Prepared by Public Affairs 312-751-4777
Rights to benefits under the
Railroad Retirement Act also carry
responsibilities for reporting events that may affect the payment of these
benefits to the employee or to members of the employee’s family. If these events
are not reported, benefit overpayments can occur that have to be repaid,
sometimes with interest and penalties.
Events that can affect the payment of a railroad retirement annuity and result
in overpayments if not promptly reported include::
- social security or certain other benefit awards, and changes in the amount of
such benefit payments;
- post-retirement work and earnings;
- the death of an annuitant;
- changes in marital status;
- a child leaving the care of a spouse or widow(er);
- a student ceasing full-time attendance.
The following questions and answers describe how these events affect railroad
retirement benefits and what should be done to prevent overpayments.
1. How can the award of social security benefits result in a railroad retirement
annuity overpayment?
The tier I portion of a railroad retirement annuity is based on both the
railroad retirement and 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. These 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.
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 (RRB) after the railroad retirement annuity has been
reduced for the social security benefit.
A person should notify the RRB when he or she files for social security
benefits. If the Social Security Administration begins paying benefits directly
to a railroad retirement annuitant without the RRB’s knowledge, an overpayment
will occur. This frequently happens when a railroad employee’s spouse or
widow(er) is awarded social security benefits not based on the employee’s
earnings.
Also, annuitants who are receiving their social security benefits directly from
the Social Security Administration must notify the RRB if their social security
benefits are subsequently increased for any reason
other than annual
cost-of-living increases, such as a recomputation to reflect post-retirement
earnings. As such recomputations are usually retroactive, they can result in
substantial overpayments.
While social security benefit information is provided to the RRB as a result of
routine information exchanges between the RRB and the Social Security
Administration, it will generally not be provided in time to avoid such a
benefit overpayment.
2. What other types of benefit payments, besides social security benefits,
require dual benefit reductions in a railroad retirement annuity?
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 tier I
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.
The tier I portion of a spouse 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 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.) In addition, most military service
pensions and payments from the Department of Veterans Affairs will not cause a
reduction.
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.
If annuitants become entitled to any of the above payments, they should promptly
notify the RRB. If there is any question as to whether a payment requires a
reduction in an annuity, an RRB field office should be contacted.
3. Can earnings cause railroad retirement overpayments?
Unreported post-retirement work and earnings in nonrailroad employment are a
major cause of overpayments in railroad retirement annuities. Like social
security benefits, railroad retirement tier I benefits and vested dual benefits
paid to employees and spouses, plus tier I, tier II, and vested dual benefits
paid to survivors, are subject to earnings deductions if post-retirement
earnings exceed certain exempt amounts, which increase annually.
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.
For those under full retirement age throughout 2007, the exempt earnings amount
is $12,960. For those under full retirement age throughout 2008, the exempt
earnings amount will be $13,560. 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 beneficiaries attaining full retirement age
in 2008, the exempt earnings amount will be $36,120 for the months before the
month full retirement age is attained.
For those under full retirement age throughout a calendar year, the earnings
deduction is $1 in benefits for every $2 of earnings over the exempt amount. For
those attaining full retirement age during a calendar year, the deduction is $1
for every $3 of earnings over the exempt amount in the months before the month
full retirement age is attained.
Annuitants who work after retirement and expect that their earnings for a year
will be more than the annual exempt amount must promptly notify the nearest RRB
field office and furnish an estimate of their expected earnings. This way their
annuities can be adjusted to take the excess earnings into consideration and
prevent an overpayment. Annuitants whose original estimate changes significantly
during the year, either upwards or downwards, should also notify the RRB.
Retired employees and spouses, regardless of age, who work for their last
pre-retirement nonrailroad employer are also subject to an earnings deduction in
their tier II and supplemental benefits of $1 for every $2 in earnings up to a
maximum reduction of 50 percent. This earnings restriction does not change from
year to year and does not allow for an exempt amount. Retired employees and
spouses should therefore promptly notify the RRB if they return to employment
for their last pre-retirement nonrailroad employer, or if the amount of their
earnings from such employment changes.
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 any other
post-retirement employment. (Effective
August 17, 2007, an annuity paid to a divorced spouse may continue despite the
employee’s work activity.)
4. How do post-retirement earnings affect disability annuities?
Special restrictions limiting earnings to $700 per month in 2007 and $730 per
month in 2008, exclusive of disability-related work expenses, apply to disabled
railroad retirement employee annuitants.
In addition, any work performed by a disabled annuitant may be considered an
indication of an individual’s recovery from disability, regardless of the amount
of earnings. Therefore, any earnings by a disability annuitant must be reported
promptly to avoid potential overpayments.
These disability work restrictions apply until the disabled employee annuitant
attains full retirement age. This transition is effective no earlier than full
retirement age even if the annuitant had 30 years of service. Also, a disabled
employee annuitant who works for his or her last pre-retirement nonrailroad
employer would be subject to the additional earnings deduction that applies in
these cases.
5. What effect does railroad work have on an annuity?
No railroad retirement annuity is payable for any month in which an employee,
spouse or survivor annuitant performs compensated service for a railroad or
railroad union. This includes local lodge compensation totaling $25 or more for
any calendar month, and work by a local lodge or division secretary collecting
insurance premiums, regardless of the amount of salary.
6. What should be done when a railroad retirement annuitant dies?
The RRB should be notified immediately upon the death of any retirement or
survivor annuitant. Payment of a railroad retirement annuity stops upon an
annuitant’s death and the annuity is not payable for any day in the month of
death. This is true regardless of how late in the month death occurs and there
is no provision for prorating such a payment. Any payments received after the
annuitant’s death must be returned. The sooner the RRB is notified, the less
chance there is of payments continuing and an overpayment accruing. The RRB
would also determine whether any survivor benefits due are payable by the RRB or
the Social Security Administration.
7. What are some other events that can affect payments to auxiliary
beneficiaries, such as spouses and widow(er)s?
A spouse or divorced spouse must immediately notify the RRB if the railroad
employee upon whose service the annuity is based dies. A spouse must notify the
RRB if her or his marriage ends in divorce or annulment and a widow(er) or
divorced spouse must notify the RRB if she or he remarries.
Also, benefits paid to spouses, widow(er)s and surviving divorced spouses that
are based on the beneficiary caring for an unmarried child of the employee are
normally terminated by the RRB when the child attains age 18 (16 for a surviving
divorced spouse) or if a disabled child over age 18 (16 for a surviving divorced
spouse) recovers from the disability. Therefore, the RRB must be notified if the
child leaves the beneficiary’s care or marries.
Benefits are also payable to an unmarried child age 18 in full-time attendance
at an elementary or secondary school or in approved home schooling until the
student attains age 19 or the end of the school term in progress when the
student attains age 19. (In most cases where a student attains age 19 during the
school term, benefits are limited to the two months following the month age 19
is attained.) These benefits will be terminated earlier if the student marries,
graduates, or ceases full-time attendance. Therefore, the RRB must be notified
promptly to prevent an overpayment.
8. Can an annuitant contest a decision that he or she has been overpaid?
Annuitants who believe a decision regarding a benefit overpayment is incorrect
may ask for reconsideration and/or waiver of the overpayment. If not satisfied
with the initial review, the annuitant may appeal to the RRB’s Bureau of
Hearings and Appeals. Further appeals can be carried to the three-member Board
itself, and beyond the Board to Federal courts.
Annuitants are told about these appeal rights any time a decision is made
regarding a benefit overpayment.
9. How can an annuitant find out if an event might affect his or her railroad
retirement benefit payments?
Annuitants should contact the nearest field office of the RRB for information.
In any situation, the best rule is “If in doubt, report.”
Annuitants 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. They
can also get this information from the agency’s Web site at www.rrb.gov. 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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