If you are filing for a disability annuity, refer to the earnings restrictions in booklet RB-1D, "Employee Disability Benefits".

Otherwise, the age and service annuity Tier 1 and Tier 2 deductions for earnings are explained below.

Self-Employment and Other Nonrailroad Work

Earnings from nonrailroad employment, including self-employment, may affect your annuity computation. Nonrailroad work is any job that is not in the railroad industry. This includes work for a Canadian railroad that is not covered under the Railroad Retirement Act and work as an elected or appointed public official.  

We ask for information regarding your nonrailroad work, any government jobs you may have had, and any self-employment to determine whether or not you have a current connection with the railroad industry. Earnings after your annuity beginning date from any nonrailroad employment or self-employment may also cause work deductions.

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".

Tier 1, Vested Dual Benefit or Special Guaranty Work Deductions

Tier 1, Vested Dual Benefit, or Special Guaranty Computation work deductions do not apply for any months you are Full Retirement Age (FRA) or older. If you are FRA, or older, on your annuity beginning date, you may skip to Tier 2 work deductions. If you are under FRA, earnings from any nonrailroad employment (including self-employment) over the Annual Earnings Exempt Amount cause work deductions to your Tier 1, any Vested Dual Benefit payable, and to any Special Guaranty computation.

The term Annual Earnings Exempt Amount means the amount of money you can earn in nonrailroad employment in a year without losing part of your annuity or the annuities of others entitled on your earnings record. 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.

When you have earnings over the Annual Earnings Exempt Amount for your age group, the excess is charged against your annuity and the annuities of all others entitled on your earnings record. However, if a divorced spouse is entitled on your earnings record, effective from the second anniversary of the divorce, your earnings have no effect on the divorced spouse annuity.

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 Tier 1, Vested Dual Benefit, or Special Guaranty Computation - In general, earnings restrictions apply to gross earnings from employment and net earnings from self-employment. Gross earnings are all salaries (including amounts deferred to a 401(k) pension account), commissions, bonuses, retroactive wage increases, or any allowances for room or board earned in the calendar year. If these earnings are from an employer covered under the Social Security Act, the amount of the gross earnings is the amount reported for social security tax under the Federal Insurance Contributions Act (FICA). Net earnings from self-employment equals 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 calendar year for the purpose of Tier 1, Vested Dual Benefit, or Special Guaranty Computation 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.
   

• 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 you are entitled to an annuity and have a non-work month. 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 12) 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, deductions for your own earnings are not applied to any Non-Work Month. If you have high earnings before your annuity begins but do not earn more than the Monthly Earnings Exempt Amount in any month after your annuity begins, Tier 1 deductions for your own earnings will not be required.
     
  • Special Rule does not Apply - If you 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, Tier 1, Vested Dual Benefit, or Special Guaranty Computation work 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 to your Tier 1 component if you are receiving social security benefits. Earnings deductions may be made by the Social Security Administration in your social security benefit. If your annuity includes a Vested Dual Benefit, however, earnings deductions are still assessed to that part of your annuity.
  
  
• Exception for Those Who do not have a Work Deduction Insured Status - Ask your RRB field office if this exception applies to you. Most employees currently retiring are not eligible for this exception because they do have a Work Deduction Insured Status.  

However, there are a few employees who may not have accumulated the number of wage Quarters of Coverage, or compensation Quarters of Coverage after 1974, to have a Work Deduction Insured Status. For example, employees working for Canadian railroads have not accumulated Quarters of Coverage since 1983.

This exception only affects the Tier 1 component or Vested Dual Benefit work deductions. A Work Deduction Insured Status is not required for work deductions under the Special Guaranty computation.

Last Pre-Retirement Nonrailroad Employment

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 employee annuity begins or for whom you stopped working in order to receive an annuity. 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 employee annuity begins or, if you have stopped working, you still hold rights to return to service of the nonrailroad employer on the date your employee annuity begins.

The nonrailroad employer is presumed to be your LPE if your 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

Nonrailroad employment after the date your annuity begins is not LPE unless you worked for that employer before the date your annuity begins. Also, some types of nonrailroad work are not considered LPE, no matter when they are done.

The following types of 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 Corporation; or,

• self-employment as defined under the Railroad Retirement Act.

Even though earnings from employment described above are not from LPE, they can cause Tier 1 work deductions.

Tier 2 and Supplemental Annuity Work Deductions

Any earnings from your Last Pre-Retirement Nonrailroad Employer (LPE) in or after the month your annuity begins will reduce your Tier 2 component, your spouse’s Tier 2 component, and any supplemental annuity. The reduction is $1 for each $2 earned (subject to a maximum reduction of 50 percent of the Tier 2 and the supplemental annuity).

The reduction to the Tier 2 and the supplemental annuity occurs at any age, even after you attain Full Retirement Age (FRA). There is no Annual Earnings Exempt Amount or Monthly Earnings Exempt Amount for the first year of entitlement, for LPE work deductions. Work deductions for LPE 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 or supplemental annuity work deductions.