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Chapter 2:
Miscellaneous Compensation
Miscellaneous compensation defined |
Miscellaneous
compensation is any payment which is subject
to Tier I taxes and is creditable as Tier I
compensation, but cannot be credited as regular
compensation. Employer's may use "miscellaneous
compensation" or "miscellaneous payments"
to mean a variety of things, but "miscellaneous
compensation" as referred to in these instructions,
must meet these conditions:
- The payment is subject to railroad retirement
tax;
- The payment is remuneration for services
rendered in an earlier year;
- The payment cannot be credited to the earlier
year because the employee already has maximum
Tier I compensation credit in that year; and
- The payment cannot be credited to the year
when the payment is made because no service
was performed in the year of payment and the
employer reports compensation generally on
an earned basis. See Chapter 1 for an explanation
of earned basis.
Because of regulations
adopted in 1993 and related system improvements,
an employer reporting compensation on a paid
basis should include all creditable compensation
in their annual report for the year and limit
the use of Form BA-10,
Report of Miscellaneous Compensation and Sick
Pay, to report sick pay.
An
employer reporting compensation generally on
an earned basis may continue to use Form BA-10
to report miscellaneous compensation that meets
the above conditions.
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| Examples of
miscellaneous compensation |
An employee
resigns on 12/31/98 and retires 1/01/99. He earned
and received payment totaling $63,000 in 1998,
and received a payment of $7,000 in March 1999
for his last pay period in 1998, for vacation
pay and other benefits earned but not paid in
1998. His employer reports on an earned basis.
Therefore, the employer filed an adjustment increasing
1998 compensation by an additional $5,400 bringing
the total compensation for 1998 to the maximum
of $68,400. The remaining $1,600 paid in 1999
is reported as miscellaneous compensation for
1999.
You will note that the entire $7,000 paid
in 1999 is subject to 1999 Tier I, Tier II and
Medicare taxes. While the taxable and creditable
compensation are not always equal for each year,
particularly for employers who report compensation
on an earned basis, the amounts will usually
be equal in the aggregate for all years. In
this example, the creditable Tier I compensation
(after the adjustment) for 1998 is $68,400 and
for 1999 is $1,600. The total creditable compensation
for the two years is $70,000. The taxable compensation
for 1998 is $63,000 and for 1999 is $7,000 for
a total of $70,000.
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| Sick pay compensation
used in annuity calculation |
Because
sick pay is creditable only as Tier I compensation,
it is reported separately from regular earnings
to help ensure the integrity of our records. Although
sick pay is reported and maintained at the RRB
in a record which is separate from the regular
service and compensation record, all the Tier
I compensation is considered together in calculating
the Tier I component of an employee's annuity.
Payments that are creditable and taxable
as Tier I and Tier II should be reported on
Form BA-3a
and not Form BA-10. See
Part V, Chapter 4 for instructions on completing
reports for sick pay and miscellaneous compensation.
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