Chapter 11:
Exclusions to Creditable Compensation
Payments that are not considered creditable compensation |
The following payments paid to an employee by
an employer are not considered creditable compensation
under the Railroad Retirement Act and the Railroad
Unemployment Insurance Act:
- Sick pay paid subsequent
to the sixth month following the month last
worked, as described in Part
IV, Chapter 3 on sick pay and Chapter 2 on miscellaneous
compensation;
- Contributions and payments
for pension or profit sharing made under a
plan that qualifies for exclusion from income
under the Internal Revenue Code. This exclusion
does not apply to Section 401(k) plans;
- Payments made to an employee
who has been called to active military service
which are intended to supplement military
pay;
- Payments made to an employee's
survivor or to an estate in the year after
the employee died. (Payments made after death
but in the year of death are creditable compensation.);
- Interest paid on compensation
earned but not timely paid;
- The value of "qualified"
fringe benefits received under a Section 125
cafeteria plan, also known as a flexible benefit
plan. However, a cash payment received under
such a plan is compensation;
- Tip earnings of less than
$20 per month;
- Compensation paid to a non-resident
alien with a "F-1" or "J-1"
visa;
- Compensation paid to the
director of a railroad is not creditable.
However, compensation paid to officers is
creditable. Directors are not considered employees
within the meaning of the Acts;
- Receivers and Trustees are
designated employers and may not also be employees.
This treatment is consistent with the position
of the IRS;
-
The
partners in a Limited Liability Company
do not receive creditable compensation.
Their pay is treated the same as that as
of a director of a company. The exception
would be if they were performing material
work. In that case, the partner pays FICA
taxes on their individual income tax return.
There is no method by which a partner can
pay RRTA taxes.
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Reimbursements |
The
following reimbursements for employment-related
expenses are not creditable compensation or subject
to tax.
- Educational assistance that
is excluded from compensation under Section
127 of the Internal Revenue Code.
- Allowances or provisions
for meals and lodging that are excluded from
compensation under Section 119 of the Internal
Revenue Code. Section 119 covers meals and
lodging provided by the employer.
- Allowances or reimbursements
for travel, meals and lodging that are incurred
while traveling in the business of the employer
and where paid under a plan that requires
an employee to account for their expenditures.
Expenditures not accounted for are creditable
compensation.
- Reimbursements for moving
expenses that are deductible under Section
217 of the Internal Revenue Code.
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Service performed
outside the United States |
Earnings
paid by a covered railroad employer for service
performed outside the United States:
- for a non-US employer, regardless
of citizenship of the employee, is not creditable;
- for a US employer, by citizens
of the United States, is creditable;
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