Payments made by the RRB are made at the beginning of a month and represent payment
for the previous month. Consequently, changes made in accordance with Legal Opinion

L-2000-26 should be made with payments issued after the date the legal opinion was
issued.

ees



oO annuity was awarded, if later). The tier I so computed was then used to compute the tier
TI payable to the family members.

The change in the manner by which the family maximum is distributed results from a

recent change in legal interpretation. As explained above, the basis for the 1974 Act tier

Il is based upon a calculation as to the tier I amount that would have been payable as of a

specified date, no later than October 1, 1986. At that time, social security entitlement

was not relevant to the distribution of the family maximum. Therefore, it is my opinion

that an adjustment made for Parisi redistribution purposes should not result in a
+ recomputation of the thirty percent basis for 1974 Act tier II computations.

ISSUE V: Does the CFM apply to O/M cases?

Yes. The purpose of the O/M is to insure that less benefits would not be paid based upon
an employee’s earnings than would be paid if the employee’s earnings were creditable
under the Social Security Act. Consequently, the combined family maximum must be
taken into consideration in O/M cases where a child is entitled to a child’s insurance
benefit under the SSA based on earnings other than the employee’s earnings. In practice,
the end result may be that the CFM does not result in a larger share of the O/M
attributable to the auxiliary, but consideration should still be given to the CFM. If the
railroad employee’s PIA is less than the PIA for the social security benefit, however, the
O/M share attributable to the auxiliary may increase where the CFM applies.

ISSUE VI: Should an auxiliary’s share of the O/M always be reduced for that auxiliary’s
social security entitlement?

Yes. To the extent L-2000-26 suggests otherwise, that advice is withdrawn.

ISSUE VI: How-many members must be present for the Parisi redistribution to apply in
O/M cases?

The Parisi redistribution applies only if there is more than one auxiliary and at least one,
but not all of the auxiliaries, is entitled to a social security benefit based on earnings other
than the railroad employee’s earnings. In such instances, the share of the O/M to which
the dually entitled auxiliary is entitled should be reduced for the dual entitlement. To
compute the O/M amounts divisible between the remaining auxiliaries, the maximum
should be reduced by an amount equal to the employee’s PIA and should also be reduced
by the difference remaining after the dually entitled individual’s O/M share is reduced for
social security entitlement. The amount that remains should be redistributed to the
remaining auxiliaries. The O/M share payable to the remaining auxiliaries may not
exceed fifty percent (50%) of the highest PIA.

Question VIM: Legal Opinion L-2000-26 was effective August 15, 2000. Should annuity
rates be adjusted from August 1, 2000 or September 1, 2000?

SR a ee



UNITED STATES GOVERNMENT FORM G-115¢(1-92)
RAILROAD RETIREMENT BOARD
MEMORANDUM
JUL 2 8 2001
L-2001-10

TO : Nancy Z. Marks
Chief of Calculation Analysis and Systems
Through: Ronald Russo
Director of Policy and Systems

FROM: Steven A. Bartholow, PY ae
General Counsel

SUBJECT: Clarification of Legal Opinion L-2000-26

4

This memorandum addresses your request for clarification of Legal Opinion L-2000-26,
as well as related issues introduced in discussions between members of your staff and this
@ office. Legal Opinion L-2000-26 addressed a change in the Social Security
Administration’s regulations at section 404.403 regarding the computation of the family
maximum and its application to the computation of annuities payable under the Railroad
Retirement Act (RRA). Briefly stated, the regulatory change provided that, in cases
involving benefits subject to reduction for both the family maximum and dual social
security benefit entitlement, only the amount of benefits actually due or payable to the
dually entitled person based on the insured worker’s earnings record are considered when
determining how much to reduce the total monthly benefits payable to the remaining
family members. For ease of reference, this change is referred to in this decision as the
“Parisi redistribution,” after the court case which resulted in the processing change.

The issues presented in your memorandum and in subsequent discussions are addressed
below.

ISSUE I: Does the amount of the social security benefit the survivor annuitant receives,
ie., an amount that is greater than or less than tier I, impact the application of the Parisi
redistribution?

Answer: The amount of the social security benefit the survivor annuitant receives may

impact the application of the Parisi redistribution if the survivor annuitant receives an

auxiliary benefit. (If the survivor annuitant receives an annuity based on his or her own

earnings, the Parisi redistribution applies, regardless of whether the social security benefit

is greater than or less than tier I, provided of course, that there are family members not
@ subject to a social security reduction.)



As you note in your memorandum, under the Social Security Act, where an individual is
simultaneously entitled to two auxiliary benefits, only the larger auxiliary benefit is
payable. See 42 U.S.C. § 402(k). Consequently, you suggest that applying the Parisi
redistribution where the tier I is greater than the social security benefit, results in paying a
family group more than they would receive under the Social Security Act. However,
based upon an example provided in your memorandum, and our review of the applicable
provisions of the Social Security Act, it appears that a provision of the Social Security
Act that should be applied in computing the family maximum is not being applied at this
: time.

Provisions regarding the computation of the maximum payable based upon an
individual’s earnings record are found in Section 203(a) of the SSA (45 U.S.C § 403(a)).
Where a child’s annuity is limited due to the application of the family maximum, and the
child would be entitled to more than one child’s insurance benefit except for the
restriction on simultaneous entitlement found in section 202(k)(2)(A) of the SSA (45
U.S.C. § 402(k)(2)(A)), the statute provides for consideration of a combined family
maximum (CFM). This provision is found in sestion 203(a), which provides, in relevant
part, as follows:

(3)(A) When an individual who is entitled to benefits on the basis of the
wages * * * of any insured individual and to whom this subsection applies
would (but for the provisions of section 202(k)(2)(A)) be entitled to
child’s insurance benefits for a month on the basis of the wages * * * of
one or more other individuals, the total monthly benefits to which all
beneficiaries are entitled on the basis of such wages * * * shall not be
reduced * * * to less than the smaller of —

(i) the sum of the maximum amounts of benefits payable on the
basis of the wages * * * of all such insured individuals, or

Gi) an amount (1) initially equal to the product of 1.75 and the
primary insurance amount that would be computed under section
215(a)(1) for January of the year determined for purposes of this clause
under the following two sentences, with respect to average indexed
monthly earnings equal to one-twelfth of the contribution and benefit base
determined for that year under section 230, and (Il) thereafter increased in
accordance with the provisions of section 215(i)(1)(A)(ii).

The year established for purposes of clause (ii) shall be 1983 or, if it
occurs later with respect to any individual, the year in which occurred the
month that the application of the reduction provisions contained in this
subparagraph began with respect to benefits payable on the basis of the
wages * * * of the insured individual.



Section 4(f)(1) of the RRA provides that the tier I component of the annuity of a survivor
of a deceased employee shall be in an amount equal to the amount of the benefit to which
the survivor would have been entitled under the Social Security Act if such deceased
employee’s service as an employee after December 31, 1936, had been included in the
term “employment” as defined in that Act. Consequently, consideration must be given to
the CFM which would be payable to a family group where a child annuitant is entitled to
a child’s insurance benefit under the SSA.

ISSUE I: Where the CFM applies, how should the combined family maximum be
computed?

Answer: The maximum should be computed in accordance with the applicable
provisions of the SSA and relevant regulations. See 42 U.S.C. § 403(a)(3)(A) and 20
CFR 404.403. In order to insure that the family group does not receive less under the
Railroad Retirement Act, than would have been paid under the Social Security Act, it is
my opinion that the amount paid to the family members should not necessarily be limited
by the’railroad employee’s PIA, but should be limited to no more than the statutory share
of the highest PIA involved. 3

ISSUE I: If a surviving mother’s tier I is subject to reduction for social security
entitlement, thereby reducing her tier I to zero and allowing for a Parisi redistribution of
the maximum to the children, must the mother be included in the family group
composition when computing the tier II?

Answer: Yes. The mother must be included in the family group composition as long as
she is entitled to an annuity. Of course, if the mother loses entitlement, or withdraws her
application, then she should not be included in the family group composition.

ISSUE IV: Should the thirty percent basis for survivor 1974 Act tier It computations be
recomputed in Parisi redistribution cases?

Answer: No. Prior to the 1981 amendments, section 4(g) of the Railroad Retirement Act
provided that a survivor’s annuity shall “be increased by an amount equal to 30 per
centum of the amount of the annuity (before any deductions on account of work) to
which such survivor is entitled for such month under the provisions of subsection (f) of
this section, or to which such survivor would have been entitled for such month under
such subsection if such survivor were entitled to no other monthly benefit under section 2
of this Act or under the Social Security Act.”

Section 4(g) was amended in 1981 to change the method by which the tier II component
of a survivor annuity is computed. However, provisions were included which allowed
some individuals to receive a tier II under section 4(g) as quoted above if the annuity was
awarded prior to October 1, 1986. These provisions were discussed in Legal Opinion L-
82-130. In that opinion, this office determined that the calculation of the tier II following
a change in a family group’s composition, required a calculation as to the tier I amount
that would have been payable to the “new” family group in May of 1982 (or when the