U n ite d S ta te s G o v ern m e n t f o r m o -i h t o -m )

Ra il r o a d R e t ir e m e n t Bo a r d

August29,2003

L-2003-12

TO : Robert E. Bergeron

Office of the Labor Member

FROM : Steven A. Bartholow 

General

SUBJECT : CSX 1999 Voluntary Early Retirement and Separation Program 

Compensation - Separation Allowance

This is in reply to your request for my opinion as to whether the payments 

received by the former railroad employee, Mr. James V. Brown, Jr., pursuant to 

his election under the CSX 1999 Voluntary Early Retirement and Separation 

Program, constitute compensation creditable for benefit entitlement purposes 

under the Railroad Retirement Act. As explained below, in my opinion the 

payments which the employee has received do not constitute railroad 

compensation under the Act, and do not allow the crediting of any additional 

railroad service months.

The records of the Board show that the employee, who was born in 1947 and is 

currently age 56, has been credited with a total of 408 months of railroad 

service through January 2000. To support a claim for additional service months 

and compensation, the employee has furnished copies of various documents, 

including an October 1999 summary of the CSX 1999 program, the “ Employment 

Separation and Release Form" which he signed November 21,1999, 

correspondence between CSX and himself at the time of his separation, and a 

copy of his August 2003 "Earnings Statement".

The introduction to the program summary distinguishes between two distinct 

types of payments which CSX offered to its employees under the 1999 program: 

the "Voluntary Separation Program,” and the "Voluntary Early Retirement *3 

PLUS 3"’ program. The Voluntary Separation Program also offered two payment

M e m o r a n d u m
alternatives: a lump sum or monthly installments. The lump sum recipient 

terminated all aspects of employment at time of payment, while an employee 

who elected the monthly installments remained covered by medical and life 

insurance during the payment period (subject to payment of required 

premiums); the time period of the installment payments also counted as 

continued company service in determining the vesting service requirement 

under the company pension plan. Employment taxes were withheld up to the 

annual limit, whether the employee elected the lump sum or installment 

payment method. Voluntary Separation Program payments were made from 

general company funds.

The Voluntary Early Retirement 3 PLUS 3 option was evidently offered to those 

CSX employees who were within three years of certain age requirements or who 

were within three years of certain minimum CSX service requirements under the 

com pany pension plan. Employees electing this option were considered, for 

purposes of meeting the age and service requirements of the CSX pension plan, 

to be three years older and have three years additional employment with the 

company. In effect, these employees retired on the company pension three 

years earlier. The summary document states that pension payments are made 

from a qualified trust, and no Railroad Retirement employment taxes are 

withheld.

The subject employee in the case you submitted executed an “ Election to 

Resign Pursuant to the CSX 1999 Voluntary Early Retirement and Voluntary 

Separation Program" form, which states in part that "After careful review, I am 

willing to resign pursuant to the Program and agree to sign the Release at the 

time and place specified by the Company. Further, I elect to receive the Early 

Retirement Window * * The Agreement and Release furnished by the 

employee states in pertinent part that in consideration of the agreement by CSX 

Transportation to pay the benefit described, the signatory employee agrees 

that:

Effective upon the date of this Agreement, I hereby relinquish forever any 

seniority rights I may have under any labor agreement with the Company, 

and I agree that until my employment relationship with the Company 

ceases, my compensation and other employment terms, conditions and 

benefits will be as set forth [elsewhere in the release document] * * *.
As you know, section 1(h)(1) of the Railroad Retirement Act (RRA) defines 

compensation for benefit entitlement purposes under that Act in part as:

* * * any form of money remuneration paid to an individual for services 

rendered as an employee to one or more [railroad] employers * * * 

including remuneration paid for time lost as an employee, but 

remuneration paid for time lost shall be deemed earned in the month in 

which such time is lost. A payment made by an employer to an individual 

through the employer's payroll shall be presumed, in the absence of 

evidence to the contrary, to be compensation for service rendered by 

such individual as an employee of the employer in the period with respect 

to which the payment is made. * * *

Section 1 (h)(2) of the RRA further provides that:

An employee shall be deemed to be paid "for time lost" the amount he is 

paid by an employer with respect to an identifiable period of absence 

from the active service of the employer, including absence on account of 

personal injury, and the amount he is paid by the employer for loss of 

earnings resulting from his displacement to a less remunerative position or 

occupation. * * *

The Railroad Unemployment Insurance Act at section 1 (i)(l) provides essentially 

the same definition with respect to compensation creditable for benefit 

entitlement purposes under that Act as well. In addition, regulations of the 

Board (20 CFR 211.9,211.10) provide:

§211.9 Dismissal allowance.

Dismissal allowances paid to an employee under a protective labor 

agreement that covers the amounts paid for specific periods of time are 

creditable as compensation under the Railroad Retirement Act, provided 

the employee has not severed his or her employee-employer relationship.

§211.10 Separation allowance or severance oav.

Separation or severance payments are creditable compensation except 

that no part of such payment shall be considered creditable 

compensation to any period after the employee has severed his or her 

employer-employee relationship except as provided for in §211.11 of this
part [which allows a payment taxable only for tier I purposes under the 

Railroad Retirement Tax Act to be credited for purposes of calculating the 

tier I annuity component under the RRA pursuant to section 1 (h)(8) of that 

Act].

Section 210.5(d) of the regulations (20 CFR 210.5(d)) provides in part that for 

purposes of annuity calculation and entitlement under the Act, "Any month or 

any part of a month during which an employee performed no active service but 

received pay for time lost as an employee is counted as a month of service."

This Office previously determined that the lump sum payment under the CSX 

1999 Voluntary Separation program constituted compensation as a separation 

allowance. See Legal Opinion L-99-18. Because the employment relation 

terminated at the time of the election to receive the lump sum payment, 

however, compensation could not be credited and service months allocated 

after the month of election to receive the lump sum payment. That opinion did 

not address whether any additional compensation or service months may be 

credited where the employee chose, as in the case you submitted, the 

“Voluntary Early Retirement 3 Plus 3" option.

It is evident that CSX made the 1999 Voluntary Early Retirement and the 

Voluntary Separation Programs available to certain employees for the same 

, purpose: to reduce the number of CSX employees. The liberalized eligibility 

afforded under the Voluntary Early Retirement program for the company 

pension, as an inducement to terminate employment, might appear to be 

separation payments in exchange for the employee's relinquishment of any 

right to further employment. Cf. Legal Opinions L-96-9, L-96-10 (holding 

payments from a "supplemental pension trust fund" which were in return for 

resignation, were separation payments for purposes of the disqualification 

period imposed on unemployment and sickness insurance benefits under 

section 4(a-l)(iii) of the Railroad Unemployment Insurance Act). It is 

noteworthy, however, that the Voluntary Early Retirement program required, as 

did the lump sum payment alternative of the Voluntary Separation program, 

that the employee terminate his employment relationship with the employer at 

the time of election. Consequently, even if the payments were otherwise 

considered compensation, no additional compensation could be credited, or 

service months allocated, under the Railroad Retirement Act after the date of 

the employee's election. Compare, e.g., Legal Opinion L-2003-10 (separation 

payments made by installments are creditable as service and compensation 

through period of payment, where employment relationship continues until last 

payment is made).
There are additional significant differences between the Voluntary Early 

Retirement and the Voluntary Separation programs. Because the payments 

elected under the Voluntary Early Retirement option are paid from the trust fund 

established for the com pany pension, they are therefore not “A payment made 

by an employer to an individual through the employer’s payroll" within the 

meaning of section 1 (h)(1) of the Act. In addition, because the payments are 

predicated on retirement from service, they are not made “with respect to an 

identifiable period of absence from the active service of the employer" within 

the meaning of section 1 (h)(2) of the Act, and section 211.9 of the regulations. 

This Office has therefore declined in the past to find that pension payments 

m ade under an offer of liberalized eligibility requirements as an inducement to 

separate from railroad employment, are in fact separation payments creditable 

as compensation under the Act. See Legal Opinion L-2001-04 (CSX Special 

Enhanced Benefits Program, 2 Plus 2 Option).

The offer to increase the employee’s age and company service by 3 years each 

under the 1999 program is essentially indistinguishable from the offer to increase 

the employee’s age and company service considered by Legal Opinion L-2001- 

04. Consistent with the reasoning of that opinion, I conclude that the 

employee's railroad compensation and service in the Board's records correctly 

reflects that the payments which he receives pursuant to his election of the "3 

PLUS 3" early retirement option of the CSX 1999 Voluntary Early Retirement and 

Separation Program are not creditable as compensation under the Acts.

cc: Policy and Systems, Office of Programs

KT

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