The
Parts Of A Railroad Retirement Annuity
Your annuity can be made up of one or two parts,
depending on the type of annuity you are receiving.
The first part, Tier
I, is included in all annuities.
The second part, Tier
II, is not included in your annuity computation
if you are a remarried widow(er), surviving divorced
spouse, divorced mother/father or a parent, if other
survivor annuitants are entitled or potentially entitled
to a widow(er), surviving divorced spouse or child
benefit.
Cost-of-Living
Increases
Periodically, you will receive a cost-of-living
increase. Your gross Tier I increase will be the same
percentage as the social security benefit cost-of-living
increase. Your Tier II will generally increase by
32.5 percent of the Tier I percentage increase. An
increase may not be payable each year.
Tier
I
The Tier I amount is based on the deceased employee's
combined railroad retirement and social security credits.
The Tier I you will receive is equal to a percentage
of the amount that the employee would have received
if he or she had retired under the social security
system only. The percentage depends on the type of
benefit you are receiving and the number of annuitants
who are qualified to receive a benefit. If there are
fewer than three qualified family members, the percentages
are as follows:
Family Member |
Per Cent |
Widow |
100 |
Mother/Father |
75 |
Child |
75 |
Student |
75 |
One Parent |
82-1/2 |
Two Parents |
75 each |
If there are three or more qualified family members,
an amount called the "family maximum" applies
to the Tier I amount. The "family maximum"
amount is divided proportionately among the family
members to determine the individual annuity Tier I
amounts.
The Tier I portion of the annuity is reduced for:
- the entire amount of any social security benefit
which you are entitled to receive on your own account
or on the account of another person;
- a portion of any railroad retirement annuity based
on your own railroad industry work;
- two-thirds of the amount of any public service
pension based on your earnings if you are receiving
a widow(er) type benefit and you do not meet one
of the exceptions given in the section "Public
Service Pension."
If you are not entitled to a Tier II, you cannot
receive an annuity if the amount of any social security
benefit you receive is greater than the amount of
the maximum Tier I which could be paid on the employee's
account.
Tier
II
Widow(er)s
December 2001 legislation established an "initial
minimum amount" which yields, in effect, a widow(er)'s
tier II benefit equal to the tier II benefit the
employee would have received at the time of the award
of the widow(er)'s annuity, minus any applicable
age reduction. It does this by adding a "guaranty
amount," initially set at 50% of the employee's
tier II, to the 100% tier I and 50% tier II benefits
provided under prior law. The "initial minimum amount"
is computed as if it applied on the widow(er)'s annuity
beginning date and is not increased for cost-of-living
adjustments.
This "guaranty amount" is reduced each year by the
dollar amount of the cost-of-living increases payable
in both the tier I and tier II benefits provided
under prior law. Consequently, the widow(e)'s
net benefit payment will not increase until the
annuity, as computed under prior law, exceeds the
annuity computed under the intial miniumum amount
formula.
The widow(er)s' guaranty provision applies to all
widow(er)s entitled to a tier II effective February
1, 2002. If the annuity beginning date is before
February 1, 2002 the increase due to the "intial
minimum amount" maybe zero, because of previous
cost-of-living adjustments.
If a widow(er) is also a railroad employee annuitant
and both the widow(er) and the deceased employee
started railroad emplyment after 1974, only the railroad
retirement employee annuity or the survivor annuity,
whichever is larger, is, in effect, payable to
the widow(er) unless the smaller annuity is chosen.
Other Survivors
Each child received 15% of the deceased employee's
tier II amount, and each surviving parent received
35%. The minimum total tier II amount payable to
a family is 35% of the employee's tier II amount,
and the maximum, 130%.
A tier II benefit is not payable for a surviving
divorced spouse or a remarried widow(er). A tier
II benefit is not payable to surviving parents if
other family members may receive benefits or if the
parent has remarried.
Social
Security Benefits
If you are qualified to receive an old age, survivor,
or disability insurance benefit from the Social Security
Administration (SSA) at the time that you file your
railroad retirement application, and you indicate
on the application that you want to use your application
to protect your filing date for a social security
benefit, SSA will get in touch with you and advise
you on how to file a social security application.
If you become qualified to receive any social security
benefits after you file your application for an annuity
with the Railroad Retirement Board (RRB), you must
contact the SSA office directly to file an application
for social security benefits. In either case, SSA
will decide if you are entitled to receive benefits
and will compute the amount of the benefits which
can be paid. However, the actual payment will be made
by the RRB and will be combined with your regular
monthly railroad retirement payment.
The section "Tier
I," explained how your annuity must be adjusted
for any social security benefit which you are entitled
to receive. In most cases, the total amount which
will be paid to you each month by both the RRB and
SSA will not change if you file for social security
benefits.
Filing for a social security benefit will usually
increase the total benefits payable to you only if
all of the following situations apply:
- Your social security benefit is larger than the
Tier I part of your railroad retirement annuity;
and
- You do not expect to earn more than the annual
earnings exempt amount.
It is important to notify the RRB as soon as you
file a social security application for monthly benefits.
If you do not notify the RRB, a railroad retirement
annuity overpayment may result.
Public
Service Pension
As explained in the section "Tier
I," a
widow(er) type annuity must be adjusted for any public
service pension payment, based on your earnings, that
you receive.
A public service pension is the retirement pay you
receive because you worked for the Federal Government
of the United States, a state government or any political
subdivision of a state, such as a city, county, town,
township, village, school or sanitation district.
The definition of "state" includes the 50
states, the District of Columbia, the Commonwealth
of Puerto Rico, the Virgin Islands, Guam and American
Samoa. Work for the government of a foreign country
is not included.
The public service pension may either be monthly
checks or a lump-sum payment. It may be administered
by the government agency or a private insurance company.
The following are not considered to be public service
pension payments:
- Social security benefits.
- Railroad retirement annuities.
- Veteran affairs benefits.
- Worker's compensation.
- Black lung benefits.
In addition, your annuity will not be adjusted for
a public service pension if:
- you were eligible for or entitled to a public
service pension before July 1, 1983; a special
exemption may apply to you. Contact an RRB field
office if this situation applies to you.
- you worked for state or local government:
- Your application for benefits was filed after March 2004 and your
date last worked is later than June 30,
2004 and FICA taxes were deducted from
your public service wages for 60 months.
Coverage must include the last month of
employment.
- Your application for benefits was filed before March 2004 or
your date last worked is before July 1,
2004, FICA taxes must have been deducted
on the last day of your public service
employment.
- you are a federal employee and you elected ocverage under the Federal
Employee Retirement System (FERS). If FERS coverage
was elected in 1998, you must have worked for a
minimum of five years under FERS.
If you are receiving a public service pension when
you file an application, you must report, to the RRB,
any changes in the amount of the public service pension
payments.
Widow(er)'s
Rate Is Never Less Than Previous Rate
If you are currently receiving a retirement Spouse annuity, the total of your Widow(er)'s annuity will
be compared to the amount you are now receiving. If
the calculation of your Widow(er)'s annuity results
in an amount that is less than what you are currently
receiving as a spouse, your Widow(er)'s annuity will
be increased to equal that amount. Your Widow(er)'s annuity amount will never be less than the annuity
you were receiving in the month before the employee's
death.
This guarantee does not apply to a Surviving Divorced
Spouse annuity.
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