640 Jan. 1 from the current $14,160. The earnings deduction is $1 in benefits for every $2 in earnings over the exempt amount.

Railroad retirees, regardless of age, who work for their last pre-retirement non-railroad employer, are subject to an additional earnings deduction in their Tier II and supplemental benefits — $1 for every $2 in earnings up to a maximum reduction of 50 percent. This earnings restriction does not change from year to year and does not allow for an exempt amount.

For more information, contact your nearest Railroad Retirement or Social Security office.

Railroad Retirement, Social Security, Medicare and Railroad Unemployment Insurance payroll taxes have changed for 2011.

Following are the tax rates:

 Railroad Retirement Tier I:

  • Paid by employer: 6.20% on wages up to $106,800.
  • Paid by employee: 4.2% on wages up to $106,800.

Social Security (non-railroad employment):

  • Paid by employer: 6.2% on wages up to $106,800.
  • Paid by employee: 4.2% on wages up to $106,800. 

Medicare (railroad and non-railroad employment):

  • Paid by employer: 1.45% on all wages (no cap).
  • Paid by employee: 1.45% on all wages (no cap).

 Railroad Retirement Tier II

  • Paid by employer: 12.1% on wages up to a $79,200.
  • Paid by employee: 3.9% on wages up to $79,200.

 Railroad Unemployment Insurance:

  • Paid by employer: 3.15% on wages up to $15,960.
  • No tax on employee.

 

Come May 1, Social Security and Railroad Retirement checks for new recipients no longer will be mailed.

The Social Security Administration and the Railroad Retirement Board are going paperless — sending payment electronically (direct deposit) to those receiving retirement, disability and survivor benefits.

Those already receiving Social Security and Railroad Retirement benefits will have until March 1, 2013 to establish direct deposit at a financial institution, or arrange for the benefits to be credited to a debit card. An exception will be made for those at least 90 years old and those living in remote areas.

The agencies say that eight of 10 benefits recipients already receive them electronically.

Electronic payment eliminates the problem of lost or stolen checks, and makes it easier and more prompt for those away from home to ensure payments are available for use.

Beneficiaries who do not have bank or credit union accounts may obtain a Direct Express debit MasterCard.

For more information and assistance, go to www.GoDirect.org, or call, toll free, (800) 333-1795.

The 2 percentage point reduction in payroll taxes for railroad workers covered by Railroad Retirement, and bus and aviation workers covered by Social Security, will NOT have a negative impact on either the Railroad Retirement or Social Security trust funds, as has been wrongly alleged by some.

Beginning Jan. 1, all workers will see an increase in their paychecks as a result of Railroad Retirement and Social Security payroll taxes being cut from 6.2 percent to 4.2 percent. The purpose of the tax cut is to stimulate the economy through consumer spending that will snowball into increased demand for products and new hiring by employers.

For workers earning $50,000 annually, the additional take-home pay from the reduced payroll taxes will be some $1,000 in 2011. For those earning the maximum Social Security and Tier I Railroad Retirement taxable income, the additional take-home pay will top $2,000 in 2011.

The payroll tax deduction will NOT have a negative impact on the Railroad Retirement or Social Security trust funds because the legislation provides that the shortfall in the trust funds — as a result of the payroll tax cut —  will be made up by a contribution to those funds from the U.S. Treasury’s General Fund.

The legislation is absolutely clear on this point. In Section 601(e) of the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010,
it is stated:

“There are hereby appropriated to [the Social Security Trust Fund] amounts equal to the reduction in revenues to the Treasury by reason of the application of [the payroll tax cut].”

This was confirmed by the Railroad Retirement Board, which advises that the payroll tax-cut legislation “provides for the transfer of money from the general fund to the Social Security Equivalent Benefit Account, one of the trust funds from which the Railroad Retirement Board (RRB) pays benefits, in an amount equal to the revenue lost due to the reduced payroll tax rate.”

Separately, the Social Security systems chief actuary, in a Dec. 10 letter to Treasury Secretary Timothy Geithner, said, “The law specifies that Social Security will receive every dollar it would have gotten even without the payroll tax cut.”

And AARP Executive Vice President John Rother said in a press release that the payroll tax cut “has no financial impact on Social Security because the trust fund is made whole.”

Said President Obama in signing the legislation: “Social Security is a sacred compact that in return for a lifetime of hard work, America’s seniors will have a chance to retire with dignity. We have an obligation to keep that promise and safeguard and strengthen Social Security for seniors, people with disabilities and all Americans, both now and in the future.”

How long will you live after you retire, and will you have enough money to live on comfortably?

Good question. That’s why – before you retire – you should think about post-retirement economic security, because few things could be worse than money running out during what are supposed to be carefree years.

A balanced retirement portfolio should resemble a three-legged stool.

The first leg is your Tier I Railroad Retirement, Social Security or CalPERS (the California retirement system for public employees), plus Tier II Railroad Retirement and/or an employer pension.

The second leg is the equity in your home, plus your personal savings, such as certificates of deposit and mutual funds.

The third leg of this financial stool are annuities, IRAs, 401(k) plans and whole life insurance.

These three financial legs are the assets to support you through retirement. The fewer legs, or the lower value of any legs, could mean a less secure financial situation during retirement.

Determining available assets before you retire is essential. You may, for example, choose to wait another year or two before retiring and build up assets in one or more legs of your financial stool.

Younger members are wise to consider these financial legs long before they retire.

The UTUIA can help build the third leg of your financial stool prior to, and even during, retirement.

UTUIA whole life policies provide a death benefit while accumulating cash value. The death benefit protects your surviving family if you die; and the cash value becomes a source of tax-deferred savings available during your retirement years.

UTUIA annuities and individual retirement accounts (IRAs) earn guaranteed interest that is tax deferred until you draw down the balance. You may invest in UTUIA annuities up to age 85.

Existing IRAs and/or employer 401(k) plans may be rolled over into a UTUIA IRA.

To learn how the UTUIA can help make your retirement more secure, talk with a UTUIA regional insurance manager, call the UTUIA toll-free line at (800) 558-8842, or click here.