Bonus pay |
Bonus payments, such as safety, incentive, fuel
conservation, signing bonus, and suggestion
awards, constitute creditable compensation because
the payments are made in consideration of services.
Bonus pay which is conferred
in non-monetary form is creditable as compensation
only if there is an agreement between the employer
and employee in advance as to the value of the
non-monetary payment and that the award will
be paid other than in cash.
The
Railroad Retirement Act (RRA) and the Railroad
Retirement Tax Act (RRTA) differ with respect
to non-monetary payments. The RRA requires a
prior agreement between the employer and employee
on the form and value of the non-cash payment,
while the RRTA does not require any agreement.
Thus, a non-monetary payment which was not agreed
upon may be taxable but is not creditable. Also
see stock options below.
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| Retention pay |
Payments
made to an employee as an incentive to remain
with the employer for a period of time are considered
incentive bonuses and constitute creditable compensation.
Although a retention bonus may be paid along with
severance pay at the time the employee terminates,
the retention bonus is not severance pay and should
not be included on Form
BA-9, "Report of Severance Pay and Separation
Allowances Subject to Tier II Taxation".
If both a retention bonus and a separation
allowance are being paid upon the employee's
resignation, it is preferable if the two payments
are issued separately. This will make clear
to both the employee and the RRB, the amount
of separation allowance which is subject to
Tier II tax. This will help to prevent unnecessary
inquiries to the employer for clarification.
|
| Stock awards
and stock options |
If an
employee agrees to receive shares of stock as
a bonus, or in lieu of some earnings, the value
of the shares at the time of transfer is considered
creditable compensation. Stock awarded without
agreement from the employee that the bonus or
earnings would be paid in the form of stock, does
not constitute creditable compensation. Also see
Bonus Pay above.
An employee purchase of stock under a qualified
employee stock purchase plan or statutory purchase
plan does not result in creditable compensation
when the options are granted. The spread between
the exercise price and fair market value of
the stock at the time of exercise is creditable
compensation.
The grant
of an option to purchase stock made under a
non-qualified purchase plan is creditable compensation
to the extent that the option has a readily
ascertainable fair market value.
|
| Personal days |
Compensated
personal leave days, including days taken pursuant
to the Family Leave Act, are considered pay
for time lost and are creditable as service
and compensation. If an employee is paid for
unused leave the payment yields creditable compensation
but not service month credit.
|
| Holiday pay |
Holiday
Pay or Birthday Bonus is creditable compensation.
In addition, service may be credited for the
month of the holiday or birthday.
|
| Productivity
fund payments |
Productivity
fund payments are made under cost-containment
plans where distribution is made to employees
for working in such a way as to reduce costs.
Generally bank trust fund departments administer
these funds. Productivity fund payments are
creditable and taxable as Tier I, Tier II, and
RUIA compensation, but do not yield a service
month credit. Although creditable as RUIA compensation,
based on coordination or prorated with the employer,
the payments do not usually yield additional
RUIA compensation credit.
|
| Profit sharing/loss
sharing |
Employees,
who receive more or less than their regular
earnings due to profit or loss sharing plans,
are credited with and taxed on the actual amount
received. Payments made under a profit sharing
plan are creditable compensation.
|
| Purchase of
employee benefits |
The
payment to an employee for the termination or
"purchase" of an employee right or
benefit, such as seniority rights, profit sharing
rights, sick benefits, etc., is creditable compensation.
|
| Tips |
Tip
earnings of $20 or more per month are creditable
as Tier I and Tier II compensation and are to
be included in the annual report of service
and compensation. Tips are not subject to RUIA
contributions. Tip compensation is subject to
employee Medicare and Tier taxes but tax liability
for tips does not extend to employers. If the
employer is reporting tip income to the IRS
under the Tip Rate Alternative Commitment program
(TRACE) or the Tip Rate Determination Agreement
(TRDA), the total amount should be reported
to the RRB as creditable compensation.
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