t u i O f U n it e d St a t e s

G o v e r n m e n t

M e m o r a n d u m

FORM G-115f (1-92)

R a il r o a d R e t ir e m e n t B o a r d

May 6,2004

L-2004-09

TO Ronald Russo

Director, Policy and Systems 

Office of Programs

FROM Steven A. Bartholow JsA jZ euGeneral Counsel

SUBJECT : CSX 2003/2004 Enhanced Pension Benefits Program 

Organizational Effectiveness Initiative 

Eligibility for Unemployment Insurance Benefits and Current 

Connection

This memorandum is in reference to a request by CSX Transportation 

(CSXT) for my opinion as to the effect upon eligibility for benefits under the 

Railroad Retirement and Railroad Unemployment Insurance Acts of 

payments by CSXT under the CSX 2003/2004 Enhanced Pension Benefits 

Program (the 2003/2004 Program). I am providing my analysis of the 

program directly to you so you may notify agency employees regarding 

any necessary action in adjudication of benefit claims under either Act.

A copy of this memorandum has also been sent directly to CSXT.

The employer has requested advice regarding whether employees 

eligible for these payments may receive unemployment insurance 

benefits under the Railroad Unemployment Insurance Act (RUIA), and 

whether employees whose employment terminates in connection with the 

2003/2004 Program will retain a current connection with the railroad 

industry for purposes of annuity entitlement determinations under the 

Railroad Retirement Act (RRA). As explained below, in my opinion the
payments under the 2003/2004 Program do not constitute railroad 

compensation under the Acts, and do not allow the crediting of any 

additional railroad service months. Payments under the Program also do 

not constitute a separation allowance which would disqualify a claimant 

for unemployment insurance benefits. Those employees who receive 

benefits under the Program may be considered eligible for 

unemployment insurance benefits subject to evidence of availability for 

work, while the group which does not receive benefits under the Program 

need not establish availability first. Certain categories of employees may 

be considered qualified for a deemed current connection, while the 

current connection of those who expressed a willingness to have 

employment terminated in exchange for benefits under the Program must 

be determined upon the circumstances under which each individual left 

employment.

I. Summary of the 2003/2004 Program.

CSXT explains that its parent company, CSX Corporation, determined to 

reduce management positions throughout its organization, including 

subsidiary corporations, by 800 to 1000 jobs, under a program entitled 

“ Organizational Effectiveness Initiative" or OEI. CSXT complied with the 

parent company directive by redesigning each level of management, 

then deciding which current employees will be moved from the existing 

jobs to the newly created positions. Benefits under the 2003/2004 Program 

are offered to certain classes of individuals who lose employment as a 

result of the restructuring.

CSXT has described several categories of employees offered benefits 

under the 2003/2004 Program. The first two are (1) managers who are not 

offered a new position after restructuring; and (2) managers who notify 

the employer that they would agree to allow CSXT to terminate their 

employment as part of the restructuring in order to receive benefits under 

the 2003/2004 Program. In both instances, CSXT determines whether to 

retain the employee based on information such as effectiveness ratings, 

but in the second category CSXT considers the expressed interest of the 

employee as well. If terminated, both categories receive the same form 

letter from a CSXT official which states that as a result of company 

restructuring, “your employment with [CSXT] is being terminated * * * your 

separation is effective [the date of the letter].”
CSXT describes another group of employees who are “suspensed". CSXT 

explains that as the reorganization proceeds one management 

classification level at a time, some employees who are not offered a job 

at their present management level are notified that they may elect 

benefits under the 2003/2004 Program or may consider a position at the 

next lower corporate level. If they wish to be considered for this 

employment, their employment status is "suspended” until the reordering 

of next lower level of management is concluded and those positions are 

filled, a period which I am informed would last about 60 days. At that 

time the “suspensed" employee is either told no position is available, or is 

offered a managerial position at the lower management level. If no 

position is available, then the employee is offered benefits under the 

2003/2004 Program. Employees offered “suspensed" status receive a 

letter from CSXT which states that “as a result of * * * [the company 

restructuring] you no longer have a position with CSX Transportation" at 

the employee's current management level. "If you do not choose to be 

considered for a position at * * * [the next lower management 

classification], your employment will be terminated." If CSXT offers the 

suspended employee a lower echelon management position, but the 

employee declines, his or her status as a suspended employee ends. For 

purposes of this memorandum, employees who elect immediate benefits 

under the 2003/2004 Program rather than suspended status, and those 

who request suspended status but are then not offered a position will be 

classified together as category 3; those who elect suspend status but then 

decline an offered position will be classified as category 4. I note that no 

benefits under the 2003/2004 Program are available to this fourth 

category of employees.

CSXT has also provided a summary of benefits which may be paid under 

the 2003/2004 Program. As described by the summary, the Program 

offers two distinct types of payments. The "2+2 Option" allows employees 

to be considered, for purposes of meeting the age and service 

requirements of the CSX pension plan, to be two years older and have 

two years additional employment with the company. In effect, these 

employees may retire on the company pension two years earlier. The 

summary document states that pension payments are made from a 

qualified trust, and no Railroad Retirement employment taxes are 

withheld. The "Lump Sum Option" allows the employee to receive a 

special lump sum distribution from the Pension Plan equal to the product
of the employee's monthly base salary multiplied by a “benefit factor" 

ranging from 3 to 12, derived from a table grouping length of company 

service.1 The summary document warns the employee that a lump sum 

payment is subject to normal distribution rules of the CSX pension plan, 

and therefore is subject to a 10 percent Federal tax penalty if received 

before the employee is age 55.

II. Payments are not creditable compensation.

Because unemployment insurance benefits are not payable for any day 

for which the employee receives remuneration (RUIA section 1 (k)), it must 

first be determined whether payments under the 2003/2004 Program 

constitute railroad compensation. As both the RRA and RUIA contain 

essentially the same definition of creditable compensation, the status of 

Program payments may be considered under both Acts together. See 

RUIA sections 1 (i) and 1 (j); RRA section 1 (h). Both Acts thus define 

compensation for benefit entitlement purposes to include * * * any form 

of money remuneration paid to an individual for services rendered as an 

employee to one or more [railroad] employers * * Absent evidence to 

the contrary, both Acts also presume that “a paym ent m a de to an 

individual through the employer's payroll shall be compensation for 

service rendered". RUIA section 1 (i)(1), RRA section 1(h)(1). Railroad 

compensation includes remuneration paid for time lost as an employee. 

Id. Pay for time lost itself includes the amount paid by the employer for 

loss of earnings resulting from displacement of the employee to a less 

remunerative position or occupation. (RUIA section 1 (i) (1), RRA section 

1 (h)(2)). However, pay for time lost may not be credited as 

compensation after the employee's employment with the railroad 

terminates due to retirement or discharge. See regulations of the Board at 

20 CFR 204.6 and 210.5(d) (RRA); and 20 CFR 322.6(b)(RUIA).

A benefit under either option of the 2003/2004 Program is paid from the 

trust fund established for the company pension. They are therefore not "A 

payment made by an employer to an individual through the employer's 

payroll" within the meaning of sections 1 (h)(1) of the RRA or 1 (i) of the 

RUIA. In addition, because the payments are predicated on termination

1 For example, the table provides an employee with eight to nine years of service with a

factor of 6, so the lump sum option distribution would equal a month's base salary

multiplied by 6; while an employee with 14 to 15 years of company service would have a

factor of 9 from the table, yielding a lump sum equal to monthly base salary multiplied by
of the employment relation and retirement from service, they are not 

made "with respect to an identifiable period of absence from the active 

service of the employer". This Office has declined in the past to find that 

pension payments made under an offer of liberalized eligibility 

requirements are separation payments creditable as compensation under 

the Act, even if evidently offered as inducements to retire. See Legal 

Opinion L-2001-04, (CSX Special Enhanced Benefits Program, 2 Plus 2 

Option), and Legal Opinion L-2003-12 (CSX 1999 Voluntary Early 

Retirement and Separation Program, 3 Plus 3 Option).

The offer to increase the employee's age and company service by 2 

years each under the 2003/2004 Program is essentially indistinguishable 

from the offer to increase the employee's age and company service 

considered by Legal Opinions L-2001-04 and L-2003-12. Consistent with 

the reasoning of those opinions, I conclude that payments under the 

2003/2004 Program are also not creditable as compensation under the 

Acts.

III. Eligibility for Unemployment Insurance Benefits.

Given that payments under the 2003/2004 program are not creditable 

railroad compensation which would constitute a day of remuneration, the 

next question is whether the payments otherwise impact the employee's 

eligibility for unemployment insurance benefits. Section 4(a-1 )(iii) of the 

RUIA disqualifies an employee paid a separation allowance from 

receiving unemployment insurance benefits for roughly the period of time 

equal to the number of weeks the employee would have worked at base 

salary to receive an equivalent amount of compensation. The payment 

need not be creditable as compensation to trigger the 4(a-1 )(iii) 

disqualification. I note that the General Counsel has previously advised 

that both a monthly payment and a lump sum paid to employees age 55 

and over who elect to voluntarily retire by a specified date constituted 

separation allowance payments for purposes of the 4(a-1 )(iii) 

disqualification, even though paid from a "supplemental pension plan" 

which may not result in creditable compensation. See1 Legal Opinions L96-9, L-96-10, reviewing the Conrail Voluntary Retirement Program.

The 2003/2004 Program differs significantly from the Conrail program. The 

Conrail program established a separate plan with eligibility limited only to 

certain individuals, who were guaranteed to receive immediate payment.
The 2003/2004 Program is an extension of the CSX pension plan. Eligibility 

for payment remains subject to the general disbursement rules under the 

plan, as augmented by the Program. This means, for example, that an 

employee may elect the 2+2 option, yet still not be eligible for immediate 

pension payments because he or she is under the requisite age, even with 

the additional 2 years age allowed under Program. In addition, while the 

Conrail plan was an inducement to voluntary separation, the 2003/2004 

Program is offered only to individuals whose employment the company 

has decided to terminate as part of its restructuring, and is not limited by 

age. In my opinion these distinctions support a conclusion that, unlike the 

Conrail plan, payments received under the 2003/2004 Program are 

pension payments rather than a severance or separation allowance for 

purposes of the disqualification required by section 4(a-l)(iii).

To be eligible for unemployment insurance benefits, the RUIA also requires 

that a claimant must not leave employment voluntarily and without good 

cause, and must be available for work. See RUIA sections 4(a-2)(i); and 

1 (k)(1). Considering only the earlier description of various categories of 

employees would lead to the conclusion that the current employment of 

at least the employees in category (1) and those category (3) employees 

not offered a position at the end of the suspense period, has been 

involuntarily terminated, while those employees in category (2) may have 

volunteered to leave employment. However, CSXT also states that all 

employees must execute an “ Employment Separation Agreement and 

Release Form" as a condition of eligibility to receive benefits under the 

2003/2004 Program. An agreement to separate indicates the employee 

exercises volition in choosing to end employment. I note that agency 

policy generally considers an employee who leaves employment in 

exchange for a separation or severance payment has voluntarily left 

employment, but with good cause. See: Adjudication Instruction Manual 

(AIM) § 1505.05(h). The same policy applies to those who leave 

employment to receive a pension. AIM at § 1505.05(j). Without further 

analysis, categories 1, 2 and 3 of the employees who leave employment 

as a result of the management restructuring described by CSXT, may at 

least be determined to have left employment with good cause for 

purposes of the unemployment insurance disqualification provision of 

section 4(a-2)(i). Based on the circumstances described, the fourth 

category of employees would not be disqualified pursuant to section 4(a2) (i) because the employment offered but declined does not meet the 

definition of suitable work. See RUIA section 4(c).
The last question regarding eligibility for unemployment insurance benefits 

is whether the individual is available for work. In this regard, section 

327.10(c) of the Board's regulations (20 CFR 327.10(c)) presumes an 

employee who voluntarily retires is not available for work, and therefore 

not eligible for unemployment benefits. Agency policy allows rebuttal of 

the presumption on evidence that the claimant is "doing what a 

reasonable person in similar circumstances would do to get substantial 

full-time employment." AIM § 804.04(b). I believe the ambiguity 

regarding the weight an expression of willingness to leave employment 

may have had in the employer’s decision to terminate employment, and 

the fact that all employees who receive payments under the 2003/2004 

Program must execute a release form, justifies requiring all employees, 

prior to receiving unemployment insurance benefits, to provide evidence 

of availability consistent with AIM § 804.04(b) in order to rebut the 

presumption that they left CSXT to receive pension payments. Availability 

evidence would not be required in the case of employees who are 

offered work only at a lower echelon of the organization, and then 

decline (category 4), because these individuals receive no payments 

under the 2003/2004 Program, and therefore cannot be said to have left 

in exchange for a pension.

IV. Current Connection under the Railroad Retirement Act.

The conclusion that payments under the 2003/2004 Program are not 

creditable railroad compensation means the employee receives no 

additional railroad service months, and may receive the pension payment 

under the 2+2 Option without effect upon the date an annuity under the 

RRA may begin. The last question is whether the employees leaving 

employment through the 2003/2004 Program due to the CSXT 

management restructuring retain a current connection for benefit 

entitlement purposes under the RRA.

As you know, an occupational disability annuity under section 2(a)(1) (iv) 

of the RRA, a supplemental annuity under section 2(b) of the RRA, and 

survivor annuities under section 2(d) of the RRA Act, each require that the 

railroad employee have a current connection with the railroad industry as 

defined by section 1 (o). An employee has a current connection for all 

purposes if he or she has worked for a railroad in 12 of the 30 months 

immediately preceding the month the employee annuity begins or the
- 8-

employee dies. See regulations of the Board at 20 CFR 216.13(a). An 

employee also retains a current connection if he or she has not had 

regular and substantial non-railroad employment between the end of the 

30 month interval describe above, and the month the employee annuity 

begins, or the employee dies. See regulations of the Board at (20 CFR 

216.13(b)). An employee who does not meet either of the foregoing may 

still have a current connection only for supplemental annuity and survivor 

benefit entitlement purposes if (1) the employee has com pleted at least 

25 years of railroad service, (2) is involuntarily terminated from the railroad 

industry without fault, and (3) thereafter does not decline an offer of 

employment in the same class or craft as his most recent railroad 

employment. See 20 CFR 216.15(b) and .15(c). An employee who 

accepts a separation allowance and relinquishes his or her rights to 

employment has voluntarily terminated. 20 CFR 216.15(d). However, 

where loss of employment is imminent and certain, election to receive a 

separation payment is considered involuntary. See Legal Opinion L-90- 

106, (Management and Non-Contract Employees of Chicago and 

Northwestern Voluntary Separation Program) and the further opinions 

cited therein.

Based on the evidence provided, the CSXT employees in category (1), 

though required to sign the “ Employment Separation Agreement and 

Release Form", have been first notified that they no longer have a 

position. For these employees, loss of employment was certain. Similarly, 

employees in both categories (3) and (4) have been notified that their 

current position has ended. Regardless of whether or not they are later 

offered a position at a lower level, the loss of their current employment is 

also certain, and they are not offered an equivalent manager's job. In 

my opinion, employees with 25 years of railroad service in categories 

(1 ),(3), and (4) meet the requirements for a current connection as set forth 

in 20 CFR 216.15(b).

There remains those employees in category (2) who notified CSXT that 

they would be willing to be terminated as part of the restructuring in order 

to receive benefits under the 2003/2004 Program. Because CSXT states 

willingness to leave employment was a factor, but not the sole factor, in 

the ultimate decision, in my opinion a decision cannot be made that the
loss of the positions of all individuals falling in this category was imminent 

and certain without regard for this voluntary action. Whether each of 

these employees may meet the requirements for a current connection as 

set forth in 20 CFR 216.15(b) must be determined on the facts in each 

case.

cc: Director, Disability, Sickness & Unemployment Benefits Division

Chief, Compensation and Employer Services

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