September 2002
Full Retirement Age & Early Retirement Age Reductions
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Railroad retirement benefits
are subject to reduction if an employee with less than 30 years of service
retires before attaining full retirement age. While employees with less
than 30 years of service may still retire at age 62, the age at which full
retirement benefits are payable was increased by 1983 social security
legislation first effective in the year 2000. This legislation affected
railroad retirement benefits through coordinating provisions of the
Railroad
Retirement Act, and the age requirements for some unreduced railroad
retirement benefits changed just like the social security requirements. The following questions and answers explain how these early retirement age reductions are applied to railroad retirement annuities. |
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1. What age is full railroad retirement age for employees with less than 30 years of service and is it the same for all employees? | ||||||||||||||||||||||||||||||||||||||||||
Full retirement
age, the earliest age at which a person can begin receiving railroad
retirement or social security benefits without any reduction for early
retirement, ranges from age 65 for those born before 1938 to age 67 for
those born in 1960 or later, the same as for social security. |
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2. How are the changes in the maximum age reduction phased in? | ||||||||||||||||||||||||||||||||||||||||||
Beginning in the year
2000, the age requirements for some unreduced railroad retirement benefits
began to rise just like the social security requirements. For employees
with less than thirty years of service and their spouses, the full
retirement age increases from 65 to 66, and from 66 to 67, at the rate of
two months per year over two separate six-year periods. This also affects
how reduced benefits are computed for early retirement. The increase in full retirement age from age 65 to age 66 affects those people who were born in the years 1938 through 1942. The full retirement age will remain at age 66 for people born in the years 1943 through 1954. The increase in full retirement age from age 66 to age 67 affects those who were born in the years 1955 through 1959. For people who were born in 1960 or later the full retirement age will be age 67. |
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3. How does this affect the early retirement age reductions applied to the annuities of those who retire before full retirement age? | ||||||||||||||||||||||||||||||||||||||||||
The early retirement annuity reductions applied to
annuities awarded before full retirement age are increasing. For employees
retiring between age 62 and full retirement age with less than 30 years of
service, the maximum reduction will be 30 percent by the year 2022. Under
prior law, the maximum reduction was 20 percent. Employee Retires with Less than 30 Years of Service
* A person attains a given age the day before his or her
birthday. Consequently, someone born on January 1 is considered to have
been born on December 31 of the previous year. |
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4. What are some examples of how this will affect the amounts payable to employees retiring before full retirement age with less than 30 years of service? | ||||||||||||||||||||||||||||||||||||||||||
Take the example of an
employee born on June 2, 1950, who retires in 2012 at the age of 62. In
terms of today's dollars and current benefit levels, not counting future
increases in creditable earnings, assume this employee is eligible for
monthly tier I and tier II benefits, before age reductions, of $1,200 and
$800, respectively, for a total monthly benefit of $2,000. Upon retirement at age 62, the employee's tier I benefit would be reduced by 25 percent, the maximum age reduction applicable in 2012. This would yield a tier I monthly benefit of $900; the employee's tier II benefit would also be reduced by 25 percent, providing a tier II amount of $600 and a total monthly rate of $1,500. However, if the employee had any rail service before August 12, 1983, the tier II benefit would be subject to a maximum reduction of only 20 percent, providing a tier II amount of $640, and a total monthly rate of $1,540. As a second example, take an employee born on June 2, 1960, and also eligible for monthly tier I and tier II benefits, before age reductions, of $1,200 and $800, respectively, for a total monthly benefit of $2,000. This employee retires in 2022 at age 62 with no service before August 12, 1983. Consequently, a 30 percent reduction is applied to both the tier I and tier II benefits and the net total annuity would be $1,400. |
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5. How are railroad retirement spouse benefits affected by this change? | ||||||||||||||||||||||||||||||||||||||||||
If an employee retiring 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.
Beginning in the year 2000, full retirement age for a spouse gradually
began to rise to age 67, just as for an employee, depending on the year of
birth. While reduced spouse benefits are still payable at age 62, the
maximum reduction will be 35 percent by the year 2022. However, if an
employee had creditable rail service prior to August 12, 1983, the
increased age reduction is limited to the spouse's tier I benefit. Spouse Age Reductions
* A person attains a given age the day before his or her
birthday. Consequently, someone born on January 1 is considered to have
been born on December 31 of the previous year. |
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6. What age reductions
are applied to employees who retired with 30 years of service prior to 2002? |
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Under the
Railroad Retirement and Survivors' Improvement
Act of 2001, employees with 30 or more years of creditable service are
eligible for full age and service annuities the first full month they are
age 60, if their annuities begin January 1, 2002, or later. The spouses of
such employees are likewise eligible for full annuities, which can also
begin with the first full month the spouse is age 60. Also, if a
disability annuitant is age 60 and has 30 years of service, his or her
spouse can receive an annuity at age 60 without any age reduction if the
spouse's annuity beginning date is January 1, 2002, or later. However, early retirement reductions are applied to the tier I portion of an employee's annuity 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. The tier I benefit awarded such an employee's spouse will also be reduced for early retirement, regardless of whether the spouse retires at age 60 or 62, and regardless of the date the spouse's annuity begins. |
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7. Are age reductions applied to employee disability annuities? | ||||||||||||||||||||||||||||||||||||||||||
Employee annuities based on
disability are not subject to age reductions except for employees
with less than 10 years of service, but who have 5 years of service after
1995. Such employees may qualify for a tier I benefit before retirement
age based on total and permanent disability, and only if they have a
disability insured status (also called a "disability freeze") under Social
Security Act rules, counting both railroad retirement and social
security-covered earnings. Unlike with a 10-year employee, a tier II
benefit is not payable in these disability cases until the employee
attains age 62. And, the employee's tier II benefit will be reduced for
early retirement in the same manner as the tier II benefit of an employee
who retired at age 62 with less than 30 years of service. |
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8. Do these changes also affect survivor benefits? | ||||||||||||||||||||||||||||||||||||||||||
Yes. The eligibility age for
a full widow(er)'s annuity is also gradually rising from 65 to 67. A
widow(er), surviving divorced spouse or remarried widow(er) whose annuity
begins at full retirement age or later will generally receive an annuity
unreduced for early retirement. However, if the deceased employee received
an annuity that was reduced for early retirement, a reduction would be
applied to the tier I amount payable to the widow(er), surviving divorced
spouse or remarried widow(er). The maximum age reductions will range from
17.1 percent to 20.36 percent, depending on the widow(er)'s date of birth.
For a surviving divorced spouse or remarried widow(er), the maximum age
reduction is 28.5 percent. For a disabled widow(er), disabled surviving
divorced spouse or disabled remarried widow(er), the maximum reduction is
28.5 percent, even if the annuity begins at age 50. |
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9. How can individuals get more information about railroad retirement annuities and their eligibility requirement? | ||||||||||||||||||||||||||||||||||||||||||
Employees should contact the nearest field office of the
Board for information or refer to the Board's Web site at
www.rrb.gov. # # # |
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