Basic Service Requirement
The basic requirement for a regular employee annuity is 120 months (10 years) of
creditable railroad service or 60 months (5 years) of creditable railroad
service if such service was performed after 1995. Service months need not be
consecutive, and, in some cases, military service may be counted as railroad
service.
Credit for a month of railroad service is given for every month in which an
employee had some compensated service for an employer covered by the Railroad
Retirement Act, even if only one day's service is performed in the month.
(However, local lodge compensation earned after 1974 is disregarded for any
calendar month in which it is less than $25.) Under certain circumstances,
additional months of service may be deemed.
Covered employers include railroads engaged in interstate commerce and certain
of their subsidiaries, railroad associations and national railway labor
organizations.
Railroad retirement benefits are based on months of service and earnings
credits. Earnings are creditable up to certain annual maximums on the amount of
compensation subject to railroad retirement taxes.
Age and Service, Disability and Supplemental
Annuities
An AGE
AND SERVICE ANNUITY can be paid to:
Employees with 30 or more years of creditable service. They are eligible for
regular annuities based on age and service the first full month they are age 60.
Early retirement reductions are applied if the employee first became eligible
for a 60/30 annuity July 1, 1984, or later and retired at ages 60 or 61
before
2002.
Employees with 10-29 years of creditable service, or
5-9 years, if at least 5 years were after 1995. They are eligible for
regular annuities based on age and service the first full month they are age 62.
Early retirement annuity reductions are applied to annuities awarded before full
retirement age, which ranges from age 65 for those born before 1938 to age 67
for those born in 1960 or later, the same as under social security. Reduced
annuities are still payable at age 62 but the maximum reduction will be 30%
rather than 20% by the year 2022. The tier II portion of an annuity (as defined
below) is not reduced beyond 20% if the employee had any creditable railroad
service before August 12, 1983. See Railroad
Retirement Annuity Formula Components for a detailed explanation of age reductions.
An annuity based on age cannot be paid until the employee stops railroad
employment, files an application and gives up any rights to return to work for a
railroad employer.
A
DISABILITY ANNUITY can be paid for:
Total disability, at any age, if an employee is permanently disabled for
all
regular work and has at least 10 years (120 months) of creditable railroad
service. Employees with 5-9 years of creditable railroad service, if at least 5
years were performed after 1995, may qualify for tier I only (as defined
below) before retirement age on the basis of total disability if they also meet
certain social security earnings requirements. An age reduced tier II amount
would be payable at age 62.
Occupational disability, at age 60, if an employee has at least 10 years of
railroad service or at any age if the employee has at least 20 years (240
months) of service, when the employee is permanently disabled for his or her
regular railroad occupation. A “current connection” with the railroad industry
is also required for an annuity based on occupational, rather than
total,
disability.
A 5-month waiting period beginning with the month after the month of the
onset of disability is required before any disability annuity payments can
begin.
An employee can be in compensated service while filing a disability annuity
application as long as the compensated service terminates within 90 days from
the date of filing. However, in order for a supplemental
annuity to be paid by the Board, or for an eligible spouse to begin receiving
annuity payments, a disabled annuitant under full retirement age must relinquish
employment rights.
A
SUPPLEMENTAL ANNUITY can be paid at:
Age 60, if the employee has at least 30 years of creditable railroad service.
Age 65, if the employee has 25-29 years of railroad service.
In addition to the service requirements, a “current connection” with the
railroad industry is required for all supplemental annuities. An employee must
also be receiving a railroad retirement age and service or disability annuity
before a supplemental annuity can be paid. Eligibility is
further limited to employees who had some rail service before October 1981.
Current Connection Requirement
An employee who worked for a railroad in at least 12 months in the 30 months
immediately preceding the month his or her railroad retirement annuity begins
will meet the current connection requirement for a supplemental annuity,
occupational disability annuity or survivor benefit. (If the employee died before retirement, railroad service in at least
12 months in the 30 months before the month of death will meet the current connection
requirement for the purpose of paying survivor benefits.)
If an employee does not qualify on this basis, but has 12 months’ service in an
earlier 30-month period, he or she may still meet the current connection
requirement. This alternative generally applies if the employee did not have any
regular employment outside the railroad industry after the end of the last
30-month period which included 12 months of railroad service and before the
month the annuity begins or the date of death. Full or part-time work for a
nonrailroad employer in the interval between the end of the last 30-month period
including 12 months of railroad service and the beginning date of an employee's
annuity, or the month of death if earlier, can break a current connection.
Self-employment in an unincorporated business will not break a current
connection; however, self-employment can break a current connection if the business is incorporated.
Working for certain U.S. Government agencies--Department of Transportation,
National Transportation Safety Board, Surface Transportation Board, National Mediation Board, Transportation
Security Administration, Railroad Retirement Board--will
not break a current
connection. State employment with the Alaska Railroad, as long as that railroad
remains an entity of the State of Alaska, will not break a current connection.
Also, railroad service in Canada for a Canadian railroad will neither break nor
preserve a current connection.
A current connection can also be maintained, for purposes of supplemental and
survivor annuities, if the employee completed 25 years of railroad service, was
involuntarily terminated without fault from his or her last job in the railroad industry, and did not
thereafter decline an offer of employment in the same class or craft in the
railroad industry, regardless of the distance to the new position.
A termination
of railroad service is considered voluntary unless there was no choice available
to the individual to remain in service. Generally, where an employee has no
option to remain in the service of his or her railroad employer, the termination of the
employment is considered involuntary, regardless of whether the employee does or
does not receive a separation allowance. However, each case is decided by the
Board on an individual basis. This exception to the normal current connection
requirements became effective October 1, 1981, but only for employees still
living on that date who left the rail industry on or after October 1, 1975, or
who were on leave of absence, on furlough, or absent due to injury on October 1,
1975.
Once a current connection is established at the time the railroad retirement
annuity begins, an employee never loses it no matter what kind of work is
performed thereafter.
Spouse Annuities
The age requirements for a spouse annuity depend on the employee’s age and date
of retirement and the employee’s years of railroad service.
If a retired employee with 30 years of service is age 60, the employee’s spouse
is also eligible for an annuity the first full month the spouse is age 60.
Certain early retirement reductions are applied if the employee first became
eligible for a 60/30 annuity July 1, 1984, or later and retired at ages 60 or 61
before
2002. If the employee was awarded a disability annuity, has attained age
60 and has 30 years of service, the spouse can receive an unreduced annuity the
first full month she or he is age 60, regardless of whether the employee annuity
began before or after 2002 as long as the spouse’s annuity beginning date is
after 2001.
If a retired employee with less than 30 years of service is age 62, the
employee’s spouse is also eligible for an annuity the first full month the
spouse is age 62. Early retirement reductions are applied to the spouse annuity
if the spouse retires prior to her or his full retirement age. Full retirement age for a
spouse is gradually rising to age 67, just as for an employee,
depending on the year of birth. Reduced benefits are still payable at age 62,
but the maximum reduction will be 35% rather than 25% by the year 2022. The tier
II portion of a spouse annuity (as defined below) is not reduced beyond 25%
if the employee had any creditable railroad service before August 12, 1983.
A spouse of an employee receiving an age and service annuity (or a spouse of a
disability annuitant who is otherwise eligible for an age and service annuity)
is eligible for a spouse annuity at any age if caring for the employee's
unmarried child, and the child is under age 18 or a disabled child of any age
who became disabled before
age 22.
The employee must have been married to the spouse for at least 1 year, unless
the spouse is the natural parent of their child, the spouse was eligible or
potentially eligible for a railroad retirement widow(er)’s, parent’s or disabled
child’s annuity in the month before marrying the employee or the spouse was
previously married to the employee and received a spouse annuity. However,
entitlement to a surviving divorced spouse, surviving divorced young mother
(father), or remarried widow(er) annuity does not waive the 1-year marriage
requirement.
An annuity may also be payable to the divorced wife or husband of a retired
employee if their marriage lasted for at least 10 consecutive years, both have attained age
62 for a full month and the divorced spouse is not currently married. The amount
of a divorced spouse’s annuity is, in effect, equal to what social security
would pay in the same situation and therefore less than the amount of the spouse
annuity otherwise payable (tier I only). Effective
August 17, 2007, a
divorced spouse can receive an annuity even if the employee has not retired,
provided they have been divorced for a period of not less than 2 years, and the
employee and spouse are at least age 62 and the employee is fully insured under the
Social Security Act using combined railroad and social security earnings.
Employee and Spouse Annuity Estimates
Railroad employees can get estimates of future annuities for themselves and
their spouses through the
Board’s Web site. The estimates are
based on the service and earnings records maintained by the Board and show the
earliest date the employee can receive a full annuity and, if applicable, the
earliest date he or she can receive a reduced annuity. Employees who want
estimates can also contact the nearest field office of the Board for approximate figures. Each Board field office can furnish estimates for
employees with at least 10 years of railroad service, or 5 years after 1995. It
is not possible to provide a precise amount if the employee is not currently
eligible.
See Table 1 and Table 2 in IB-2 Facts for more
information.
Two-tier Annuities and Dual Benefits
Regular railroad retirement annuities are calculated under a two-tier formula.
The annuity formula components for employees and spouses are described in the
section on formulas at the back of this
publication.
The first tier is based on railroad retirement credits and any social security
credits an employee has acquired. The amount of the first tier is calculated
using social security formulas, but with railroad retirement age and service
requirements.
The second tier is based on railroad retirement credits only, and may be
compared to the retirement benefits paid over and above social security benefits
to workers in other industries.
An additional amount may also be payable as part of the regular annuity if an
employee had at least 120 months of railroad service and acquired sufficient
quarters of coverage for an insured status under the Social Security Act before
1975 and also met certain vesting requirements.
Employees with Railroad Retirement and
Social Security Benefits
Since 1975, if a retired or disabled railroad retirement annuitant is also
awarded social security benefits, the Social Security Administration determines
the amount due, but a combined monthly benefit payment is issued by the
Railroad Retirement Board.
The tier I portion of an employee annuity is based on his or her combined
railroad retirement and social security credits, figured under social security
formulas, and approximates what social security would pay if railroad work were
covered by that system. It is reduced by the amount of any actual social
security benefit paid on the basis of the employee’s nonrailroad employment in
order to prevent a duplication of benefits based on social security covered
earnings. The tier I amount is also reduced in the event a social security
benefit is payable to the employee on the basis of another person’s earnings.
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. An annuitant is required to advise the Railroad Retirement Board if
any benefits are received directly from the Social Security Administration or if
those benefits increase other than for an annual cost-of-living increase.
If an employee qualified for dual benefits before 1975 and
met certain vesting
requirements, he or she can receive an additional annuity amount, which offsets,
in part, the dual benefit reduction. This additional amount, which reflects the
dual benefits payable prior to 1975, is called the vested dual benefit payment.
The vested dual benefit cannot be paid prior to the date the employee could
begin to receive a social security benefit if he or she were to file for such a
benefit.
Employees who do not qualify for a vested dual benefit may be eligible for a
refund of any excess social security taxes they paid (see
Dual Taxes Paid).
Limitations on vested dual benefits
Vested
dual benefit payments are funded by annual appropriations from general U.S.
Treasury revenues, rather than the railroad retirement payroll taxes and other
revenues that finance about 94% of the railroad retirement system’s benefit
payments.
Payment of these vested dual benefits is dependent on the time and amount of
such appropriations. If the appropriation in a fiscal year is for less than the
estimated total vested dual benefit payments, individual payments must be
reduced.
Employees with Public, Non-profit or Foreign
Pensions
For employees first eligible for a railroad retirement annuity
and a Federal,
State or local government pension after 1985, there may be a reduction in the
tier I amount 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, but 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.
Workers' Compensation
If an employee is receiving a disability annuity, the tier I portion may, under
certain circumstances, be reduced for receipt of workers’ compensation or public
disability benefits.
If an annuitant becomes entitled to any pensions or benefits as described above,
the Board must be notified immediately.
Spouses with Dual Benefits
Social Security 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.
Public Pensions
The tier I portion of a spouse annuity may also be reduced for receipt of any
Federal, State or local government pension separately payable to the spouse
based on the spouse’s own earnings. The reduction generally does not apply if
the employment on which the pension is based was covered under the Social
Security Act throughout the last 60 months of public employment. (This 60-month
requirement is being phased in over a
5-year period ending March 1, 2009, and there are some exceptions.)
Most military service pensions and payments from the Department of Veterans
Affairs will not cause a reduction. Pensions paid by a foreign government or
interstate instrumentality will also not cause a reduction. For spouses
subject to the public pension reduction, the tier I reduction is equal to 2/3 of
the amount of the public pension.
Employee Annuity
If both the husband and wife are qualified railroad employees and either had
some railroad service before 1975, both can receive separate railroad retirement
employee and spouse annuities, without a full dual benefit reduction.
If both the husband and wife started railroad employment after 1974, the amount
of any spouse or divorced spouse annuity is reduced by the amount of the
employee annuity to which the spouse is also entitled.
Minimum Guaranty for Employee and Spouse
Annuities
Under a special minimum guaranty provision, railroad families will not receive
less in monthly benefits than they would have if railroad earnings were covered
by social security rather than railroad retirement laws. This guaranty is
intended to cover situations in which one or more members of a family would
otherwise be eligible for a type of social security benefit which is not
provided under the Railroad Retirement Act.
For example, social security provides children's benefits when an employee is
totally disabled, retired, or deceased. The Railroad Retirement Act only
provides children’s benefits if the employee is deceased. Therefore, if a
retired rail employee has children who would otherwise be eligible for a benefit
under social security, the employee's annuity would be increased to reflect what
social security would pay the family, unless the annuity is already more than
that amount.
Cost-of-living Increases in Employee and
Spouse Retirement Benefits
After retirement, the tier I portions of both employee and spouse annuities are
generally increased for higher living costs at the same time, and by the same
percentage, as social security benefits. These increases, effective December 1
and included in the January payment, are triggered under both programs when the
Consumer Price Index rises during the 12 months ending the previous September
30. Generally, if the Index increases by 5%, for example, the tier I portion
increases by 5%. Under certain circumstances, the increase can be based on
average national wage increases rather than price increases.
If an annuitant is receiving both railroad retirement and social security
benefits, the increased tier I portion is reduced by the increased social
security benefit.
The tier II portions of retired employee and spouse annuities are normally
increased annually by 32.5% of the increase in the Consumer Price Index.
Tier II cost-of-living increases are generally payable at the same time as tier
I cost-of-living increases. Vested dual benefit payments and supplemental
annuities are not increased by these cost-of-living adjustments.
Working After Retirement
Neither a regular annuity, a supplemental annuity nor a spouse annuity is
payable for any month in which a retired employee works for an employer covered
under the Railroad Retirement Act, regardless of age, including labor organizations. However,
service for less than $25 a month to a local lodge will not prevent payment of
the annuity for that month.
Retired employees and spouses who work for their last pre-retirement nonrailroad
employer are subject to an earnings deduction. Such employment will reduce tier
II benefits and supplemental annuity payments, which are not otherwise subject
to earnings deductions, by $1 for each $2 of earnings received, subject to a
maximum reduction of 50%. These reductions continue after full retirement age.
Retired employees and spouses who have not yet attained full social security
retirement age, which ranges from age 65 for those born before 1938 to age 67
for those born in 1960 or later, may also be subject to additional earnings
deductions for any earnings, in or outside the rail industry, that exceed
certain exempt amounts. The tier I and vested dual benefits of these employee
and spouse annuities are subject to deductions if earnings exceed the exempt
amounts applicable to social security beneficiaries. Prior to the calendar year
in which full social security retirement age is attained, the deduction is $1 in
benefits for every $2 of annual earnings exceeding an exempt amount ($13,560 in
2008).
If the employee or spouse has a tier I reduction for social security benefits,
the tier I benefit is not reduced for excess earnings.
In the first year in which an employee subject to these earnings deductions is
both entitled to an annuity and has a non-work month, a full annuity can be paid
for those months in which the employee had low earnings or did not have
substantial self-employment, no matter what total earnings for the year were. A
non-work month is one in which the employee neither earns over 1/12th of the
annual exempt amount nor has substantial self-employment. Non-work months can be
claimed in only one calendar year, which need not necessarily be the first year
of entitlement.
In the calendar year in which an individual attains full social security
retirement age, deductions of $1 are made in tier I and vested dual benefits for
every $3 earned in excess of an exempt amount ($36,120 in 2008), but only
counting those earnings in the months prior to the month full retirement age is
attained. These tier I and vested dual benefit deductions stop effective with
the month full retirement age is attained.
Earnings received for services rendered, plus any net earnings from
self-employment, are considered when assessing deductions for earnings.
Interest, dividends, certain rental income or income from stocks, bonds, or
other investments are not generally considered earnings for this purpose.
Annuitants under full retirement age who work after retirement and expect that
their earnings for a year will be more than the annual exempt amount must
promptly notify the Board and furnish an estimate of their expected earnings in
order to prevent an overpayment and penalties. They should also notify the Board
if their original estimate changes significantly.
Retired employees and spouses who return to work for a railroad or for their
last pre-retirement nonrailroad employer must notify the Board, regardless of
earnings or age.
A spouse benefit is subject to reductions not only for the spouse’s earnings,
but also for the earnings of the employee, regardless of whether the earnings
are from service for the last pre-retirement nonrailroad employer or other
post-retirement employment.
A spouse annuity is not payable for any month in which the employee’s annuity is
not payable, or for any month in which the spouse, regardless of age, works for an employer covered
under the Railroad Retirement Act. Effective August 17, 2007, an annuity
can be paid to a divorced spouse despite the employee's work activity, if
certain conditions are met.
Disability Work Restrictions
If an annuity is based on disability, there are certain work restrictions that
can affect payment, depending on the amount of earnings. The annuity is not
payable for any month in which the annuitant works for an employer covered under
the Railroad Retirement Act. The annuity is not payable for any month in 2008 in which
the annuitant earns more than $730 in any employment or net self-employment,
exclusive of disability-related work expenses. If a disabled annuitant's
earnings in a year (after deduction of disability-related work expenses) exceed
the annual limit, the annuity is not payable for the number of months derived by
dividing the amount by which those earnings exceed the annual limit by the
amount of the monthly limit. Any resulting fraction of a month equal to or
greater than one-half (0.5) is rounded up, increasing the number of months in
which the annuity is not payable by one. For example, a disability
annuitant earns $10,000 in 2008, which is $1,240 over the 2008 annual limit of
$8,760. Dividing $1,240 by $730 yields 1.70. As .70 is more than
one-half, the annuitant would lose 2 months of benefits. Failure to report
such earnings could result in a penalty charge.
These disability work restrictions cease upon a disabled employee annuitant’s
attainment of full retirement age. This transition is effective no earlier than
full retirement age even if the annuitant had 30 years of service. Earnings
deductions continue to apply to those working for their last pre-retirement
nonrailroad employer.
If a disabled annuitant works before full retirement age, this may also raise a
question about the possibility of that individual’s recovery from disability,
regardless of the amount of earnings. Consequently, any earnings must be
reported promptly to avoid overpayments, which are recoverable by the Board and
may also include penalties.
When Annuities Stop
Payment of any annuity stops upon the annuitant's death, and the annuity is not
payable for any day in the month of death.
A disability
annuity stops after the employee recovers from the disability; it
can be reinstated if the disabling condition recurs.
A spouse annuity stops if the employee's annuity terminates, or the spouse
annuity was based on caring for a child and the child is no longer under age 18
or disabled or the child is no longer in the spouse's care. However, the spouse
annuity may continue if she or he is qualified without the child or it can
resume when the spouse attains a qualifying age.
While a divorce ends eligibility for a spouse annuity, a divorced spouse may,
under conditions described previously, qualify for a divorced spouse's annuity.
A divorced spouse’s annuity stops upon remarriage or upon entitlement to a
social security benefit based on her or his own earnings, if the unreduced
social security benefit is equal to or greater than one-half of the employee’s
unreduced tier I amount. A divorced spouse’s annuity may be reduced or stopped
if the divorced spouse is also entitled to a railroad retirement annuity.
It is important to notify the Railroad Retirement Board promptly if one of the
above changes occurs. Failure to report can result in an overpayment, which the
Board will take action to recover, sometimes with interest or penalties. Failure
to report changes promptly or making a false statement can also result in a fine
or imprisonment.
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