United States 

Program Letter Railroad Retirement Board 

Office of Programs 

Office of Programs Letter No. 02-06 

Quality Reporting Service Center Date: January 30, 2002 

Phone: (312) 751-4992 

Fax: (312) 751-7190 

E-mail: qrsc@rrb.gov 

TO: Certification Contact Officials 

SUBJECT: Payroll Tax Provisions of the Railroad Retirement and Survivors’ 

Improvement Act of 2001 

Introduction The Railroad Retirement and Survivors’ Improvement Act of 2001 

(RRSIA), among other provisions, amended the Internal Revenue Code to: 

� reduce tier II railroad retirement tax rates on rail employers and rail 

labor organizations in 2002 and 2003, 

� provide for future modifications in Tier II tax rates based on railroad 

retirement fund levels; and, 

� repeal the railroad retirement supplemental annuity tax paid by rail 

employers. 

This letter explains the RRSIA implications on tier II payroll taxes and the 

supplemental annuity tax. 

Effects on 

Tier II Payroll 

Tax 

The tier II tax rate on rail employers and rail labor organizations is reduced 

from 16.1 percent to 15.6 percent in 2002 and to 14.2 percent in 2003. The 

tier II earnings base and employee tier II tax rate for 2002 are unchanged. 

Beginning with the taxes payable for calendar year 2004, tier II taxes will 

be based on the ratio of certain asset balances to the sum of benefits and 

administrative expenses. Depending on this ratio, tier II tax rates for 

employers will range between 8.2 percent and 22.1 percent, while the tier II 

tax rates for employees will be between 0 percent and 4.9 percent. 

Continued on next page 
Effects on An employee representative is a labor official of a non-covered labor 

Employee organization who represents employees covered under the Acts 

Representative administered by the Railroad Retirement Board. Tier II Payroll 

Tax The tier II tax rate for rail employee representatives is 14.75 percent in 

calendar year 2002 and 14.2 percent in 2003. 

Effects on 

Supplemental 

Annuity Tax 

The RRSIA repeals section 26 USCS 3221(c) and 26 USCS 3221(d) of the 

Internal Revenue Code effective January 1, 2002. Those sections covered 

the supplemental annuity work-hour tax paid by employers, supplemental 

annuity tax credits and the special supplemental tax for employers with 

pensions established pursuant to a collective bargaining agreement. 

With the repeal of the supplemental annuity tax, employers will not receive 

supplemental annuity tax credits for months after December 2001. 

Employers will receive Form G-245 “Statement of Quarterly Supplemental 

Annuity Tax Credits” in calendar year 2002 if any corrections for months 

prior to 2002 are processed. If no corrections are made, no form will be 

sent. Beginning in 2003 employers will no longer receive Form G-245. 

Supplemental railroad retirement annuities provided by section 2(b) the 

Railroad Retirement Act (RRA) will continue to be due and payable. 

Supplemental railroad retirement annuities will now be funded through the 

new National Railroad Retirement Investment Trust. 

The RRSIA did not remove the supplemental annuity reduction for an 

employer pension from section 2(h)(2) of the RRA. Employers will 

continue to receive Form G-88p “Employer’s Supplemental Pension 

Report” requesting employer pension information. To ensure accurate 

supplemental annuity payments to your former employees, please respond 

promptly to the Railroad Retirement Board’s Form G-88p requests. 

Questions If you have questions concerning this letter, please contact the Quality 

Reporting Service Center at (312) 751-4992.