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Dual
Benefit Payments |
The payment of a railroad retirement annuity
can be affected by entitlement to social security benefits, as well
as certain other government benefits.
Such dual entitlement, if not reported to the Railroad
Retirement Board, can result in benefit overpayments which have to
be repaid, sometimes with interest and penalties.
The following questions and answers describe how dual benefit
payments are adjusted by the Railroad Retirement Board for
annuitants eligible for social security benefits and/or other
benefit payments.
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1. How
are dual benefits paid to persons entitled to both railroad
retirement and social security benefits?
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Since 1975, if a railroad retirement annuitant is also awarded a
social security benefit, the Social Security Administration
determines the amount due, but a combined monthly dual benefit
payment should, in most cases, be issued by the Railroad
Retirement Board after the railroad retirement annuity has been
reduced for the social security benefit.
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2.
Why is a railroad retirement annuity reduced when a social
security benefit is also payable? |
The tier I portion of a railroad retirement annuity is based on
both the railroad retirement and social security credits acquired
by an employee and reflects what social security would pay if
railroad work were covered by social security.
Tier I benefits are, therefore, reduced by the amount of
any actual social security benefit paid on the basis of
nonrailroad employment, in order to prevent a duplication of
benefits based on the same earnings.
The
tier I dual benefit reduction also applies to the annuity of an
employee qualified for social security benefits on the earnings
record of another person, such as a spouse.
And, the tier I portion of a spouse or survivor annuity is
reduced for any social security entitlement, even if the social security
benefit is based on the spouse’s or survivor’s own earnings.
These reductions follow principles of social
security law which, in effect, limit payment to the higher of any
two or more benefits payable to an individual at one time.
However,
the tier II portion of a railroad retirement annuity is based on
railroad service and earnings alone, is computed under a separate
formula, and is not reduced for entitlement to a social security
benefit.
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3.
Are
there any exceptions to the railroad retirement annuity reduction
for social security benefits?
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No.
However, if an employee qualified for dual benefits
before 1975 and
meets
certain vesting requirements,
he or she can receive an additional annuity amount which
offsets, in part, the dual benefit reduction.
This additional amount, reflecting the dual benefits payable
prior to 1975, is called a vested dual benefit payment.
Legislation enacted in 1974 coordinated dual railroad
retirement and social security benefit payments to eliminate certain
duplications; but this legislation also included a “grandfather”
provision to preserve the pre-1975 dual benefits of persons meeting
certain vesting requirements by including vested dual benefit
payments in their annuities.
Awards of these vested dual benefit amounts
are now limited only to vested railroad employees with dual coverage on their own earnings.
Spouses and widow(er)s retiring since 1981 no longer qualify.
Of the over 16,000 employee annuities awarded in Fiscal Year
2002, less than 230 contained vested dual benefit payments.
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4.
Are there any funding limitations on the payment of
vested dual benefits? |
Vested dual benefit payments are
funded by annual appropriations from general U.S. Treasury
revenues, rather than the railroad retirement payroll taxes and
other revenues that finance over 98% of the railroad retirement
system’s benefit payments. Payment of these vested dual benefits is dependent on the
time and amount of such appropriations.
If the appropriation in a fiscal year is for less than the
estimated total vested dual benefit payments, individual payments
must be reduced by proration.
Vested dual benefits are not increased by cost-of-living
adjustments.
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5. Can Federal,
State, or local government pensions also result in dual benefit
reductions in a railroad retirement annuity? |
Tier I benefits for employees first eligible for a railroad
retirement annuity and a Federal, State
or local government pension after 1985 may be reduced for receipt of
a public pension based, in part or in whole, on employment not
covered by social security or railroad retirement after 1956.
This also applies to certain other payments not covered by
social security, such as payments from a non-profit organization or
from a foreign government or a foreign employer.
However, it does not include military service pensions,
payments by the Department of Veterans Affairs, or certain benefits
payable by a foreign government as a result of a totalization
agreement between that government and the United States.
This
reduction is made by adjusting certain weighting factors in the
social security and tier I benefit formulas.
These factors increase benefits for workers with low lifetime
social security and/or railroad retirement earnings.
The weighting factors were not, however, intended to increase
benefits for those whose major employment was not covered by social
security or railroad retirement.
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6.
How does the public service pension apply to spouse or widow(er)s’
benefits? |
The
tier I portion of a spouse’s or widow(er)’s annuity may also
be reduced for receipt of any Federal, State or local pension
separately payable to the spouse or widow(er) based on her or his
own earnings.
The reduction generally does not apply if the employment on
which the public pension is based was covered by social security
on the last day of public employment.
(A special rule applies to Federal employees who switch
from the Civil Service Retirement System to the Federal Employees
Retirement System.)
For spouses and widow(er)s subject to the government
pension reduction, the tier I reduction is equal to 2/3 of the
amount of the government pension.
The public service pension reduction in railroad retirement
spouse and widow(er) benefits was brought about by 1977 social
security legislation which also applied to the tier I portion of
railroad retirement spouse and widow(er) annuities.
Since a social security spouse or widow(er) benefit is
reduced if the beneficiary is also entitled to a social security
benefit based on her or his own earnings, it was considered
equitable that a social security spouse or widow(er) benefit also
be reduced for a public service pension based on the
beneficiary’s own nonsocial security earnings.
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7.
What dual benefit restrictions apply when both a husband and wife
are rail employees entitled to railroad retirement annuities? |
If both the husband and wife are qualified
railroad employees and either has some railroad service before 1975, both
can receive separate railroad retirement employee and spouse
annuities, without a full dual benefit reduction under the
phase-out provisions of the 1974 Railroad Retirement Act.
However, if both the husband and wife started railroad
employment after 1974, only the railroad retirement employee
annuity or the spouse annuity, whichever he or she chooses, is
payable.
If a widow(er) is qualified for a railroad retirement
employee annuity as well as a widow(er)’s annuity, a special
guaranty applies in some cases.
If both the widow(er) and the deceased employee started
railroad employment after 1974, the survivor annuity payable to
the widow(er) is reduced by the amount of the employee annuity.
If either the
deceased employee or the widow(er) had some railroad service
before 1975 but had not completed 120 months of service before
1975, the widow(er)’s own employee annuity and the tier II
portion of the survivor annuity would be payable to the widow(er).
The tier I portion of the survivor annuity would be payable
only to the extent that it exceeds the tier I portion of the
widow(er)’s own employee annuity.
If either the
deceased employee or the widow(er) completed 120 months of
railroad service before 1975, the widow or dependent widower may
receive both an employee annuity and a survivor annuity, without a
full dual benefit reduction.
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8.
Can workers’ compensation or public disability benefits affect
railroad retirement benefits? |
If an
employee is receiving a disability
annuity, tier I benefits for the employee and spouse may,
under certain circumstances, be reduced for receipt of workers’
compensation or public disability benefits.
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9.
How can an annuitant find out if receipt of any dual
benefits might affect his or her railroad retirement annuity? |
If an annuitant becomes entitled to any of the previously
discussed dual benefit payments, or if there is any question as to
whether a dual benefit payment requires a reduction in an annuity, a
Board field office should be contacted.
In any situation, the best rule is, “When in
doubt-report.”
Annuitants
can find the address and phone number of the
Board office
serving their area by calling the automated toll-free RRB
Help Line
at 1-800-808-0772 or by checking the Board’s Web site at www.rrb.gov. Most Board field offices are open to the public from 9:00
a.m. to 3:30 p.m., Monday through Friday, except on Federal
holidays.
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