Your annuity is not payable for any month in which you are, or the employee
is, in railroad service. In addition, nonrailroad earnings after your Annuity
Beginning Date (ABD) can have an effect your annuity computation as explained in
this section.
Self-Employment and Other Nonrailroad
Work
Earnings from nonrailroad employment, including self-employment, after you
annuity beginning date may cause work deductions. Nonrailroad work is any job
that is not in the railroad industry. This includes work for a Canadian
railroad, which is not covered under the Railroad Retirement Act, and work as an
elected or appointed public official.
If you are claiming self-employment, the RRB determines whether or not you
are performing "substantial services" as an independent contractor. The payment
of self-employment taxes may be evidence of an independent contractor status,
but is not conclusive. If you are working for an incorporated business that you
own, the RRB does not consider that work self-employment.
If you are self-employed as a consultant, the RRB considers how your
self-employment compares to the work you did for your former railroad or
nonrailroad employer before you applied for your annuity. You should complete
and return Form AA-4 Self-Employment and Substantial Service Questionnaire to
provide the RRB with the necessary information to make that determination.
For more information about self-employment, see
Form G-177L General
Information about Continuing in or Returning to Nonrailroad Employment after
Retirement under the Railroad Retirement Act.
Spouse Annuity Tier 1 Component and
Divorced Spouse Annuity Work Deductions
If both you and the employee are Full Retirement Age (FRA), or older, on your
ABD, you may skip to Tier 2 Component Work Deductions. You are not affected by
work deductions to your spouse annuity Tier 1 component or divorced spouse
annuity.
If either you are or the employee is under FRA, earnings from any nonrailroad
employment (including self-employment) over the Annual Earnings Exempt Amount
may cause work deductions to your spouse annuity Tier 1 component or divorced
spouse annuity.
- Definition of Annual Earnings Exempt Amount - The term Annual Earnings
Exempt Amount means the amount of money you or the employee can earn in nonrailroad employment in a year without losing part of your annuity. There
are separate Annual Earnings Exempt Amounts for persons under FRA, and for the
year in which the person attains FRA, as explained in the following chart.
For a year in which:
|
You may lose up to $1 in
your Tier 1 component for every
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The reduction:
|
you attain FRA, |
$3.00 of earnings over the Annual Earnings Exempt Amount
for your age group. However, your earnings are only counted for
months before the month in which you attain FRA. |
is removed effective the month in which you attain FRA.
|
you are under FRA for the entire year, |
$2.00 of earnings over the Annual Earnings Exempt Amount
for your age group. |
applies for the full year. |
you work outside the U.S. for 45 or more hours per month, |
$2.00 of earnings. There is no Annual Earnings Exempt Amount for
work outside the U.S. However, your earnings are only counted
for months before the month in which you attain FRA. |
is removed effective the month in which you attain FRA. |
Refer to Form G-77a How Work Affects Your Railroad Retirement Benefits for
the Annual Earnings Exempt Amount to use when completing the earnings items on
your annuity application.
- Definition of Earnings for Work Deductions - In general, earnings
restrictions apply to gross earnings from employment and net earnings from
self-employment. Gross earnings are all salaries, commissions, bonuses,
retroactive wage increases, or any allowances for room or board. If these
earnings are from an employer covered under the Social Security (SS) Act, the
amount of the gross earnings is equal to the amount reported for social
security tax under the Federal Insurance Contributions Act (FICA). Net
earnings from self-employment equal the amount of gross income minus expenses
that were reported for social security tax under the Self-Employment
Contributions Act (SECA). Add your earnings from employment and
self-employment together to determine the total earnings for the year for the
purpose of work deductions.
Do not include as earnings any money that you received for any reason other
than work, such as interest from savings, income from investments, gifts,
inheritances, pensions or other retirement benefits.
When employees have earnings over the Annual Earnings Exempt Amount for their
age group, the excess is charged against their annuity and the annuities of
all others entitled on their earnings record. An exception applies for a
divorced spouse who has been divorced from the employee for at least two
years. The employee's earnings will not cause work deductions to the divorced
spouse annuity effective from the second anniversary of the divorce.
- Exception For First Year of Entitlement - In the year your annuity begins,
deductions for your own earnings are based on your earnings for the entire
year, not just the earnings after you retire. However, a special rule may be
used to apply work deductions in the first year after your annuity begins in
which you have a non-work month. For many people, this is the year their
annuity begins.
A Non-Work Month is a month in which you earn less than the Monthly Earnings
Exempt Amount for your age (the Annual Earnings Exempt Amount for your age
divided by twelve) or, if self-employed, render no substantial services. (The
RRB uses Form AA-4 Self-Employment and Substantial Service Questionnaire to
determine months in which you rendered no substantial services.)
- Special Rule Applies - In the year the special rule is applied, no Tier
1 work deductions for your own earnings are applied to any Non-Work Month.
If you have high earnings before your annuity begins, but do not earn more
than the Monthly Exempt Earnings Amount in any month after your annuity
begins, Tier 1 work deductions for your own earnings will not be required.
- Special Rule Does Not Apply - If you do earn more than the Monthly
Earnings Exempt Amount in one or more months after your annuity begins,
deductions are assessed to those months up to the amount required based on
your total earnings for the year. Also, after the first year in which you
have a Non-Work Month, this monthly test does not apply. If your earnings
are high enough, deductions will be assessed to your annuity for the entire
year, even if you only work part of the year.
- Exception for Social Security Benefit Entitlement - No earnings deductions
are made by the RRB in your spouse annuity Tier 1 component or divorced spouse
annuity if you are receiving social security benefits. Earnings deductions may
be made by the Social Security Administration in your social security benefit.
Last Pre-Retirement Employment (LPE)
Definition -
Your Last Pre-Retirement Nonrailroad Employment (LPE) is defined as any
nonrailroad individual, company or institution for whom you are working on the
date your spouse annuity begins or for whom you stopped working in order to
receive an annuity. Even work for which you are paid minimal earnings can be LPE.
A few exceptions for types of nonrailroad work are listed below.
The nonrailroad employer is always your LPE if you are working in nonrailroad
employment on the date your spouse annuity begins or, if you have stopped
working, you still hold rights to return to service of the nonrailroad employer
on the date your spouse annuity begins.
The nonrailroad employer is presumed to be your LPE if you stopped working
within the six months preceding your annuity beginning date. When you were
working for two or more persons, companies, or institutions within the six
months preceding your annuity beginning date, all such employers are presumed to
be your LPE.
Work That is not Considered LPE -
Some types of nonrailroad work are not considered LPE, no matter when they
are done. The following types of nonrailroad work are not LPE:
- military service;
- mail handling under contract for the U.S. Post Office;
- jury duty;
- employment for which you are reimbursed only for your expenses;
- certain seasonal employment where you do not have rights to return to the
employment (such as working in a department store during the Christmas
season);
- work as a member (owner) of a Limited Liability Corporations; or,
- self-employment as defined under the Railroad Retirement Act.
Also note that any nonrailroad employment after the date your spouse annuity
begins, for an employer that you never worked for before the date your spouse
annuity begins, is not LPE and does not affect your Tier 2 component. It can,
however, cause Tier 1 work deductions.
Spouse Tier 2 Component Work Deductions
Employee annuitants must report earnings from their own
Last Pre-Retirement Nonrailroad Employer (LPE). They are charged work deductions against their Tier
2 components and their supplemental annuities, if any, and the Tier 2 components
of spouses entitled on their earnings records.
Also, if you are applying for a spouse annuity, you must report your own
earnings from your LPE in or after the month your spouse annuity begins. Your
LPE earnings will reduce your Tier 2 component. The reduction is $1 for each $2
earned (subject to a maximum reduction of 50 percent of the Tier 2 component).
The reduction to Tier 2 component occurs at any age, even after
Full Retirement Age.
Work deductions for LPE apply even if the employee has 360 or more months of
railroad service. There is no Annual Earnings Exempt Amount or Monthly Earnings
Exempt Amount for the first year of entitlement for LPE work deductions. LPE
work deductions apply no matter how much money you earn in LPE.
Earnings from self-employment or other nonrailroad employment are not added
to your LPE earnings when computing Tier 2 component work deductions.
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