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Average Employee Age Annuity on the Rolls*
Average Spouse Annuity on the Rolls
Average Employee Age Annuity Awarded in 2
015*
Average Spouse Annuity Awarded in 2
015^
Average Disability A
nnuity Awarded in 2
015
Occupational Disability A
warded?
Full Annuity at 6
0 with 3
0 Years?
Average Widow(er) Annuity on the Rolls
Average Widow(er) Annuity Awarded in 2
015
RRB
$39,420
$11,700
$45,660
$17,160
$33,840
Yes
Yes
$18,780
$24,780
SSA
$16,080
$7,980
$22,080
$11,040
$15,240
No
No
$15,000
$14,340
'Career rail employee with at least 30 years of service. (T
he RRB figures d
o not include employees Initially awarded an annuity based o
n disability.)
Note. - Amounts shown are as of the close o
f fiscal y
ear ending September 30, 2015.
U.S. RAILROAD RETIREMENT BOARD
RRB ONUNEWHY YOU SHOULD USE
www.rrb.qov
The Railroad Retirement Board's website offers access to
select services and important information 24 hours a day/7 days a week and has been recognized for excellence amongFederal government websites. And there's more . . .
WWW.rrb.qOV is convenient! our Benefit online Services* let you:
□ apply for unemployment benefits□ file unemployment claims□ file sickness claims
□ pay unemployment/sickness or retirement/survivor bills□ view an account statement listing your unemployment/sickness
benefit payments□ request an estimate of your and your spouse's annuity rate□ view/request your service and compensation history□ request a duplicate tax statement□ request a replacement Medicare card□ request proof of your monthly annuity rate
WWW.rrb.qOV is informative! You can access:
□ RRB benefit publications for viewing and downloading□ RRB press releases covering topics of general Interest to the
railroad community□ RRB reports, plans and inventories, including our Customer Service Plan□ links to helpful railroad union and governmental websites as well as
other Important sites
*To use certain online services, you must first establish an RRB online account. To learnhow, click on the link for requesting a Password Request Code (PRC) located In the BenefitOnline Services Login section of the www.rrb.gov home page.
WWW.rrb.aOV is fast! using e-mail, you can get quick responses to:
□ your questions and concerns about the RRB and its programs□ your comments on the quality of our customer service, Including our
website service
WWW.rrb.gov is secure! it protects your privacy by:
□ using the most secure encryption technology available to ensure Internettransmissions remain safe from unauthorized access
□ requiring users to provide Identifying information, such as a personalidentification number (PIN), to access personal information
www.rrb.gov is part of the RRB's effort to expand therailroad public's access to information and allow rail employeesand employers to conduct their business with the agencyonline. For persons who choose not to conduct business overthe Internet, however, the RRB's field offices are still availableto answer in-person, telephone, and written inquiries.Contact the RRB toll-free at 1-877-772-5772.
U.S. Railroad Retirement BoardOffice of the Labor Member
844 North Rush StreetChicago, IL 60611-2092
August 2012
RRB News
U.S. Railroad Retirement Board
844 North Rush street Chicago, Illinois 60611-1275
www.rrb.gov877-772-5772 general information
Public Affairs
312-751-4777
opa @ rrb.gov media Inquiries
No. 16-1 For Immediate Release
April 2016
RRB Announces Change in Service Hours for Field Offices
Effective at noon on June 1, 2016, U.S. Railroad Retirement Board (RRB) field offices
around the country will be closed to the public on Wednesday afternoons. Field office
representatives will not be available to assist walk-in customers or to answer the phones
during Wednesday afternoons only. All RRB offices will remain open from 9 a.m. to noon
on Wednesdays, and during their usual hours of 9 a.m. to 3:30 p.m. on the remaining
weekdays, except for Federal holidays.
The change is necessary due to reduced staffing levels, coupled with increased
workloads in several key areas, and will allow the staff in the RRB's nationwide network of
53 field offices to focus on processing applications for benefits, conducting necessary
verifications for pending applications or claims, resolving complex cases and reducing
backlogged workloads.
RRB customers will continue to have the opportunity to conduct most business through
the agency website (www.rrb.gov) 24 hours a day, 7 days a week, or by calling the RRB's
nationwide toll-free telephone number, 1-877-772-5772, and speaking with a field office
representative during regular business hours.
Current railroad employees can use the www.rrb.gov website to apply for and claim
unemployment benefits, file a claim for sickness benefits, check the status of their
unemployment or sickness claim, view their statement of account under the Railroad
Unemployment Insurance Act, view their service and compensation history, or get an
annuity estimate. Annuitants currently receiving benefits can request a letter verifying the
amount of their annuity, a duplicate tax statement, a replacement Medicare card or a copy of
their service and compensation history. All services are accessible through the "Benefit
Online Services" section of www.rrb.gov or by calling the RRB's toll-free number at
1-877-772-5772.
# # #
An independent Federal agency headquartered in Chicago, the RRB pays more than
$12 billion a year in benefits under the Federal Railroad Retirement and Unemployment
Insurance Acts covering the nation's railroad workers and their families.
Visit our Website
www.rrb.gov
Offices of the U.S. Railroad Retirement BoardCUSTOMER Service 877/772-5772
tenl>
I si
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Footnote Legend; ^ Change of Address 'Change of Rep '^Change of Fax No.
Changes to the T-83 wiii appear in bold.06-16
Printed on recycled paper
U.S. RAILROAD RETIREMENT BOARD
District Office Mapfwm\/ \
NORTH DAKOTAMINNESOTA
Pomand
OREGON
mSCONSM
SOUTH DAKOTA
—JwOMWQIDAHO
St. Paul
Albany
Buffalo
{NEBRASKA
Central isHp
ewYork
Milwaukee
Hanisbuig
Detroit
MDIANA • OHtO ClevelandAltoona
SaB l.ake CityJoDe
IOINOIS
PlttstJurShDeaMoinesICOLORADORoaevuie
Omaha
IndianapoBs l andnnatiMISSOURIVIRC^NIA ̂
^GlNtA
Huntington /
Oakland KANSASDenver
naasCtty
St. LouisLoutsw&e
KENTUCKY■NEW Mexico
Cliaiiotle
ARKANSAS
AlbuquerqueSOUTH CAROUNA
ALABAMA
UtUeRockAtlanta
Btrmingliain
LOUISIANAR. Worth
FLORIDA
Houston
LEGEND
• District Office
06-16
FROM THE DESK OF
WALTER A. BARROWS
LABOR MEMBER
U.S. RAILROAD RETIREMENT BOARD
For Publication
July 2015
Unemployment and Sickness Benefits for Railroad Employees
The Railroad Retirement Board (RRB) administers the Railroad Unemployment Insurance Act,
which provides two kinds of benefits for qualified railroaders: unemployment benefits for those who
become unemployed but are ready, willing and able to work; and sickness benefits for those who are
unable to work because of sickness or injury. Sickness benefits are also payable to female rail workers
for periods of time when they are unable to work because of pregnancy and childbirth. A new benefit
year begins each July 1.
The following questions and answers describe these benefits, their eligibility requirements, and
how to claim them.
1. What are the eligibility requirements for railroad unemployment and sickness benefits inJuly 2015?
To qualify for normal railroad unemployment or sickness benefits, an employee must have had
railroad earnings of at least $3,600 in calendar year 2014, counting no more than $1,440 for any
month. Those who were first employed in the rail industry in 2014 must also have at least five months
of creditable railroad service in 2014.
Under certain conditions, employees who do not qualify on the basis of their 2014 earnings may
still be able to receive benefits in the new benefit year. Employees with at least 10 years of service
(120 or more cumulative months of service) who received nonnal benefits in the benefit year ending
June 30, 2015, maybe eligible for extended benefits, and employees with at least 10 years of service
(120 or more cumulative months of service) might qualify for accelerated benefits if they have rail
earnings of at least $3,637.50 in 2015, not counting earnings of more than $1,455 a month.
In order to qualify for extended unemployment benefits, a claimant must not have voluntarily quit
work without good cause and not have voluntarily retired. To qualify for extended sickness benefits, a
claimant must not have voluntarily retired and must be under age 65.
To be eligible for accelerated benefits, a claimant must have 14 or more consecutive days of
unemployment or sickness; not have voluntarily retired or, if claiming unemployment benefits, quit
work without good cause; and be under age 65 when claiming sickness benefits.
2. What is the daily benefit rate payable in the new benefit year beginning July 1, 2015?
Almost all employees will qualify for the new maximum daily benefit rate of $72. Benefits are
generally payable for the number of days of unemployment or sickness over four in 14-day claim
periods, which yields $720 for each two full weeks of unemployment or sickness. Sickness benefits
(More)
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payable for the first 6 months after the month the employee last worked are subject to tier I railroadretirement payroll taxes, unless benefits are being paid for an on-the-job injxiry. (Claimants should beaware that as a result of a sequestration order under the Budget Control Act of 2011, the RRB willreduce unemployment and sickness benefits by 7.3 percent through September 30,2015. As a result,the total maximum amount payable in a 2-week period covering 10 days of unemployment or sicknesswill be $667.44. The maximum amount payable for sickness benefits subject to tier I payroll taxes of7.65 percent will be $616.38 over two weeks. Future reductions, should they occur, will be calculatedbased on applicable law.)
3. How long are these benefits payable?
Normal unemployment or sickness benefits are each payable for up to 130 days (26 weeks) in abenefit year. The total amount of each kind of benefit which may be paid in the new benefit yearcannot exceed the employee's railroad earnings in calendar year 2014, counting earnings up to $1,860per month.
If normal benefits are exhausted, extended benefits are payable for up to 65 days (during 7
consecutive 14-day claim periods) to employees with at least 10 years of service (120 or more
cumulative service months).
4. What IS the waiting-period requirement for unemployment and sickness benefits?
Benefits are normally paid for the number of days of unemployment or sickness over four in14-day registration periods. Initial sickness claims must also begin with four consecutive days ofsickness. However, during the first 14-day claim period in a benefit year, benefits are only payable foreach day of unemployment or sickness in excess of seven which, in effect, provides a one-weekwaiting period. (If an employee has at least five days of unemployment or five days of sickness in a14-day period, he or she should still file for benefits.) Separate waiting periods are required forunemployment and sickness benefits. However, only one seven-day waiting period is generallyrequired during any period of continuing unemployment or sickness, even if that period continues intoa subsequent benefit year.
5. Are there special waiting-period requirements if unemployment is due to a strike?
If a worker is unemployed because of a strike conducted in accordance with the Railway LaborAct, benefits are not payable for days of unemployment during the first 14 days of the strike, butbenefits are payable during subsequent 14-day periods.
If a strike is in violation of the Railway Labor Act, unemployment benefits are not payable toemployees participating in the strike. However, employees not among those participating in such anillegal strike, but who are unemployed on account of the strike, may receive benefits after the first twoweeks of the strike.
While a benefit year waiting period cannot count toward a strike waiting period, the 14-day strikewaiting period may count as the benefit year waiting period if a worker subsequently becomesunemployed for reasons other than a strike later in the benefit year.
(More)
-3-
6. Can employees in train and engine service receive unemployment benefits for days whenthey are standing by or laying over between scheduled runs?
No, not if they are standing by or laying over between regularly assigned trips or they missed a
turn in pool service.
7. Can extra-board employees receive unemployment benefits between jobs?
Yes, but only if the miles and/or hours they actually worked were less than the equivalent ofnormal full-time work in their class of service during the 14-day claim period. Entitlement to benefits
would also depend on the employee's earnings.
8. How would an employee's earnings in a claim period affect his or her eligibility forunemployment benefits?
If a claimant's earnings for days worked, and/or days of vacation, paid leave, or other leave in a
14-day registration period are more than a certain indexed amount, no benefits are payable for any
days of unemployment in that period. That registration period, however, can be used to satisfy the
waiting period.
Earnings include pay from railroad and nonrailroad work, as well as part-time work and self-employment. Earnings also include pay that an employee would have earned except for failure to markup or report for duty on time, or because he or she missed a turn in pool service or was otherwise not
ready or willing to work. For the benefit year that begins July 2015, the amount is $1,440, which
corresponds to the base year monthly compensation amount used in determining eligibility for benefitsin each year. Also, even if an earnings test applies on the first claim in a benefit year, this will not
prevent the first claim from satisfying the waiting period in a benefit year.
9. How does a person apply for and claim unemployment benefits?
Claimants can file their applications for unemployment benefits, as well as their subsequent
biweekly claims, by mail or online.
To apply by mail, claimants must obtain an application from their labor organization, employer,local RRB office or the agency's website at www.rrb.gov. The completed application should be mailed
to the local RRB office as soon as possible and, in any case, must be filed within 30 days of the date
on which the claimant became unemployed or the first day for which he or she wishes to claim
benefits. Benefits may be lost if the application is filed late.
To file their applications ~ or their biweekly claims ~ online, claimants must first establish anRRB online account at www.rrb.gov. Instructions on how to do so are available through the RRB's
website. Employees are encouraged to establish online accounts while still employed so the account is
ready if they ever need to apply for these benefits or use other select RRB Internet services.
Employees who have already established online accounts do not need to do so again.
The local RRB field office reviews the completed application, whether it was submitted by mail or
online, and notifies the claimant's current railroad employer, and base-year employer, if different. The
employer has the opportunity to provide information about the benefit application.
(More)
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After the RRB office processes the application, biweekly claim forms are mailed to the claimant,
and are also available on the RRB's website, as long as he or she remains unemployed and eligible for
benefits. Claim forms should be signed and sent on or after the last day of the claim. This can be done
by mail or electronically. The completed claim must be received by an RRB office within 15 days of
the end of the claim or the date the claim form was mailed to the claimant or made available online,
whichever is later. Claimants must not file both a paper claim and an online claim form for the same
period(s).
Only one application needs to be filed during a benefit year, even if a claimant becomes
unemployed more than once. However, a claimant must, in such a case, request a claim form from an
RRB office within 30 days of the first day for which he or she wants to resume claiming benefits.
These claims may then be filed by mail or online.
10. How does a person apply for and claim sickness benefits?
An application for sickness benefits can be obtained from railroad labor organizations, railroad
employers, any RRB office or the agency's website. An application and a doctor's statement of
sickness are required at the beginning of each period of continuing sickness for which benefits are
claimed. Claimants should make a special effort to have the doctor's statement of sickness completed
promptly since no claims can be paid without it.
The RRB suggests that employees keep an application on hand for use in claiming sickness
benefits, and that family members know where the form is kept and how to use it. If an employee
becomes unable to work because of sickness or injury, the employee should complete the applicationand then have his or her doctor complete the statement of sickness. Employees should note that theymust indicate on the application whether they are applying for sickness benefits because they were
injured at work or have a work-related illness. They must also indicate whether they have filed or
expect to file a lawsuit or claim against a third party for personal injury. If a claimant receives sicknessbenefits for an injury or illness for which he or she is paid damages, it is important to be aware that theRRB is entitled to reimbursement of either the amount of the benefits paid for the injury or illness, or
the net amount of the settlement, after deducting the claimant's gross medical, hospital, and legal
expenses, whichever is less.
If the employee is too sick to complete the application, someone else may do so. In such cases, a
family member should also complete Form SI-10, "Statement of Authority to Act for Employee,"
which accompanies the statement of sickness.
After completion, the forms should be mailed to the RRB's headquarters in Chicago by the seventhday of the illness or injury for which benefits are claimed. However, applications received after 10days but within 30 days of the first day for which an employee wishes to claim benefits are generallyconsidered timely filed if there is a good reason for the delay. After the RRB receives the application
and statement of sickness and determines eligibility, biweekly claim forms are mailed to the claimant
for completion and return to an RRB field office for processing. The RRB also makes claim formsavailable for completion online by those employees who establish an online account. The claim formsmust be received at the RRB within 30 days of the last day of the claim period, or within 30 days of
(More)
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the date the claim form was mailed to the claimant or made available online, whichever is later.
Benefits may be lost if an application or claim is filed late.
Claimants are reminded that while claim forms for sickness benefits can be submitted online,
applications and statements of sickness must be returned to the RRB by mail.
11. Is a claimant's employer notified each time a biweekly claim for unemployment orsickness benefits is filed?
The Railroad Unemployment Insurance Act requires the RRB to notify the claimant's base-year
employer each time a claim for benefits is filed. That employer has the right to submit information
relevant to the claim before the RRB makes an initial determination on the claim. In addition, if a
claimant's base-year employer is not his or her current employer, the claimant's current employer is
also notified. The RRB must also notify the claimant's base-year employer each time benefits are paid
to a claimant. The base-year employer may protest the decision to pay benefits. Such a protest does not
prevent the timely payment of benefits. However, a claimant may be required to repay benefits if the
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.
The RRB also conducts checks with other Federal agencies and all 50 States, as well as the District
of Columbia and Puerto Rico, to detect fraudulent benefit claims, and it checks with physicians to
verify the accuracy of medical statements supporting sickness benefit claims.
12. How long does it take to receive payment?
Under the RRB's Customer Service Plan, if a claimant filed an application for unemployment or
sickness benefits, the RRB will release a claim form or a denial letter within 10 days of receiving his
or her application. If a claim for subsequent biweekly unemployment or sickness benefits is filed, the
RRB will certify a payment or release a denial letter within 10 days of the date the RRB receives the
claim form. If the claimant is entitled to benefits, benefits will generally be paid within one week of
that decision.
However, some claims for benefits may take longer to handle than others if they are more
complex, or if an RRB office has to get information from other people or organizations. If this
happens, claimants may expect an explanation and an estimate of the time required to make a decision.
Claimants who think an RRB office made the wrong decision about their benefits have the right to
ask for review and to appeal. They will be notified of these rights each time an unfavorable decision is
made on their claims.
13. How are payments made?
Railroad unemployment and sickness insurance benefits are paid by the U.S. Treasury's Direct
Deposit program. With Direct Deposit, benefit payments are made electronically to an employee's
bank, savings and loan, credit union or other financial institution. New applicants for unemployment
and sickness benefits will be asked to provide information needed for Direct Deposit enrollment.
(More)
-6-
14. How can claimants get more information on railroad unemployment or sicknessbenefits?
Claimants with questions about unemployment or sickness benefits, or who are seeking
information about their claims and benefit payments, can contact an RRB office by calling toll-free at
1-877-772-5772. Claimants can also access an online service, "View RUIA Account Statement" on the
"Benefit Online Services" page at www.rrb.gov, which provides a summary of the unemployment and
sickness benefits paid to them. To use this service, claimants must first establish an online account.
Persons can find the address of the RRB office serving their area by calling 1-877-772-5772, or by
visiting www.rrb.gov. 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.
###
FROM TIIK DESK OF
WALTER A. BARROWS
LABOR MEMBER
U.S. RAILROAD RETIREMENT BOARD
February 2016
Federal Income Tax and Railroad Retirement Benefits
The following questions and answers describe the tax statements issued by the Railroad Retirement
Board (RRB) each January for Federal income tax purposes. Railroad retirement beneficiaries needing
information about these statements, or about tax withholding from their benefits, should contact an
office of the RRB. For further Federal income tax information, railroad retirement beneficiaries should
contact the nearest office of the Internal Revenue Service (IRS).
1. How are the annuities paid under the Railroad Retirement Act treated under the Federalincome tax laws?
A railroad retirement annuity is a single payment comprised of one or more of the following
components, depending on the annuitant's age, the type of annuity being paid, and eligibility
requirements: a Social Security Equivalent Benefit (SSEB) portion of tier I, a Non-Social Security
Equivalent Benefit (NSSEB) portion of tier I, a tier II benefit, a vested dual benefit, and a
supplemental annuity.
In most cases, part of a railroad retirement annuity is treated like a social security benefit for
Federal income tax purposes, while other parts of the annuity are treated like private pensions for tax
purposes. Consequently, most annuitants are sent two tax statements from the RRB each January, even
though they receive only a single annuity payment each month.
2. Which railroad retirement benefits are treated as social security benefits for Federalincome tax purposes?
The SSEB portion of tier I (the part of a railroad retirement annuity equivalent to a social security
benefit based on comparable earnings) is treated for Federal income tax purposes the same way as a
social security benefit. The amount of these benefits that may be subject to Federal income tax, if any,
depends on the beneficiary's income. (To determine if any amount of a SSEB benefit is taxable, please
refer to IRS publication 915, Social Security and Equivalent Railroad Retirement Benefits.) If part of a
SSEB benefit is taxable, how much is taxable depends on the total amount of a beneficiary's benefits
and other income. Usually, the higher that total amount, the greater the taxable part of a beneficiary's
benefit.
Generally, up to 50 percent of a beneficiary's benefits will be taxable. However, up to 85 percent
of his or her benefits can be taxable if either of the following situations applies.
• The total of one-half of a beneficiary's benefits and all his or her other income is more than
$34,000 ($44,000 if a beneficiary is married filing jointly).
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• A beneficiary is married filing separately and lived with his or her spouse at any time during
2015.
3. Which railroad retirement benefits are treated like private pensions for Federal incometax purposes?
The NSSEB portion of tier I, tier II benefits, vested dual benefits, and supplemental annuities are
all treated like private pensions for Federal income tax purposes. In some cases, primarily those in
which early retirement benefits are payable to retired employees and spouses between ages 60 and 62,
some occupational disability benefits, and other categories of unique RRB entitlements, the entire
annuity may be treated like a private pension. This is because social security benefits based on age and
service are not payable before age 62, social security disability benefit entitlement requires total
disability, and the Social Security Administration does not pay some categories of beneficiaries paid
by the RRB.
4. What information is shown on the railroad retirement tax statements sent to annuitants
in January?
One statement. Form RRB-1099 for U.S. citizens or residents (or Form RRB-1042S for
nonresident aliens), shows the SSEB portion of tier I or special minimum guaranty payments made
during the tax year, the amount of any such benefits that an annuitant may have repaid to the RRB
during the tax year, and the net amoimt of these payments after subtracting the repaid amoimt. The
amoxmt of any offset for workers' compensation and the amount of Federal income tax withheld from
these pajmients are also shown. Illustrations and explanations of items found on Form RRB-1099 and
Form RRB-1042S can be found in IRS Publication 915, Social Security and Equivalent Railroad
Retirement Benefits.
The other statement. Form RRB-1099-R (for both U.S. citizens and nonresident aliens), shows the
NSSEB portion of tier I, tier II, vested dual benefit, and supplemental annuity paid to the annuitant
during the tax year, and may show an employee contribution amount. The NSSEB portion of tier I
along with tier II are considered contributory pension amounts and are shown as a single
combined amount in the Contributory Amount Paid box (Item 4) on the statement. The vested
dual benefit and supplemental annuity are considered noncontributory pension amotmts and are shown
as separate items on the statement. The total gross paid amoimt shown on Form RRB-1099-R is the
sum of the NSSEB portion of tier I, tier II, vested dual benefit and supplemental annuity payments.
Also shown is the amount of Federal income tax withheld from these payments. The statement also
shows the amount of any of these prior year benefits repaid by the armuitant to the RRB during the tax
year. This amount is not subtracted from the gross amounts shown because its treatment depends on
the years to which the repayment applies and its taxability in those years. To determine the year or
years to which the repayment applies, aimuitants should contact the RRB. Illustrations and
explanations of items found on Form RRB-1099-R can be found in IRS Publication 575, Pension and
Annuity Income.
If the annuitant is taxed as a nonresident alien of the United States, Form RRB-1042S and/or
Form RRB-1099-R will show the rate of tax withholding (0 percent, 15 percent or 30 percent) and
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country of residence for income tax purposes. Nonresident aliens may receive more than one set oforiginal tax statement Forms RRB-1042S and/or RRB-1099-R in a tax year if there was a change inthe country of residence for income tax purposes, or a change in the rate of income tax applied toannuity payments. Nonresident aliens who resided in the United States for part of a tax year may
receive a set of original U.S. citizen tax statement Forms RRB-1099 and/or RRB-1099-R and one ormore sets of nonresident alien tax statement Forms RRB-1042S and/or RRB-1099-R.
The total Medicare premiums deducted from the railroad retiranent annuity may also be shown oneither Form RRB-1099 (Form RRB-1042S for nonresident aliens) or Form RRB-1099-R. Medicare
premiums deducted from social security benefits paid by the RRB, paid by a third party, or paidthrough direct billing are not shown on RRB-issued tax statements.
Copy B and/or Copy 2 of Form RRB-1099-R must be submitted with the annuitant's tax retum.Annuitants should retain copy C of all statements for their records, especially if they may be required
to verify their income in connection with other Government programs.
5. What is the significance of the employee contribution amount?
For railroad retirement annuitants, the employee contribution amount is considered the amount of
railroad retirement payroll taxes paid by the employee that exceeds the amount that would have beenpaid in social security taxes if the employee's railroad service had been covered imder the Social
Security Act. The employee contribution amount is referred to by the IRS as an employee's
investment, or cost, in the contract. An employee contribution amount is not a payment or income
received during the tax year. Only employee and survivor annuitants may have an employeecontribution amoimt shown in Item 3 of their Form RRB-1099-R.
The contributory amount paid (NSSEB portion of tier I and/or tier II) is considered income and isreported to the IRS. The contributory amount paid is either fully taxable or partially taxable depending
on whether the employee contribution amount has been used to compute a tax-free (nontaxable)
portion of the contributory amount paid. If no employee contribution amount is shown on Form RRB-
1099-R, then the contributory amount paid is fully taxable.
The use and recovery of the employee contribution amount is important for annuitants since it
affects the amount of taxable income to be reported on income tax returns. There is a tax savings
advantage in using (recovering) employee contributions since it may reduce the taxability of the
contributory amount paid and in turn the amount of taxable income.
Annuitants should refer to IRS Publication 575, Pension and Annuity Income, and Publication 939,
General Rule for Pensions and Annuities, for more information concerning the tax treatment of the
contributory amount paid (see questions 6 and 7 below) and use of the employee contribution amount.
6. If an employee contribution amount is shown on my Form RRB-1099-R, may I use the
entire amount?
The employee contribution amount shown is attributable to the railroad retirement account
number. This means that the employee contribution amount must be shared by all eligible annuitants
under that same railroad retirement account number.
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If an employee contribution amount is shown on your Form RRB-1099-R and your annuity
beginning date is July 2,1986, or later, you may be able to use some or all of the employee
contribution amoimt shown to compute the nontaxable (tax-free) amoimt of your contributory
amoimt paid. Therefore, your contributory amount paid and total gross paid shown on your
Form RRB-1099-R may be partially taxable.
If an employee contribution amount is not shown on your Form RRB-1099-R, you cannot use or
share the employee contribution amount. Therefore, your contributory amount paid and total gross
paid shown on your Form RRB-1099-R are fully taxable.
When more than one annuitant is or was entitled to a contributory amount paid under the same
railroad retirement account number, any eligible annuitants may not use the entire employee
contribution amoimt shown on their Form RRB-1099-R for themselves. They must first determine the
amount of the total employee contribution amount they are individually entitled to use. That means
determining:
1. The portion of the total employee contribution amount still potentially available for use, and
2. The portion of that amount that must be shared by those eligible annuitants currently receiving
contributory amounts paid.
For example, a survivor family group consists of a widow and two full-time students. All three
annuitants are eligible to use a portion of the employee contribution amount shown on their Forms
RRB-1099-R. They must determine the portion of the employee contribution amount they may each
use. Question 7 below provides general information on how to calculate this amount. For more
specific information, annuitants should refer to IRS Publication 575, Pension and Annuity Income, and
Publication 939, General Rule for Pensions and Annuities.
Any change in the total number of eligible annuitants receiving contributory amounts paid will
affect the nontaxable amounts of these annuitants. This change is retroactive to the date on which
the number of eligible annuitants changed. Any of these changes could potentially affect the taxable
amounts reported to the IRS on prior year income tax returns. Annuitants should determine if any
change would require them to file original or amended U.S. Federal income tax returns for prior tax
years. For more specific information, annuitants should refer to IRS Publication 575, Pension and
Annuity Income, and Publication 939, General Rule for Pensions and Annuities.
7. How are contributory and noncontributory pension amounts taxed?
Amounts shown on Form RRB-1099-R are treated like private pensions and taxed either as
contributory pension amounts or as noncontributory pension amounts. The NSSEB portion of tier I
and tier II (shown as the contributory amount paid on the statement) are contributory pension amounts.
Contributory pension amounts may be fully taxable or partially taxable depending on the presence anduse (recovery) of the employee contribution amount. Vested dual benefits and supplemental annuities
are considered noncontributory pension amounts. Noncontributory pension amounts are always fully
taxable and do not involve the use of the employee contribution amount.
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For annuitants with annuity beginning dates before July 2,1986, the contributory amount paid is
fully taxable. These annuitants cannot use the employee contribution amount, even if the amount is
shown on Form RRB-1099-R, to compute a nontaxable amount of their contributory amount paid
because their employee contribution amount has been fiilly recovered. Since the contributory amount
paid is fully taxable, the total gross pension paid in Item 7 of Form RRB-1099-R is fiilly taxable.
For annuitants with annuity beginning dates from July 2,1986, through December 31,1986, the
contributory amount paid may be partially nontaxable for the life of the annuity. These annuitants may
be able to use some or all of the employee contribution amount to compute a nontaxable contributory
amount paid. Once that nontaxable amount is computed, it does not need to be recomputed and can be
used for each tax year unless there is a change in the employee contribution amount, annuity beginning
date, date of birth used to determine life expectancy, or the number of eligible annuitants receiving
contributory amounts paid. Therefore, the contributory amount paid in Item 4 and the total gross
pension paid in Item 7 of Form RRB-1099-R may be partially taxable.
For annuitants with annuity beginning dates effective January 1,1987, and later, the contributory
amount paid may be partially nontaxable for a specified period of time based on life expectancy as
determined by IRS actuarial tables. These annuitants may use some or all of the employee contribution
amount to compute the nontaxable amount of their contributory amount paid. Once that nontaxable
amount is computed, it does not need to be recomputed and can be used for each tax year unless there
is a change in the employee contribution amoimt, annuity beginning date, date of birth used to
determine life expectancy, or the number of eligible annuitants receiving contributory amounts paid.
Therefore, the contributory amount paid in Item 4 and the total gross pension paid in Item 7 of Form
RRB-1099-R maybe partially taxable. However, once the specified life expectancy is met, the
employee contribution amount is considered fully recovered, and the contributory amount paid
and total gross pension paid are both fully taxable.
The contributory amounts paid of disabled employee annuitants under minimum retirement age
are fully taxable and these annuitants cannot use the employee contribution amount. Therefore, the
contributory amount paid in Item 4 and the total gross pension paid in Item 7 of Form RRB-1099-R
are fiilly taxable. (Minimum retirement age is generally the age at which individuals could retire based
on age and service, which is age 60 with 30 or more years of railroad service or age 62 with less than
30 years of railroad service.) However, once the disabled employee annuitant reaches minimum
retirement age, the annuitant may use the employee contribution amount shown on
Form RRB-1099-R to compute the nontaxable amount of his or her contributory amount paid.
The RRB does not calculate the nontaxable amount of the contributory amount paid for
annuitants. Annuitants should contact the IRS or their own tax preparer for assistance in calculating
the nontaxable amount of their contributory amount paid. For more information on the tax treatment of
the contributory amount paid, vested dual benefits, supplemental annuities, the employee contribution
amount, and how to use the IRS actuarial tables, annuitants should refer to IRS Publication 939,
General Rule for Pensions and Annuities, and IRS Publication 575, Pension and Annuity Income.
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8. Does Form RRB-1099-R show the taxable amount of any contributory railroadretirement benefits or just the total amount of such benefits paid during the tax year?
Form RRB-1099-R shows the total amount of any contributory railroad retirement benefits
(NSSEB and tier II) paid during the tax year. The RRB does not calculate the taxable amounts. It is up
to the annuitant to determine the taxable and nontaxable (tax-fi*ee) amounts of the contributory amount
paid using the employee contribution amount.
9. Can an employee contribution amount change?
Yes. The employee contribution amount shown on Form RRB-1099-R is based on the latest
railroad service and earnings information available on the RRB's records. Railroad service and
earnings information (and the corresponding employee contribution amount) often changes in the first
year after an employee retires fi*om railroad service. That is when the employee's final railroad service
and earnings information is furnished to the RRB by his or her employer. As a result, the employee
contribution amount shown on the most recent Form RRB-1099-R may have increased or decreased
firom a previously-issued Form RRB-1099-R.
Any change in an employee contribution amount is fully retroactive to the railroad retirement
annuity beginning date. Therefore, the nontaxable amotmt of the contributory amount paid should be
recomputed. This could affect the taxable amounts reported to the IRS on prior income tax returns.
Generally, an increase in the employee contribution amount is advantageous, as it will yield a larger
tax-free amount. However, a decrease in the employee contribution amount may be disadvantageous
since it may result in an increased tax liability. In any case, annuitants should determine if any change
in their employee contribution amount would require them to file original or amended Federal income
tax returns for prior tax years.
10. What if a person receives social security as well as railroad retirement benefits?
Railroad retirement annuitants who also received social security benefits during the tax year
receive a Form SSA-1099 (or Form SSA-1042S if they are nonresident aliens) fi*om the Social
Security Administration. They should add the net social security equivalent or special guaranty amount
shown on Form RRB-1099 (or Form RRB-1042S) to the net social security income amount shown on
Form SSA-1099 (or Form SSA-1042S) to get the correct total amount of these benefits. They should
then enter this total on the Social Security Benefits Worksheet in the instructions for Form 1040 or
1040A to determine if part of their social security and railroad retirement social security equivalent
benefits is taxable income.
Additional information on the taxability of these benefits can be found in IRS Publication 915,
Social Security and Equivalent Railroad Retirement Benefits.
11. Are the residual lump sums, lump-sum death payments or separation aUowance lump-sum amounts paid by the RRB subject to Federal income tax?
No. These amounts are nontaxable and are not subject to Federal income tax. The RRB does not
report these amounts on statements.
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12. If an annuity was due but unpaid at the time of an annuitant's death, it may be payableto another person. Would that person be subject to Federal income tax on this annuity?
Yes, if the deceased annuitant would have had to pay Federal income tax on the benefit. The
taxable amount of the annuity is reported to the IRS and on Form RRB-1099 (or Form RRB-1042S) or
Form RRB-1099-R, as appropriate, which is sent to the person who received the annuity.
13. Are Federal income taxes withheld from railroad retirement annuities?
Yes, and the amounts withheld are shown on the statements issued by the RRB each year.
However, an annuitant may request that Federal income taxes not be withheld, unless the annuitant is anonresident alien or a U.S. citizen living outside the 50 States or Washington, D.C.
Annuitants can voluntarily choose to have Federal income tax withheld firom their SSEB payments.
To do so, they must complete IRS Form W-4V, Voluntary Withholding Request, and send it to the
RRB. They can choose withholding from their SSEB payments at the following rates: 7 percent,
10 percent, 15 percent, or 25 percent.
Annuitants who are taxed as U.S. citizens and who do not live outside the 50 States or Washington,
D.C., and wish to have Federal income taxes withheld fi:om their NSSEB and tier II (contributory
amount paid), vested dual benefit, and supplemental annuity payments must complete a tax
withholding election on Form RRB W-4P, Withholding Certificate For Railroad Retirement
Payments, and send it to the RRB. An annuitant is not required to file Form RRB W-4P. If that form is
not filed, the RRB will withhold taxes only if the combined portions of the NSSEB and tier II
(contributory amount paid), vested dual benefit and supplemental annuity payments are equal to or
exceed an annual threshold amount. In that case, the RRB withholds taxes as if the annuitant were
married and claiming three allowances.
14. How is tax withholding applied to the railroad retirement benefits of nonresident aliens?
A nonresident alien is a person who is neither a citizen nor a resident of the United States. Under
the Internal Revenue Code, nonresident aliens are subject to a 30-percent tax on income firom sources
within the United States not connected to a U.S. trade or business. The 30-percent rate applies to all
annuity payments exceeding social security equivalent payments and to 85 percent of the annuity
portion treated as a social security benefit. The Internal Revenue Code also requires the RRB to
withhold the tax. The tax can be at a rate lower than 30 percent or can be eliminated entirely if a tax
treaty between the United States and the country of residence provides such an exemption, and the
nonresident alien completes and sends Form RRB-1001, Nonresident Questionnaire, to the RRB.
Form RRB-1001 secures citizenship, residency and tax treaty claim information for nonresident
beneficiaries (nonresident aliens or U.S. citizens residing outside the United States).
Form RRB-1001 is sent by the RRB to nonresident aliens every three years to renew the claim for
a tax treaty exemption. Failure by a nonresident alien to complete Form RKB-1001 wiU cause loss
of the exemption until the exemption is renewed. Such renewals have no retroactivity. Also, a
nonresident alien must include his or her United States taxpayer identifying number on Form RRB-
1001. Otherwise, any tax treaty exemption claimed on the form is not valid. The majority of
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nonresident aliens receiving annuities from the RRB are citizens of Canada, which has a tax treaty
with the United States.
If a Canadian citizen claims an exemption under the tax treaty, no tax is withheld from the SSEB
portion of tier I and a tax withholding rate of 15 percent is applied to the benefit portions treated like
pension payments.
Additional information concerning the taxation of nonresident aliens can be found in IRS
Publication 519, U.S. Tax Guide for Aliens.
15. Are unemployment benefits paid under the Railroad Unemployment Insurance Actsubject to Federal income tax?
All unemployment benefit payments are subject to Federal income tax. Each January, the RRB
sends Form 1099-G to individuals, showing the total amount of railroad imemployment benefits paid
during the previous year.
16. Are sickness benefits paid by the RRB subject to Federal income tax?
Sickness benefits paid by the RRB, except for sickness benefits paid for on-fiie-job injuries, are
subject to Federal income tax under the same limitations and conditions that apply to the taxation ofsick pay received by workers in other industries. Each January, the RRB sends Form W-2 to affectedbeneficiaries. This form shows the amoimt of sickness benefits that each beneficiary should include in
his or her taxable income.
17. Does the RRB withhold Federal income tax from unemployment and sickness benefits?
The RRB withholds Federal income tax from unemployment and sickness benefits only if
requested to do so by the beneficiary. A beneficiary can request withholding of 10 percent of his or herunemployment benefits by filing IRS Form W-4V, Voluntary Withholding Request, with the RRB. A
beneficiary can request withholding from sickness benefits by filing IRS Form W-4S, Request forFederal Income Tax Withholdingfrom Sick Pay.
18. Are railroad retirement and railroad unemployment and sickness benefits paid by theRRB subject to State income taxes?
The Railroad Retirement and Railroad Unemployment Insurance Acts specifically exempt these
benefits from State income taxes.
19. Can a railroad employee claim a tax credit on his or her Federal income tax return if theemployer withheld excess railroad retirement taxes during the year?
If any one railroad employer withheld more than the annual maximum amount, the employee must
ask that employer to refund the excess. It cannot be claimed on the employee's return.
20. Can a railroad employee working two jobs during the year get a tax credit if excessretirement payroll taxes were withheld by the employers?
Railroad employees who also worked for a nonrailroad social security covered employer in thesame year may, under certain circumstances, receive a tax credit equivalent to any excess socialsecurity taxes withheld.
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Employees who worked for two or more railroads during the year, or who had tier I taxes withheldfrom their RRB sickness benefits in addition to their railroad earnings, may be eligible for a tax credit
of any excess tier I or tier II railroad retirement taxes withheld. The amount of tier I taxes withheldfrom sickness benefits paid by the RRB is shown on Form W-2 issued to affected beneficiaries.Employees who had tier I taxes withheld from their supplemental sickness benefits (benefits paidunder an RRB-approved nongovernmental sickness insurance plan, such as a supplemental sicknessbenefit plan established by a railroad) may also be eligible for a tax credit of any excess tier I tax.
Such tax credits may be claimed on an employee's Federal income tax return.
Employees who worked for two or more railroads, received sickness benefits, or had both railroadretirement and social security taxes withheld from their earnings should see IRS Publication 505,Tax Withholding and Estimated Tax, for information on how to figure any excess railroad retirementor social security tax withheld.
# # #
REQUIREMENTS FOR
CREDITING MILITARY SERVICE
TOWARD BENEFITS UNDER
THE RAILROAD RETIREMENT ACT
Certain military service (M/S) may be used in the same way as railroad service monthsto provide eligibility for, or to increase the amount of benefits payable to railroademployees and their survivors. Credit is given only for active duty service in the ArmedForces of the United States.
FOR M/S TO BE CREDITABLE
Before entering active duty, the employee must have performed some creditablerailroad service in the same calendar year, or the year just prior to the year, that theterm of M/S began. If a railroad employer has already reported a service month inwhich M/S also occurred, the compensation for the M/S is still credited, up to themaximum amount reportable, for that month.
INVOLUNTARY M/S
Credit is given for any month during which an employee was recuired (inducted, drafted,called up) to leave a railroad Job to enter federal active duty M/S and for the monthsthereafter that the individual was recuired to remain in active duty.
VOLUNTARY M/S
Restrictions on M/S credits apply for employees who voluntarily left railroad work andenlisted, re-enlisted, or were commissioned to active duty. The active duty must becinduring a time declared to be a war, a war service period, or a state of nationalemergency. The dates of the latest declared creditable periods are:
• September 8,1939, through June 14,1948 (World War II war and post-warservice period).
• December 16,1950, through September 14,1978 (Korean Conflict, Vietnam Eraand post-Vietnam war service period.
• August 2, 1990, and continuing (Gulf Wars state of national emergency).
Other Restrictions if Entry was Voluntary
• M/S of an individual in active duty status December 31,1946, is creditablethrough the end of that term of service.
• Voluntary M/S entered January 1,1947, through June 14, 1948, iscreditable only through June 14,1948, when the national emergencyended.
Form G-177B (04-08)
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• Voluntary M/S entered June 15, 1948, through December 15,1950, iscreditable only IF. upon completing M/S, the employee returned to railroadservice in the same year, or the next calendar year immediately following,without aoy nonrailroad employment between the M/S and the return torailroad service.
• Voluntary M/S, including re-enlistment, which began after June 1973, iscreditable only through September 14,1978, when the nationalemergency ended.
RESERVIST ACTIVE DUTY
An individual's call from reserve status to active duty is considered involuntary entry,and it may be credited whenever the employee was required (called or recalled) toenter, and continue in, active federal duty. A call to active duty for training is included inthis rule.
Local or State National Guard duty activities and assembly for drills or reserve meetingsare not creditable M/S.
M/S THAT IS NOT CREDITABLE AS RAILROAD SERVICE
An employee's active duty M/S that does not meet the requirements described abovecannot be used for added railroad service, but the M/S earnings will be considered aswages under the Social Security Act, as allowed by law, in the calculation of RRBbenefits.
HOW TO RECEIVE M/S CREDIT
The employee, or his survivors, must submit proof that the M/S meets the creditingrequirements. Official military service documents may be submitted to an RRB office atany time. The RRB will record and store the vital information and, upon request, willadvise the number of months of additional railroad service credit.
Original documents will be returned promptly. Always include the railroad employee'sname and social security number, a daytime telephone number, and return address withany material mailed to an RRB office.
Form G-177B (04-08)
General Information about Continuing in orReturning to Nonrallroad Employment after Retirement
under the Railroad Retirement Act
Definition of Last Pre-Retirement Nonrailroad EmpioyerYour Last Pre-Retlrement Nonrailroad Employer (LPE) is defined as any nonrailroad individual,company or institution for whom you are working on your annuity beginning date (ABD) or forwhom you stopped working in order to receive an annuity. This includes work for a Canadianrailroad that is not covered under the Railroad Retirement Act and work as an elected orappointed public official.
The nonrailroad employer is always your LPE if you are working in nonrailroad employment onyour ABD or, if you have stopped working and you still hold rights to return to service of thenonrailroad employer on your ABD.
The nonrailroad employer is presumed to be your LPE if you are:
• The employee annuitant, and stopped working for the nonrailroad employer within sixmonths immediately before your employee ABD, whether or not you also had beenworking for a railroad employer at the same time, or,
• The spouse annuitant, who may have never worked for a railroad, and stopped workingfor the nonrailroad employer within the six months immediately before your ABD.
When you were working for two or more persons, companies, or institutions within the sixmonths preceding your ABD, a|i such employers are presumed to be your LPE.
If you begin nonrailroad employment after your ABD, the RRB does not consider thatnonrailroad employment to be LPE.
Exceptions to LPETypes of work that are not considered to be LPE are: military service, jury duty, mail handling bycontract with the U.S. Postal Service, volunteer work, work for which you only receive paymentof expenses, work as a member (owner) of a Limited Liability Corporation (LLC), or self-employment.
The Effect of LPE on Your AnnuityLPE does not affect your ABD. You are not required to relinquish rights or stop working for yourLPE to receive annuity payments. However, reductions for LPE earnings on or after your ABDapply regardless of your age.
If you are:
• The employee annuitant, work for your LPE requires deductions of $1 for every $2 ofLPE earnings from your Tier 2 and any supplemental annuity and your spouse's Tier 2.
• The spouse annuitant, work for your own LPE requires deductions of $1 for every $2 ofyour own LPE earnings from your spouse Tier 2.
LPE cannot reduce the employee or spouse Tier 2 or employee supplemental annuity by morethan 50%.
Regular Work DeductionsIf you are under Full Retirement Age. earnings over your Annual Earnings Exempt Amount fromLPE may cause regular work deductions to your RRB annuity. Refer to Form G-77a HowEarnings Affect Payment of Retirement Annuities for current Annual Earnings Exempt Amounts.
1 G-177L (05-03)
LPE vs. Self-Employment DeterminationsThe RRB considers some work claimed as self-employment to actually be work for an employer.Whether the RRB classifies a particular activity as self-employment or as work for an employerdepends upon the circumstances of each case.
A. Self-Emoloved Independent Contractor -. Worked claimed as self-employment and thepayment of self-employment taxes may be evidence of an Independent contractor status,but are not conclusive. In general, If the arrangement between you and your client Is suchthat you are not supervised by your client when you perform your services and you are notIntegrated Into the staff or operations of that client, then you will be considered to be a self-employed Independent contractor.
However, If your business Is Incorporated In other than a Limited Liability Corporation(LLC), you will be considered to be an employee of the corporation.
B. Work for an Emolover - If, on the other hand, you perform work for your client subject to thecontinuing authority of that client to supervise and direct the manner In which you work, or Ifyou are Integrated Into the staff or operations of your client while performing such work,then you will be considered to be acting as an employee and your client Is your LPEemployer.
Note: If your client or employer Is a railroad, the RRB would consider that work to berailroad employment, not LPE. Your annuity Is not payable for any month you work for arailroad.
C. Comoarlson Chart
Self-Empioyed Independent Contractor Work for an Employer
Maintains independent office or works in places notconnected with the client's premises.
Works on the client's premises.
Uses own tools and equipment. Uses the client's tools and equipment.
Has complete freedom as to the amount of timespent in rendering a particular service.
Has contract for continuing services over a long orindefinite period and devotes substantially all ofworking time to such service.
Bears a risk of profit or loss in the endeavor and,
• Receives payments for a particularresult accomplished rather than regularremuneration on a time basis or
• Has agreements or arrangements forthe performance of specific services oflimited duration for a particular project.
Receives periodic payment of regular remunerationrather than payment for a specific result or workproduct.
Performs similar services for persons other thanone client.
Works only for one client.
Maintains own health or life insurance and
retirement benefit plan.Participates in the client's benefit programs such ashealth or life insurance and retirement plans.
Performs duties similar in many respects to thosepreviously performed as an employee beforeretirement.
LPE Determinations
The RRB will make LPE vs. self-employment determinations. You may request this decisionbefore you apply for your annuity. Contact the nearest office of the RRB for further Information.Most RRB offices are open to the public Monday through Friday from 9:00 am to 3:30 p.m. Youmay be asked to complete Form AA-4 Self-Employment and Substantial Service Questionnaire.
G-177L (05-03)
EMPLOYEE FULL RETIREMENT AGE
Retirement With Less Than 30 Years of Service
If EmployeeBorn In*
At Age 62Annuity
Will Be
Reduced By
OR
For Unreduced AnnuityTo Be Payable,Retirement Age
Must Be**
1937 or earlier 20.00% 65
1938 20.83% 65 and 2 months
1939 21.67% 65 and 4 months
1940 22.50% 65 and 6 months
1941 23.33% 65 and 8 months
1942 24.17% 65 and 10 months
1943 through 1954 25.00% 66
1955 25.83% 66 and 2 months
1956 26.67% 66 and 4 months
1957 27.50% 66 and 6 months
1958 28.33% 66 and 8 months
1959 29.17% 66 and 10 months
1960 or later 30.00% 67
* A person attains a given age the day before his or her birthday. Consequently, someone born onJanuary 1 is considered to have attained his or her given age on December 31 of the previous year.
** If employee has less than 10 years of railroad service and is already entitled to an age-reducedsocial security benefit, tier I reduction based on reduction applicable on beginning date of socialsecurity benefit, even if employee of full retirement age on beginning date of railroad retirementannuity.
Note.— If the employee had any railroad service before August 12,1983, the tier il reductionremains 20% and the fuil retirement age remains 65 for tier il purposes.
33
SPOUSE FULL RETIREMENT AGE
When Employee Retires With Less Than 30 Yearsof Service ̂ Spouse Retires at Age 62
If SpouseBorn In
At Age 62SpouseAnnuity ORWill Be
Reduced By*
For Unreduced AnnuityTo Be Payable,
Spouse Retirement AgeMust Be
1937 or earlier 25.00% 65
1938 25.83% 65 and 2 months
1939 26.67% 65 and 4 months
1940 27.50% 65 and 6 months
1941 28.33% 65 and 8 months
1942 29.17% 65 and 10 months
1943 through 1954 30.00% 66
1955 30.83% 66 and 2 months
1956 31.67% 66 and 4 months
1957 32.50% 66 and 6 months
1958 33.33% 66 and 8 months
1959 34.17% 66 and 10 months
1960 or later 35.00% 67
These reductions also apply to divorced spouses.
* If the employee has less than 10 years of railroad service and the spouse is already entitled to an age-reduced social security benefit, the age reduction in her or his tier I will be based on the age reductionapplicable on the beginning date of the spouse's social security benefit, even if the spouse is already of fullretirement age on the beginning date of her or his railroad retirement annuity.
Note.— If the employee had any railroad service before August 12,1983, the tier II reduction remains25% for the spouse and the full retirement age remains 65 for tier II purposes.
41
WIDOW(ER) FULL RETIREMENT AGE
For Unreduced
AnnuityTo Be Payable,
Widow(er) RetirementAge Must Be
At Age 60 Widow(er)Will Be Deemed To Be
Age 62 And Annuity WillBe Reduced By
If Widow(er)Born In
17.10%1939 or earlier
65 and 2 months17.47%
65 and 4 months17.81%
65 and6 months18.14%
65 and 8 months18.44%
65 and 10 months18.73%
19.00%1945 through 1956
1957 2 months19.26% 66 and
66 and 4 months19.50%
19.73% 66 and 6 months
19.95% 66 and 8 months
10 months20.16% 66 and
20.36%1962 or ater
Note.— Maximum age reductions for remarried wldow(er)s and surviving divorcedspouses are 28.50% at age 60. Maximum age reductions for disabled widow(er)s,disabled remarried widow(er)s and disabled surviving divorced spouses are also 28.50%.
FKOM THE DESK OF
WALTER A. BARROWS
LABOR MEMBER
U.S. RAILROAD RETIREMENT BOARD
^ —For Publication
June 2015
Railroad Retirement Spouse and Widow(er)s'Annuities and Public Service Pensions
Railroad Retirement Act spouse and widow(er)s' annuities (including divorced spouse, surviving
divorced spouse and remarried widow(er)s' annuities) are subject to reduction when social security
benefits or dual railroad retirement annuities are also payable. Such railroad retirement benefits may
also be reduced when a spouse or widow(er) is entitled to a public service pension unless certain
exemption requirements are met.
Since the payment of railroad retirement spouse or widow(er)s' annuities can be affected by
entitlement to certain other government benefits, such dual entitlement, if not reported to the Railroad
Retirement Board (RRB), can result in benefit overpayments which have to be repaid, sometimes with
interest and penalties. The following questions and answers describe how payments are adjusted by
the RRB for spouse and widow(er) annuitants entitled to public service pensions.
1. For social security or railroad retirement purposes, what is considered a public servicepension?
A public service pension is any periodic benefit payment, as well as lump-sum payments made in
lieu of periodic payments, based on an individual's own employment with a Federal, State, or local
government unit. Some examples are pensions paid to teachers, police officers, and civil service
personnel on the basis of age or disability. Full salary benefits paid to a retired or resigned judge
under the Federal judiciary retirement system are also considered public service pensions.
Most military service pensions and payments fi"om the Department of Veterans Affairs will notcause a reduction. A pension paid by a foreign government or an interstate instrumentality also has no
effect on a spouse or widow(er)'s annuity.
2. How is the public service pension reduction applied to railroad retirement spouse orwidow(er)s' annuities?
For spouses and widow(er)s subject to the public service pension reduction, the tier 1 reduction is,
under current law, equal to 2/3 of the amount of the public pension. The amount of the public service
pension is the current gross amount, before any deductions for income tax withholding. Medicare
premiums, health insurance or other benefits.
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3. What is the background of the public service pension reduction in spouse andwidow(er)s' annuities and how does it affect such payments?
The public service pension reduction in social security and railroad retirement spouse andwidow(er)s' benefits was brought about by 1977 social security legislation which also applied to thetier I benefits of railroad retirement spouses and widow(er)s. The tier I portion of a railroad retirementannuity is based on railroad retirement credits and any social security credits an employee hasacquired. It is computed under social security formulas and approximates what social security wouldpay if railroad work were also covered by that system. Tier I benefits are, therefore, reduced in thesame manner as social security benefits when certain other benefits are also payable.
4. Are there any provisions that would exempt railroad retirement spouse or widow(er)annuitants from the public service pension offsets?
Generally, in order to be exempt fi:om a public service pension reduction. Federal, State and localgovernment workers must be covered by social security throughout their last 60 months ofemployment with the pension-paying government entity.
The public pension reduction also does not apply to a spouse or widow(er) who filed for andbecame entitled to her or his railroad retirement annuity before December 1977, or to a spouse or
widow(er) whose public pension is not based on her or his own earnings.
5. Where can more specific mformation on how these pension offsets affect railroadretirement benefits be obtained?
Persons can contact an RRB field office for information as to how their public service pensions
could affect their railroad retirement benefits via the agency's website, www.rrb.gov, or by calling
toll-fi*ee at 1-877-772-5772. Most RRB offices are open to the public fi-om 9:00 a.m. to 3:30 p.m.,
Monday through Friday, except on Federal holidays.
###
FROM THE OFFICE OF
THE LABOR MEMBER
U.S. RAILROAD RETIREMENT BOARD
For Publication
December 2011
Railroad Retirement Spouse Benefits
In addition to the retirement annuities payable to employees, the Railroad Retirement Act provides
annuities for the spouses of retired employees. Payment of a spouse annuity is made directly to the
wife or husband of the employee.
Many spouses who are eligible for such railroad retirement benefits are not applying forthem. In some cases this is due to the employee and/or spouse not being aware that such spouse
benefits are available. However, it appears that in many cases this situation is due to spouses being
eligible for non-railroad retirement benefits, such as social security benefits, based on their own work
and earnings and their belief that they cannot receive railroad retirement spouse annuities. While
certain benefits can cause a reduction in a portion of the railroad retirement annuity otherwise payable,
it is to the spouse's financial advantage to apply for a railroad retirement spouse annuity.
The following questions and answers should clear up some of the misconceptions about spouse
benefits that may exist in the railroad community.
1. How are spouse annuities reduced for the receipt of other benefits?
The tier I portion of a spouse annuity is reduced for any social security entitlement, regardless of
whether the social security benefit is based on the spouse's own earnings, the employee's earnings or
the earnings of another person. This reduction follows principles of social security law which, in
effect, limit payment to the higher of any two or more benefits payable to an individual at one time.
The tier I portion of a spouse annuity may also be reduced for receipt of any Federal, State or local
pension separately payable to the spouse based on the spouse's own earnings. For spouses subject tothe public service pension reduction, the tier I reduction is equal to 2/3 of the amount of the public
service pension.
While these offsets can reduce or even completely wipe out the tier I benefit otherwise
payable to a spouse, they do not affect the tier II benefit potentially payable to that spouse.
2. What would be an example of how this reduction applies?
Mary, the spouse of a retired 60/30 employee, quits her social security-covered job as soon as
she attains age 62 and applies for her social security benefit which, after the required age reduction,
yields $850 a month. Mary also applies for a railroad retirement spouse annuity. Her husband's
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railroad retirement annuity consists of a tier I benefit of $1,600 a month and a tier II benefit of $1,200
a month. Her gross spouse annuity would therefore consist of a tier I benefit of $800 a month (50
percent of $1,600 with no early retirement reduction as her husband is 60/30) and a tier II benefit of
$540 (45 percent of $1,200 with no age reduction). Since Mary's own social security benefit is larger
than her spouse tier I benefit, no tier I spouse benefit is payable in this case, but she would still be
entitled to the spouse tier II benefit, yielding an additional $540 in monthly income.
3. How can someone get more information about railroad retirement spouse annuities?
The RRB strongly encourages railroad employees and their spouses to contact an RRB field office
prior to retirement for information about their benefit rights and/or a benefit estimate. Persons can speak
to an agency representative or find the address of the RRB office servicing their area by calling the
agency's toll-free number, 1-877-772-5772. Questions can also be sent to an RRB office via secure
email through the agency's website, www.rrb.gov.
###
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FROM THE DESK OF
WALTER A. BARROWS
LABOR MEMBER
For Publication
U.S. RAILROAD RETIREMENT BOARD
September 2015
Private Rail Pensions May Reduce Supplemental Annuities
Railroad retirement beneficiaries are reminded that receipt of a private railroad pension may
reduce the amount of a supplemental annuity payable by the Railroad Retirement Board (RRB). The
following questions and answers provide information on this subject, as well as how distributions fi"om
a 401(k) plan affect supplemental annuities, and whether railroad employee contributions to 401(k)
plans are subject to railroad retirement payroll taxes.
1. What are the eligibility requirements for a supplemental annuity?
Individuals receiving a railroad retirement age and service, or disability annuity, can be paid a
monthly supplemental annuity at age 60, if the employee has at least 30 years of creditable railroad
service, or at age 65 with at least 25 years of service. (Disabled annuitants under full retirement age,
which ranges fi-om age 65 to 67, depending on the year of birth, must relinquish employment rights in
order for a supplemental annuity to be paid by the RRB.) A "current connection" with the railroad
industry is also required, as is at least one month of creditable rail service before October 1981. The
maximum monthly supplemental annuity rate is $43.
2. What effect does the receipt of a private railroad pension have on the payment of asupplemental annuity?
If a retired employee also receives a private pension funded entirely or in part by a railroad
employer, the supplemental annuity is permanently reduced by the amount of the monthly pension
benefit that is based on the railroad employer's contributions. However, if the employer reduces the
pension for the employee's entitlement to a supplemental annuity, the amount by which the pension is
reduced is restored to the supplemental annuity (but does not raise it over the $43 maximum). There is
no reduction for a pension paid by a railroad labor organization.
3. What if an employee elects to receive the pension in a lump-sum payment instead of as amonthly benefit?
If a retired employee elects to receive his or her pension in a lump-sum payment instead of as a
monthly benefit, the supplemental annuity is reduced in the same way as it would be if the employee
was receiving the monthly benefit. If the lump sum is paid in installments, the installment payments
are not considered monthly benefit payments, but part of the single, lump-sum payment.
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4. Does the receipt of a 401(k) plan distribution reduce the amount of a supplementalannuity?
No. In Legal Opinion L-2014-2, issued January 13,2014, the RRB's General Counsel determinedthat 401(k) plans should not be considered supplemental pension plans as defined by the RailroadRetirement Act and, therefore, employee supplemental annuities should not be reduced due to thereceipt of 401 (k) distributions.
In accordance with the legal opinion, the RRB removed the 401(k) distribution reduction from thesupplemental annuities of affected beneficiaries effective January 1,2014, or the supplemental annuitybeginning date, whichever date is later. Refimds of the amounts previously deducted for the 401 (k)distribution reduction (beginning on the applicable date above) were issued to those beneficiaries inJuly 2015.
5. Are employee contributions to a 401(k) plan subject to railroad retirement tier I andtier II payroll taxes?
Yes. Federal budget legislation enacted in 1989 and effective January 1,1990, provided thatemployee contributions to 401(k) plans are subject to railroad retirement payroll taxes and brought thetreatment of 401(k) plans under railroad retirement law into conformity with the treatment of suchplans under social security law. Consequently, employee contributions to a 401(k) plan are also treatedas creditable compensation for railroad retirement benefit purposes. For example, an employee earning$40,000 a year, but who has 10 percent of his earnings deferred under a 401(k) plan, would have only$36,000 reported to the IRS as earnings subject to Federal income tax. However, the entire $40,000would be subject to railroad retirement payroll taxes and therefore creditable as compensation underthe Railroad Retirement Act.
6. How can a person get more information about the effect of private rail pensions and401(k) plan payments on supplemental annuities?
Persons can contact an RRB field office for more information via the agency's website,
www.rrb.gov, or by calling toll-free at 1-877-772-5772. Most RRB offices are open to the public from9:00 a.m. to 3:30 p.m., Monday through Friday, except on Federal holidays.
###
FROM THE i;)KSK OF
WALTER A. BARROWS
LABOR MEMBER
^
U.S. RAILROAD RETIREMENT BOARD
For Publication
November 2014
Railroad Retirement Annuities and Pensions from
Work Not Covered by Social Security or Railroad Retirement
Employee annuities paid under the Railroad Retirement Act are subject to dual benefit reductions
when social security benefits are also payable, and they may be subject to reduction when certain
public, non-profit or foreign pension payments are also due a retired employee.
The following questions and answers describe how railroad retirement annuities are affected when
retired rail employees are also entitled to pensions from employers not covered by railroad retirement
or social security.
1. When and how did the noncovered service pension reduction in employee annuities comeabout?
The noncovered service pension reduction in railroad retirement benefits was introduced by 1983
social security legislation which also applied to the tier 1 benefits of railroad retirement employee
annuities. (Regular railroad retirement annuities are computed under a two-tier formula.)
Social security and railroad retirement tier I benefits replace a percentage of a worker's pre
retirement earnings. The formula used to compute benefits includes factors that ensure lower-paid
workers get a higher return than highly-paid workers. For example, lower-paid workers could get a
social security or tier I benefit that equals about 55 percent of their pre-retirement earnings. The
average replacement rate for highly-paid workers is about 25 percent. Before 1983, such benefits for
people who worked in jobs not covered by railroad retirement or social security were computed as if
they were long-term, low-wage workers. They received the advantage of the higher percentage
benefits in addition to their other pension. The modified formula eliminated this advantage.
2. In general terms, which employees are affected by this reduction and what types ofbenefits would cause a reduction?
For employees first eligible for a railroad retirement annuity and a Federal, State or local
government pension affer 1985, there may be a reduction in the tier 1 portion of their annuity 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 from a non-profit organization or from a foreign government or a
foreign employer. It does not include 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.
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3. If a noncovered service pension reduction is required in a raUroad retirement employeeannuity, how would it be applied?
Unlike the dual benefit offset for social security entitlement applied by deducting the amount ofthe social security benefit from the annuitant's tier I railroad retirement benefit, an alternate factor isused in the tier I benefit computation of annuitants with noncovered service pensions.
A tier I benefit is calculated in the same way as a social security benefit. In computing a tier Ibenefit, an employee's creditable earnings are adjusted to take into account the changes in wage levelsover a worker's lifetime. This procedure, called indexing, increases creditable earnings from pastyears to reflect average national wage levels at the time of the employee's retirement. The adjustedearnings are used to calculate the employee's "average indexed monthly earnings" and a formula isapplied to determine the gross tier I amount.
This benefit formula has up to three levels. Each level of earnings is multiplied by a specifiedpercentage. The first level of earnings is multiplied by 90 percent, the second by 32 percent, and thefinal level by 15 percent. The results are added to obtain the basic benefit rate. For those first eligiblein 2014, the gross tier I benefit is equal to: 90 percent of the first $816 of average indexed monthlyearnings, plus 32 percent of the amount of those earnings over $816 up to $4,917, plus 15 percent ofthose earnings in excess of $4,917.
Beginning with 1986, a reduction in the 90 percent factor was phased in until, for employeessubject to the noncovered service pension reduction who became eligible in 1990 or later, the 90percent factor is reduced to as low as 40 percent. For example, an employee bom in 1952 is eligiblefor a noncovered service pension and has less than 30 years of service. Her railroad retirement annuitybegins with the first full month she is age 62 and her average indexed monthly eamings are $1,800.The gross tier I amount, after reduction for the noncovered service pension, would be $641, rather thanthe $1,049 otherwise payable. A reduction for early retirement would also be applied to her annuity.
However, for employees with relatively low noncovered service pensions, there is a guarantee thatthe amount of the reduction in tier I cannot be more than 50 percent of the pension.
4. Are there any provisions exempting railroad retirement employee annuitants who alsoreceive noncovered service pensions from this reduction?
Railroad employees eligible for a noncovered service pension who have 30 or more years of"substantial railroad retirement and/or social security eamings" are generally exempt from thereduction. Also, employees with 21 to 29 years of substantial eamings may be subject to a lesserreduction. In such cases, the 90 percent factor is reduced in increments of 5 percent, providing factorsranging from 85 percent for employees with 29 years of substantial eamings to 45 percent for thosewith 21 years.
The reduction also does not apply to:
• Railroad retirement employee annuitants also receiving a noncovered service pension who attainedage 62 before 1986, or who became entitled to a railroad retirement disability annuity before 1986and remained entitled to it in any of the 12 months before attaining age 62 (even if the employeeattained age 62 after 1985) are not affected by the noncovered service pension reduction;
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• Railroad retirement employee annuitants who received, or were eligible to receive, theirnoncovered service pensions before 1986 would not be affected. They are considered eligible ifthey met the requirements of the pension plan before January 1986, even if they continued to work;
• Federal workers hired after December 31, 1983;
• Persons employed on December 31, 1983, by a nonprofit organization that was exempt fi-om socialsecurity and became mandatorily covered under social security on that date; and
• Railroad employees whose pensions are based entirely on noncovered employment before 1957.
5. What is currently considered a year of ̂^substantial railroad retirement and/or socialsecurity earnings?"
In 2014, earnings of $21,750 would be considered a year of substantial earnings. Substantialearnings amounts usually vary from year to year. For example, in 2004, earnings of $16,275 would beconsidered a year of substantial earnings; in 1994, earnings of $11,250 would be needed; and, in 1984,earnings of $7,050. Persons acquire a year of coverage if their earnings for 1951-78 are 25 percent ofthe annual social security maximum creditable earnings bases in effect for those years. For years after1978, the amounts are 25 percent of an amount equal to the annual Tier II taxable maximum creditableearnings bases. It is important to understand that a year of substantial earnings is not the same as ayear of service.
6. Are any reductions made in railroad retirement spouse or widow(er)s' benefits if a publicservice pension is also payable?
Yes. The tier I portion of a spouse or widow(er) annuity may also be reduced for receipt of certainFederal, State or local government pensions separately payable to the spouse or widow(er) based onher or his own earnings. The reduction generally does not apply if the emplojnnent on which thepublic pension is based was covered under the Social Security Act throughout the last 60 months ofpublic employment. Most military service pensions and payments from the Department of VeteransAffairs will not cause a reduction. Pensions paid by a foreign government or interstate instrumentality
will also not cause a reduction. For spouses and widow(er)s subject to the public pension reduction,the tier I reduction is equal to 2/3 of the amount of the public pension.
7. Wbere can more specific information be obtained on bow noncovered pensions affectrailroad retirement benefits?
For more information, individuals should contact an office of the Railroad Retirement Board
(RRB) by calling toll-free 1-877-772-5772. Most RRB offices are open to the public from 9:00 a.m. to3:30 p.m., Monday through Friday, except on Federal holidays.
###
FROM THE DESK OF
WALTER A. BARROWS
LABOR MEMBER
U.S. RAILROAD RETIREMENT BOARD
April 2016
Buy-outs and Railroad Retirement Benefits
Railroad employees frequently ask the Railroad Retirement Board (RRB) how the acceptance of a
buy-out from a railroad employer affects their future eligibility for benefits under the RailroadRetirement and Railroad Unemployment Insurance Acts. The following questions and answers provide
information on this subject.
1. Would leaving railroad work and accepting a buy-out mean that an employee forfeits anyfuture entitlement to an annuity under the Railroad Retirement Act?
As long as an employee has acquired at least 10 years (120 months) of creditable rail service, or 5
years (60 months) of creditable service if such service was performed after 1995, he or she would still
be eligible for a regular railroad retirement annuity upon reaching retirement age, or, if totally and
permanently disabled, for an annuity before retirement age, regardless of whether or not a buy-out was
ever accepted.
However, if a person permanently leaves railroad employment before attaining retirement age, the
employee may not be able to meet the requirements for certain other benefits, particularly the current
connection requirement for annuities based on occupational, rather than total, disability and for
supplemental annuities paid by the RRB to career employees.
In addition, if an employee does not have a current connection, the Social Security Administration,
rather than the RRB, would have jurisdiction of any survivor benefits that become payable on the basis
of the employee's combined railroad retirement and social security covered earnings in the future. Thesurvivor benefits payable by the RRB are generally greater than those paid by the Social Security
Administration.
2. How are buy-out payments treated under the Railroad Retirement and RailroadUnemployment Insurance Acts?
Buy-out payments that result from the abolishment of an employee's job are creditable as
compensation under the Railroad Retirement and Railroad Unemployment Insurance Acts. While the
actual names of these employer payments may vary, the treatment given them by the RRB will depend
upon whether the employee relinquished or retained his or her job rights. If the employee
relinquishes job rights to obtain the compensation, the RRB considers the payment a separation
allowance. This compensation is credited to either the month last worked or, if later, the month in
which the employee relinquishes his or her employment relationship. While all compensation subject
to tier I payroll taxes is considered in the computation of a railroad retirement annuity, no additional
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service months can be credited after the month in which rights are relinquished.
The RRB considers the buy-out payment a dismissal allowance, even though the employer might
designate the payment a separation allowance, if the employee retains job rights and receivesmonthly payments credited to the months for which they are allocated imder the dismissal allowanceagreement. This is true even if the employee relinquishes job rights after the end of the period forwhich a monthly dismissal allowance was paid. However, supplemental unemployment or sickness
benefits paid imder an RRB-approved nongovernmental plan by a railroad or third party are not
considered compensation for railroad retirement purposes.
3. Suppose an employee is given a choice between (1) accepting a separation allowance,relinquishing job rights and having the payment he or she receives credited to one month or(2) accepting a dismissal allowance, retaining job rights and having the payment credited to themonths for which it is allocated. What are some of the railroad retirement considerations the
employee should keep iu mind?
Individual factors such as an employee's age and seryice should be considered.
For example, if an employee is already eligible to begin receiving a railroad retirement annuity, heor she may find it advantageous to relinquish job rights, accept a separation allowance, and have theannuity begin on the earliest date allowed by law. Any periodic payments made after that date wouldnot preclude payment of the annuity because the employee has relinquished job rights.
On the other hand, some younger employees may find it more advantageous to retain job rightsand accept monthly compensation payments under a dismissal allowance if these payments wouldallow them to acquire 120 months of creditable rail service (or 60 months of creditable rail service ifsuch service was performed after 1995) and establish future eligibility for a railroad retirement
annuity. Also, additional service months might allow a long-service employee to acquire 30 years ofservice, which is required for early retirement at age 60, or 25 years of rail service, which is requiredfor supplemental annuities paid by the RRB. Establishing 25 years of service could also aid anemployee in maintaining a current connection xmder the Railroad Retirement Act.
4. How would acquiring 25 years of railroad service assist an employee in maintaining acurrent connection?
The current connection requirement is normally met if the employee has railroad service in at least12 of the last 30 consecutive months before retirement or death. If an employee does not qualify onthis basis but has 12 months of service in an earlier 30-month period, he or she may still meet the
requirement if the employee does not work outside the railroad industry in the interval following the30-month period and the employee's retirement, or death if that occurs earlier. Nonrailroademployment in that interval will likely break the employee's current connection.
However, since 1981, a current connection can be maintained for purposes of supplemental andsurvivor annuities, but not occupational disability annuities, if the employee completed 25 years ofrailroad service, was involuntarily terminated without fault from the railroad industry, and did not
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thereafter decline an offer to return to work in the same class or craft as his or her most recent railroad
service, regardless of the location of the work offered. If all of these requirements are met, an
employee's current connection may not be broken, even if the employee works in regular nonrailroad
employment after the 30-month period and before retirement or death.
5. Would the acceptance of a buy-out have any effect on determining whether an employeecould maintain a current connection under the exception provision?
In cases where an employee has no option to remain in the service of his or her employer, the
termination of the employment is considered involuntary, regardless of whether the employee does or
does not receive a separation or dismissal allowance.
However, an employee who chooses a separation allowance instead of keeping his or her seniority
rights to railroad employment would, for railroad retirement purposes, generally be considered to have
volimtarily terminated railroad service, and, consequently, would not maintain a current connection
under the exception provision.
6. An employee with 25 years of service is offered a buy-out with the option of either takingpayment in a single lump sum, or receiving monthly payments until retirement age. Could themethod of payment affect the employee's current connection under the exception provision?
If the employee had the choice to remain in employer service and voluntarUy relinquished job
rights prior to accepting the payments, his or her current connection would not be maintained under
the exception provision, regardless of which payment option is chosen. Therefore, nonrailroad work
after the 30-month period and before retirement, or the employee's death if earlier, could break the
employee's current connection. Such an employee could only meet the current connection requirement
under the normal procedures.
7. Is it always advantageous to maintain a current connection?
While a current connection is generally advantageous for railroad retirement purposes, the costs of
maintaining a current connection could outweigh its value, depending on individual circumstances.
There may be other financial or personal factors involved besides railroad retirement eligibility and/or
the preservation of a current connection, and these will vary from individual to individual.
8. Are separation and dismissal allowances subject to railroad retirement payroll taxes?
Under the Railroad Retirement Tax Act, which is administered by the Internal Revenue Service,
payments of compensation, including most buy-outs, are subject to tier I, tier II and Medicare taxes on
earnings up to the annual maximum earnings bases in effect when the compensation is paid. This is
true whether payment is made in a lump sum or on a periodic basis.
To the extent that a separation allowance does not yield additional tier II railroad retirement
service credits, a lump sum, approximating part or all of the railroad retirement tier II payroll taxes
deducted from the separation allowance, will be paid upon retirement to employees meeting minimum
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service requirements or their survivors. This lump sum applies to separation allowances made after1984.
If an employee receives a dismissal allowance, he or she receives service credits for the tier II
taxes deducted from the dismissal allowance payments. Consequently, such a lump sum would not be
payable.
If an employee has an option about how a buy-out is to be distributed, he or she should consider
the impact of both payroll taxes and income tax on the payments. Employees with questions in thisregard should contact the payroll department of their railroad employer and/or the Internal Revenue
Service.
9. Would an employee be able to receive unemployment or sickness benefits paid by theRRB after accepting a separation allowance?
An employee who accepts a separation allowance cannot receive imemployment or sicknessbenefits for roughly the period of time it would have taken to earn the amount of the allowance at hisor her straight-time rate of pay. This is true regardless of whether the allowance is paid in a lump sumor installments. For example, if an employee's salary was $3,000 a month without overtime pay andthe allowance was $12,000, he or she would be disqualified from receiving benefits for approximately
four months.
10. Can an employee receive unemployment benefits after his or her separation allowancedisqualification period has ended?
An employee who has not obtained new employment by the end of the disqualification period andis still actively seeking work may be eligible for unemployment benefits at that time. The employeemust meet all the usual eligibility requirements, including the availability for work requirement. Anemployee can establish his or her availability for work by demonstrating a willingness to work andmaking significant efforts to obtain work. In judging the employee's willingness to work, the RRBconsiders, among other factors, the reason the employee accepted the separation allowance and theextent of his or her work-seeking efforts during the disqualification period.
11. How would the acceptance of a dismissal allowance affect an employee's eligibility forunemployment and sickness benefits?
Payments made under a dismissal allowance would be considered remuneration under the RailroadUnemployment Insurance Act and the employee would not be eligible for unemployment or sicknessbenefits during the period the dismissal allowance is being paid. The employee may, of course, beeligible for benefits after the end of this period if he or she is still actively seeking work or is unable towork because of illness or injury.
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12. Where can employees get more specific information on how benefits payable by theRRB are affected by a buy-out?
Employees can contact an RRB field office by calling the agency's toll-free phone number at1-877-772-5772 for information on how a buy-out they have been offered could affect their eligibilityfor benefits. However, RRB personnel are not equipped to advise on other financial or personalfactors, which may also bear consideration. Most offices are open to the public from 9:00 a.m. to3:30 p.m., Monday through Friday, except on Federal holidays.
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