U n it e d States G o v e r n m e n t

M em o r an d u m

FORM G-1151 (1-72)

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

July 7, 2003 

L-2003-08

TO : V. M. Speakman, Jr. 

Labor Member

FROM : Steven A. Bartholow^ 

General Counsel

SUBJECT : Burlington Northern and Santa Fe Voluntary Reserve Board 

Program Compensation - Separation Allowance

This is in response to your request that I review the provisions of Burlington 

Northern and Santa Fe Voluntary Reserve Board Program, to determine the 

effect of payments under this plan under the Railroad Retirement and Railroad 

Unemployment Insurance Acts. As explained below, in my opinion, payments 

made under the Program are creditable as railroad compensation for benefit 

entitlement purposes under the Acts for months through the month in which the 

employee’s resignation takes effect.

According to a summary of the Program which the General Director, Labor 

Relations, of the Burlington Northern and Santa Fe Railway (BNSF) provided to 

"all active clerical protected employees working at Topeka, Kansas", an eligible 

employee may file an election to be placed on a “Voluntary Reserve Board". 

The employee will be paid $2,500 per month for a period of three years, except 

that payments end before expiration of three years if the employee becomes 

eligible for a full annuity under the Railroad Retirement Act. During the period of 

payment, the employee retains health insurance coverage, and the employee 

remains subject to recall. The BNSF will withhold health insurance premiums, 

union dues, and employment taxes under the Railroad Retirement Tax Act. The 

employee agrees to not reapply for any position at BNSF while on the Reserve 

Board, nor to perform service for BNSF in any capacity other than recall to 

service. The employee also agrees while on the Reserve Board to keep a
current telephone number and address on file with the BNSF Manager of Labor 

Relations. The employee's resignation becomes effective at conclusion of the 

payments.

A second alternative offers employees eligible for the Reserve Board to elect 

immediate resignation and payment of a lump sum equal to $2,500 per month 

multiplied by the number of months in what would otherwise be the employee's 

maximum period of Reserve Board eligibility (i.e., the lesser of 36 months or the 

number of months through eligibility for full retirement) for a gross lump sum not 

to exceed $90,000. The employer will deduct "federal, state and railroad 

retirement taxes, and union dues, etc." but employees electing the lump sum 

are not subject to recall, and are not eligible for continuing health and welfare 

benefits or for 401 (k) contributions. The election form for the lump sum 

alternative includes a statement that "I hereby agree to terminate my 

employment relationship and all of my employment rights with BNSF and its 

affiliates effective___________ ."

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

including remuneration paid for time lost as an employee, but 

remuneration paid for time lost shall be deemed earned in the month in 

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

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

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

such individual as an employee of the employer in the period with respect 

to which the payment is made. * * *

Section 1 (h)(2) of the RRA further provides that:

An employee shall be deemed 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 amount he is paid by the employer for loss of 

earnings resulting from his displacement to a less remunerative position or 

occupation. * * *

Section 1 (i)(l) of the Railroad Unemployment Insurance Act provides essentially 

the same 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 employee under a protective labor 

agreement that covers the amounts paid for specific periods of time are 

creditable as compensation under the Railroad Retirement Act, provided 

the employee has not severed his or her employment relationship.

§211.10 Separation allowance or severance pav.

Separation or severance payments are creditable compensation except 

that no part of such payment shall be considered creditable 

compensation to any period after the employee has severed his or her 

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

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

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

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

Act].

In Legal Opinion L-94-8, this Office reviewed an agreement between an 

employer and the collective bargaining representative of its employees which 

allowed the employees to elect assignment to a reserve board in lieu of 

resignation and payment of a lump sum payment. An employee on the reserve 

board remained subject to recall by the employer. The agreement allowed the 

employee to determine the number of months he or she would remain on the 

reserve board. During this time the lump sum the employee would otherwise 

have received would be apportioned in equal parts to each month the 

employee remained on the reserve board. Legal Opinion L-94-8 determined 

that the payments to the employees remained creditable railroad 

compensation under the Acts during the time the employees remained on the 

reserve board. The lump sum paid to those who resigned immediately, 

however, was creditable only through the date of resignation, except for tier I 

benefit purposes as provided by RRA section 1 (h)(8) and section 211.11 of the 

Board's regulations.

The provisions of Burlington Northern and Santa Fe Voluntary Reserve Board 

Program do not differ in any material respect from those of the agreement 

considered by Legal Opinion L-94-8. Accordingly, it is my opinion that payments 

made to employees electing placement on the voluntary reserve board are 

creditable as compensation for benefit entitlement purposes under the RRA and
RUIA, including calculation of the tier II annuity component, during the period 

the employee remains on the reserve board. The lump sum payment made 

under the Program to those who elect immediate resignation is creditable only 

through the date of resignation, except with respect to the tier I annuity 

calculation.1

I trust that the foregoing will be of assistance to you.

. cc: Chief, Employer Service/Training Center

Office of Assessment and Training

Director of Policy and Systems 

Office of Programs

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1 1 may note that although the lump sum payment is not creditable as compensation

from railroad service after the employee’s resignation, this payment nevertheless

disqualifies the employee from eligibility for unemployment or sickness insurance

benefits for the period of time calculated pursuant to section 4(a-1 )(iii) of the RUIA.