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U.S. Railroad Retirement Board
An Agency Overview
January 2013
The Railroad Retirement Board (RRB) is an independent agency in the
executive branch of the Federal Government. The RRB's primary function is to
administer comprehensive retirement-survivor and unemployment-sickness
benefit programs for the nation's railroad workers and their families, under
the Railroad Retirement and Railroad Unemployment Insurance Acts. As part of
the retirement program, the RRB also has administrative responsibilities
under the Social Security Act for certain benefit payments and railroad
workers' Medicare coverage.
In fiscal year 2012, the RRB paid retirement-survivor benefits of some $11.3
billion to about 573,000 beneficiaries. The RRB also paid net
unemployment-sickness benefits of $89 million (including almost $7 million
in temporary extended unemployment benefits under the American Recovery and
Reinvestment Act of 2009 and subsequent reauthorizing legislation) to about
26,000 claimants. At the end of fiscal year 2012, the average annuity paid
to retired rail employees was more than $2,370 a month, spouse benefits
averaged $880 a month, and benefits for aged widow(er)s averaged $1,425 a
month. The maximum biweekly rate for unemployment and sickness benefits was
$660.
Development of the Railroad Retirement and
Unemployment Insurance Systems
The RRB was created in the 1930s by legislation establishing a retirement benefit program for the nation's railroad workers. The railroad industry had pioneered private industrial pension plans, with the first industrial pension plan in North America established by a railroad in 1874. By the 1930s, railroad pension plans were far more developed than in most other businesses or industries, but these plans had serious defects which the Great Depression magnified.
Retirement program
The economic conditions of the 1930s demonstrated the need
for retirement plans on a national basis, because few of the
nation's elderly were covered under any type of retirement
program. While the social security system was in the planning
stage, railroad workers sought a separate railroad retirement
system which would continue and broaden the existing railroad
programs under a uniform national plan. The proposed social
security system was not scheduled to begin monthly benefit
payments for several years and would not give credit for service
performed before 1937, while conditions in the railroad industry
called for immediate benefit payments based on prior service.
Legislation enacted in 1934, 1935, and 1937 established a
railroad retirement system separate from the social security
program legislated in 1935. Such legislation, taking into
account particular circumstances of the rail industry, had some
precedent. Many laws pertaining to rail operations and safety
had already been enacted since the Interstate Commerce Act of
1887. Since passage of the Railroad Retirement Acts of the
1930s, several other railroad laws have subsequently been
enacted.
While the railroad retirement system has remained separate from
the social security system, the two systems are closely
coordinated with regard to earnings credits, benefit payments,
and taxes. A financial interchange links financing of the two
systems by coordinating the portion of railroad retirement
annuities that is equivalent to social security benefits with
the social security system. The purpose of this financial
coordination is to place the social security trust funds in the
same position they would be in if the social security program
covered railroad service instead of the railroad retirement
program.
Legislation enacted in 1974 restructured railroad retirement
benefits into two tiers to coordinate them more fully with
social security benefits. The first tier is based on combined
railroad retirement and social security credits, using social
security benefit formulas. The second tier is based on railroad
service only and compares with private pensions paid over and
above social security benefits in other industries.
Unemployment Insurance Program
The railroad unemployment insurance system was also established in the 1930s.
The Great Depression demonstrated the need for unemployment compensation
programs, and the Social Security Act of 1935 created State unemployment
programs. While the State unemployment programs generally covered railroad
workers, railroad operations which crossed State lines caused special problems.
In some instances, one State denied compensation for unemployed railroad workers
because their employers had paid unemployment taxes in another State. Although
there were cases where employees appeared to be covered in more than one State,
they often did not qualify in any.
A Federal study commission, which reported on the nationwide State plans for
unemployment insurance, recommended that a separate plan cover railroad workers
because of complications with the State plans. Congress then enacted the
Railroad Unemployment Insurance Act in June 1938. The Act established a system
of benefits for unemployed railroaders, financed entirely by railroad employers
and administered by the RRB. Legislation added sickness benefits in 1946.
Railroad Retirement Act
Under the Railroad Retirement Act, railroad workers with at least 10 years of service can receive retirement and disability annuities. Such annuities are also payable to workers with 5 years of service if performed after 1995.
Full age annuities are payable at age 60 to workers with 30 years of service.
For those with less than 30 years of service, reduced annuities are payable at
age 62 and unreduced annuities are payable at full retirement age, which is
gradually rising from 65 to 67, depending on the year of birth. Disability
annuities can be paid on the basis of total or occupational disability.
Annuities are also payable to spouses and divorced spouses of retired workers,
widow(er)s, surviving divorced spouses, remarried
widow(er)s, children, and
parents of deceased railroad workers. Qualified railroad retirement
beneficiaries receive Medicare coverage just like social security beneficiaries.
As noted, the RRB pays retirement annuities to employees, as well as their
spouses and/or divorced spouses, if the employee had at least 10 years of
railroad service, or 5 years if performed after 1995. However, for survivor
benefits, there is an additional requirement that the employee's last regular
employment before retirement or death was in the railroad industry. If a
railroad employee or his or her survivors do not qualify for railroad retirement
benefits, the RRB transfers the employee's railroad retirement credits to the
Social Security Administration, which treats them as social security credits.
Payroll taxes paid by railroad employers and their employees are the primary
source of funding for the railroad retirement-survivor benefit programs.
Railroad retirement taxes, which have historically been higher than social
security taxes, are calculated, like benefit payments, on a two-tier basis.
Railroad retirement tier I payroll taxes are coordinated with social security
taxes so employees and employers pay tier I taxes at the same rate as social
security taxes. In addition, both employees and employers pay tier II taxes to
finance railroad retirement benefit payments beyond social security levels. The
ratio of certain asset balances to the sum of benefit payments and
administrative expenses determines tier II tax rates.
Revenues in excess of benefit payments are invested to provide additional trust
fund income. The National Railroad Retirement Investment Trust manages and
invests railroad retirement assets. It invests these funds in non-governmental
assets, as well as in governmental securities.
Additional trust fund income derives from the financial interchange with the
social security trust funds, revenues from Federal income taxes on railroad
retirement benefits, and appropriations from general treasury revenues provided
after 1974 as part of a phase-out of certain vested dual benefits.
Railroad Unemployment Insurance Act
Under the Railroad Unemployment Insurance Act, unemployment insurance benefits are paid to railroad workers who are unemployed but ready, willing, and able to work, and sickness benefits to railroad workers unable to work because of illness or injury. The RRB also operates a placement service to help unemployed railroaders secure employment.
Benefit year
A new unemployment-sickness benefit year begins every July 1, with eligibility generally based on railroad service and earnings in the preceding calendar year. Up to 26 weeks of normal unemployment or sickness benefits are payable to an individual in a benefit year. Additional extended benefits are payable to persons with 10 or more years of service.
Financing
Taxes on railroad employers under an experience-rating system finance the railroad unemployment-sickness benefits program. The RRB calculates each employer's payroll tax rate annually on the basis of benefit payments to the railroad's employees.
Railroad Medicare
The Medicare program covers railroad workers just like workers covered under
social security. The Medicare program provides health insurance to persons ages
65 and older, as well as persons under age 65 who have been entitled to monthly
benefits based on total disability for at least 24 months or who suffer from
chronic kidney disease requiring hemodialysis or transplant. In addition to
basic hospital insurance (Part A) financed by payroll taxes, there is an
elective supplementary medical insurance (Part B) that covers many other medical
services, such as doctor visits, durable medical equipment, and outpatient
services that hospital insurance does not cover.
Eligible railroad retirement annuitants and social security beneficiaries whose
benefits are payable by the RRB are automatically enrolled under both plans, but
the annuitant or beneficiary can decline Medicare Part B. Eligible nonretired
persons must apply in order to obtain Medicare coverage. The RRB automatically
enrolled some 31,100 beneficiaries for Medicare during fiscal year 2012. As of
the end of that fiscal year, over 470,900 persons were enrolled in the Part A
plan, and nearly 452,200 (96 percent) of them were also enrolled in Part B.
Palmetto GBA, a subsidiary of Blue Cross and Blue Shield, processes medical
insurance (Part B) claims for railroad retirement Medicare beneficiaries.
RRB Organization and Functions
A three-member Board appointed by the President of the United States, with
the advice and consent of the Senate, heads the RRB. The President appoints one
member upon the recommendation of railroad employers, another upon the
recommendation of railroad labor organizations and the third, who is the
Chairman, to represent the public interest. The Board Members' terms of office
are 5 years and expire in different years. The President also appoints an
Inspector General for the RRB.
The primary function of the RRB is the determination and payment of benefits
under the retirement-survivor and unemployment-sickness programs. To this end,
the RRB employs field representatives to help railroad personnel and their
families in filing claims for benefits, examiners to adjudicate the claims, and
information technology staff, equipment and programs to maintain earnings
records, calculate benefits, and process payments.
The RRB also employs actuaries to predict the future income and outlays of the
railroad retirement system, statisticians to analyze and provide data, and
attorneys to interpret legislation and represent the RRB in litigation. The
Inspector General employs auditors and investigators to detect waste, fraud, or
abuse in the benefit programs.
The RRB and the Federal Government
As an independent agency in the executive branch of the Federal Government,
the RRB reports on its operations to the President and the Congress. RRB
officials also may testify at congressional hearings on issues related to the
Railroad Retirement and Railroad Unemployment Insurance Acts. Congress
appropriates funds to the railroad retirement system for benefit payments and
administrative expenses.
The RRB works closely with other Federal agencies and with some State agencies.
Its dealings with some of these agencies, such as the President's Office of
Management and Budget, the Office of Personnel Management, the Government
Accountability Office, and the Department of Treasury, are similar to those of
other executive branch agencies. Interactions with some others--principally
the Social Security Administration, the Centers for Medicare & Medicaid
Services, State employment security departments and, on a smaller scale, the
Department of Labor-- are specifically related to the RRB's various benefit
programs.
The RRB and the National Railroad Retirement Investment Trust
The Railroad Retirement and Survivors' Improvement Act of 2001 established
the National Railroad Retirement Investment Trust. The sole purpose of the
Trust is to manage and invest railroad retirement assets. The Trust is a
tax-exempt entity independent from the Federal Government.
The Act authorizes the Trust to invest the assets of the Railroad Retirement
Account in a diversified investment portfolio in the same manner as those of
private sector retirement plans. Before the Act, the law limited investment
of Railroad Retirement Account assets to U.S. government securities.
The Trust has seven trustees, with railroad labor unions and railroad
companies each selecting three. These six trustees then select a seventh
independent trustee. In turn, they hire professional staff to manage
investment of the assets. While the Act does not delegate any authority to
the RRB with respect to day-to-day activities of the Trust, the Act does
provide that the RRB may bring a civil action to enjoin any act or practice
of the Trust that violates the provisions of the Act or to enforce any
provision of the Act. The Trust has no powers or authority over the
administration of benefits under the Railroad Retirement Act.
The RRB and the Railroad Industry
The administrative organization of the RRB fosters close relations with
railroad employers, employees and their representatives. Two of the three Board
Members are appointed on the recommendations of railway labor and management
associations and labor and management officials have been active in the
development of the railroad retirement and unemployment insurance programs since
their inception.
In addition, the RRB relies on railroad employers and labor groups for help in
keeping railroad personnel informed about the benefit programs.
The RRB conducts informational programs for railroad management and labor
officials to acquaint them with the details of the benefit programs. These
officials, in turn, educate railroad workers as to their benefit rights and
responsibilities.
Railroad employers and railway labor groups also assist the RRB with a joint
placement program to find jobs for unemployed personnel. These joint placement
efforts help to reduce the costs of the unemployment insurance program.
The RRB has direct contact with individual railroad employees, in person or by
phone, through its national network of 53 field offices. Field personnel explain
benefit rights and responsibilities, help employees apply for benefits, provide
related services for annuitants, and answer any questions related to the benefit
programs. The RRB maintains field offices in railroad locales across the United
States. A toll-free number (1-877-772-5772) also provides RRB customers with
easy access to the agency's field offices.
The RRB's headquarters is located at 844 North Rush Street, Chicago, Illinois 60611-2092.
A list of the RRB's publications is provided below.
Information on the RRB is also available on the RRB's website at www.rrb.gov.
Publications
The following publications about benefits payable by the RRB are available at any RRB field office, or RRB headquarters at 844 North Rush Street, Chicago, Illinois 60611-2092. Most are also available on the agency's website at www.rrb.gov.
- Railroad Retirement and Survivor Benefits, RRB Form IB-2
- Guide to Railroad
Retirement and Survivor Benefits (Spanish-language edition), RRB
Form RB-4a
- Federal Income Tax and Railroad Retirement Benefits (Questions and Answers)
- Medicare for Railroad Workers and Their Families, RRB Form RB-20
- Railroad Unemployment and Sickness Benefits, RRB Form UB-9
The following publications about administrative, financial, statistical, legal and other aspects of the railroad retirement and unemployment insurance systems are available on the RRB's website.
- Annual Report - yearly summary of RRB's operations is distributed to officials of railway management and labor, members of Congress, officials of the Federal Government, and requesting libraries.
-
Performance and Accountability Report
- annual report that highlights goals and accomplishments of the RRB in the
most recent fiscal year, future plans, and a summary review of the agency's
financial statements.
\\Share\web_work\00 Bureau Work Documents\BFO\Par2012 - Railroad Retirement Handbook - a comprehensive single source of authoritative information on the development and character of the railroad retirement and railroad unemployment insurance systems.
- RRB News - periodic news releases distributed to editors of railway publications and major newspapers, railway management and labor officials, and requesting agencies and organizations.
- Railroad Retirement Information - questions and answers distributed monthly to editors of railway publications and officials of railway management and labor.
- Statistical Tables and Quarterly Benefit Statistics - distributed to officials of railway management and labor organizations and requesting libraries.
- RRB Strategic Plan
- long-range planning document, updated every 4 years, that outlines
agency plans to improve RRB operations and provide outstanding customer
service.
