U n it e d S t 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*119f (1-92)

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

August 22, 2003 

L-2003-10

TO: Ann Chaney

Office of M anagem ent Member

FROM: Steven A. Barthok

General Counsel

SUBJECT: CSX Corporation Severance Pay Plan

Compensation - Separation Allowance

This is in reply to your request for my opinion concerning the status under the 

Railroad Retirement and Railroad Unemployment Insurance Acts of payments to 

employees of CSX Corporation in acco rd an ce with the provisions of the CSX 

Corporation Severance Pay Plan. As explained below, in my opinion payments 

under the Plan constitute railroad compensation under the Acts. Periodic 

payments are creditable to the month in which each installment is paid, while 

paym ent by lump sum is creditable only to the month in which the em ployee 

executes an agreem ent and release form. However, I must note that as I have 

not been provided the Plan or a summary plan description, my advice is based 

solely on my review of the "Employment Separation Agreement and Release 

Form" and my opinion is therefore predicated upon the information available.1

Paragraph 6 of the Agreement and Release states in pertinent part that:

6. I understand that I will receive separation pay that is above and 

beyond any remuneration for the performance of services, benefit plan 

payments or any other amounts to which I am otherwise entitled * * *.

11n particular, it is unclear whether the payments are offered in lieu of layoff benefits to 

employees facing indefinite furlough, or to employees who may remain in their existing 

position. See CSX Corporation. Inc. v. United States. 52 Fed. Cl. 208, 2002 U.S. 

Claims LEXIS 73, (Cl. Ct., 2002) (holding, inter alia, that the former are excluded from 

compensation under the Railroad Retirement Tax Act as supplemental unemployment 

insurance benefits, while holding the latter are taxable compensation.)
Separation pay will b e in an amount calculated pursuant to the

"Separation Pay Schedule" set forth in the Plan based on my monthly

salary and length of Com pany service • • I understand that I may

choose to receive this separation pay in the form of periodic payments for

a limited period of time or as a single lump-sum payment.

* * *

I understand that under either of these options, the Com pany will withhold 

appropriate amounts for federal, state and local income taxes and 

employment taxes * * *. [I]f I choose paym ent on a periodic basis, 

paym ent will b e m ade on or about the first of each month * * *. I further 

understand that throughout the period of time during which I receive 

separation pay in monthly payments, I will be entitled to participate in 

welfare benefits * * * [but] will not be eligible to participate in the * * *

Thrift Plan * * * or to accrue any additional benefits under the CSX Pension 

Plan or accrue vacation or sick leave * * *. At the conclusion of the 

payments, my employment relationship with the Com pany shall cease.

In consideration of the agreem ent by CSX Transportation to pay these benefits, 

the signatory em ployee agrees “that my employment relationship with the 

Company will ce ase and terminate upon the d ate of the last paym ent * * * 

under this Agreement." The em ployee also agrees that:

Effective upon the d a te of this Agreement, I hereby relinquish forever any 

seniority rights I may have under any labor agreem ent with the Company, 

and I agree that until my employment relationship with the Com pany 

ceases, my com pensation and other employment terms, conditions and 

benefits will b e as set forth in paragraphs 6 [quoted above] and 7 

[pertaining to prorating annual bonuses based on com pany 

performance] * * *.

As you know, section 1 (h)(1) of the Railroad Retirement Act (RRA) defines 

compensation for benefit entitlement purposes under that Act in part as:

* * * any form of money remuneration paid to an individual for services

rendered as an em ployee to one or more [railroad] employers ** * 

including remuneration paid for time lost as an employee, but 

remuneration paid for time lost shall be deem ed earned in the month in 

which such time is lost. A payment m ade by an employer to an individual 

through the employer's payroll shall be presumed, in absen ce of 

evidence to the contrary, to be compensation for service rendered by 

such individual as an em ployee of the employer in the period with respect 

to which the paym ent is m ade. * * *
Section 1 (h)(2) of the RRA further provides that:

An em ployee shall b e d eem ed to be paid "for time lost" the amount he is 

paid by an employer with respect to an identifiable period of absence 

from the active service of the employer, including absence on account of 

personal injury, and the am ount he is paid by the employer for loss of 

earnings resulting from his displacement to a less remunerative position or 

occupation. * * *

The Railroad Unemployment Insurance Act at section 1 (i)(l) provides essentially 

the sam e definition with respect to compensation creditable for benefit 

entitlement purposes under that Act as well. In addition, regulations of the 

Board (20 CFR 211.9, 211.10) provide:

§211.9 Dismissal allowance.

Dismissal allowances paid to an em ployee under a protective labor 

agreem ent that covers the amounts paid for specific periods of time are 

creditable as compensation under the Railroad Retirement Act, provided 

the em ployee has not severed his or her employment relationship.

§211.10 Separation allowance or severance oav.

Separation or severance payments are creditable com pensation except 

that no part of such paym ent shall be considered creditable 

compensation to any period after the em ployee has severed his or her 

employer-employee relationship, except as provided for in §211.11 of this 

part [which allows a paym ent taxable only for tier I purposes under the 

Railroad Retirement Tax Act to be credited for purposes of calculating the 

tier I annuity com ponent under the RRA pursuant to section 1 (h)(8) of that 

Act].

This Office has considered prior CSX plans with provisions similar to those referred 

to in the "Separation and Release" form submitted, and has determined that a 

lump sum paym ent under these terms constitutes com pensation for the month 

of election to receive the lump sum payment. See L-99-18 (CSX 1999 Voluntary 

Early Retirement and Voluntary Separation Program): L-2001-04 (CSX Special 

Enhanced Pension Benefits Program). Consistent with the reasoning of those 

opinions, I conclude that the lump sum payment provided by the CSX 

Corporation Severance Pay Plan is compensation under the Acts, creditable 

only through the month in which the payment is m ade.
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Where an em ployee receives separation or dismissal payments in installments, 

and resigns at the end of the period, the payments are com pensation under the 

Acts, creditable to e a ch month of payment. Reed v. Railroad Retirement 

Board, 145 F.3d 373, (D.C. 1998). Evidence of existence of continuation of the 

employment relationship during the period of paym ent includes retention of 

health benefits and other benefits accruing to employees. See Legal Opinions 

L-89-66 (Voluntary Resignation Agreement for Chessie System Noncontract 

Employees), and L-89-80 (Illinois Central Gulf Termination Agreement). The 

language of the "Separation and Release" form submitted evidences the intent 

that the employment relationship shall continue through the d ate of the last 

installment payment. Com pare L-2002-12 (where em ployee is notified by letter 

that “employment is terminated" and then offered severance options, 

installment payments after execution of a release form are not creditable 

compensation.) Accordingly, based on the information you have furnished, in 

my opinion, monthly installment payments under the CSX Corporation 

Severance Pay Plan are compensation under the Railroad Retirement and 

Railroad Unemployment Insurance Acts, creditable to the months in which the 

payments are m ade, up to and including the last month of paym ent.

cc: Joseph M. W aechter

Policy and Systems, Office of Programs

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