Prepared by Public Affairs 312-751-4777
Railroad retirement benefits
are subject to reduction if an employee with less than 30 years of service
retires before attaining full retirement age. While employees with less than 30
years of service may still retire at age 62, the age at which full retirement
benefits are payable has been gradually increasing since the year 2000, the same
as for social security.
The following questions and answers explain how these early retirement age
reductions are applied to railroad retirement annuities.
1. What is the full retirement age
for employees with less than 30 years of service and is it the same for all
employees?
Full retirement age, the earliest age at which a person can begin receiving
railroad retirement or social security benefits without any reduction for early
retirement, ranges from age 65 for those born before 1938 to age 67 for those
born in 1960 or later, the same as for social security.
2. How are the changes in the maximum
age reduction being phased in?
Since 2000, the age requirements for some unreduced railroad retirement benefits
have been rising just like the social security requirements. For employees with
less than 30 years of service and their spouses, full retirement age increases
from 65 to 66, and from 66 to 67, at the rate of two months per year over two
separate six-year periods. This also affects how reduced benefits are computed
for early retirement.
The gradual increase in full retirement age from age 65 to age 66 affects those
people who were born in the years 1938 through 1942. The full retirement age
will remain age 66 for people born in the years 1943 through 1954. The gradual
increase in full retirement age from age 66 to age 67 affects those who were
born in the years 1955 through 1959. For people who were born in 1960 or later
the full retirement age will be age 67.
3. How does this affect the early
retirement age reductions applied to the annuities of those who retire before
full retirement age?
The early retirement annuity reductions applied to annuities awarded before full
retirement age are increasing. For employees retiring between age 62 and full
retirement age with less than 30 years of service, the maximum reduction will be
30 percent by the year 2022. Prior to 2000, the maximum reduction was 20
percent.
Age reductions are applied separately to the tier I and tier II components of an
annuity. The tier I reduction is 1/180 for each of the first 36 months the
employee is under full retirement age when his or her annuity begins and 1/240
for each additional month. This will result in a gradual increase in the
reduction at age 62 to 30 percent for an employee once the age 67 retirement age
is in effect.
These same reductions apply to the tier II component of the annuity. However, if
an employee had any creditable railroad service before August 12, 1983, the
retirement age for tier II purposes will remain 65, and the tier II benefit will
not be reduced beyond 20 percent.
The following chart shows how the gradual increase in full retirement age will
affect employees.
Employee Retires with Less than 30 Years of
Service
1937 or earlier |
65 |
20.00% |
1938 |
65 and 2 months
|
20.833% |
1939 |
65 and 4 months
|
21.667% |
1940 |
65 and 6 months
|
22.50% |
1941 |
65 and 8 months
|
23.333% |
1942 |
65 and 10 months
|
24.167% |
1943 through 1954 |
66 |
25.00% |
1955 |
66 and 2 months
|
25.833% |
1956 |
66 and 4 months
|
26.667% |
1957 |
66 and 6 months
|
27.50% |
1958 |
66 and 8 months
|
28.333% |
1959 |
66 and 10 months
|
29.167% |
1960 or later |
67 |
30.00% |
* A person attains a given age
the day before his or her birthday. Consequently, someone born
on January 1 is considered to have attained his or her given age
on December 31 of the previous year.
**If an employee has less than 10
years of railroad service and is already entitled to an
age-reduced social security benefit, the tier I reduction is
based on the reduction applicable on the beginning date of the
social security benefit, even if the employee is already of full
retirement age on the beginning date of the railroad retirement
annuity. |
4. What are some examples of how this
will affect the amounts payable to employees retiring before full retirement age
with less than 30 years of service?
Take the example of an employee born on June 2, 1950, who retires in 2012 at the
age of 62. In terms of today’s dollars and current benefit levels, not counting
future increases in creditable earnings, assume this employee is eligible for
monthly tier I and tier II benefits, before age reductions, of $1,200 and $800,
respectively, for a total monthly benefit of $2,000.
Upon retirement at age 62, the employee’s tier I benefit would be reduced by 25
percent, the maximum age reduction applicable in 2012. This would yield a tier I
monthly benefit of $900; the employee’s tier II benefit would also be reduced by
25 percent, providing a tier II amount of $600 and a total monthly rate of
$1,500. However, if the employee had any rail service before August 12, 1983,
the tier II benefit would be subject to a maximum reduction of only 20 percent,
providing a tier II amount of $640, and a total monthly rate of $1,540.
As a second example, take an employee born on June 2, 1960, and also eligible
for monthly tier I and tier II benefits, before age reductions, of $1,200 and
$800, respectively, for a total monthly benefit of $2,000. This employee retires
in 2022 at age 62 with no service before August 12, 1983. Consequently, a 30
percent reduction is applied to both the tier I and tier II benefits and the net
total annuity would be $1,400.
5. How are railroad retirement spouse
benefits affected by this change?
If an employee retiring with less than 30 years of service is age 62, the
employee’s spouse is also eligible for an annuity the first full month the
spouse is age 62. Early retirement reductions are applied to the spouse annuity
if the spouse retires prior to full retirement age. Beginning in the year 2000,
full retirement age for a spouse gradually began to rise to age 67, just as for
an employee, depending on the year of birth. While reduced spouse benefits are
still payable at age 62, the maximum reduction will be 35 percent by the year
2022. However, if an employee had any creditable rail service prior to August
12, 1983, the increased age reduction is applied only to the spouse’s tier I
benefit. The maximum reduction in tier II, in this case, would only be 25
percent, as under prior law.
Take for an example the spouse of a railroader with less than 30 years of
service, none of it prior to August 12, 1983, who was born on April 2, 1960, and
is retiring in 2022 at age 62, with a spouse annuity, in terms of today’s
dollars and current benefit payments and before any reductions for age, of
$1,000 a month. With the maximum reduction of 35 percent applicable in 2022, her
net monthly benefit would be $650.
As a second example, if the same spouse had been born on April 2, 1948, and was
retiring in 2010 at age 62, with the maximum age reduction of 30 percent, her
net monthly benefit would be $700.
The following chart shows how this will affect the spouses of railroad employees
if the employee retires with less than 30 years of service.
Spouse Age Reductions
1937 or earlier |
65 |
25.00% |
1938 |
65 and 2 months
|
25.833% |
1939 |
65 and 4 months
|
26.667% |
1940 |
65 and 6 months
|
27.50% |
1941 |
65 and 8 months
|
28.333% |
1942 |
65 and 10 months
|
29.167% |
1943 through 1954 |
66 |
30.00% |
1955 |
66 and 2 months
|
30.833% |
1956 |
66 and 4 months
|
31.667% |
1957 |
66 and 6 months
|
32.50% |
1958 |
66 and 8 months
|
33.333% |
1959 |
66 and 10 months
|
34.167% |
1960 or later |
67 |
35.00% |
* A person attains a given age
the day before his or her birthday. Consequently, someone born
on January 1 is considered to have attained his or her given age
on December 31 of the previous year.
**If the employee has less than 10 years of railroad service and
the spouse is already entitled to an age-reduced social security
benefit, the age reduction in her or his tier I will be based on
the age reduction applicable on the beginning date of the
spouse’s social security benefit, even if the spouse is already
of full retirement age on the beginning date of her or his
railroad retirement annuity. |
6. Are age reductions applied to employee
disability annuities?
Employee annuities based on disability are not subject to age reductions
except for employees with less than 10 years of service, but who have 5 years of
service after 1995. Such employees may qualify for a tier I benefit before
retirement age based on total and permanent disability, but only if they have a
disability insured status (also called a “disability freeze”) under Social
Security Act rules, counting both railroad retirement and social
security-covered earnings. Unlike with a 10-year employee, a tier II benefit is
not payable in these disability cases until the employee attains age 62. And,
the employee’s tier II benefit will be reduced for early retirement in the same
manner as the tier II benefit of an employee who retired at age 62 with less
than 30 years of service.
7. Do these changes also affect survivor
benefits?
Yes. The eligibility age for a full widow(er)’s annuity is also gradually rising
from age 65 for those born before 1940 to age 67 for those born in 1962 or
later. A widow(er), surviving divorced spouse or remarried widow(er) whose
annuity begins at full retirement age or later will generally receive an annuity
unreduced for early retirement. However, if the deceased employee received an
annuity that was reduced for early retirement, a reduction would be applied to
the tier I amount payable to the widow(er), surviving divorced spouse or
remarried widow(er). The maximum age reductions will range from 17.1 percent to
20.36 percent, depending on the widow(er)’s date of birth. (These age reductions
apply to both tier I and tier 2.) For a surviving divorced spouse or remarried
widow(er), the maximum age reduction is 28.5 percent. For a disabled widow(er),
disabled surviving divorced spouse or disabled remarried widow(er), the maximum
reduction is also 28.5 percent, even if the annuity begins at age 50.
8. Does the increase in full retirement age
affect the age at which a person becomes eligible for Medicare benefits?
No. Although the age requirements for some unreduced railroad retirement
benefits have risen just like the social security requirements, beneficiaries
are still eligible for Medicare at age 65.
9. Do these increases in full retirement age
also apply to the earnings limitations and work deductions governing benefit
payments to annuitants who work after retirement?
Like social security benefits, railroad retirement tier I 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 limitations and work deductions
apply to all age and service annuitants and spouses under full retirement age
regardless of the employee’s years of service. Although employees retiring at
age 60 with 30 years of service have no age reduction, these earnings
limitations and work deductions still apply until they reach their full
retirement age. These earnings limitations also apply to survivor annuitants,
with the exception of disabled widow(er)s under age 60 and disabled children.
Likewise, while special earnings restrictions apply to employees entitled to
disability annuities, these disability earnings 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 railroad service.
The additional deductions applied to the annuities of retired employees and
spouses who work for their last pre-retirement nonrailroad employer continue to
apply after the attainment of full retirement age.
10. How can individuals get more information
about railroad retirement annuities and their eligibility requirements?
Employees should contact a field office of the RRB by calling toll-free
1-877-772-5772 or via the RRB’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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