U n i t e d S t a t e s G o v e r n m e n t FORM 0-11SI (1-M )

M R a i l r o a d R e t i r e m e n t b o a r d e m o r a n d

MM2 5 2000

L-2000-16

TO: Nancy Z. Marks

Chief of Calculation Analysis and Systems 

Through: Ronald Russo

Director of Policy and Systems

FROM: Steven A. Bart!

General Couns<

SUBJECT: Public Law 106-182 - Senior Citizens’ Freedom to Work Act of 2000

This is in response to your memorandum dated April 26,2000, wherein you 

asked several questions about the above captioned Act in order to develop 

procedure for the implementation of that Act. Each of your questions is 

repeated below, followed by a response.

Does the annuitant already on the rolls have to be working in order to request 

waiver of payment of benefits in order to earn a DRC (delayed retirement 

credit)? If yes, does it matter how much the annuitant earns?

This question refers to the amendment to section 202(w)(2)(B)(ii) of the Social 

Security Act (42 U.S.C. § 402(w)(2)(B)(ii)) made by section 4(b) of Public Law 

106-182. That amendment provides that an individual shall be entitled to an 

increment month, for purposes of a DRC, for months beginning with the month 

before the month in which the individual attains retirement age, for which the 

individual is either not entitled to an old age insurance benefit or if entitled, 

did not receive benefits due to a request that the benefit not be paid. A DRC 

increases the social security benefit payable. No increment month can be 

granted beginning in the month the individual attains age 70.

There is no requirement that the individual be working, although the tax 

consequences of earnings seems to be the most likely reason a person would 

waive the receipt of the entire social security benefit. The amendment requires 

that the entire social security benefit not be paid based on a request to that 

effect made by the annuitant. This amendment applies to the computation of 

the tier I benefits, which is the equivalent of the social security benefit. Thus,
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the tier I annuity component must be waived by an employee - annuitant in 

order for the annuitant to receive a DRC when the annuity does become 

payable. It should be noted that annuitants under the Railroad Retirement Act 

have always had the right to waive all or part of their annuity under section 11 

of the Railroad Retirement Act (45 U.S.C. § 23 lj).

Are we correct in our assumption that only the tier I and the VDB work 

deduction components are subject to the waiver provision?

As noted in the response to the previous question, annuitants under the 

Railroad Retirement Act have always had the right to waive all or part of their 

annuity under section 11 of the Railroad Retirement Act (45 U.S.C. § 23 lj). This 

has not been changed by the amendment made by section 4(b) of P.L. 106-182.

Delayed Retirement Credits (DRC) are applied to the tier I annuity component 

of an annuity under the Railroad Retirement Act. The Vested Dual Benefit 

(VDB) is not increased for DRC’s. Under the law prior to its amendment by P.L. 

106-182, a DRC was earned if the benefit was reduced for work deductions 

under section 203(b) or 203(c) of the Social Security Act. Consequently, under 

the prior law, since the tier I work deduction component and the vested dual 

benefit were subject to reduction under these sections, a DRC was earned 

whenever those annuity components (tier I work deduction component and the 

vested dual benefit) were not paid due to work.

In order to earn a DRC, P.L. 106-182 no longer requires that the person lose his 

benefit due to work. Instead, the amendment provides that if the person 

entitled to a benefit requests that the benefit not be paid, a DRC will be earned. 

As noted above, there is no need to work in order to get a DRC. An annuitant 

must, however, waive the tier I annuity component. The amendment to the 

Social Security Act provides that the Social Security Administration will grant 

a DRC only if the entire benefit is not paid due to waiver. Therefore, since the 

tier I annuity component is equivalent to the amount which the person would 

have received under the Social Security Act if all of his railroad employment 

had been covered under that Act, the amount to be waived in order to receive a 

DRC will also be the entire tier I annuity component.

If an annuitant’s tier I is reduced for social security benefits or is reduced to 

zero by any other tier I reduction and there is no VDB (no work deductions
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would have been assessed), would this provision be applicable?

Initially, as noted above, there is neither a requirement that the annuitant be 

working nor that the VDB not be payable. However, when the tier I annuity 

component is reduced to zero by other reductions imposed by the Railroad 

Retirement Act, the tier I annuity component cannot be waived. Consequently, 

no DRC can be earned for such a month.

If an employee elects waiver of his benefit in order to earn a DRC, would this 

have any effect on the spouse’s or divorced spouse’s annuity?

No, the waiver of the tier I annuity component in order to earn a DRC does not 

affect the entitlement of the individual or any auxiliary beneficiary. The 

amendment made by P.L. 106-182 provides that the person “if so entitled, did 

not receive benefits pursuant to a request by such individual that benefits not

be paid”. Thus, the person is only waiving payment, not entitlement. In 

addition, section 11 of the Railroad Retirement Act specifically provides that 

the waiver of all or a portion of the annuity “will have no effect on entitlement 

to, or the amount of, any other annuity or benefit.” Thus, although a waiver 

may be requested in order to get a DRC, the auxiliary benefits are not 

immediately affected by that wavier.

Are we correct in our assumption that the DRCs would continue to be payable 

to the employee effective January 1 of the year after the year in which they are 

earned?

Section 4(b) of P.L. 106-182 did not amend section 202(w)(3) of the Social 

Security Act (42 U.S.C. § 402(w)(3)), which provides that DRC’s shall be 

increased beginning with the January after the year in which the DRC’s are 

earned. Therefore, your assumption is correct.

If the annuitant is entitled to social security benefits and waives payment of 

that benefit in order to earn a DRC, would we remove the social security benefit 

offset from the tier I for that month?

The reduction in the employee tier I annuity component for a social security 

benefit is made pursuant to section 3(m) of the Railroad Retirement Act (45 

U.S.C. § 231b(m)). That provision reads as follows:
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The annuity of any individual under subsection (a) of this section for 

any month shall, after any reduction pursuant to paragraph (iii) of 

section 2(a)(1), be reduced, but not below zero, by the amount of any 

monthly benefit (before any deductions on account of work) payable to 

that individual for that month under title II of the Social Security Act. 

(Emphasis supplied.)

The reduction is only for the amount of any social security benefit payable. If 

the employee elects not to be paid a social security benefit, no reduction in the 

employee’s tier I annuity component for the payment of a social security 

benefit should be made.

Does the provision apply to auxiliary annuitants?

To clarify this question, a member of my staff telephoned you on May 3, 2000. 

You stated that this question asks whether the amendment made by section 

4(b) of P.L. 106-182 makes any changes in the persons who are entitled to 

DRC’s. The amendment made by section 4(b) did not change the individuals 

who are entitled to a DRC; it merely changed how a DRC is earned.

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