Prepared by Public Affairs 312-751-4777
The payment of a railroad retirement annuity can be affected by
entitlement to social security benefits, as well as certain other government
benefits. Such dual entitlement, if not reported to the Railroad Retirement
Board, can result in benefit overpayments which have to be repaid, sometimes
with interest and penalties. The following questions and answers describe how
dual benefit payments are adjusted by the Railroad Retirement Board for
annuitants eligible for social security benefits and/or other government benefit
payments. 1. How are dual
benefits paid to persons entitled to both railroad retirement and social
security benefits? Since 1975, if a railroad retirement
annuitant is also awarded a social security benefit, the Social Security
Administration determines the amount due, but a combined monthly dual benefit
payment should, in most cases, be issued by the Railroad Retirement Board after
the railroad retirement annuity has been reduced for the social security
benefit. 2. Why is a railroad
retirement annuity reduced when a social security benefit is also payable?
The tier I portion of a railroad retirement annuity is based on both railroad
retirement and nonrailroad social security credits acquired by an employee and
reflects what social security would pay if railroad work were covered by social
security. Tier I benefits are, therefore, reduced by the amount of any actual
social security benefit paid on the basis of nonrailroad employment, in order to
prevent a duplication of benefits based on the same earnings. The
tier I dual benefit reduction also applies to the annuity of an employee
qualified for social security benefits on the earnings record of another person,
such as a spouse. And, the tier I portion of a spouse or survivor annuity is
reduced for any social security entitlement, even if the social security benefit
is based on the spouse’s or survivor’s own earnings. The reductions follow
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.
However, the tier II portion of a railroad retirement annuity is based on
railroad service and earnings alone, is computed under a separate formula, and
is not reduced for entitlement to a social security benefit.
3. Are there any exceptions to the railroad
retirement annuity reduction for social security benefits?
No. However, if an employee qualified for dual benefits before 1975 and meets
certain vesting requirements, he or she can receive an additional annuity amount
which offsets, in part, the dual benefit reduction. This additional amount,
reflecting the dual benefits payable prior to 1975, is called a vested dual
benefit payment. Legislation enacted in 1974 coordinated dual railroad
retirement and social security benefit payments to eliminate certain
duplications; but this legislation also included a "grandfather" provision to
preserve the pre-1975 dual benefits of persons meeting certain vesting
requirements by including vested dual benefit payments in their annuities.
Awards of these vested dual benefit amounts are now limited only to vested
railroad employees with dual coverage on their own earnings. Spouses and
widow(er)s retiring since 1981 no longer qualify. Of some 12,000 employee
annuities awarded in Fiscal Year 1999, less than 600 contained vested dual
benefit payments. 4. Are
there any funding limitations on the payment of 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 98% 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 by proration. Vested dual benefits are not increased by
cost-of-living adjustments.
5. Can Federal, State, or local government pensions also require dual benefit
reductions in a railroad retirement annuity? Tier I
benefits for employees first eligible for a railroad retirement annuity and a
Federal, State or local government pension after 1985 may be reduced for receipt
of a public pension based, in part or in whole, on employment not covered by
social security or railroad retirement after 1956. This also applies to certain
other payments not covered by social security, such as payments from a
non-profit organization or from a foreign government or a foreign employer.
However, 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. This public service pension reduction is
effected by adjusting certain weighting factors in the social security and tier
I benefit formulas. These factors increase benefits for workers with low
lifetime social security and/or railroad retirement earnings. The weighting
factors were not, however, intended to increase benefits for those whose major
employment was not covered by social security or railroad retirement.
6. How does the public service pension apply
to spouse or widow(er)’s benefits? The tier I portion of a
spouse’s or widow(er)’s annuity may also be reduced for receipt of any Federal,
State or local pension separately payable to the spouse or widow(er) based on
her or his own earnings. The reduction generally does not apply if the
employment on which the public pension is based was covered by social security
on the last day of public employment. (A special rule applies to Federal
employees who switch from the Civil Service Retirement System to the Federal
Employees Retirement System.) For spouses and widow(er)s subject to the
government pension reduction, the tier I reduction is equal to 2/3 of the amount
of the government pension. The public service pension reduction in railroad
retirement spouse and widow(er) benefits was effected by 1977 social security
legislation which also applied to the tier I portion of railroad retirement
spouse and widow(er) annuities. Since a social security spouse or widow(er)
benefit is reduced if the beneficiary is also entitled to a social security
benefit based on her or his own earnings, it was considered equitable that a
social security spouse or widow(er) benefit also be reduced for a public service
pension based on the beneficiary’s own nonsocial security earnings.
7. What dual benefit restrictions apply when
both a husband and wife are rail employees entitled to railroad retirement
annuities? If both the husband and wife are qualified
railroad employees and either has some railroad service before 1975, both can
receive separate railroad retirement employee and spouse annuities, without a
full dual benefit reduction under the phase-out provisions of the 1974 Railroad
Retirement Act. However, if both the husband and wife started railroad
employment after 1974, only the railroad retirement employee annuity or the
spouse annuity, whichever he or she chooses, is payable. If a
widow(er) is qualified for a railroad retirement employee annuity as well as a
widow(er)’s annuity, a special guaranty applies in some cases. If both the
widow(er) and the deceased employee started railroad employment after 1974, the
survivor annuity payable to the widow(er) is reduced by the amount of the
employee annuity. If either the deceased employee or the widow(er)
had some railroad service before 1975 but had not completed 120 months of
service before 1975, the employee annuity and the tier II portion of the
widow(er)’s annuity would be payable to the widow(er). The tier I portion of the
widow(er)’s annuity would be payable only to the extent that it exceeds the tier
I portion of the employee annuity. If either the deceased
employee or the widow(er) completed 120 months of railroad service before 1975,
the widow or dependent widower may receive both an employee annuity and a
survivor annuity, without a full dual benefit reduction.
8. Can workers’ compensation or public
disability benefits affect railroad retirement benefits?
If an employee is receiving a disability annuity, tier I benefits for the
employee and spouse may, under certain circumstances, be reduced for receipt of
workers’ compensation or public disability benefits.
9. How can an annuitant find out if receipt
of any dual benefits might affect his or her railroad retirement annuity?
If an annuitant becomes entitled to any of the previously discussed dual benefit
payments, or if there is any question as to whether a dual benefit payment
requires a reduction in an annuity, a Board field office should be contacted. In
any situation, the best rule is, "When in doubt-report." For the
phone number or address of the nearest Board field office, annuitants should
look in the telephone directory under "United States Government," or check with
their local union official, rail employer, post office, or Federal Information
Center. Annuitants can also find the address and phone number of the Board
office serving their area by calling the automated toll-free RRB Help-Line at
1-800-808-0772 or by checking the Board’s Web site at www.rrb.gov. Most Board
field offices are open to the public from 9:00 a.m. to 3:30 p.m., Monday through
Friday. ### |