Prepared by Public Affairs 312-751-4777

Most railroad retirement annuities, like social security benefits, are scheduled to increase in January 2007 on the basis of the rise in the Consumer Price Index (CPI) during the 12 months preceding October 2006.

Cost-of-living increases are calculated in both the tier I and tier II benefits included in a railroad retirement annuity. Tier I benefits, like social security benefits, will increase by 3.3 percent, which is the percentage of the CPI rise. Tier II benefits will increase by 1.1 percent, which is 32.5 percent of the CPI rise. The vested dual benefit payments and supplemental annuities also paid by the Railroad Retirement Board are not adjusted for the CPI rise.

In January 2007, the average regular railroad retirement employee annuity will increase $48 a month to $1,876 and the average of combined benefits for an employee and spouse will increase $65 a month to $2,622. For those aged widow(er)s eligible for an increase, the average annuity will increase $29 a month to $994. However, widow(er)s whose annuities are being paid under the Railroad Retirement and Survivors’ Improvement Act of 2001 will not receive annual cost-of-living adjustments until their annuity amount is exceeded by the amount that would have been paid under prior law, counting all interim cost-of-living increases otherwise payable. Almost 31 percent of the widow(er)s on the Board’s rolls are being paid under the 2001 law.

If a railroad retirement or survivor annuitant also receives a social security or other government benefit, such as a public service pension or another railroad retirement annuity, the increased tier I benefit is reduced by the increased government benefit. However, tier II cost-of-living increases are not reduced by increases in other government benefits. If a widow(er) whose annuity is being paid under the 2001 law is also entitled to an increased government benefit, her or his railroad retirement survivor annuity may decrease.

However, the total amount of the combined railroad retirement widow(er)’s annuity and other government benefits will not be less than the total payable before the cost-of-living increase and before increased Medicare premium deductions.

For most beneficiaries covered by Medicare, the standard Part B premium generally deducted from monthly benefits increases from $88.50 to $93.50 in 2007.

In late December the Railroad Retirement Board will mail notices to all annuitants providing a breakdown of the annuity rates payable to them in January 2007.

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