Basic
Service Requirement
The
basic requirement for a regular employee annuity is 120 months
(10 years) of creditable railroad service or 60 months (5
years) of creditable railroad service if such service was
performed after 1995. Service months need not be consecutive,
and in some cases military service may be counted as railroad
service.
Credit for a month of railroad service
is given for every month in which an employee had some compensated
service for an employer covered by the Railroad Retirement
Act, even if only one day's service is performed in the month.
(However, local lodge compensation earned after 1974 is disregarded
for any calendar month in which it is less than $25.) Under
certain circumstances, additional months of service may be
deemed.
Covered employers include railroads
engaged in interstate commerce and certain of their subsidiaries,
railroad associations and national railway labor organizations.
Railroad retirement benefits are based
on months of service and earnings credits. Earnings are creditable
up to certain annual maximums on the amount of compensation
subject to railroad retirement taxes.
Age
and Service, Disability and Supplemental Annuities
An AGE
AND SERVICE ANNUITY can be paid to:
Employees
with 30 or more years of creditable service. They are
eligible for regular annuities based on age and service the
first full month they are age 60. Early retirement reductions
are applied if the employee first became eligible for a 60/30
annuity July 1, 1984, or later and retired at ages 60 or 61
before 2002.
Employees with 10 to 29
years of creditable service, or 5-9 years, if at least 5
years were after 1995. They are eligible for
regular annuities based on age and service the first full
month they are age 62. Early retirement annuity reductions
are applied to annuities awarded before full retirement age,
which ranges from age 65 for those born before 1938 to age
67 for those born in 1960 or later, the same as under social
security. Reduced annuities are still payable at age 62 but
the maximum reduction will be 30% rather than 20% by the year
2022. The tier II portion of an annuity is not reduced beyond
20% if the employee had any creditable railroad service before
August 12, 1983. (See the Employee
Tier I formula component for a detailed explanation of
age reductions.)
An
annuity based on age cannot be paid until the employee
stops railroad employment, files an application and gives
up any rights to return to work for a railroad employer.
A DISABILITY
ANNUITY can be paid for:
Total
disability, at any age, if an employee is permanently
disabled for all regular
work and has at least 10 years (120 months) of creditable
railroad service. Employees with 5-9 years of creditable
railroad service, if at least 5 years were performed after 1995,
may qualify for tier I only (as defined below)
before retirement age on the basis of total disability if
they also meet certain social security earnings requirements.
An age reduced tier II amount would be payable at age 62.
Occupational
disability, at age 60, if an employee has at least
10 years of railroad service or at any age if the employee
has at least 20 years (240 months) of service, when the employee
is permanently disabled for his or her regular
railroad occupation. A “current connection” with the
railroad industry is also required for an annuity based on
occupational, rather
than total, disability.
A five-month waiting period beginning
with the month after the month of the onset of disability
is required before any disability annuity payments can begin.
While an annuity based on disability
is not paid until an employee has stopped working for a railroad,
employment rights need not be relinquished until the employee
attains full retirement age. However, in order for a supplemental
annuity to be paid by the Board, or for an eligible spouse
to begin receiving annuity payments, a disabled annuitant
under full retirement age must relinquish employment rights.
A SUPPLEMENTAL
ANNUITY can be paid at:
Age
60, if the employee has at least 30 years of creditable
railroad service.
Age
65, if the employee has 25-29 years of railroad service.
In addition to the service requirements,
a “current connection” with the railroad industry is required
for all supplemental annuities. Eligibility is further limited
to employees who had some rail service before October 1981.
Current
Connection Requirement
An employee who worked for a railroad
in at least 12 months in the 30 months immediately preceding
the month his or her railroad retirement annuity begins will
meet the current connection requirement for a supplemental
annuity, occupational disability annuity or survivor
benefits. (If the employee died before retirement, railroad
service in at least 12 months in the 30 months before death
will meet the current connection requirement for the purpose
of paying survivor benefits.)
If an employee does not qualify on
this basis, but has 12 months’ service in an earlier 30-month
period, he or she may still meet the current connection requirement.
This alternative generally applies if the employee did not
have any regular employment outside the railroad industry
after the end of the last 30-month period which included 12
months of railroad service and before the month the annuity
begins or the date of death. Full or part-time work for a
nonrailroad employer in the interval between the end of the
last 30-month period including 12 months of railroad service
and the beginning date of an employee's annuity, or the date
of death if earlier, can break a current connection.
Self-employment
in an unincorporated business will not break a current connection;
however, self-employment can break a current connection if
the business is incorporated.
Working
for certain U.S. Government agencies--Department of
Transportation, National Transportation Safety Board, Surface
Transportation Board (the former Interstate Commerce Commission),
National Mediation Board, Railroad Retirement Board--will
not break a current
connection. Neither State employment with the Alaska Railroad,
so long as that railroad remains an entity of the State of
Alaska, nor non-creditable Canadian railroad service will
break a current connection.
A
current connection can also be maintained, for purposes of
supplemental and survivor annuities, if the employee
completed 25 years of railroad service, was involuntarily
terminated without fault from the railroad industry, and did
not thereafter decline an offer of employment in the same
class or craft in the railroad industry, regardless of the
distance to the new position. A termination of railroad service
is considered voluntary unless there was no choice available
to the individual to remain in service. Generally, where an
employee has no option to remain in the service of his or
her employer, the termination of the employment is considered
involuntary, regardless of whether the employee does or does
not receive a separation allowance. However, each case is
decided by the Board on an individual basis. This exception
to the normal current connection requirements became effective
October 1, 1981, but only for employees still living on that
date who left the rail industry on or after October 1, 1975,
or who were on leave of absence, on furlough, or absent due
to injury on October 1, 1975.
Once a current connection is established
at the time the railroad retirement annuity begins, an employee
never loses it no matter what kind of work is performed thereafter.
Spouse
Annuities
The age requirements for a spouse
annuity depend on the employee’s age and date of retirement
and the employee’s years of railroad service.
If
a retired employee with 30 years of service is age 60,
the employee’s spouse is also eligible for an annuity the
first full month the spouse is age 60. Certain early retirement
reductions are applied if the employee first became eligible
for a 60/30 annuity July 1, 1984, or later and retired at
ages 60 or 61 before
2002. If the employee
was awarded a disability annuity, has attained age 60 and
has 30 years of service, the spouse can receive an unreduced
annuity the first full month she or he is age 60, regardless
of whether the employee annuity began before or after 2002
as long as the spouse’s annuity beginning date is after 2001.
If
a retired employee with less than 30 years of service is age
62, the employee’s spouse is also eligible for an annuity
the first full month the spouse is age 62. Early retirement
reductions are applied to the spouse annuity if the spouse
retires prior to full retirement age. Full retirement age
for a spouse is gradually rising from age 65 to age 67, just
as for an employee, depending on the year of birth. Reduced
benefits are still payable at age 62, but the maximum reduction
will be 35% rather than 25% by the year 2022. The tier II
portion of a spouse annuity (as defined below)
is not reduced beyond 25% if the employee had any creditable
railroad service before August 12, 1983.
A
spouse of an employee receiving an age and service annuity
(or a spouse of a disability annuitant who is otherwise eligible
for an age and service annuity) is eligible for a spouse annuity
at any age if caring for the employee's unmarried child,
and the child is under age 18 or the child became disabled
before age 22.
The employee must have been married to the spouse for at least
one year, unless the spouse is the natural parent of their
child, the spouse was eligible or potentially eligible for
a railroad retirement widow(er)’s, parent’s or disabled child’s
annuity in the month before marrying the employee or the spouse
was previously married to the employee and received a spouse
annuity. However, entitlement to a surviving divorced spouse,
surviving divorced young mother(father), or remarried widow(er)
annuity does not waive the one-year marriage requirement.
An annuity may also be payable to
the divorced wife or husband
of a retired employee if their marriage lasted for at least
10 years, both have attained age 62 for a full month and the
divorced spouse is not currently married. The amount of a
divorced spouse’s annuity is, in effect, equal to what social
security would pay in the same situation and therefore less
than the amount of the spouse annuity otherwise payable.
Employee
and Spouse Annuity Estimates
Railroad employees can get estimates
of future annuities for themselves and their spouses through
the Board's
Web site.
The estimates are based on the service and earnings records
maintained by the Board and show the earliest date the
employee can receive a full annuity and, if applicable, the
earliest date he or she can receive a reduced annuity. Employees
who want estimates can also contact the nearest
field office of the Railroad Retirement Board for approximate figures. Each
Board field office can furnish estimates for employees with
at least 10 years of railroad service, or 5 years after 1995. It
is not possible to provide a precise estimate of an annuity
rate if the employee will not be eligible until a future year.
(See Table 1 and Table
2 in IB-2
Facts for more information)
Two-tier
Annuities and Dual Benefits
Regular railroad retirement annuities
are calculated under a two-tier formula. The annuity formula
components for employees and spouses are described in the
section on formulas at the back of this pamphlet.
The first tier is based on railroad
retirement credits and any social security credits an employee
has acquired. The amount of the first tier is calculated using
social security formulas, but with railroad retirement age
and service requirements.
The second tier is based on railroad
retirement credits only, and may be compared to the retirement
benefits paid over and above social security benefits to workers
in other industries.
An additional amount may also be payable
as part of the regular annuity if an employee had at least
120 months of railroad service and acquired sufficient
quarters of coverage for an insured status under the Social
Security Act before
1975 and also met certain vesting requirements.
Employees with Railroad Retirement
and Social Security Benefits
Since 1975, if a retired or disabled
railroad retirement annuitant is also awarded social security
benefits, the Social Security Administration determines the
amount due, but a combined monthly dual benefit payment is
issued by the Railroad Retirement Board.
The tier I portion of an employee
annuity is based on his or her combined railroad retirement
and social security credits, figured under social security
formulas, and approximates what social security would pay
if railroad work were covered by that system. It is reduced
by the amount of any actual social security benefit paid on
the basis of the employee’s nonrailroad employment in order
to prevent a duplication of benefits based on social security
covered earnings. The tier I amount is also reduced in the
event a social security benefit is payable to the employee
on the basis of another person’s earnings. This reduction
follows 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. An annuitant is required to
advise the Railroad Retirement Board if any benefits are received
directly from the Social Security Administration or if those
benefits increase.
If an employee qualified
for dual benefits before 1975 and met
certain vesting requirements, he or she can receive
an additional annuity amount, which offsets, in part, the
dual benefit reduction. This additional amount, which reflects
the dual benefits payable prior to 1975, is called the vested
dual benefit payment. The vested dual benefit cannot
be paid prior to the date the employee could begin to receive
a social security benefit if he or she were to file for such a
benefit.
Employees who do not qualify for a
vested dual benefit may be eligible for a refund of any excess
social security taxes they paid (see Dual
Tax Payments).
Limitations
on 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 about 96% 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.
Employees with Public, Non-profit
or Foreign Pensions
For employees first eligible for a
railroad retirement annuity and
a Federal, State or local government pension after 1985, there
may be a reduction in the tier I amount 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
may also apply to certain other payments not covered by railroad
retirement or social security, such as from a non-profit organization
or from a foreign government or a foreign employer, but 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.
Workers’ Compensation
If an employee is receiving a disability
annuity, the tier I portion may, under certain circumstances,
be reduced for receipt of workers’ compensation or public
disability benefits.
If an annuitant becomes entitled to
any pensions or benefits as described above, the Board must
be notified immediately.
Spouses
with Dual Benefits
Social Security Benefits
The tier I portion of a spouse annuity
is reduced for any social security entitlement, regardless
of whether the social security benefit is based on the spouse's
own earnings, the employee's earnings or the earnings of another
person. This reduction follows 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.
Public Pensions
The tier I portion of a spouse annuity
may also be reduced for receipt of any Federal, State or
local government pension separately payable to the spouse
based on the spouse’s own earnings. The reduction generally
does not apply if social security taxes were deducted from
the public service wages for the last 60 months of
employment. (This 60-month period is being phased in
over the next 5 years and there are some exceptions.)
Most military service pensions and
payments from the Department of Veterans Affairs will not
cause a reduction. For spouses subject to the public
pension reduction, the tier I reduction is equal to 2/3 of
the amount of the public pension.
Employee Annuity
If both the husband and wife are qualified
railroad employees and either had some railroad service before
1975, both can receive separate railroad retirement employee
and spouse annuities, without a full dual benefit reduction.
If both the husband and wife started
railroad employment after 1974, the amount of any spouse or
divorced spouse annuity is reduced by the amount of the
employee annuity to which the spouse is also entitled.
Minimum
Guaranty for Employee and Spouse Annuities
Under a special minimum guaranty provision,
railroad families will not receive less in monthly benefits
than they would have if railroad earnings were covered by
social security rather than railroad retirement laws. This
guaranty is intended to cover situations in which one or more
members of a family would otherwise be eligible for a type
of social security benefit which is not provided under the
Railroad Retirement Act.
For example, social security provides
children's benefits when an employee is totally disabled,
retired, or deceased. The Railroad Retirement Act only provides
children’s benefits if the employee is deceased. Therefore,
if a retired rail employee has children who would otherwise be
eligible for a benefit under social security, the employee's
annuity would be increased to reflect what social security
would pay the family, unless the annuity is already more than
that amount.
Cost-of-living
Increases in Employee and Spouse Retirement Benefits
After retirement, the tier
I portions of both employees’ and spouses’ annuities
are generally increased for higher living costs at the same
time, and by the same percentage, as social security benefits.
These increases, effective December 1 and included in the
January payment, are triggered under both programs when the
Consumer Price Index rises during the 12 months ending the
previous September 30. Generally, if the Index increases by
5%, for example, the tier I portion increases by 5%. Under
certain circumstances, the increase can be based on average
national wage increases rather than price increases.
If an annuitant is receiving both
railroad retirement and social security benefits, the increased
tier I portion is reduced by the increased social security
benefit.
The tier
II portions of retired employee and spouse annuities
are normally increased annually by 32.5% of the increase in
the Consumer Price Index.
Tier II cost-of-living increases are
generally payable at the same time as tier I cost-of-living
increases. Vested dual benefit payments and supplemental annuities
are not increased by these cost-of-living adjustments.
Working
After Retirement
Neither a regular annuity, a supplemental
annuity nor a spouse annuity is payable for any month in which
a retired employee works for an employer covered under the
Railroad Retirement Act, including
labor organizations. However, compensation of less than $25
a month by a local lodge employee will not prevent payment
of the annuity for that month.
Retired employees and spouses who
work for their last pre-retirement nonrailroad employer are
subject to an earnings deduction. Such employment will reduce
tier II benefits and supplemental annuity payments, which
are not otherwise subject to earnings deductions, by $1 for
each $2 of earnings received, subject to a maximum reduction
of 50%.
Retired employees and spouses who
have not yet attained full social security retirement age,
which ranges from age 65 for those born before 1938 to age
67 for those born in 1960 or later, may also be subject to
additional earnings deductions for any earnings, in or outside the
rail industry, that exceed certain exempt amounts. The tier
I and vested dual benefits of these employee and spouse annuities
are subject to deductions if earnings exceed the exempt amounts
applicable to social security beneficiaries. Prior to the
calendar year in which full social security retirement age
is attained, the deduction is $1 in benefits for every $2
of annual earnings exceeding an exempt amount ($11,640 in
2004).
If the employee or spouse has a tier
I reduction for social security benefits, the tier I benefit
is not reduced for excess earnings.
In the first year in which an employee
subject to these earnings deductions is both entitled to an
annuity and has a non-work
month, a full annuity can be paid for those months in which
the employee had low earnings or did not have substantial
self-employment, no matter what total earnings for the year
were. A non-work month is one in which the employee neither
earns over 1/12th of the annual exempt amount nor has substantial
self-employment. Non-work months can be claimed in only one
calendar year, which need not necessarily be the first year
of entitlement.
In the calendar year in which an individual
attains full social security retirement age, deductions of
$1 are made in tier I and vested dual benefits for every $3
earned in excess of an exempt amount ($31,080 in 2004), but
only counting those earnings in the months prior to the month
full retirement age is attained. These tier I and vested dual
benefit deductions stop effective with the month full retirement
age is attained.
Earnings received
for services rendered, plus any net earnings from
self-employment, are considered when assessing deductions for
earnings. Interest, dividends, certain rental income or income from
stocks, bonds, or other investments are not generally considered
earnings for this purpose.
Annuitants under full retirement age
who work after retirement and expect that their earnings for
a year will be more than the annual exempt amount must promptly
notify the Board and furnish an estimate of their expected
earnings in order to prevent an overpayment and penalties.
They should also notify the Board if their original estimate
changes significantly.
Retired employees and spouses who
return to work for a railroad or for their last pre-retirement
nonrailroad employer must notify the Board, regardless of
earnings or age.
A spouse benefit is subject to reductions
not only for the spouse’s earnings, but also for the earnings
of the employee, regardless of whether the earnings are from
service for the last pre-retirement nonrailroad employer or
other post-retirement employment.
A spouse annuity is not payable for
any month in which the employee’s annuity is not payable,
or for any month in which the spouse works for an employer
covered under the Railroad Retirement Act.
Disability Work Restrictions
If an annuity is based on disability,
there are certain work restrictions that can affect payment,
depending on the amount of earnings. The annuity is not payable
for any month in which the annuitant works for an employer
covered under the Railroad Retirement Act. The annuity is not payable for
any month in which the annuitant earns more than $400 in any
employment or net self-employment, exclusive of work-related
expenses. Withheld payments will be restored if earnings for
the year are less than $5,000 after deduction of disability-related
work expenses. Otherwise, the annuity is subject to a deduction
of one month’s benefit for each multiple of $400 earned over
$4,800 (the last $200 or more of earnings over $4,800 count
as $400). Failure to report such earnings could involve a
penalty charge.
These disability work restrictions
cease upon a disabled employee annuitant’s attainment of full
retirement age. This transition
is effective no earlier than full retirement age even if the
annuitant had 30 years of service. Earnings deductions
continue to apply to those working for their last
pre-retirement nonrailroad employer.
If a disabled annuitant works before
full retirement age, this may also raise a question about
the possibility of that individual’s recovery from disability,
regardless of the amount of earnings. Consequently, any earnings
must be reported promptly to avoid overpayments, which are
recoverable by the Board and may also include penalties.
When
Annuities Stop
Payment of any annuity stops upon
the annuitant's death, and the annuity is not payable for
any day in the month of death.
A disability annuity
stops after the employee recovers from the disability; it
can be reinstated if the disabling condition recurs.
A spouse
annuity stops if the employee's annuity terminates,
or the spouse annuity was based on caring for a child and
the child is no longer under 18 or disabled or the child is
no longer in the spouse's care. However, the spouse annuity
may continue if she or he is qualified without the child or
it can resume when the spouse attains a qualifying age.
While a divorce
ends eligibility for a spouse annuity, a divorced spouse may,
under conditions described previously, qualify for a divorced
spouse's annuity.
A divorced
spouse’s annuity stops upon remarriage or upon entitlement
to a social security benefit based on her or his own earnings,
if the unreduced social security benefit is equal to or greater
than one-half of the employee’s unreduced tier I amount. A
divorced spouse’s annuity may be reduced or stopped if the
divorced spouse is also entitled to a railroad retirement
annuity.
It is important to notify the Railroad
Retirement Board promptly if one of the above changes occurs.
Failure to report can result in an overpayment, which the
Board will take action to recover, sometimes with interest
or penalties. Failure to report changes promptly or making
a false statement can also result in a fine or imprisonment.
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