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 (RRB), 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 RRB for annuitants eligible for social security
benefits and/or other 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
RRB 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 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.
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. Fewer than 100 vested dual
benefits were awarded in fiscal year 2007.
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. These appropriations account for less than 1% of total
financing sources for the railroad retirement system. 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 result in 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 reduction is made 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 be reduced for
receipt of any Federal, State or local government 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 service 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.) For spouses
and widow(er)s subject to the public service pension reduction, the tier I
reduction is equal to 2/3 of the amount of the public service pension. The
public service pension reduction in railroad retirement spouse and widow(er)
benefits was brought about 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 non-social 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 employee and spouse are qualified railroad employees and either one
had some railroad service before 1975, the spouse tier I amount is reduced by
the amount of the railroad employee tier I to which the spouse is entitled and
that reduction is restored in the spouse tier II amount. The spouse tier I
amount cannot be reduced below zero.
If both the employee and spouse started railroad employment after 1974, the
amount of any spouse or divorced spouse annuity is reduced by the amount of the
employee annuity to which the spouse is also entitled.
In survivor cases, if a widow or dependent widower is also a railroad employee
annuitant, and either the widow(er) or the deceased employee had 120 months of
railroad service before 1975, the tier I reduction may be partially restored in
the survivor tier II amount.
If either the deceased employee or the widow(er) had some railroad service
before 1975 but less than 120 months of service, the widow(er)’s own employee
annuity and the tier II portion of the survivor annuity would be payable to the
widow(er). The tier I portion of the survivor annuity would be payable only to
the extent that it exceeds the tier I portion of the widow(er)’s own employee
annuity.
If the widow(er) qualifies for a railroad retirement employee annuity and
neither the widow(er) nor the deceased employee had any railroad service before
1975, the survivor annuity payable to the widow(er) is reduced by the total
amount of the widow(er)’s own employee annuity.
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, an RRB
field office should be
contacted. In any situation, the best rule is, “When in doubt-report.”
RRB field 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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