FORM G-115f(l-92)

R a i l r o a d R e t i r e m e n t B o a r d

AUG 1 5 2000

L-2000-26

TO

FROM

SUBJECT :

This is in response to your memorandum dated March 14, 2000 in which you 

request confirmation of your interpretation of a change in the Social Security 

Administration’s regulations and its application to the computation of 

annuities payable under the Railroad Retirement Act.

The Social Security Act limits the amount of monthly benefits that can be paid 

for any month based on the earnings of an insured individual. If the total 

benefits to which all persons are entitled on one earnings record exceed a 

maximum amount prescribed by law, commonly referred to as the family 

maximum, then those benefits must be reduced so that they do not exceed the 

prescribed maximum. The Social Security Administration has amended its 

regulations by adding a new paragraph to section 404.403 (20 CFR 404.403) 

effective October 27,1999. 64 FR 57774. The new paragraph provides 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 worker’s earnings 

record are considered when determining how much to reduce the total monthly 

benefits payable to the remaining family members because of the family 

maximum. Previously, all social security benefits were taken into 

consideration, not merely those benefits based on the worker’s earnings record.

The change in SSA’s processing was adopted following the decision in Parisi bv 

Coonev v. Chater. 69 F. 3d 614 (1st Cir., 1995). At issue in Parisi was whether an 

illegitimate child’s social security benefit should be decreased upon the

Nancy Z. Marks

Chief of Calculation Analysis and Systems 

Through: Ronald Russo

Director of Policy and Systems

Steven A. Bartholow 

General Counsel

Revision to Section 404.403 of the Regulations of the Social 

Security Administration

U n i t e d S t a t e s G o v e r n m e n t

MEMORANDUM
Nancy Z. Marks

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entitlement of the wage earner’s spouse, even though the spouse’s own social 

security benefit reduced the spouse benefit payable to her to zero. The court 

concluded that the adjustment to the child’s benefit was not supported by the 

statutory language, or by reason. In arriving at this conclusion, the court 

focused on the fact that no benefits were actually payable to the spouse based 

upon the wage earner’s work record and held that only the actual benefits 

payable on the wage earner’s record should be taken into consideration when 

determining whether the child’s benefit should be reduced.

Your memorandum presents the following questions:

1. Is your interpretation of the change as it applies to the family maximum

in survivor cases correct?

You summarize your interpretation of the change as it applies to the 

family maximum in survivor cases by way of an example involving a 

young mother and two minor children. It is my opinion the manner in 

which you applied the change in SSA’s processing to this family group is 

correct.

In the example, each member of the family group is entitled to a 

statutory share of $929.60, representing 75% of the PIA amount of 

$1,239.50. Because the sum of the statutory shares exceeds the family 

maximum of $2,168.20, the family maximum applies and the starting 

point for the computation of the annuities for the young mother and 

children is $722.00. The mother is also entitled to a social security 

benefit in the amount of $500.00 reducing the tier 1 payable to her to 

$222.00.

Under current processing, the young mother receives a tier I of $222.00 

and the children each receive a tier I in the amount of $722.00, resulting 

in a total for the family group of $1,666.00. Applying the change 

proposed by SSA, the young mother will continue to receive a tier I of 

$222.00, but the tier I payable to the minor children will be increased to 

$929.60. The amount payable to the minor children is determined by 

reducing the family maximum amount by the $222.00 payable to the 

young mother and then dividing the difference among the remaining 

family members, in proportion to the applicable statutory share 

percentages. This result is then compared to the statutory share of the
Nancy Z. Marks

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remaining family members, and they receive the lesser of the two 

amounts. In the example provided, the minor children’s statutory share 

of the PIA is $929.60, which is less than $973.10, the result of the fam ily

maximum (2,168.20) minus the young mother’s share (222.00), divided by 

two. Consequently, the starting point for the computation of the tier I 

component of the minor children’s annuity is $929.60.

2. Does the change impact the computation of cases involving the overall 

minimum (O/M) guaranty in retirement cases?

Your memorandum indicates that, under current procedure, a family 

member is not included in the O/M if his or her social security benefit 

would reduce the amount payable to the family below the family 

maximum, unless there are no other family members to include in the 

family group. If there are no other family members, then the O/M rate 

payable is reduced, but in most cases this results in the railroad formula 

rate exceeding the O/M, such that the O/M is no longer payable. 

Therefore, you conclude that the change in SSA’s regulations would not 

affect retirement cases. I disagree.

In accordance with SSA’s recent changes, it is my opinion that in those 

cases where a spouse is included in the computation of the O/M, the O/M 

rate should be reduced for the spouse’s social security entitlement only if 

the social security benefit to which she is simultaneously entitled is 

based upon the employee’s work record. If the social security benefit the 

spouse receives is not based upon the railroad employee’s earnings 

record, no reduction for the spouse’s social security entitlement should 

occur in the O/M computation.

3. Should dual-entitlement to annuities payable under the Railroad 

Retirement Act be treated in the same manner as dual-entitlement to 

social security benefits?

Provisions regarding the computation of the tier I component of a 

survivor annuity are found in section 4(f) of the Railroad Retirement Act 

(45 U.S.C. § 231c(f)). As noted in your memorandum, that section 

provides, in part, as follows:
Nancy Z. Marks

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(1) The annuity of a survivor * * * shall be in the amount 

equal to the amount (before any deductions on account of 

work) of the * * * benefit * * * to which he or she would have 

been entitled under the Social Security Act if [the] deceased 

employee’s service as an employee after December 31,1936, 

had been included in the term “employment” as defined in 

that Act.

Section 4(a)(1) of the Railroad Retirement Act (45 U.S.C. § 231c(a)(l)) 

includes a similar provision as it applies to the computation of the tier I 

component of a spouse annuity.

Consistent with the court’s reasoning in Parisi. it’s my opinion that, 

where the dependent or survivor is entitled to dual railroad retirement 

annuities, and the reduction for the dual railroad entitlement occurs in 

the tier I component of the dually-entitled dependent’s or survivor’s 

annuity, the dual railroad retirement entitlement should be handled in 

the same fashion as the dual social security benefit entitlement. That is, 

only the amount of tier I benefits actually due or payable on the worker’s 

record to the dually entitled person should be used when determining 

how much to reduce the total monthly benefits payable on the 

employee’s earnings record because of the applicable maximum. If the 

reduction for the dual railroad retirement entitlement does not occur in 

the tier I component, then the dual-railroad retirement entitlement 

should not be taken into consideration.

4. Assuming a change is required for cases paid under the Railroad

Retirement Act, what is the appropriate effective date of the change in 

processing?

The change in processing should be effective with the date of issuance of 

this memo, as this memorandum represents a change in legal 

interpretation.

cc: Director of Programs

Director of Assessment and Training 

Director of Hearings and Appeals

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