Employee and Spouse Railroad Retirement Annuities
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The following text is from the IB-2 which contains additional information and is in smaller type more suitable for printing.
The basic requirement for a regular employee annuity is 120 months (10 years) of creditable railroad service. 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.
Return to Index
Age and Service, Disability and Supplemental Annuities
An AGE AND SERVICE ANNUITY can be paid to:
Employees with 30 or more years of 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 to annuities awarded before age 62.
Employees with 10 to 29 years of creditable service. 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 age 65.
Starting in the year 2000, the age at which full benefits are payable increases in gradual steps until it reaches age 67. This affects people born in 1938 and later. Reduced annuities will still be payable at age 62 but the maximum reduction will be 30% rather than 20% by the year 2022. Part of an annuity is not reduced beyond 20% if the employee had any creditable railroad service before August 12, 1983. These reductions do not affect those who retire at age 62 with 30 years' service but will affect those who retire at ages 60-61.
Benefits are increased for each month an employee delays retirement past full retirement age, currently 65, up until age 70 (more information).
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.
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 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, currently age 65. 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. An employee who was born before September 2, 1916, must not have worked in rail service after certain closing dates (generally the last day of the month following the month in which age 65 is attained).
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 the survivor benefits described later in this booklet. (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 such 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.
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 to such a spouse annuity if the employee retires before age 62, unless the employee attained age 60 and completed 30 years' service prior to July 1, 1984. If a 30-year employee retires at age 62, an age reduction is not applied to the spouse annuity even if the spouse retires at age 60 rather than age 62, unless the employee retired on the basis of disability.
If a retired employee with 10-29 years of service is age 62 (or age 65 if the employee's annuity began before 1975), 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 age 65. Beginning in the year 2000, full retirement age for a spouse will gradually rise to age 67, just as for an employee. Reduced benefits will still be payable at age 62, but the maximum reduction will be 35% rather than 25% by the year 2022. Part of a spouse annuity 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 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 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 remarried. 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
Because of the complexities of the railroad retirement laws and the need for lifetime earnings records, it is generally not practical for an employee to attempt to estimate his or her own regular annuity or the annuity of the spouse. Employees who want estimates should contact the nearest field office of the U.S. Railroad Retirement Board for approximate figures. Each Board field office can furnish estimates for employees with at least 10 years of railroad service.
The following tables show (1) fiscal year 1997 annuity awards to 30-year employees retiring before age 65 and (2) annuity awards in fiscal year 1997 to employees with an average of less than 30 years of service.
The maximum total benefit payable by the Board to an employee and spouse is $3,880 in 1998.
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.
Fiscal Year 1997 Annuity Awards to 30-Year
Employees Retiring Before Age 65
| Average award |
Average years of service |
|
| Retirement at ages 60-61: | ||
| Employee | $1,762 | 36.3 |
| Employee and spouse | $2,511 | 36.5 |
| Retirement at ages 62-64: | ||
| Employee | $2,099 | 38.3 |
| Employee and spouse | $3,015 | 38.5 |
| NOTE.--For employees with at least 25 years of service and a current connection, a supplemental annuity may be payable. The supplemental annuity amount, for awards after 1974, is $23 plus $4 for each year of service over 25 years, up to a maximum of $43. Figures in this table and the following table include supplemental annuity amounts. |
||
Fiscal Year 1997 Annuity Awards
Based on Service Averaging Less than 30 Years
| Average award |
Average years of service |
|
| Employee age 65 or over |
$1,216 | 21.7 |
| Employee age 65 or over and spouse |
$1,819 | 24.0 |
| Employee ages 62-64 with less than 30 years of service |
$899 | 17.4 |
| Employee ages 62-64 with less than 30 years of service and spouse |
$1,273 | 17.9 |
| Employee retiring because of disability |
$1,595 | 23.4 |
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 qualified for both railroad retirement and social security benefits before 1975 and 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 accordingly 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 those 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 had 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, which reflects the dual benefits payable prior to 1975, is called the vested dual benefit payment.
Requirements for vested dual benefits.--Employees who worked for a railroad in 1974 and retired after 1974 are considered vested if on December 31, 1974, they had both 10 years of railroad service and sufficient quarters of coverage to qualify for a social security retirement benefit at age 62. Employees qualified on this basis are eligible for vested dual benefit amounts computed on their railroad and social security credits through December 31, 1974.
Employees who did not work for a railroad in 1974 but had 25 or more years of railroad service before 1975 or employees with 10 years of railroad service before 1975 who had either a current connection with the railroad industry on December 31, 1974, or at the time they retired are also considered vested under the same conditions as persons who were railroad employees in 1974.
Other employees who completed 10 or more years of railroad service before 1975 but left the industry before 1974 are considered vested only if they had sufficient social security quarters of coverage to qualify for a social security retirement benefit as of the end of the year in which they left the railroad industry. Their vested dual benefit amount is based only on credits acquired through their last year of pre-1975 railroad service instead of through December 31, 1974.
Employees who do not qualify for a vested dual benefit may be eligible for a refund of any excess social security taxes they paid.
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 97% 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.
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.
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 pension separately
payable to the spouse based on the spouse's own earnings. The reduction does not apply if the employment on which the public
pension is based was covered under the Social Security Act on the last day of public employment. However, most military service
pensions and payments from the Department of Veterans Affairs will not cause a reduction. For spouses subject to the government
pension reduction, the tier I reduction is equal to 2/3 of the amount of the government 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, only the railroad retirement employee annuity or the spouse annuity, whichever he or she chooses, is payable.
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 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.
The total amount of monthly railroad retirement benefits payable to an employee and spouse at the time the employee's annuity begins is limited to a maximum based on the highest two years of creditable railroad retirement or social security covered earnings in the 10-year period ending with the year the employee's annuity begins. This maximum generally applies only at the time of the initial award, and benefits are subsequently increased for the cost of living regardless of whether or not a maximum limitation applies at the time of the initial award.
The maximum increases every year as the amounts of creditable earnings rise. Therefore, an employee with high recent earnings who is affected by the maximum may still gain larger benefits by continuing work after his or her earliest eligibility date.
However, the maximum provision may also affect retirees with low earnings, or no earnings, in the 10-year period ending with the year the employee's annuity begins. An example of someone with low earnings could be an employee who accepted a separation allowance and then worked part-time social security covered jobs until retirement. Cases with no earnings could include Canadian employees whose coverage under the Railroad Retirement Act ceased after December 31, 1982, and who had no sub-sequent creditable earnings under the Railroad Retirement Act and Social Security Act. Cases with no earnings could also include persons working in noncovered Federal jobs.
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, normally payable on January 1, 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.
Neither a regular annuity, a supplemental annuity nor a spouse annuity is payable for any month in which a retired employee works for a railroad employer, including labor organizations ( exception regarding local lodge employees).
The tier I and vested dual benefit components of employee and spouse retirement annuities may be subject to certain limitations based on any earnings outside the railroad industry. Tier I and vested dual benefit components are subject to deductions if earnings exceed the exempt amounts applicable to social security beneficiaries. The deduction is $1 in benefits for every $3 earned over the exempt amount in a calendar year for those ages 65-69; for those under age 65 it is $1 in benefits for every $2 of earnings. An employee's earnings over the exempt amount may also reduce the spouse benefit.
Earnings consist of all wages received for services rendered plus any net earnings from self-employment. Interest, dividends, certain rental income or income from stocks, bonds, or other investments are not generally considered earnings for this purpose. Annual earnings in 1998 up to $14,500 for those ages 65-69 and $9,120 for those under age 65 are exempt from work deductions. However, no deduction is made in either the tier I or vested dual benefit components for any months after the annuitant reaches age 70.
In the first year in which an employee 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 the monthly exempt amount nor has substantial self-employment. Otherwise, work deductions are based on annual earnings, whether or not the annuitant worked in every month and regardless of the amount of earnings in a particular month.
Annuitants 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 work for their last pre-retirement nonrailroad employer are subject to an additional 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 compensation received, subject to a maximum reduction of 50%.
The deductions in the tier II benefits and supplemental annuities of individuals who work for pre-retirement non-railroad employers apply even if earnings do not exceed the tier I exempt earnings limits. Also, while tier I and vested dual benefit earnings deductions stop when an annuitant attains age 70, these tier II and supplemental annuity deductions continue to apply after the attainment of age 70. Retired employees and spouses must therefore promptly notify the Board if they return to work for their last pre-retirement nonrailroad employer.
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.
If an employee was born before September 2, 1916, working for a railroad or railroad union after a supplemental annuity closing date will terminate a supplemental annuity permanently. Employees who were born after September 1, 1916, are not affected by the previous closing-date restriction.
Earnings of $25 or more a month by a local lodge employee will prevent payment of the annuity for that month.
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 a railroad employer or railroad union.
Disability Annuities
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 earns more than $400 in any employment or 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 counts 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, currently age 65, when the annuitant becomes subject to the work and earnings restrictions applicable to employee annuities based on age and service as described above. This transition is effective no earlier than full retirement age even if the annuitant had 30 years of service.
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.
Payment of an annuity stops upon an 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.
For retirees receiving supplemental annuities, who were born before September 2, 1916, a return to railroad service would result in the permanent loss of a supplemental annuity.
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 (but 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 two-tier 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.
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.
See also form G-177A (05-94) When the Wife or Husband of a Railroad Retirement Annuitant May Receive A Spouse's Annuity or form G-177C (05-94) When an Individual is Eligible for a Railroad Retirement Divorced Spouse Annuity.
© 1999 Railroad Retirement Board