TO 

FROM 

UNITED STATES G OVERNMENT 

MEMORANDUM 

Randolph Hayden 

Chief of RRA Application and Calculation 

THROUGH: Kimberly Price-Butler 

FORM G-115f(1-92) 

RAILROAD RETIREMENT BOARD 

October 12, 2016 

L-2016-48 

Director of Policy and Systems 

Karl T. Blank JU~ M-/4--

General Counsel . 

SUBJECT : Supplemental Pension Plan 

Amended New Jersey Transit Rail Operations Money Purchase 

Plan 

This is in reply to your request for an opinion on whether the New Jersey Transit 

Rail Operations Money Purchase Plan as amended and restated on July 1, 2007 and 

amended again on July 25, 2012 is a private pension plan under section 216.42 of 

our regulations. In my opinion, the amended plan is a private pension plan under 

§216.42, and is therefore a supplemental employer pension plan which must offset 

a supplemental annuity under section 2(h)(2) of the Railroad Retirement Act 

(RRA). 

Original Plan 

The original New Jersey Transit Rail Operations Money Purchase Plan ("the 

original plan") was effective on July 1, 1989. Legal Opinion L-89-100 held that 

the original plan was a supplemental pension plan under section 2(h)(2) of the 

RRA. Your memorandum indicates that a monthly benefit in the form of an 

annuity was the normal method of payment of plan benefits under the original 

plan. 

The original plan was a 40l(a) plan, intended to provide retirement benefits for its 

employees and their beneficiaries. The employer was required to contribute an 

amount equal to 3% of the compensation of each participant covered by a 
- 2 -

collective bargaining agreement requmng contributions to the trust fund, and 

participants were not required nor permitted to make any contributions to the plan. 

Under the original plan's terms, except as provided in section 8.05(e), a participant 

who met the requirements of section 8.05 was deemed to have elected to receive 

his benefits under the plan in the form of a joint-and-survivor annuity. Under 

section 8.05(e), small annuities not exceeding $3,500.00 were to be immediately 

distributed. However, under section 8.05(d) of the original plan, in lieu of the jointand-survivor annuity form of benefit, each participant had the option to elect in 

writing to receive his benefits in one of three forms: a lump-sum payment; a joint 

and 2/3 survivor annuity; or a single life annuity upon spousal consent. 

Amended Plan 

The Amended and Restated New Jersey Transit Rail Operations Money Purchase 

Pension Plan of July I, 2007, as further amended on July 25, 2012 ("amended 

plan") is also a 40 I (a) plan and money purchase pension plan. Under Article I, 

Section 1.4 of the amended plan, it appears the amended plan continues to be a 

defined contribution plan. Section 3.1 of the amended plan indicates that employer 

contributions to the fund are established pursuant to collective bargaining 

agreements. While contribution rates may change from time to time, they may only 

change pursuant to the terms of a collective bargaining agreement, and no 

employer contributions made to the trust fund may revert to the respective 

employer. Section 4.4 of the amended plan indicates that participants may direct 

the trustee to invest all or any portion of his account in any of the investment 

funds, or where no investment direction is made, the plan contributions will be 

invested in a life-cycle, target retirement date, or balanced fund. There is no 

indication that employees may contribute to their accounts under the amended 

plan, as Article 4 discusses only employer contributions. 

Your memorandum indicated that lump-sum distribution is the only form of 

payment available for benefits under the amended plan. However, it appears that 

the amended plan continues to provide for a distribution over the participant's life, 

or over the lives of the participant and beneficiary, as noted under section 6.7 (a) 

(ii). Like the original plan, the amended plan provides for the election of a lumpsum distribution in certain instances, namely: (I) where a tennination of 

employment has occurred (Section 6.1 ), or (2) where the participant dies prior to 

benefit commencement date (Section 6.2). Also similar to the original plan, 

account balances not exceeding a certain amount are to be immediately distributed 

(See Section 6.3). Unlike the original plan that required lump-sum distributions 

where the account balance did not exceed $3,500.00, the amended plan requires 

Printed on recycled paper 
- 3 -

involuntary lump-sum distributions where the account balance does not exceed 

$1,000.00. 

Although the amended plan indicates that the employee or former employee (or 

his/her spouse or former spouse, or surviving spouse or former spouse) may choose 

to have any portion of their account that is equal to at least five hundred dollars 

($500.00) rolled over into an ''eligible Retirement Plan" at the time and in the 

manner prescribed by the Plan Administrator at Section 6.4, nothing in the 

amended plan suggests that such a rollover would circumvent the intent of the plan 

to distribute the participant's interest over his or her life as required at section 6.7. 

Consistent with this intent, section 6.4(b) indicates that an eligible Retirement Plan 

includes an individual retirement account, individual retirement annuity, annuity 

plan, annuity contract, qualified trust, eligible plan under IRS Code Section 

457(6 ), 1 or a distribution to a spouse under a qualified domestic relations order. 

Law and Analysis 

As you know, section 2(h)(2) of the Act requires that a supplemental annuity shall 

be reduced by the amount of the supplemental pension, attributable to the 

employer's contribution, that such individual is entitled to receive for that month 

under any other supplemental pension plan. 

Regulations of the Board at 20 CFR 216.42 define a ''supplemental pension plan" 

as follows: 

(a) What is a private railroad pension. * * * * A private pension for 

purposes of this subpart is a plan that: 

(I) Is a written plan or arrangement which is communicated to the 

employees to whom it applies; 

(2) Is established and maintained by an employer for a defined 

group of employees; and 

(3) Provides for the payment of definitely detem1inable benefits 

to employees over a period of years, usually for life, after 

retirement or disability. Such a plan is sometimes referred to 

as a defined benefit plan. 

(b)Defined contribution plan. A plan under which the employer is 

obligated to make fixed contributions to the plan regardless of 

profits (sometimes known as a money purchase plan) is a private 

1 Section 457 establishc~ ERISA benefit plan~ for nonprofit and government entities. Section 457 replaces section 

40 1 for those employer:-.. 

,· 

Printed on recycled paper 
- 4 -

pension plan. A plan under which the employer's contributions are 

discretionary is not a private pension plan under this section. 

Legal Opinion L-89-100 held that the original plan was a supplemental pension 

plan under section 2(h)(2) of the RRA. As acknowledged in your memorandum, a 

monthly benefit in the form of an annuity was the normal method of payment of 

plan benefits under the original plan. The amended plan also provides for a 

monthly benefit in the form of an annuity as the normal method of payment under 

section 6.7(a). The amended plan, like the original plan, is a private pension plan 

under §216.42, and is therefore a supplemental employer pension plan which must 

offset a supplemental annuity under section 2(h)(2) of the Railroad Retirement Act 

(RRA). In my opinion, the amended plan is substantially similar to the original 

plan, and thus remains consistent with the holding in Legal Opinion L-89-100. 

Specifically, the amended plan does not convert the benefits to a distribution which 

I held in L-2014-02 no longer requires the 2(h)(2) offset. Therefore, Programs 

would continue to treat plan distributions under the amended plan in the same 

manner that plan distributions under the original plan were treated. 

Printed on recycled paper