Prepared by Public Affairs 312-751-4777
Retirees, and those planning retirement, should be aware of the railroad
retirement laws governing benefit payments to annuitants who work after
retirement.
The following questions and answers describe these railroad retirement work
restrictions and earnings limitations on post-retirement employment, and how
these rules can affect retirees engaging in self-employment.
1. What are the basic railroad retirement
work restrictions and earnings limitations that apply to post-retirement work?
Neither a regular railroad retirement annuity (whether based on age and service
or on disability) nor a supplemental annuity is payable for any month in which a
retired employee, regardless of age, works for an employer covered under the
Railroad Retirement Act, including labor organizations. This is true even if
only one day’s service is performed during the month and includes local lodge
compensation totaling $25 or more for any calendar month.
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, a divorced spouse can receive an annuity even if the employee has not
retired, provided they have been divorced for at least 2 years, 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.) A survivor
annuity is not payable for any month the survivor works for an employer covered
under the Railroad Retirement Act, regardless of the survivor’s age.
Also, like social security benefits, railroad retirement tier I benefits and
vested dual benefits paid to employees and spouses, and tier I, tier II and
vested dual benefits paid to survivors are subject to deductions if an
annuitant’s earnings exceed certain exempt amounts.
These earnings deductions do not apply to those who have attained full social
security retirement age. Full retirement age for employees and spouses ranges
from age 65 for those born before 1938 to age 67 for those born in 1960 or
later. Full retirement age for survivor annuitants ranges from age 65 for those
born before 1940 to age 67 for those born in 1962 or later. Deductions for all
annuitants, however, remain in effect for the months before the month of full
retirement age during the calendar year of attainment. (The attainment of full
retirement age does not mean an annuitant can return to work for an employer
covered under the Railroad Retirement Act. As explained above, no annuity is
payable for any month in which the annuitant works for a railroad employer,
regardless of the annuitant’s age).
2. What are the current exempt earnings
amounts for those annuitants subject to earnings limitations?
For those under full retirement age throughout 2007, the exempt earnings amount
is $12,960. For beneficiaries attaining full retirement age in 2007, the exempt
earnings amount is $34,440 for the months before the month full retirement age
is attained.
For those under full retirement age throughout the year, the earnings deduction
is $1 in benefits for every $2 of earnings over the exempt amount. For those
attaining full retirement age in 2007, the deduction is $1 for every $3 of
earnings over the exempt amount in the months before 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 considered earnings for this purpose.
Additional deductions are assessed for retired employees and spouses who work
for their last pre-retirement nonrailroad employer and special restrictions
apply to disability annuitants.
3. What are the additional deductions applied to the annuities of retired
employees and spouses working for their last pre-retirement nonrailroad
employer?
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
compensation received subject to a maximum reduction of 50 percent. The
deductions in the tier II benefits and supplemental annuities of individuals who
work for pre-retirement nonrailroad employers apply even if earnings do not
exceed the tier I exempt earnings limits. Also, while tier I and vested dual
benefit earnings deductions stop when an annuitant attains full retirement age,
these tier II and supplemental annuity deductions continue to apply after the
attainment of full retirement age.
4. Can a retired employee’s earnings also reduce a spouse’s benefit?
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.
5. What are the special earnings restrictions applied to disability annuitants?
A disability annuity is not payable for any month in 2007 in which the annuitant
earns more than $700 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 $9,500
in
2007, which is $1,100 over the 2007 annual limit of $8,400. Dividing $1,100 by
$700 yields 1.57. As .57 is more than one-half, the annuitant would lose 2
months of benefits.
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 RRB and may also
include penalties.
6. After becoming entitled to a railroad retirement annuity, a retired employee
is thinking of becoming a self-employed contractor or consultant, and might be
providing services for a railroad or last pre-retirement nonrailroad employer.
How would this affect his or her railroad retirement annuity?
It depends on whether or not the Railroad Retirement Board (RRB) considers the
employee to be truly engaging in self-employed contracting or consulting, or
whether the RRB considers him or her to be functioning as an employee, and if
so, who the RRB considers to be the actual employer for railroad retirement
purposes.
If a retiree is considered to be functioning as a self-employed contractor or
consultant, his or her annuity is subject to tier I and vested dual benefit
earnings deductions for net self-employment earnings.
However, if a retiree is considered to be functioning as an employee of a
railroad or railroad labor organization, rather than as a self-employed
contractor or consultant, the retiree’s annuity would be subject to suspension.
If the retiree is considered the employee of a nonrailroad employer, the
retiree’s annuity would be subject to earnings deductions for nonrailroad wages,
and to additional deductions if he or she is considered to be working for a last
nonrailroad pre-retirement employer.
RRB determinations on contracting or consulting services take into account
multiple factors which could be evaluated differently depending on the
circumstances of the individual situation. Since no single rule covers every
case, anyone requiring a determination as to whether contractor or consultant
service is valid self-employment should contact the RRB for a determination well
in advance of making a commitment so as to be sure of the effect on benefit
payments.
7. How can individuals get more information about these railroad retirement work
restrictions and earnings limitations?
They should contact the nearest field office of the RRB for information or refer
to the RRB’s
Web site at
www.rrb.gov.
Persons can find the address and phone number of the RRB office serving their
area by calling the automated toll-free RRB
Help Line at 1-800-808-0772, or from
the agency’s Web site. 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.
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