TO 

FROM 

SUBJECT 

U NITED STATES GOVERNMENT 

MEMORANDUM 

Kimberly Price-Butler 

Director of Policy and Systems 

FORM G-115f (1 -92) 

RAILROAD R ETIREMENT B OARD 

September 28, 2016 

L-2016-44 

General 

Karl T. Blank 

Counsel 

J ~ ~ 

Supplemental Pension Plan 

Association of American Railroads Pension Plan 

Association of American Railroads Pension Plan (Cash Balance 

Plan) 

This is in response to your memorandum dated August 11, 2016 in which you 

requested a legal opinion as to whether the Association of American Railroads 

Pension Plan ("the AAR Pension Plan") and the Association of American 

Railroads Pension Plan (Cash Balance Plan) ("the Cash Balance Plan") are 

"supplemental pension plans" within the meaning of section 2 (h)(2) of the 

Railroad Retirement Act ( 45 U.S.C. § 23 la(h)(2)) (the Act). The Summary Plan 

Descriptions for both plans indicate that the plans are amended versions of the 

Association of American Railroads Pension Plan, which was initially established 

on January 1, 1952. 1 As you pointed out in your memorandum, in Legal Opinion, 

L-91 -116, the Office of General Counsel found that a predecessor to the current 

version of the AAR Pensions Plan, as amended May 25, 1990, was a supplemental 

pension plan within the meaning of section 2(h)(2) of the Act. The current plan is 

an updated version of its predecessors. However, the Office of General Counsel 

has not reviewed and determined whether the Cash Balance Plan is also a 

supplemental pension plan within the meaning of the Act. For the reasons 

The AAR Pension Plan is for employees who became participants prior to December 31, 

2011. The Cash Balance Plan is for employees who first became participants on or after 

December 31 , 2011. 
2 

described below, it is my opinion that the AAR Pension Plan and the Cash Balance 

Plan are supplemental pension plans under the Act. 

The pension plans in question are defined contribution plan with definite 

provisions concerning participation, contributions, creditable service, vesting, 

retirement age, and benefits. 

Section 216.42(a) of the Board's regulations (20 CFR 216.42(a)) defines a 

supplemental pension plan that will reduce a supplemental annuity as a plan that: 

1) Is a written plan or arrangement which is communicated to the 

employees to whom it applies; 

2) Is established and maintained by an employer for a defined 

group of employees; and 

3) Provides for the payment of definitely determinable benefits to 

employees over a period of years, usually for life, after retirement or 

disability. Such a plan is often referred to as a defined benefit plan. 

Section 216.42(b) (20 CFR 216.42(b)) describes a defined contribution plan as 

follows: 

Defined contribution plan. A plan under which the employer is obligated to 

make fixed contributions to the plan regardless of profits (sometimes known 

as a money purchase plan) is a private pension plan. A plan under which the 

employer's contributions are discretionary is not a private pension plan. 

The AAR Pension Plan is an updated version of its predecessors (January 1, 1952 

and May 25, 1990) and does not contain any significant differences that would 

reverse the determination made in Legal Opinion, L-91-116. With respect to the 

Cash Pension Plan, I find that the plan also falls within the criteria set forth in 

section 216.42(a) of the Board's regulations. Therefore, it is my opinion that both 

pension plans, are supplemental plans under section 2(h)(2) of the Railroad 

Retirement Act. Benefits paid under the plans will reduce the supplemental annuity 

to the extent benefits are based upon employer contributions.