U.S. Railroad Retirement Board 

MISSION STATEMENT
 

T he Railroad Retirement Board’s mission is to administer retirement/ survivor and unemployment/sickness insurance benefit programs for 

railroad workers and their families under the Railroad Retirement Act and 

the Railroad Unemployment Insurance Act. These programs provide income 

protection during old age and in the event of disability, death or temporary 

unemployment and sickness. The Railroad Retirement Board also administers aspects of the Medicare program and has administrative responsibilities 

under the Social Security Act and the Internal Revenue Code. 

In carrying out its mission, the Railroad Retirement Board will pay benefits to the right people, in the right amounts, in a timely manner, and will 

take appropriate action to safeguard our customers’ trust funds. The Railroad 

Retirement Board will treat every person who comes into contact with the 

agency with courtesy and concern, and respond to all inquiries promptly, 

accurately and clearly. 
Railroad Retirement and 

Unemployment Insurance 

Systems 

Handbook

U.S. Railroad Retirement Board 

844 North Rush Street 

Chicago, Illinois 60611-2092 

www.rrb.gov 
INTRODUCTION
 

T his publication describes the history, operations and financing

of the retirement, disability, survivor, and health insurance

programs provided under Federal law for railroad workers

and their families, as well as the unemployment and sickness insurance

program provided for railroad employees. 

For many years this book has been utilized by officials of railway

management, rail labor, government and beneficiaries, as well as by

students of social insurance programs and pension systems. It was

designed to provide a convenient reference for those requiring a comprehensive single source of information on the development and character of

the railroad retirement/survivor and unemployment/sickness benefit 

programs. 

This edition reflects the laws in effect as of July 2015. Certain limitations, exceptions and special cases are not covered. Further information

may be obtained by contacting the Railroad Retirement Board toll-free at

1-877-772-5772 or by visiting the agency’s website at www.rrb.gov. 

We trust that this book will continue to serve as an authoritative 

and useful source of information on the railroad retirement and unemployment insurance systems. 

Steven J. Anthony 

Management Member 

Michael S. Schwartz 

Chairman 

Walter A. Barrows 

Labor Member 
 

 

 

 

 

 

 

CONTENTS
 

Page 

1 DEVELOPMENT OF THE RAILROAD RETIREMENT SYSTEM 1
 

Railroad Retirement Acts of the 1930s ............................................ 1 
 

Amendments to the 1937 Act ..................................................... 2 
 

Railroad Retirement Act of 1974 .................................................. 5 
 

1981 Railroad Retirement Amendments........................................... 6 
 

Railroad Retirement Solvency Act of 1983......................................... 7 
 

Legislation Enacted 1985-2000 ................................................... 9 
 

The Railroad Retirement and Survivors’ Improvement Act of 2001 ................. 10 
 

Court Decisions, Legislation Enacted 2006-2015 ................................... 12 
 

2 PROVISIONS OF THE RAILROAD RETIREMENT ACT 15
 

Creditable Service and Earnings .................................................. 15 
 

Employee and Spouse Annuities .................................................. 17 
 

Survivor Benefits ................................................................ 26 
 

Retirement-Survivor Information ................................................. 30 
 

Employee and Spouse Annuity Formula Components .............................. 35 
 

Survivor Annuity Formula Components ........................................... 40 
 

Appeals .......................................................................... 42 
 

3 FINANCING OF THE RAILROAD RETIREMENT SYSTEM 45
 

Payroll Taxes .................................................................... 45
 

Financial Interchange ............................................................ 46 
 

Investments ..................................................................... 47 
 

Borrowing from General Revenues Related to the

 Financial Interchange.......................................................... 48 
 

Appropriations from General Revenues ........................................... 48 
 

Taxation of Railroad Retirement Benefits ......................................... 50 
 

Financial Position of the Railroad Retirement System ............................. 50 
 

4 HEALTH INSURANCE FOR THE AGED AND DISABLED 51
 

Eligibility ........................................................................ 51 
 

Part A and Part B Enrollment .................................................... 52 
 

Explanation of Hospital Insurance Benefits ....................................... 53 
 

Explanation of Medical Insurance Benefits ........................................ 54 
 

Medicare Plan Choices ........................................................... 55 
 

Medicare Prescription Drug Coverage ............................................. 57 
 

Appeals .......................................................................... 57 
 

Advance Directives ............................................................... 57 
 

Other Medicare Publications...................................................... 58 
 

Help Lines/Web Sites............................................................. 58 
 
 

 

 

 

 

 

Page 

5 DEVELOPMENT OF THE RAILROAD UNEMPLOYMENT INSURANCE SYSTEM 59
 

Railroad Unemployment Insurance Act of 1938.................................... 59 
 

Major Amendments to the Railroad Unemployment

 Insurance Act ................................................................. 59 
 

1988 Legislation and Later Amendments.......................................... 62 
 

6 PROVISIONS OF THE RAILROAD UNEMPLOYMENT INSURANCE ACT 65
 

Benefit Provisions................................................................ 65 
 

Payment Process ................................................................. 69 
 

Appeals ......................................................................... 71 
 

Income Taxes .................................................................... 71 
 

7 FINANCING UNEMPLOYMENT AND SICKNESS INSURANCE 73
 

Contributions .................................................................... 73 
 

Railroad Unemployment Insurance Account....................................... 74 
 

Financial Report ................................................................. 74 
 

8 ADMINISTRATION OF THE RAILROAD RETIREMENT SYSTEM 77
 

Administration ................................................................. 77 
 

Keeping Beneficiaries Informed................................................... 79 
 

Program Integrity................................................................ 80 
 

Office of Inspector General ....................................................... 80 
 

INDEX .......................................................................... 82 
 
1
 

DEVELOPMENT OF THE
 

RAILROAD RETIREMENT SYSTEM
 

Private pension plans originated in 

the railroad industry in 1874 when 

the first formal industrial pension 

plan in North America was established. By 

1927, over 80 percent of all railroad employees in the United States worked for employers who had formal plans in operation, but 

only a small proportion of the employees ever 

received benefits under these plans. The pension plans had a number of serious defects. 

They generally paid inadequate benefits and 

had limited provisions for disability retirement. Credits could not be transferred freely 

from employer to employer, and the employers could terminate the plans at will. With 

few exceptions, the plans were inadequately 

financed and could not withstand even temporary difficulties. 

The Great Depression of the early 1930s 

led to movements for retirement plans on 

a national basis because few of the nation’s 

elderly were covered under any type of retirement plan. Railroad employees were particularly concerned because the private railroad 

pension plans could not keep up with the 

demands made upon them by the general 

deterioration of employment conditions and 

by the great accumulation of older workers in 

the industry. While the social security system 

was in the planning stage, railroad workers 

sought a separate railroad retirement system which would continue and broaden the 

existing railroad programs under a uniform 

national plan. The proposed social security 

system was not scheduled to begin monthly 

benefit payments for several years and would 

not give credit for service performed prior to 

1937, while conditions in the railroad industry called for immediate benefit payments 

based on prior service. 

Legislation was enacted in 1934, 1935 

and 1937 to establish a railroad retirement 

system separate from the social security 

program legislated in 1935. Such legislation, taking into account the particular 

circumstances of the rail industry, was not 

without precedent. Numerous laws pertaining to rail operations and safety had already 

been enacted since the Interstate Commerce 

Act of 1887. Since passage of the Railroad 

Retirement Acts of the 1930s, numerous 

other railroad laws have subsequently been 

enacted. 

RAILROAD RETIREMENT ACTS 

OF THE 1930s 

The Railroad Retirement Act of 1934 set 

up the first retirement system for nongovernmental workers in this country to be administered by the Federal Government. However, the Act was declared unconstitutional 

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Railroad Retirement Handbook, 2015 

by a Federal district court, and this decision 

was sustained by the Supreme Court. The 

Railroad Retirement and Carriers’ Taxing 

Acts of 1935 were enacted to avoid the constitutional difficulties encountered by the 1934 

Act. However, these Acts were also challenged in the courts, and a Federal district 

court held that neither the employees nor 

their employers could be compelled to pay 

railroad retirement taxes. The court, however, did not prohibit the payment of benefits, 

and the Railroad Retirement Board (RRB) 

began awarding annuities in July 1936 under 

the provisions of the 1935 Act. 

While an appeal was pending, railroad 

management and labor, at the request of 

President Roosevelt, formed a joint committee to negotiate their differences. The result 

was a memorandum of agreement which led 

to the Railroad Retirement and Carriers’ 

Taxing Acts of 1937 establishing the railroad 

retirement system. The pensions of retired 

employees on the railroads’ private pension 

rolls were transferred to the RRB’s rolls with 

pension reductions restored. The benefit 

payments of almost 50,000 pensioners were 

taken over by the RRB in July 1937. There 

followed an immediate reduction in both the 

number of employed and unemployed older 

railroad workers. By the end of 1938, the 

number of workers age 65 and over in active 

railroad service was less than one-half of the 

number two years earlier. Almost 100,000 

employees had retired under the system by 

that date, 80 percent of them under the nondisability annuity provisions. 

Features of the 1937 Act 

The 1937 Act set up a staff retirement 

plan which provided annuities to aged retired 

employees based on their creditable railroad earnings and service. The amounts of 

retirement annuities awarded were directly 

related to the employee’s earnings and length 

of service, with a maximum of $120 a month. 

Creditable earnings were limited to a maximum of $300 a month, while no more than 

30 years of service could be credited when 

service before 1937 was counted. Annuities 

could be paid at age 65 or later, regardless 

of length of service, or at ages 60-64 (on a 

reduced basis) after 30 years of service. 

The conditions for paying annuities based 

on disability were severely restricted. The 

disability had to be total and permanent 

and 30 years of service were required for full 

annuities. Employees could receive disability 

annuities at ages 60-64 after less than 30 

years of service, but on a reduced basis. 

The Act made little provision for dependents of deceased employees and no provision 

for spouse annuities. A survivor could receive 

a lump sum equal to 4 percent of the employee’s creditable earnings after 1936, less any 

annuity payments already made. In addition, 

a retiring employee could elect to receive a 

reduced annuity in order to provide an annuity to his surviving spouse. 

The system was financed by a schedule 

of taxes beginning with 2.75 percent each on 

employers and employees applicable to the 

first $300 of monthly compensation. 

AMENDMENTS TO THE 1937 ACT 

Numerous amendments after 1937 

increased benefits and added, to what began 

as a staff retirement system, social insurance 

features similar to those provided by the 

social security system. 

The first significant sets of amendments 

were enacted in 1946 and 1951. By initiating 

coordination in certain areas with the social 

security system, they laid the foundation for 

the evolution of the system’s present structure. Amendments enacted in 1946 added 

survivor benefits to the railroad retirement 

system which were similar to those provided 

under social security coverage, but approximately 25 percent higher. 

2
 
DEVELOPMENT OF THE RAILROAD RETIREMENT SYSTEM 

These amendments also introduced the 

first step of coordination with the social 

security system by dividing jurisdiction over 

individual survivor benefits between the 

RRB and the Social Security Administration. 

Benefits to survivors were thereafter based 

on combined railroad retirement and social 

security earnings credits. 

Provisions for annuities based on occupational disability—a staff retirement feature— 

were also established by the 1946 amendments. The provision for occupational disability annuities recognized that employees who 

were not totally disabled could be prevented 

from earning a living because they could 

not perform their regular railroad jobs. The 

1946 amendments also reduced the service 

requirements for total disability annuities, 

making it possible for comparatively young 

disabled employees to receive benefits. 

In addition, the amounts of disability 

retirement annuities were increased through 

the elimination of the reduction for employees with less than 30 years of service and the 

extension of new minimum provisions of the 

law to annuities based on disability. In 1954, 

annuities were provided for disabled children 

of deceased employees. And in 1968, disabled 

widows ages 50-59 were added to those who 

could receive benefits. 

In 1951, amendments added annuities 

for the spouses of retired railroad employees. This legislation completed the addition 

of social insurance features to the railroad 

retirement system and expanded the coordination of the railroad retirement and social 

security systems. 

Provision was made for social security to 

assume jurisdiction of benefits for employees 

not having at least 10 years of railroad service, and a minimum guaranty was provided 

to ensure that railroad retirement benefits 

would be no less than the benefit, or additional benefit, the social security system 

would have paid on the basis of the railroad 

service involved. In addition, a financial 

interchange was established between the two 

systems to apportion the costs of benefits and 

taxes, related to railroad service, on an equitable basis. 

In 1965, provision was made to coordinate the railroad retirement tax base and tax 

rate with those of the social security system. 

This provision and the existing provisions for 

the financial interchange served as an operating vehicle through which the Medicare 

program was easily extended in 1965 to railroad employees and members of their families, on the same basis as it was provided for 

social security beneficiaries. The addition of a 

strictly staff benefit for career employees was 

provided in 1966 in the form of supplemental 

railroad retirement annuities. 

By 1970, amendments to the Act provided for regular annuities of more than 

double the amount provided under the original formula. The amounts of earnings creditable and taxable were $650 a month in 1970 

compared with $300 originally. Tax rates had 

substantially increased in order to finance 

the new types of benefits, the increases in 

benefit amounts and other liberalizations 

in the program. The rate of regular railroad retirement taxes, still divided equally 

between employees and employers in 1971, 

was 9.95 percent on each as compared with 

3.5 percent in 1946. 

The annuities being paid in 1970 included 

a general benefit increase of 15 percent provided in that year following a social security 

benefit increase of 15 percent. In the following two years of an inflationary spiral 

in the national economy, social security and 

railroad retirement benefits were again substantially increased, by 10 percent in 1971 

and 20 percent in 1972. However, these three 

increases were provided for railroad retirement annuities on a temporary basis only. 

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Railroad Retirement Handbook, 2015 

The costs of making these three increases, 

aggregating 51.8 percent, permanent without 

adequate financing would have jeopardized 

the solvency of the system. Congress directed 

that a Commission on Railroad Retirement 

be formed to study the railroad retirement 

system and its financing for the purpose of 

recommending to Congress changes in the 

system that would ensure adequate benefit 

levels on an actuarially sound basis. 

Report of the Commission 

The Commission’s 1972 report proposed a 

restructuring of the railroad retirement system with two separate tiers of benefits, 

tier I being a social security-type benefit and 

tier II a supplemental staff benefit. It also 

recommended a phase-out of dual railroad 

retirement-social security benefits with some 

protection for the vested rights to such benefits already acquired by employees. Under 

the 1937 Act, an individual engaging in covered employment under both the Railroad 

Retirement Act and the Social Security Act 

was entitled to separate benefits under both 

Acts, assuming he or she met at least the 

minimum requirements for benefit eligibility. By the early 1970s, approximately 40 

percent of all beneficiaries on the RRB’s rolls 

were also receiving social security benefits. 

Because of certain duplications in their dual 

benefits, considered a windfall element, the 

total of their benefits from both systems 

averaged more than the annuities of railroad 

employees who worked in the rail industry 

exclusively, and who had paid proportionally higher retirement taxes for the purpose 

of receiving higher benefits. At the same 

time, dual benefits were a cost to the railroad 

retirement system because they reduced the 

system’s income from its financial interchange with the social security system. (By 

the mid-1970s, the costs to the railroad 

retirement system of dual benefits exceeded 

$450 million per year and would have been 

a major factor in bankrupting the railroad 

retirement system if allowed to continue. The 

cumulative total loss to the system by 1974 

had been about $4 billion.) 

Upon the release of the Commission’s 

report, Congress ordered that representatives of employees and representatives of 

carriers negotiate mutual recommendations 

for a restructuring of the railroad retirement system which would put it on a sound 

financial basis, taking into account the report 

and recommendations of the Commission on 

Railroad Retirement. 

Preliminary Agreement 

The preliminary recommendations of 

management and labor for revision of the 

railroad retirement system, recorded in 

a Memorandum of Understanding, were 

enacted by the Congress in 1973. The major 

provisions, which reflected components of 

an industry-wide wage settlement, effected 

a redistribution of railroad retirement taxes 

and earlier retirement as follows. Generally 

effective October 1, 1973, employee and 

employer tax rates under the Railroad 

Retirement Tax Act were revised so as to 

reduce the employee rate to the percentage 

rate paid by employees in social security covered employment, with the employer absorbing the difference so that total tax income 

to the program was maintained at the level 

in effect before the change. Employee rates 

consequently were lowered from 10.60 percent of creditable earnings to 5.85 percent; 

employer rates correspondingly increased 

from 10.60 percent to 15.35 percent. Effective 

July 1, 1974, all employees at least 60 years 

of age and having 30 years or more of creditable railroad service could retire without 

their annuities being subject to reduction for 

retirement before age 65. Under previous 

law, only female employees were granted this 

advantage. 

4
 
DEVELOPMENT OF THE RAILROAD RETIREMENT SYSTEM 

RAILROAD RETIREMENT ACT credits were acquired after December 31, 

OF 1974 1974.

The Railroad Retirement Act of 1974, 

reflecting the basic principles of the 

Commission Report and incorporating the 

subsequent management-labor agreement, 

was enacted on October 16, 1974. 

Two-tier Formulas 

The 1974 Act provided a first tier formula yielding amounts equivalent to social 

security benefits, taking into account both 

railroad retirement and nonrailroad social 

security credits. A second tier formula, based 

on railroad service exclusively, provides benefits comparable to those paid over and above 

social security benefits by other industrial 

pension systems. The total annuity yielded 

by the tier formulas continued traditional 

levels of railroad retirement benefits and 

reflected the three cost-of-living increases 

aggregating 51.8 percent, which had been 

provided between 1970 and 1972 on a temporary basis. 

Dual Benefit Phase-out 

The 1974 Act eliminated duplications 

in dual railroad retirement-social security benefits for new hires and individuals 

not vested as of December 31, 1974, under 

both programs. Dual benefits for vested 

employees were protected through provision 

for payment of an amount in their annuities referred to as a “vested dual benefit.” 

However, such vested dual benefit amounts 

were not allowed to increase because of any 

social security credits earned after 

December 31, 1974. 

For career employees, vesting was 

defined as having 10 years of railroad service 

on December 31, 1974, and, in addition, having enough quarters of coverage under the 

social security program to be entitled to a 

benefit at age 62 if no further social security 

Vesting for employees who had fully 

qualified for benefits under both systems but 

had left the industry prior to 1974 presented 

a difficult problem. The 1974 Act favored 

employees who had remained in the railroad 

industry more than those who left railroad 

employment. Accordingly, active or longterm employees in the railroad industry, in 

a sense, were placed in the same situation 

as employees who had already retired, while 

former employees were made subject to more 

stringent requirements. The resulting vesting provisions were subsequently tested in 

the courts and upheld by the U.S. Supreme 

Court in 1980. 

Cost-of-living Increases 

The 1972 amendments to the Social 

Security Act introduced provisions for cost-ofliving adjustments in social security benefits 

on the basis of changes in the Consumer 

Price Index. Under the two-tier plan, the first 

tier railroad retirement benefit increases 

automatically the same way social security 

benefits increase. Four separate tier II costof-living adjustments were provided during 

the six-year period commencing January 1, 

1975. (A fifth increase was provided in subsequent legislation.) 

Benefit Improvements 

The 1974 Act also provided improvements 

in existing benefits. The initial agreement of 

labor and management had enabled employees to retire on or after July 1, 1974, on unreduced annuities if they met the eligibility 

requirements of attaining age 60 and completing 30 years of service. But an employee 

could not receive a supplemental annuity 

until age 65 nor could a spouse receive a 

spouse annuity until the employee reached 

age 65. The Act revised the eligibility 

5
 
Railroad Retirement Handbook, 2015 

requirements for these benefits so that they 

were coordinated directly with the employee 

annuity requirements. 

Under the 1937 Act, the vast majority of 

widows and other survivors received benefits 

based upon 110 percent of the comparable 

social security benefit, and the resulting 

amount was generally felt to be inadequate 

in relation to the level of other railroad benefits. The 1974 Act survivor formula increased 

the calculation basis to 130 percent from the 

former 110 percent. 

Financing 

It was anticipated that the changes in the 

benefit formulas, the reduction in dual benefits, higher investment earnings, plus provisions for additional funds from the Federal 

Government to pay the phase-out costs of 

dual benefits, together would place the railroad retirement system on a reasonably 

sound basis. However, the cost estimates 

made at that time did not anticipate the 

resurgence of substantial inflation in the latter part of the decade, which led to a recurrence of financial difficulties for the railroad 

retirement system. 

With regard to financing the phase-out 

costs of dual benefits, the joint managementlabor committee initially proposed that the 

cost of vested dual benefit payments be 

paid out of the social security trust funds, 

as this element was basically a social security benefit. However, Congress concluded 

that the cost should be borne by the General 

Treasury. It was thought that it would be 

unfair to impose this cost upon current and 

future employees who would not (except 

where vested rights are involved) be permitted to receive dual benefits upon retirement, 

or upon the railroads since the excess benefit 

arose out of nonrailroad employment performed by these individuals. Payment out 

of the General Treasury was supported by a 

precedent regarding military service and by 

the fact that the dual benefit problem had 

been brought about by prior congressional 

action repealing past dual benefit restrictions 

over the objections of the railroads. 

1981 RAILROAD RETIREMENT 

AMENDMENTS 

By 1980, recurring inflation and recession 

combined with other factors placed financial 

stresses on the railroad retirement system 

which made it clear that further financial 

action was needed to maintain the system. 

Railroad retirement amendments were subsequently enacted on August 13, 1981, as 

part of an Omnibus Budget Reconciliation 

Act. The amendments were generally effective October 1, 1981. 

Taxes 

These amendments increased railroad 

retirement taxes on both rail employers and 

employees. While tier I taxes on employers 

and employees remained at the same rate as 

social security taxes, 6.65 percent in 1981, 

the 9.5 percent tier II tax paid by employers 

was increased to 11.75 percent and employees assumed a tier II tax of 2 percent. The 

amendments also gave the RRB the authority to borrow from U.S. Treasury general 

funds on the basis of forthcoming financial 

interchange income if Railroad Retirement 

Account funds were insufficient to pay benefits during a month. 

Benefit Provisions 

Although the two-tier benefit structure 

provided by the 1974 Act was left intact, 

changes were made in the tier II formula 

and there were other changes in benefit provisions. The amendments revised the employee, spouse, and survivor formulas for annuity 

portions paid over and above social security 

levels. Generally, for career retirees whose 

6
 
DEVELOPMENT OF THE RAILROAD RETIREMENT SYSTEM 

annuities are awarded on or after October 1, 

1981, the simplified formula yields awards 

that automatically keep pace with average 

wage increases in the last 60 months of service. The 1981 law continued tier II employee 

and spouse cost-of-living increases, while 

revising survivor cost-of-living increases to 

correspond with those provided employees 

and spouses. It also broadened the current 

connection requirement applicable to certain 

career employee benefits. While the amended 

law eliminated future supplemental annuity 

closing dates, it restricted future supplemental annuity eligibility to employees with some 

service prior to October 1981. In addition, the 

amendments provided benefits for divorced 

spouses, surviving divorced spouses and 

remarried widow(er)s which are like those 

provided under the Social Security Act. 

This legislation also required prorated 

adjustments in individual vested dual benefit payments, depending upon the amounts 

appropriated to the fund created for these 

payments, and the level of vested dual benefit payments was made contingent on the 

annual Federal budget and appropriations 

process. The amendments restricted the further award of vested dual benefit payments 

to vested employees with dual coverage on 

their own earnings, and precluded further 

awards of vested dual benefit payments to 

spouses or widows. Furthermore, after 1981, 

no further cost-of-living adjustments are 

made to vested dual benefit payments. 

The 1981 amendments mandated, in the 

event of certain adverse financial indicators, 

that railway management and labor, and the 

White House, make further financing recommendations to Congress. And the new law 

required the RRB to reduce annuity levels 

during any fiscal year in which it appears 

there would be insufficient funds with which 

to make full benefit payments on a timely 

basis for every month of the year. 

In the first half of 1981, when the amendments were developed, it was anticipated 

that the financing arrangements would provide the railroad retirement system with 

adequate funding throughout the 1980s. 

However, the continuing recession in the 

national economy depressed rail traffic levels to the extent that large-scale layoffs 

were underway by the first quarter of 1982. 

Average monthly employment in fiscal year 

1982 dropped to 457,000 from the 512,000 

average of the previous year, and it subsequently declined to 388,000 in the first 

quarter of 1983. The decline in employment 

limited payroll tax income accordingly. In 

addition, increased unemployment benefit 

payments resulting from the layoffs made 

such unprecedented demands on the Railroad 

Unemployment Insurance Account that it 

owed $500 million to the Railroad Retirement 

Account by the end of March 1983. 

The condition of the Railroad Retirement 

Account consequently deteriorated to the point that the RRB was required to prepare to 

reduce annuity levels on October 1, 1983, by 

an estimated 40 percent of tier II portions, in 

the absence of remedial financial legislation. 

RAILROAD RETIREMENT 

SOLVENCY ACT OF 1983
	

The scheduled annuity reductions 

were averted by enactment of the Railroad 

Retirement Solvency Act on August 12, 1983. 

The 1983 Act was based on negotiated recommendations of management and labor, 

and also incorporated recommendations 

of Congress and the Administration. The 

amendments were, in part, patterned after 

major social security amendments enacted 

earlier in the year, which had already effected changes in railroad retirement taxes and 

benefits through coordinating provisions in 

the Railroad Retirement Act. 

7
 
Railroad Retirement Handbook, 2015 

Taxes 

Under the Railroad Retirement Solvency 

Act, tier II taxes on employers increased 

from 11.75 percent to 12.75 percent in 

January 1984, to 13.75 percent in January 

1985, and to 14.75 percent in January 1986. 

Tier II taxes on employees increased from 

2 percent to 2.75 percent in 1984, to 3.50 

percent in 1985, and to 4.25 percent in 1986. 

And since 1985, railroad retirement taxes 

are applied to earnings on an annual, rather 

than a monthly, basis. As a result of the 1983 

social security amendments, tier I taxes on 

employers and employees increased from 

6.70 percent to 7 percent in January 1984, to 

7.05 percent in 1985, to 7.15 percent in 1986, 

to 7.51 percent in 1988 and to 7.65 percent 

in 1990. (The tier I tax rate has remained 

unchanged since 1990; however, it was temporarily reduced to 5.65 percent on employees in 2011 and 2012.) 

The 1983 social security amendments 

subjected railroad retirement tier I annuity portions to Federal income taxes on the 

same basis as social security benefits and the 

Solvency Act made tier II benefits and vested 

dual benefit payments subject to Federal 

income tax on the same basis as private pensions, beginning with tax year 1984. The revenues raised from income taxes on tier I and 

vested dual benefits are used for benefit payments. Revenues raised by the tax on tier II 

benefits were to be used for benefit payments 

through fiscal year 1988, after which the 

revenues would remain in general Treasury 

funds. Subsequent legislation extended these 

transfers permanently. 

Other Financing Provisions 

The Railroad Retirement Account was 

reimbursed in three installments from the 

general fund of the U.S. Treasury for shortfalls in vested dual benefit appropriations 

between 1975 and 1981. The railroad retirement system’s authority to borrow general 

U.S. Treasury funds until the RRB receives 

financial interchange funds from the social 

security system was broadened to place 

financial interchange monies in the Railroad 

Retirement Account on a current basis. 

Benefit Provisions 

The 1983 social security amendments 

deferred July 1983 cost-of-living increases 

to January 1984 and required that future 

increases be made in January of subsequent 

years. This deferral applied to railroad retirement tier I annuity amounts as well as social 

security benefits. The Railroad Retirement 

Solvency Act correspondingly changed the 

future payment dates of tier II cost-of-living 

increases from July 1 to January 1, with the 

first increase payable on January 1, 1985. It 

also required an offset of the dollar amount 

of the next five percent of tier I cost-of-living 

increases from tier II benefits. 

The Act modified early retirement provisions for 30-year employees attaining age 60 

after June 1984 by applying certain reductions to the tier I portions of their annuities 

if they retired before age 62. The reductions 

did not affect tier II benefits, and employees who acquired 30 years of service and 

attained age 60 before July 1, 1984, could 

still retire at any time with full benefits, as 

under prior law. (The Railroad Retirement 

and Survivors’ Improvement Act of 2001 as 

described on pages 10-12 eliminated these 

reductions for 60/30 employees retiring after 

2001.) The 1983 law established a five-month 

waiting period for railroad retirement disability annuities, just as for social security 

disability benefits, and altered the tier I 

computation of annuities subject to reduction 

for certain non-covered service pensions. It 

required the RRB to honor court orders that 

treat non-tier I railroad retirement benefits 

as property subject to division in proceedings 

8
 
DEVELOPMENT OF THE RAILROAD RETIREMENT SYSTEM 

related to divorce, annulment or legal separation. And the Act limited the retroactivity 

of applications for benefits to a maximum of 

six months to conform to the Social Security 

Act, except for disability benefit applications, 

which can retroact 12 months. 

The Solvency Act eliminated annuity 

reductions made under prior law when military service was counted as railroad service 

and was also the basis for benefits under 

another Federal law. It conformed railroad 

retirement student benefit provisions to 

social security student benefit provisions and 

eliminated age reductions applied to disabled 

widow(er)s’ annuities for months they were 

under age 60 when their annuities began. 

LEGISLATION ENACTED 

1985-2000 

The Balanced Budget and Emergency 

Deficit Control Act of 1985, known as the 

Gramm/Rudman/Hollings Act, enacted in 

December 1985, required decreases in vested 

dual benefit payments during the 1986 fiscal year and suspension of the January 1986 

cost-of-living increase in the tier II portions 

of railroad retirement annuities. Gramm/ 

Rudman and/or related budget legislation 

reduced vested dual benefits and supplemental annuities periodically in subsequent 

years. 

Budget reconciliation legislation 

enacted in April 1986 included changes in 

Internal Revenue Code provisions increasing 

income taxes on some railroad retirement 

annuities. Effective with tax year 1986, the 

tier I portion of a railroad retirement annuity, which is treated as a social security 

benefit for Federal income tax purposes, was 

limited for tax purposes to amounts actually 

equivalent to social security benefits. This 

primarily affected tier I early retirement 

benefits payable between ages 60 and 62 and 

some occupational disability benefits that are 

now treated like private pensions. 

The Tax Reform Act of October 1986 

eliminated, for annuities beginning after July 

1, 1986, the three-year recovery rule for contributory pensions, which had been applicable to railroad retirement benefits exceeding 

social security equivalent levels. Under the 

tax reform law, railroad retirement benefits 

exceeding social security equivalent levels 

are taxable immediately upon retirement. 

For tax reporting purposes, benefit payments 

are prorated on the basis of estimated life 

expectancies to exempt an employee’s previously-taxed pension contributions. 

While the railroad retirement trust funds 

held a reserve of $6.9 billion at the end of fiscal year 1987, the continuing decline in railroad employment had caused concern over 

the system’s financing in the next century. 

A Federal budget deficit reduction 

bill enacted in December 1987 increased 

tier II tax rates in January 1988 to 16.10 

percent on employers and 4.90 percent on 

employees, and extended for one year, until 

October 1, 1989, the time during which revenues from Federal income taxes on tier II 

railroad retirement benefits could be transferred to the Railroad Retirement Account for 

use in paying benefits. 

The Railroad Unemployment 

Insurance and Retirement Improvement 

Act was included in the Technical and 

Miscellaneous Revenue Act of 1988, 

enacted November 10, 1988. The railroad 

retirement amendments in the Act eliminated the provision suspending annuities of 

retired employees and spouses who work for 

their last pre-retirement nonrailroad employers, but provided for tier II earnings deductions in such cases. The Act also increased 

the amount disabled railroad retirement 

annuitants could earn without reducing their 

9
 
Railroad Retirement Handbook, 2015 

benefits from $200 per month to $400 per 

month, exclusive of work-related expenses. 

In addition, it provided railroad retirement military service credits under certain 

conditions for railroad workers who served 

in the Armed Forces between June 15, 1948, 

and December 15, 1950, but had not been 

allowed service credit because there was not 

a national state of emergency in force during 

this period before the Korean War. 

The Act also provided a lump sum, equal 

to railroad retirement tier II payroll taxes 

deducted from separation or severance payments made after 1984, to be paid upon 

retirement to employees meeting minimum 

service requirements if the separation or severance payments did not yield additional railroad retirement service or earnings credits. 

Social security amendments included in 

this legislation modified the non-covered service pension reductions applied to the social 

security and tier I railroad retirement benefits of employees awarded certain Federal, 

State or local government pensions in recent 

years. 

Omnibus budget reconciliation legislation enacted in 1989 included a number of 

railroad retirement and social security provisions affecting payroll taxes and benefits in 

1990 and subsequent years. The budget law 

increased the amount of earnings subject to 

social security and railroad retirement payroll taxes, and specified that 401(k) contributions and some employer-paid life insurance 

premiums are subject to railroad retirement 

payroll taxes, conforming railroad retirement 

with social security. 

The 1989 budget law also revised sequestration of railroad retirement supplemental 

annuities under the Gramm/Rudman Act in 

fiscal year 1990. 

Subsequent omnibus budget legislation in 1990 permanently exempted supplemental annuities from reductions under the 

Gramm/Rudman Act. It also increased the 

maximum compensation subject to Medicare 

hospital insurance payroll tax and mandated 

an expedited payroll tax deposit schedule for 

large employers covered by social security 

or railroad retirement. Budget legislation 

enacted in 1993 made all earnings subject 

to the Medicare payroll tax and, for those in 

high tax brackets, made a larger amount of 

social security and railroad retirement tier I 

benefits subject to Federal income tax. 

The time during which revenues from 

Federal income taxes on tier II railroad 

retirement benefits could be transferred to 

the Railroad Retirement Account for use in 

paying benefits was extended one year in 

1989, and 1990 budget legislation further 

extended the date until October 1, 1992. In 

1994, legislation extended the transfers, 

retroactive to October 1992, on a permanent 

basis which improved the financing of the 

railroad retirement system. 

Legislation enacted in April 2000 

eased the earnings restrictions affecting 

social security beneficiaries working after full 

retirement age. The legislation also applied 

to railroad retirement annuitants but it did 

not change the railroad retirement work 

restrictions applying to last pre-retirement 

employment which are not included in the 

Social Security Act. 

THE RAILROAD RETIREMENT AND 

SURVIVORS’ IMPROVEMENT 

ACT OF 2001
	

The Railroad Retirement and Survivors’ 

Improvement Act of 2001, signed into law 

December 21, 2001, liberalized early retirement benefits for 30-year employees and 

their spouses, eliminated a cap on monthly 

retirement and disability benefits, low10
 
DEVELOPMENT OF THE RAILROAD RETIREMENT SYSTEM 

ered the minimum service requirement 

from 10 years (120 months) to 5 years 

(60 months) of service if performed after 

1995, and provided increased benefits for 

some widow(er)s. Financing sections in the 

law provided for the investment of railroad 

retirement funds in nongovernmental assets, 

adjustments in the payroll tax rates paid by 

employers and employees, and the repeal of 

a supplemental annuity work-hour tax. The 

law was based on joint recommendations 

to Congress negotiated by a coalition of rail 

labor organizations and rail freight carriers. 

60/30 Retirement 

The law amended the Railroad 

Retirement Act by eliminating the early 

retirement reduction applied to the annuities of 30-year employees retiring between 

the ages of 60 and 62 if their annuities 

begin January 1, 2002, or later. The spouses 

of such employees are also eligible for full 

annuities at age 60. Full 60/30 benefits 

had not been payable since 1983 legislation 

reduced such early retirement benefits. 

Maximum Provision 

The law eliminated, effective January 1, 

2002, a maximum on the amount of combined 

monthly employee and spouse benefit payments which had been intended to prevent 

benefits from exceeding an amount based on 

an employee’s earnings immediately prior 

to retirement. This maximum provision had 

the unintended effect of reducing benefits 

for former employees with no earnings, or 

low earnings, in the 10-year period prior to 

retirement, and for long-service employees 

with moderate earnings. 

Basic Service Requirement 

The legislation lowered the minimum 

eligibility requirement for regular railroad 

retirement annuities from 10 years (120 

months) of creditable railroad service to 

5 years (60 months) of creditable railroad 

service for those with 5 years of service rendered after 1995. This provision was not retroactive, and was effective January 1, 2002. 

Widow(er)s’ Benefits 

The legislation established an “initial 

minimum amount” based on the two-tier 

annuity amount that would have been payable to the railroad employee at the time the 

widow(er)’s annuity is awarded, minus any 

applicable reductions. Widow(er)s’ annuities 

computed on the basis of the initial minimum 

amount will not increase until the amount 

payable under previous law plus cost-of-living increases is higher than the initial minimum amount. 

This provision was not retroactive, and 

was effective February 1, 2002. It applied 

to widow(er)s on the rolls before the effective date only if the annuity the widow(er) 

was receiving on the effective date was less 

than she or he would have received had the 

legislation been in effect on the date the 

widow(er)’s annuity began. 

Investment Changes 

The legislation provided for the transfer of railroad retirement funds from 

the Railroad Retirement Accounts to the 

National Railroad Retirement Investment 

Trust, whose Board of seven trustees is 

empowered to invest Trust assets in 

non-governmental assets, such as equities 

and debt, as well as in governmental securities. The sole purpose of the Trust is to manage and invest railroad retirement assets. 

The Trust is a tax-exempt entity independent from the Federal Government. Its Board 

of Trustees is comprised of the following: 

three members selected by rail labor to represent the interests of labor; three members 

selected by rail management to represent 

11
 
Railroad Retirement Handbook, 2015

12 

 

 

management interests; and one independent 

member selected by a majority of the other 

six members. The Trustees are subject to 

fiduciary standards similar to those required 

by the Employee Retirement Income Security 

Act. The Trust must submit an annual report 

to Congress on its operations. 

Effect on Payroll Tax Rates 

The legislation reduced tier II tax rates 

on rail employers, including rail labor 

unions, in calendar years 2002 and 2003, 

and beginning with 2004 provides automatic 

adjustments in the tier II tax rates for both 

employers and employees. It also repealed 

the supplemental annuity work-hour tax rate 

paid by employers, beginning with calendar 

year 2002. 

The tier II tax rate on rail employers and 

rail labor organizations was reduced from 

16.10 percent to 15.60 percent in 2002 and to 

14.20 percent in 2003. The tier II tax rate for 

rail employee representatives was 14.75 percent in calendar year 2002 and 14.20 percent 

in 2003. 

While there was no change in the tier 

II tax rate of 4.90 percent on employees in 

the years 2002 and 2003, starting with calendar year 2004 tier II taxes on both employers and employees have been based on the 

ratio of certain asset balances to the sum of 

benefits and administrative expenses (the 

average account benefits ratio). Depending 

on the average account benefits ratio, tier 

II taxes for employers range between 8.20 

percent and 22.10 percent, while the tier 

II tax rate for employees ranges between 

0 percent and 4.90 percent. In 2005, as a 

result of this provision, the tier II tax rate 

on employees decreased to 4.40 percent from 

4.90 percent. The rate on employers and rail 

employee representatives decreased to 12.60 

percent from 13.10 percent. The 2006 rates 

were the same as in 2005. In 2007, the tier 

II tax rate on employees decreased from 4.40 

percent to 3.90 percent and on employers it 

decreased from 12.60 percent to 12.10 percent. Those rates remained the same through 

2012. In 2013, the tier II tax rate on employees increased from 3.90 percent to 4.40 percent. The rate on employers increased from 

12.10 percent to 12.60 percent. Those rates 

did not change in 2014. For 2015, the tier II 

tax rate on employees increased from 4.40 

percent to 4.90 percent. The rate on employers increased from 12.60 percent to 13.10 

percent. 

Supplemental Annuity Funding 

In addition to repealing the supplemental 

annuity work-hour tax, the legislation eliminated the separate Supplemental Annuity 

Account. Supplemental annuities are now 

funded through the National Railroad 

Retirement Investment Trust. 

COURT DECISIONS, 

LEGISLATION ENACTED 

2006-2015 

The Pension Protection Act of 2006 

was signed into law August 17, 2006. The 

Act, effective August 17, 2007, provided 

divorced spouses a railroad retirement annuity independent of the employee’s actual 

entitlement and extended court-ordered partition payments to surviving former spouses. 

Legislation enacted January 12, 2007, 

increased the amount employees receiving 

railroad retirement disability annuities can 

earn without losing any benefits. Legislation 

modifying partition payments was signed 

into law on December 23, 2008. 
Development of the Railroad Retirement System

13 

The Tax Relief, Unemployment 

Insurance Reauthorization, and Job 

Creation Act of 2010 was signed into law 

on December 17, 2010. Among its provisions, the Act temporarily lowered the social 

security payroll tax rate on employees, and 

the corresponding tier I payroll tax rate on 

railroad employees, by 2 percentage points 

for calendar year 2011. The Temporary 

Payroll Tax Cut Continuation Act of 

2011 extending the temporary payroll tax 

reduction through February 2012 was signed 

into law December 23, 2011. The Middle 

Class Tax Relief and Job Creation Act 

of 2012, signed into law February 22, 2012, 

extended the reduction through the end of 

calendar year 2012. 

On June 26, 2013, the Supreme Court 

found unconstitutional Section 3 of the 

Defense of Marriage Act, which had prevented the Federal Government from recognizing marriages of same-sex couples who 

were validly licensed under State law. As 

a result, the RRB began accepting applications for benefits from those eligible spouses 

in same-sex marriages. On June 26, 2015, 

the Supreme Court further found that the 

Constitution required all States to license 

same-sex marriages, and to recognize lawfully licensed same-sex marriages performed 

in other States. 

2
 

PROVISIONS OF THE
 

RAILROAD RETIREMENT ACT
 

CREDITABLE SERVICE 

AND EARNINGS
 

Service performed for a covered 

employer or as an employee representative is creditable toward 

all types of benefits under the Railroad 

Retirement Act. Covered employers include 

interstate railroads and their affiliates 

engaged in railroad-connected operations, as 

well as employer associations and national 

railroad labor organizations and their subordinate units. In some cases, military service 

may be counted as railroad service. 

Service for an employer is creditable if 

it is compensated and the employee is subject to the continuing supervision of the 

employer. Benefits are based on earnings 

credits and months of service. Earnings are 

creditable up to certain annual maximums 

on the amount of compensation subject to 

railroad retirement taxes. Credit for a month 

of railroad service is given for every month 

in which an employee had some compensated service for an employer covered by 

the Railroad Retirement Act, even if only 

one day’s service is performed in the month. 

(However, local lodge compensation earned 

after 1974 is disregarded for any calendar 

month in which it is less than $25.) Special 

rules may apply for crediting of service 

months resulting from a settlement for an 

on-the-job injury. 

The basic requirement for railroad retirement annuities is 10 years (120 months) 

of creditable railroad service or 5 years (60 

months) of creditable railroad service if such 

service was performed after 1995. Service 

months need not be consecutive. 

Additional service months may be deemed 

in some cases where an employee does not 

actually work in every month of the year. For 

additional service months to be deemed, the 

employee’s compensation for the year, up to 

the tier II maximum, must exceed an amount 

equal to 1/12 of the tier II maximum multiplied by the number of service months actually worked. 

Except for benefits paid for on-the-job 

injuries, sickness benefits are subject to tier I 

railroad retirement taxes if paid within 

6 months after the month in which the 

employee last worked. They are credited as 

compensation for tier I benefits, but are not 

credited as service months. 

Military service may be credited towards 

retirement benefits under certain conditions. 

To be creditable as compensation under the 

Railroad Retirement Act, service in the U.S. 

Armed Forces must be preceded by railroad 

service in the same or preceding calendar 

year. With the exceptions noted, the employ15
 
 

Railroad Retirement Handbook, 2015

ee must also have entered active military service when the United States was at war or in 

a state of national emergency or have served 

in the Armed Forces involuntarily. 

The war and national emergency periods 

are: 

n August 2, 1990, to a date as yet 

undetermined. 

n December 16, 1950, to September 14, 

1978. 

n September 8, 1939, to June 14, 1948. 

If military service began during a war or 

national emergency period, any active duty 

service the employee was required to continue in beyond the end of the war or national 

emergency is creditable, except that voluntary service extending beyond 

September 14, 1978, is not creditable. 

Railroad workers who voluntarily served in 

the Armed Forces between June 15, 1948, 

and December 15, 1950, when there was no 

declared national state of emergency in force, 

can be given railroad retirement credit for 

their military service if they performed railroad service in the year they entered or the 

year before they entered military service and 

if they returned to rail service in the year 

their military service ended or in the following year, and had no intervening nonrailroad 

employment. 

Service and Earnings Records 

The RRB maintains a record of all covered railroad service and creditable earnings after 1936. The information is recorded 

under the employee’s social security account 

number used by the employer to report service and compensation to the RRB. 

Each year, employees in the industry 

receive a Certificate of Service Months and 

vides both a current and cumulative record of 

an employee’s railroad service and compensation. It includes deemed service months, separation allowances and severance payments 

as well as miscellaneous compensation, 

such as taxable sickness payments. It also 

includes the cumulative amounts of railroad 

retirement payroll taxes paid by the employee over and above social security equivalent 

payroll taxes, and reflects creditable military 

service, if the service has previously been 

reported to the RRB. The BA-6 form should 

be carefully reviewed to make sure that it is 

correct. Employees can view their individual 

railroad retirement records of service months 

and compensation via the RRB’s website. 

This service, called “View Service and 

Compensation History,” is available only to 

employees with RRB online accounts and can 

be accessed by visiting the Benefit Online 

Services Login section of the www.rrb.gov 

home page. Instructions for establishing an 

online account are available by clicking on 

the link for requesting a Password Request 

Code (PRC) in that same section. This electronic alternative does not replace Form 

BA-6, but makes the same information available online. 

If an employee disagrees with the information shown on the BA-6 form, he or she 

should write the RRB as early as possible. 

The law limits to 4 years the period during which corrections can be made. All letters concerning BA-6 forms must show the 

employee’s social security number and should 

be addressed to: 

Protest Unit - CESC
 

U.S. Railroad Retirement Board
 

844 North Rush Street
 

Chicago, Illinois 60611-2092
 

Compensation (Form BA-6) from the RRB. 

This statement is important because it pro16
 
 

 

 

 

 

PROVISIONS ROVISIONS OF THE RAILROAD RETIREMENT ACT 

EMPLOYEE AND SPOUSE 

ANNUITIES
 

Age and Service, Disability and 

Supplemental Annuities
 

The basic requirement for a regular 

employee annuity is 10 years (120 months) 

of creditable railroad service, or 5 years (60 

months) of creditable railroad service if such 

service was performed after 1995. Benefits 

then become payable after the employee 

meets certain other requirements, which 

depend, in turn, on the type of annuity 

payable. 

An AGE AND SERVICE ANNUITY can 

be paid to: 

 Employees with 30 or more years (360 

or more months) of creditable railroad service. They are eligible for regular annuities

based on age and service the first full month

they are age 60. Early retirement reductions

are applied if the employee first became eligible for a 60/30 annuity July 1, 1984, or later

and retired at ages 60 or 61 before 2002. 

 Employees with 10 to 29 years of creditable railroad service, or 5 to 9 years, if 

at least 5 years were after 1995. They are

eligible for regular annuities based on age

and service the first full month they are age

62. Early retirement annuity reductions

are applied to annuities awarded before the

employee’s full retirement age, which ranges

from age 65 for those born before 1938 to age

67 for those born in 1960 or later, the same 

as under social security. Reduced annuities

are still payable at age 62 to those with less

than 30 years of service, but the maximum

reduction is gradually rising to 30 percent

from 20 percent by the year 2022 as a result

of social security legislation enacted in 1983.

The tier II portion of an annuity (as defined

on page 20) is not reduced beyond 20 percent

if the employee had any creditable railroad

service before August 12, 1983. (See pages 

36-40 for a detailed explanation of age reductions.) 

The annuities of employees retiring after 

the first full month they are age 60 (for those 

with 30 years of service) can begin with the 

first day they are eligible, with up to 

6 months’ retroactivity. The annuities of 

employees retiring at or after age 62 with an 

age reduction (for those with less than 

30 years of service) can begin with the first 

day of the month in which the application is 

filed. 

An annuity based on age cannot be paid 

until the employee stops railroad employment, files an application and gives up 

any rights to return to work for a railroad 

employer. 

A DISABILITY ANNUITY can be 

paid for: 

 Total disability, at any age, if an

employee is permanently disabled for all 

regular work and has at least 10 years

(120 months) of creditable railroad service.

Employees with 5-9 years of creditable railroad service, if at least 5 years were after

1995, may qualify for tier I only (as defined

on page 20) before retirement age on the

basis of total disability if they also meet certain social security earnings requirements.

An age reduced tier II amount would be payable at age 62. 

 Occupational disability, at age 60, if an

employee has at least 10 years (120 months)

of creditable railroad service or at any age

if the employee has at least 20 years (240

months) of service, when the employee is permanently disabled for his or her regular railroad occupation. A “current connection” with 

the railroad industry is also required for an

annuity based on occupational, rather than 

total, disability. 

A five-month waiting period beginning 

with the month after the month of the onset 

17
 
 

 

 

Railroad Retirement Handbook, 2015 

of disability is required before any disability 

annuity payments can begin. 

An employee can be in compensated service while filing a disability annuity application as long as the compensated service is not 

active service and terminates within 90 days 

from the date of filing. However, in order for 

a supplemental annuity to be paid by the 

RRB, or for an eligible spouse to begin receiving annuity payments, a disabled annuitant 

under full retirement age must relinquish 

employment rights. 

A SUPPLEMENTAL ANNUITY can be 

paid at: 

 Age 60, if the employee has at least 30

years of creditable railroad service. 

 Age 65, if the employee has 25-29 years

of creditable railroad service. 

In addition to the service requirements, a 

“current connection” with the railroad industry is required for all supplemental annuities. An employee must also be receiving a 

railroad retirement age and service or disability annuity before a supplemental annuity can be paid. Eligibility is further limited to 

employees who had some rail service before 

October 1981. 

Current Connection Requirement 

An employee who worked for a railroad 

in at least 12 months in the 30 months 

immediately preceding the month his or her 

railroad retirement annuity begins will meet 

the current connection requirement for a 

supplemental annuity, occupational disability 

annuity or the survivor benefits described 

later in this publication. (If the employee 

died before retirement, railroad service in at 

least 12 months in the 30 months before the 

month of death will meet the current connection requirement for the purpose of paying 

survivor benefits.) 

If an employee does not qualify for a current connection on this basis, but has 12 

months of service in an earlier 30-month 

period, he or she may still meet the current 

connection requirement. This alternative 

generally applies if the employee did not 

have any regular employment outside the 

railroad industry after the end of the last 

30-month period which included 12 months 

of railroad service, and before the month the 

annuity begins or the date of death. Full or 

part-time work for a nonrailroad employer 

in the interval between the end of the last 

30-month period including 12 months of railroad service and the month an employee’s 

annuity begins, or the month of death if earlier, can break a current connection. 

Self-employment in an unincorporated 

business will not break a current connection; however, self-employment can break 

a current connection if the business is 

incorporated. 

Working for certain U.S. Government 

agencies -- Department of Transportation, 

National Transportation Safety Board, 

Surface Transportation Board, National 

Mediation Board, Railroad Retirement 

Board, Transportation Security Administration -- will not break a current connection. 

State employment with the Alaska Railroad, 

as long as that railroad remains an entity of 

the State of Alaska, will not break a current 

connection. Also, railroad service in Canada 

for a Canadian railroad will neither break 

nor preserve a current connection. 

A current connection can also be maintained, for purposes of supplemental and survivor annuities, if the employee completed 25 

years of railroad service, was involuntarily 

terminated without fault from his or her 

last job in the railroad industry, and did not 

thereafter decline an offer of employment in 

the same class or craft in the railroad industry regardless of the distance to the new 

position. A termination of railroad service 

is considered voluntary unless there was no 

choice available to the individual to remain 

18
 
PROVISIONS ROVISIONS OF THE RAILROAD RETIREMENT ACT 

in service. Generally, where an employee 

has no option to remain in the service of his 

or her railroad employer, the termination of 

the employment is considered involuntary, 

regardless of whether the employee does 

or does not receive a separation allowance. 

However, each case is decided by the RRB 

on an individual basis. This exception to the 

normal current connection requirements 

became effective October 1, 1981, but only for 

employees still living on that date who left 

the rail industry on or after October 1, 1975, 

or who were on leave of absence, on furlough, 

or absent due to injury on October 1, 1975. 

Once a current connection is established 

at the time the railroad retirement annuity 

begins, an employee never loses it, no matter 

what kind of work is performed thereafter. 

Spouse Annuities 

The age requirements for a spouse annuity depend on the employee’s age and date of 

retirement and the employee’s years of railroad service. 

If a retired employee with 30 years of service is age 60, the employee’s spouse is also 

eligible for an annuity the first full month 

the spouse is age 60. Certain early retirement reductions are applied if the employee 

first became eligible for a 60/30 annuity 

July 1, 1984, or later and retired at ages 

60 or 61 before 2002. If the employee was 

awarded a disability annuity, has attained 

age 60 and has 30 years of service, the 

spouse can receive an unreduced annuity the 

first full month she or he is age 60, regardless of whether the employee annuity began 

before or after 2002 as long as the spouse’s 

annuity beginning date is after 2001. 

If a retired employee with less than 30 

years of service is age 62, the employee’s 

spouse is also eligible for an annuity the first 

full month the spouse is age 62. Early retirement reductions are applied to the spouse 

annuity if the spouse retires prior to her or 

his full retirement age. Full retirement age 

for a spouse is gradually rising to age 67, 

just as for an employee, depending on the 

year of birth. Reduced benefits are still payable at age 62, but the maximum reduction 

will be 35 percent rather than 25 percent by 

the year 2022. The tier II portion of a spouse 

annuity is not reduced beyond 25 percent if 

the employee had any creditable railroad service before August 12, 1983. 

A spouse of an employee receiving an age 

and service annuity (or a spouse of a disability annuitant who is otherwise eligible 

for an age and service annuity) is eligible for 

a spouse annuity at any age if caring for the 

employee’s unmarried child, and the child is 

under age 18 or a disabled child of any age 

who became disabled before age 22. 

The employee must have been married 

to the spouse for at least 1 year, unless the 

spouse is the natural parent of their child, or 

the spouse was eligible or potentially eligible 

for a railroad retirement widow(er)’s, parent’s or disabled child’s annuity in the month 

before marrying the employee, or the spouse 

was previously married to the employee and 

received a spouse annuity. However, entitlement to a surviving divorced spouse, surviving divorced young mother (father), or remarried widow(er) annuity does not waive the 

1-year marriage requirement. 

An annuity may also be payable to the 

divorced wife or husband of a retired employee if their marriage lasted for a period of at 

least 10 years, both have attained age 62 for 

a full month and the divorced spouse is not 

currently married. The amount of a divorced 

spouse’s annuity is, in effect, equal to what 

social security would pay in the same situation and therefore less than the amount of 

the spouse annuity otherwise payable (tier I 

only). 

A divorced spouse can receive an annuity 

even if the employee has not retired, provided they have been divorced for a period of not 

19
 
Railroad Retirement Handbook, 2015 

less than 2 years, the employee and former 

spouse are at least age 62, and the employee 

is fully insured under the Social Security Act 

using combined railroad and social security 

earnings. A court-ordered partition payment 

may be paid even if the employee is not 

entitled to an annuity provided that the 

employee has 10 years of railroad service, or 

5 years after 1995, and both the employee 

and former spouse are 62. 

Employee and Spouse 

Annuity Estimates
 

Railroad employees with RRB online 

accounts can get estimates of future annuities for themselves and their spouses by visiting the Benefit Online Services Login section 

of the www.rrb.gov home page. Instructions 

for establishing an online account are available by clicking on the link for requesting 

a Password Request Code (PRC) found in 

that same section. The estimates are based 

on the service and earnings records maintained by the RRB and show the earliest 

date the employee can receive a full annuity 

and, if applicable, the earliest date he or she 

can receive a reduced annuity. Employees 

who want estimates can also contact a field 

office of the RRB for approximate figures. 

Each RRB field office can furnish estimates 

for employees with at least 10 years of railroad service, or 5 years after 1995. It is not 

possible to provide a precise amount if the 

employee is not currently eligible. 

The tables on the next page illustrate 

average amounts awarded to employees and 

spouses in fiscal year 2014. 

Two-tier Annuities and Dual Benefits 

Regular railroad retirement annuities 

are calculated under a two-tier formula. The 

annuity formula components for employees 

and spouses are described later in this 

chapter. 

The first tier is based on railroad retirement credits and any social security credits 

an employee has acquired. The amount of the 

first tier is calculated using social security 

formulas, but with railroad retirement age 

and service requirements. 

The second tier is based on railroad 

retirement credits only, and may be compared to the retirement benefits paid over 

and above social security benefits to workers 

in other industries. 

An additional amount may also be payable as part of the regular annuity if an 

employee qualified for both railroad retirement and social security benefits before 1975 

and met certain vesting requirements. 

Employees with Railroad Retirement 

and Social Security Benefits 

Since 1975, if a retired or disabled railroad retirement annuitant is also awarded 

social security benefits, the Social Security 

Administration determines the amount due, 

but a combined monthly benefit payment is 

issued by the RRB. 

The tier I portion of an employee annuity is based on his or her combined railroad 

retirement and social security credits, figured under social security formulas, and 

approximates what social security would pay 

if railroad work were covered by that system. 

It is reduced by the amount of any actual 

social security benefit paid on the basis of the 

employee’s nonrailroad employment in order 

to prevent a duplication of benefits based on 

social security-covered earnings. The tier I 

amount is also reduced in the event a social 

security benefit is payable to the employee on 

the basis of another person’s earnings. This 

reduction follows principles of social security 

law which, in effect, limit payment to the 

higher of any two or more benefits payable 

to an individual at one time. An annuitant 

is required to advise the RRB if any benefits 

(Text continues on page 22.) 

20
 
 

 

PROVISIONS ROVISIONS OF THE RAILROAD RETIREMENT ACT 

Table 1.--Fiscal Year 2014 Annuity Awards 

to 30-year Employees Retiring Before Full Retirement Age 

Average 

award 

Average years 

of service 

Employee 

Employee and spouse 

$3,777 

$5,271 

36.8 

36.9 

NOTE.--For employees with at least 25 years of service and a current connection, a supplemental annuity may 

be payable. The supplemental annuity amount is $23 plus $4 for each year of service over 25 years, up to a 

maximum of $43 for employees with 30 or more years of service. Figures in the tables on this page include 

supplemental annuity amounts. 

Table 2.--Fiscal Year 2014 Annuity Awards 

Based on Service Averaging Less than 30 Years
 

Average Average years 

award of service 

Employee full retirement age or over $2,422 21.4 

Employee full retirement age or over 

and spouse $3,433 23.4 

Employee under full retirement age with 

less than 30 years of service $1,683 16.1 

Employee under full retirement age with 

less than 30 years of service and spouse $2,291 16.3 

Employee retiring because of disability $2,626 22.5 

21
 
Railroad Retirement Handbook, 2015 

are received directly from the Social Security 

Administration or if those benefits increase 

(other than for an annual cost-of-living 

increase). 

If an employee qualified for dual benefits 

before 1975 and met certain vesting requirements, he or she can receive an additional 

annuity amount, which offsets, in part, 

the dual benefit reduction. This additional 

amount, which reflects the dual benefits payable prior to 1975, is called the vested dual 

benefit payment. The vested dual benefit 

cannot be paid prior to the date the employee 

could begin to receive a social security benefit 

if he or she were to file for such a benefit. 

Employees who do not qualify for a vested 

dual benefit may be eligible for a refund of 

any excess social security taxes they paid 

(see page 34). 

Employees with Public, Non-profit or 

Foreign Pensions 

For employees first eligible for a railroad 

retirement annuity and a Federal, State or 

local government pension after 1985, there 

may be a reduction in the tier I amount for 

receipt of a public pension based, in part 

or in whole, on employment not covered by 

social security or railroad retirement after 

1956. This may also apply to certain other 

payments not covered by railroad retirement 

or social security, such as from a non-profit 

organization or from a foreign government 

or a foreign employer, but it does not include 

military service pensions, payments by the 

Department of Veterans Affairs, or certain 

benefits payable by a foreign government as 

a result of a totalization agreement between 

that government and the United States. 

Workers’ Compensation 

If an employee is receiving a disability 

annuity, the tier I portion may, under certain circumstances, be reduced for receipt of 

workers’ compensation or public disability 

benefits. 

If an annuitant becomes entitled to any 

pensions or benefits as described above, the 

RRB must be notified immediately. 

Spouses with Dual Benefits 

Social Security Benefits 

The tier I portion of a spouse annuity is 

reduced for any social security entitlement, 

regardless of whether the social security benefit is based on the spouse’s own earnings, 

the employee’s earnings or the earnings of 

another person. This reduction follows principles of social security law which, in effect, 

limit payment to the higher of any two or 

more benefits payable to an individual at one 

time. 

Public Pensions 

The tier I portion of a spouse annuity may also be reduced for receipt of any 

Federal, State or local government pension 

separately payable to the spouse based on 

the spouse’s own earnings. The reduction 

generally does not apply if the employment 

on which the pension is based was covered 

under the Social Security Act throughout the 

last 60 months of public employment. 

Most military service pensions and payments from the Department of Veterans 

Affairs will not cause a reduction. Pensions 

paid by a foreign government or interstate 

instrumentality will also not cause a reduction. For spouses subject to a public pension 

reduction, the tier I reduction is equal to 2/3 

of the amount of the public pension. 

Employee Annuity 

If both individuals in a marriage are 

qualified railroad employees and either had 

some railroad service before 1975, both can 

22
 
PROVISIONS ROVISIONS OF THE RAILROAD RETIREMENT ACT 

receive their own railroad retirement employee and spouse annuities, without a full dual 

benefit reduction. 

If both started railroad employment after 

1974, the amount of any spouse or divorced 

spouse annuity is reduced by the amount of 

the employee annuity to which the spouse is 

also entitled. 

Minimum Guaranty for Employee 

and Spouse Annuities 

Under a special minimum guaranty provision, railroad families will not receive less 

in monthly benefits than they would have 

if railroad earnings were covered by social 

security rather than railroad retirement 

laws. 

This guaranty is intended to cover situations in which one or more members of a 

family would otherwise be eligible for a type 

of social security benefit which is not provided under the Railroad Retirement Act. 

For example, social security provides children’s benefits when an employee is totally 

disabled, retired, or deceased. The Railroad 

Retirement Act only provides children’s benefits if the employee is deceased. Therefore, 

if a retired rail employee has children who 

would otherwise be eligible for a benefit 

under social security, the employee’s annuity would be increased to reflect what social 

security would pay the family, unless the 

annuity is already more than that amount. 

Cost-of-living Increases in Employee 

and Spouse Retirement Benefits 

After retirement, the tier I portions of 

both employee and spouse annuities are 

generally increased for higher living costs 

at the same time, and by the same percentage, as social security benefits. These 

increases, effective December 1 and included 

in the January payment, are based on the 

rise in the Consumer Price Index from the 

third quarter of the last year a cost-ofliving adjustment became effective to the 

corresponding period of the current year. 

Generally, if the Index increases by 5 percent, for example, the tier I portion increases 

by 5 percent. Under certain circumstances, 

the increase can be based on average 

national wage increases rather than price 

increases. 

If an annuitant is receiving both railroad 

retirement and social security benefits, the 

increased tier I portion is reduced by the 

increased social security benefit. 

The tier II portions of retired employee 

and spouse annuities are normally increased 

by 32.5 percent of the increase in the 

Consumer Price Index. 

Tier II cost-of-living increases are generally payable at the same time as tier I costof-living increases. Vested dual benefit payments and supplemental annuities are not 

increased by these cost-of-living adjustments. 

Working After Retirement 

Neither a regular annuity, a supplemental annuity nor a spouse annuity is payable 

for any month in which a retired employee 

regardless of age, works for an employer 

covered under the Railroad Retirement Act, 

including labor organizations. However, 

service for less than $25 a month to a local 

lodge will not prevent payment of the annuity for that month. Regardless of the amount 

of salary, work by a local lodge or division 

secretary collecting insurance premiums is 

considered railroad work and therefore, no 

annuity is payable for any month in which 

such activity occurs.

 Retired employees and spouses who 

work for their last pre-retirement nonrail23
 
Railroad Retirement Handbook, 2015 

road employer are subject to an earnings 

deduction. Last pre-retirement nonrailroad 

employment is employment that continues 

through the annuity beginning date or ended 

within 6 months of the annuity beginning 

date. Such employment will reduce tier II 

benefits and supplemental annuity payments, which are not otherwise subject to 

earnings deductions, by $1 for each $2 of 

earnings received, subject to a maximum 

reduction of 50 percent. These reductions 

continue after full retirement age. Work that 

begins on the same day as the annuity beginning date is not last pre-retirement nonrailroad employment. 

Retired employees and spouses who have 

not yet attained full social security retirement age, which ranges from age 65 for those 

born before 1938 to age 67 for those born in 

1960 or later, may also be subject to additional earnings deductions for any earnings, 

in or outside the rail industry, that exceed 

certain exempt amounts. The tier I and 

vested dual benefits of these employee and 

spouse annuities are subject to deductions if 

earnings exceed the exempt amounts applicable to social security beneficiaries. Prior to 

the calendar year in which full social security 

retirement age is attained, the deduction is 

$1 in benefits for every $2 of annual earnings exceeding an exempt amount ($15,720 in 

2015). 

If the employee or spouse has a tier I 

reduction for social security benefits, the 

tier I benefit is not reduced for excess 

earnings. 

In the first year in which an employee 

subject to these earnings deductions is both 

entitled to an annuity and has a non-work 

month, full tier I and vested dual benefits 

can be paid for those months in which the 

employee had low earnings or did not have 

substantial self-employment, no matter what 

total earnings for the year were. A non-work 

month is one in which the employee neither earns over 1/12th of the annual exempt 

amount nor has substantial self-employment. 

Non-work months can be claimed in only one 

calendar year, which need not necessarily be 

the first year of entitlement. 

In the calendar year in which an individual attains full social security retirement 

age, deductions of $1 are made in tier I and 

vested dual benefits for every $3 earned 

in excess of an exempt amount ($41,880 in 

2015), but only counting those earnings in 

the months prior to the month full retirement age is attained. These tier I and vested 

dual benefit deductions stop effective with 

the month full retirement age is attained. 

Earnings received for services rendered, 

plus any net earnings from self-employment, 

are considered when assessing deductions for 

earnings. Interest, dividends, certain rental 

income or income from stocks, bonds, or other 

investments are not generally considered 

earnings for this purpose. 

Annuitants under full retirement age 

who work after retirement and expect that 

their earnings for a year will be more than 

the annual exempt amount must promptly 

notify the RRB and furnish an estimate of 

their expected earnings in order to prevent 

an overpayment and penalties. They should 

also notify the RRB if their original estimate 

changes significantly. 

Retired employees and spouses who 

return to work for a railroad or for their last 

pre-retirement nonrailroad employer must 

notify the RRB, regardless of earnings or age. 

A spouse benefit is subject to reductions 

not only for the spouse’s earnings, but also 

for the earnings of the employee, regardless 

of whether the earnings are from service for 

the last pre-retirement nonrailroad employer 

or other post-retirement employment. 

A spouse annuity is not payable for any 

month in which the employee’s annuity 

is not payable, or for any month in which 

24
 
PROVISIONS ROVISIONS OF THE RAILROAD RETIREMENT ACT 

the spouse, regardless of age, works for 

an employer covered under the Railroad 

Retirement Act. (A divorced spouse can 

receive an annuity even if the employee has 

not retired, provided they have been divorced 

for at least 2 years, the employee and former 

spouse are at least age 62, and the employee 

is fully insured under the Social Security Act 

using combined railroad and social security 

earnings. A court-ordered partition payment 

may be paid even if the employee is not entitled to an annuity provided that the employee has at least 10 years of railroad service, 

or 5 years after 1995, and both the employee 

and former spouse are age 62.) 

Disability work restrictions.—If an annuity 

is based on disability, there are certain work 

restrictions that can affect payment, depending on the amount of earnings. The annuity is not payable for any month in which 

the disabled employee annuitant works for 

an employer covered under the Railroad 

Retirement Act. The annuity is also not payable for any month in which the annuitant 

earns over a certain amount ($850 in 2015) 

in any employment or net self-employment, 

exclusive of disability-related work expenses. 

Withheld payments will be restored if earnings for the year are less than a certain 

amount ($10,625 in 2015) after deduction of 

disability-related work expenses. Failure to 

report such earnings could involve a significant penalty charge. 

These disability work restrictions cease 

upon a disabled employee annuitant’s attainment of his or her full retirement age. This 

transition is effective no earlier than full 

retirement age even if the annuitant had 30 

years of service. Earnings deductions continue to apply to those working for their last 

pre-retirement nonrailroad employer. 

If a disabled annuitant works before his 

or her full retirement age, this may also raise 

a question about the possibility of that individual’s recovery from disability, regardless 

of the amount of earnings. Consequently, any 

earnings must be reported promptly to avoid 

overpayments, which are recoverable by the 

RRB and may also include significant penalties. 

When Annuities Stop 

Payment of any annuity stops upon the 

annuitant’s death, and the annuity is not 

payable for any day in the month of death. A 

disability annuity stops after the employee 

recovers from the disability; it can be reinstated if the disabling condition recurs. A 

spouse annuity stops if the employee’s annuity terminates, or the spouse annuity was 

based on caring for a child and the child is no 

longer under age 18 or disabled or the child 

is no longer in the spouse’s care. However, 

the spouse annuity may continue if she or 

he is qualified without the child or it can 

resume when the spouse attains a qualifying age. While a divorce ends eligibility for 

a spouse annuity, a divorced spouse may, 

under conditions described previously, 

qualify for a divorced spouse’s annuity. A 

divorced spouse’s annuity stops upon remarriage or upon entitlement to a social security 

benefit, based on her or his own earnings, if 

the unreduced social security benefit is equal 

to or greater than one-half of the employee’s 

unreduced tier I amount. A divorced spouse’s 

annuity may be reduced or stopped if the 

divorced spouse is also entitled to a railroad 

retirement annuity. 

It is important to notify the RRB promptly if one of the above changes occurs. Failure 

to report can result in an overpayment,which 

the RRB will take action to recover, sometimes with interest or penalties. Failure to 

report changes promptly or making a false 

statement can also result in a fine or imprisonment. 

25
 
 

 

 

Railroad Retirement Handbook, 2015 

SURVIVOR BENEFITS 

Annuities are payable to surviving 

widow(er)s, children and certain other dependents. Lump-sum benefits are payable after 

the death of a railroad employee only if there 

are no qualified survivors of the employee 

immediately eligible for monthly annuities. 

With the exception of a residual lump-sum 

death benefit, eligibility for survivor benefits 

depends on whether or not the employee was 

“insured” under the Railroad Retirement Act 

at the time of death. 

An employee is insured if he or she has at 

least 10 years (120 months) of railroad service, or 5 years (60 months) performed after 

1995, and a “current connection” with the 

railroad industry as of the month the annuity begins or the month of death, whichever 

occurs first. The current connection requirement is described earlier in this chapter. 

If a deceased employee was not so 

insured, jurisdiction of any survivor benefits 

payable is transferred to the Social Security 

Administration and any survivor benefits 

are paid by that agency instead of the RRB. 

Regardless of which agency has jurisdiction, 

the deceased employee’s railroad retirement 

and social security credits will be combined 

for the purpose of benefit computations. 

Types of Survivor Benefits 

WIDOW(ER)S’ ANNUITIES are payable at: 

 Age 60; age reductions are applied to

annuities awarded before full retirement age.

The eligibility age for unreduced annuities is

gradually rising from 65 to 67, depending on

the year of birth. 

 Ages 50-59 if the widow(er) is totally 

and permanently disabled and unable to 

work in any regular employment. The disability must have begun within 7 years after

the employee’s death or within 7 years after

the termination of an annuity based on caring for a child of the deceased employee.

In most cases, a 5-month waiting period is

required after the onset of disability before a

disability annuity can begin. 

 Any age if the widow(er) is caring for 

an unmarried child of the deceased employee

under age 18 or a disabled child of any age

who became disabled before age 22. 

Generally, the widow(er) must have 

been married to the employee for at least 9 

months prior to death, unless she or he was 

the natural parent of their child, the employee’s death was accidental or while on active 

duty in the U.S. Armed Forces, the widow(er) 

was potentially entitled to certain railroad 

retirement or social security benefits in the 

month before the month of marriage, or the 

marriage was postponed due to State restrictions on the employee's prior marriage and 

divorce due to mental incompetence or similar incapacity. 

Survivor annuities may also be payable 

to a surviving divorced spouse or remarried 

widow(er). Benefits are limited to the amount 

social security would pay and therefore are 

less than the amount of the survivor annuity otherwise payable. However, a former 

spouse may be paid a court-ordered partition 

amount. 

A surviving divorced spouse may qualify 

if she or he was married to the employee for 

a period of at least 10 years, is unmarried or 

remarried under the conditions described in 

the next paragraph, and is age 60 or older 

(50 if disabled). A surviving divorced spouse 

who is unmarried can qualify at any age if 

caring for the employee’s child and the child 

is under age 16 or disabled, in which case 

the 10-year marriage requirement does not 

apply. 

The portion of a survivor annuity equivalent to a social security benefit (tier I) may 

be paid to a widow(er) or surviving divorced 

spouse who remarries after age 60, or to a 

26
 
 

 

 

 

 

 

PROVISIONS ROVISIONS OF THE RAILROAD RETIREMENT ACT 

disabled widow(er) or disabled surviving 

divorced spouse who remarries after age 50; 

however, remarriage prior to age 60 (or age 

50 if disabled) would not prevent eligibility 

if such remarriage ends. Such social security 

level benefits may also be paid to a younger 

widow(er) or surviving divorced spouse caring for the employee’s child who is under age 

16 or disabled, if the remarriage is to a person entitled to railroad retirement or social 

security benefits or the remarriage ends. 

OTHER SURVIVOR ANNUITIES are 

payable to: 

 An unmarried child under age 18. 

 An unmarried child age 18 in full-time 

attendance at an elementary or secondary 

school or in approved homeschooling until 

the student attains age 19 or the end of the

school term in progress when the student

attains age 19. In most cases where a student attains age 19 during the school term,

benefits are limited to the 2 months following the month age 19 is attained. These

benefits will be terminated earlier if the student marries, graduates, or ceases full-time 

attendance. 

 An unmarried disabled child over age

18 if the child became totally and permanently disabled before age 22. 

 An unmarried dependent grandchild

meeting any of the requirements described

above for a child, if both the grandchild’s parents are deceased or disabled. 

 A parent at age 60 who was dependent on the employee for at least half of the

parent’s support. If the employee was also

survived by a widow(er), surviving divorced

spouse or child who could ever qualify for an

annuity, the parent’s annuity is limited to

the amount that social security would pay

(tier I). 

Survivor Annuity Estimates 

The best way for survivors to obtain an 

annuity estimate is to visit an RRB field 

office or contact the agency toll-free at 

1-877-772-5772. Active or retired employees 

who are concerned about the amount of benefits which would be payable to their survivors may also receive estimates from an RRB 

field office. 

The following information may be helpful 

in providing an idea of the amount of potential survivor benefits: 

The average annuity awarded to 

widow(er)s in fiscal year 2014, excluding 

remarried widow(er)s and surviving divorced 

spouses, was $1,974 a month. Children 

received $1,294 a month, on the average. 

Total family benefits for widow(er)s with children averaged $3,771 a month. The average 

annuity awarded to remarried widow(er)s or 

surviving divorced spouses in fiscal year 2014 

was $1,104 a month. 

Survivor Annuity Tiers 

Survivor annuities, like retirement annuities, consist of tier I and tier II components. 

Tier I is based on the deceased employee’s 

combined railroad retirement and social 

security credits, and is generally equivalent 

to the amount that would have been payable 

under social security. 

Tier II amounts are percentages of the 

deceased employee’s tier II amount, as 

described later in this chapter. 

Survivor annuity amounts may also be 

determined under certain minimum provisions which guarantee that a widow(er)’s 

annuity will be at least equal to the two-tier 

benefit the deceased employee would have 

received at the time of the award of the 

27
 
Railroad Retirement Handbook, 2015 

widow(er)’s annuity, minus certain reductions including those for age and receipt of 

social security benefits, and no less than the 

spouse annuity she or he was receiving just 

prior to the employee’s death. 

Survivors with Dual Benefits 

Social Security Benefits 

The tier I portion is reduced by the 

amount of any social security benefits 

received by a survivor annuitant, whether 

the social security benefits are based on the 

survivor’s own earnings or those of another 

individual. This reduction follows the principles of social security law which, in effect, 

limit payment to the higher of any two or 

more benefits payable to an individual at one 

time. When both railroad retirement annuities and social security benefits are payable, 

they are generally combined into a single 

payment issued through the RRB. A survivor annuitant must notify the RRB if any 

benefits are received directly from the Social 

Security Administration or if those benefits increase (other than for a cost-of-living 

increase). 

Public Pensions 

The tier I portion of a widow(er)’s annuity may be reduced for receipt of any Federal, 

State or local government pension based on 

the widow(er)’s own earnings. The reduction 

generally does not apply if the employment 

on which the pension is based was covered 

under the Social Security Act throughout the 

last 60 months of public employment. 

Most military service pensions and payments from the Department of Veterans 

Affairs will not cause a reduction. Pensions 

paid by a foreign government or interstate 

instrumentality will also not cause a reduction. For those subject to a public pension 

reduction, the tier I reduction is equal to 2/3 

of the amount of the public pension. 

Employee Annuity 

If a widow(er) is entitled to a railroad 

retirement employee annuity as well as a 

survivor annuity, a special guaranty applies 

in some cases. If either the deceased employee or the survivor annuitant completed 120 

months of railroad service before 1975, the 

widow or dependent widower may receive 

both an employee annuity and a survivor 

annuity, without a full dual benefit reduction. 

If either the deceased employee or the 

survivor annuitant had some service before 

1975 but had not completed 120 months of 

railroad service before 1975, the employee 

annuity and the tier II portion of the survivor 

annuity would be payable to the widow(er). 

The tier I portion of the survivor annuity 

would be payable only to the extent that it 

exceeds the tier I portion of the employee 

annuity. 

If both the widow(er) and the deceased 

employee started railroad employment after 

1974, the survivor annuity (tier I and tier II) 

payable to the widow(er) is reduced by the 

amount of the employee annuity. 

Cost-of-living Increases in 

Survivor Annuities
 

Cost-of-living increases, effective 

December 1 and included in the January 

payment, are made on the basis of increases 

in national prices or, in some circumstances, 

average national wages, and calculated 

the same way as cost-of-living increases in 

employee and spouse annuities. 

However, in the case of widow(er)s’ 

annuities computed on the basis of the initial 

minimum amount provided under 2001 legislation, the monthly payment will not increase 

until the amount payable under previous law 

plus subsequent cost-of-living increases is 

higher than the initial minimum amount. 

28
 
PROVISIONS ROVISIONS OF THE RAILROAD RETIREMENT ACT 

Work and Earnings Limitations 

A survivor annuity is not payable for any 

month the survivor works for an employer 

covered under the Railroad Retirement Act, 

regardless of the survivor’s age. 

Survivors who are receiving social security benefits have their railroad retirement 

annuity and social security benefit combined 

for earnings limitations purposes. Prior to 

the calendar year in which full retirement 

age is attained, there is a deduction of $1 in 

benefits for every $2 earned over an exempt 

amount ($15,720 in 2015). The deduction 

is $1 for every $3 earned over an exempt 

amount ($41,880 in 2015) for the months in 

the calendar year in which the individual 

attains full retirement age, up to the month 

of attainment. Work deductions stop effective with the month full retirement age is 

attained. In the first year in which a survivor is both entitled to an annuity and has a 

non-work month, a full annuity can be paid 

for those months in which the survivor had 

low earnings or did not have substantial selfemployment, no matter what total earnings 

for the year were. 

As work and earnings may affect the payment of an annuity, they must be reported 

promptly to the RRB in order to prevent 

potential overpayments. 

These earnings restrictions do not apply 

to disabled widow(er)s under age 60 or to disabled children. However, any work or earnings by a disability annuitant must be reported and are reviewed to determine whether 

they indicate recovery from the disability. 

When Survivor Payments Stop 

All survivor payments stop upon death; 

no annuity is payable for the month of death. 

A widow(er)’s annuity will be reduced 

upon remarriage and in some cases payment 

will be prevented. A widow(er)’s, surviving 

divorced spouse’s and remarried widow(er)’s 

annuity could also end upon entitlement to 

another survivor or spouse annuity under 

the Railroad Retirement Act which is greater 

than the widow(er)’s annuity. 

A surviving divorced spouse’s or remarried widow(er)’s annuity could stop when 

entitled to a social security benefit which 

equals or exceeds the deceased employee’s 

basic tier I amount and reduces the annuity 

amount to zero. 

A widow(er)’s or surviving divorced 

spouse’s annuity which is based on a child in 

care will end if the child is no longer in the 

person’s care, the child’s eligibility ceases, or 

remarriage occurs. 

A child’s or grandchild’s annuity will stop 

if he or she marries, reaches age 18 or recovers from the disability upon which his or her 

annuity was based. If the child is 18 and a 

full-time elementary or high school student, 

the annuity stops when full-time attendance 

ceases, at graduation, or upon attainment of 

age 19. In most cases, when a student attains 

age 19 during the school term, benefits are 

extended to the 2 months following the 

month age 19 is attained. 

An annuity will stop if it was based on 

disability and the beneficiary recovers from 

the disability before age 60. A disability 

annuity can be reinstated if the disability 

recurs within 7 years and the widow(er) is 

still under age 60. 

A parent’s survivor annuity may stop 

upon remarriage; in certain cases a remarried parent is entitled to a tier I benefit. 

Any of the above occurrences must be 

reported promptly to the RRB in order to prevent an overpayment. 

Lump-sum Death Benefits 

A lump-sum death benefit is payable to 

certain survivors of an employee with 10 or 

29
 
Railroad Retirement Handbook, 2015 

more years of railroad service, or less than 

10 years if at least 5 years were after 1995, 

and a current connection with the railroad 

industry if there is no survivor immediately 

eligible for a monthly annuity upon the 

employee’s death. 

If the employee did not have 10 years of 

service before 1975, the lump-sum is limited 

to $255 and is payable only to the widow(er) 

living in the same household as the employee 

at the time of the employee’s death. 

If the employee had less than 10 years 

of service but had 5 years after 1995, he or 

she must have met social security’s insured 

status requirement for the lump sum to be 

payable. 

If the employee had 10 years of service 

before 1975, the lump sum is payable to the 

living-with widow(er). If there is no such 

widow(er), the lump sum may be paid to 

the funeral home or the payer of the funeral 

expenses. These lump sums averaged $1,013 

in fiscal year 2014. 

If a widow(er) is eligible for monthly benefits at the time of the employee’s death, but 

the widow(er) had excess earnings deductions which prevented annuity payments or 

for any other reason did not receive monthly 

benefits in the 12-month period beginning 

with the month of the employee’s death totaling at least as much as the lump sum, the 

difference between the lump-sum benefit 

and monthly benefits actually paid, if any, is 

payable in the form of a deferred lump-sum 

benefit. 

The average for all types of lump sums 

was $925 in fiscal year 2014. 

Residual lump-sum payment.—The railroad retirement system also provides, under 

certain conditions, a residual lump-sum 

death benefit which ensures that a railroad 

family receives at least as much in benefits 

as the employee paid in railroad retirement 

taxes before 1975. This benefit is, in effect, a 

refund of an employee’s pre-1975 railroad 

retirement taxes, after subtraction of any 

benefits previously paid on the basis of the 

employee’s service. This benefit is seldom 

payable. 

RETIREMENT-SURVIVOR 

INFORMATION
 

Applying for an Annuity 

Applications for railroad retirement or 

survivor benefits are generally filed at one 

of the RRB’s field offices, or with a traveling 

RRB representative at a customer outreach 

program service location or by telephone and 

mail. The RRB accepts applications up to 3 

months in advance of an annuity beginning 

date, which allows the agency to complete 

the processing of most new claims by a person’s retirement date. An employee can be in 

compensated service while filing a disability 

application provided that the compensated 

service is not active service and terminates 

within 90 days from the date of filing. When 

an employee files a disability application 

while still in compensated service, it will 

be necessary for the employee to provide a 

specific ending date of the compensation. 

Compensated service includes not only compensation with respect to active service performed by an employee for an employer, but 

also includes pay for time lost, wage continuation payments, certain employee protection 

payments and any other payment for which 

the employee will receive additional creditable service. 

Railroad employees with RRB online 

accounts can get estimates of their future 

annuities through the RRB's website. 

Employees can access this service by visiting the Benefit Online Services Login section 

of the www.rrb.gov home page. Instructions 

for establishing an online account are available by clicking on the link for requesting a 

30
 
 

 

 

 

PROVISIONS ROVISIONS OF THE RAILROAD RETIREMENT ACT 

Password Request Code (PRC) found in that 

same section. 

Persons applying for railroad retirement 

benefits will be required to enroll in either 

the Direct Deposit Program, which electronically transfers payments into individuals’ 

checking or savings accounts, or the U.S. 

Department of the Treasury’s Direct Express 

program, which electronically transfers 

Federal payments to an individual’s Direct 

Express-issued debit card. Enrollment waivers are available only under very limited 

conditions. 

Applicants for railroad retirement or 

survivor benefits can check with an RRB 

field office as to when they can expect their 

first payment. Customer service standards 

and progress reports are available in field 

offices and online at www.rrb.gov. 

To expedite filing, applicants should 

contact an RRB office for a pre-retirement 

consultation. Certain documents are required 

when filing a railroad retirement annuity 

application, such as: 

For employees and spouses: 

√ Proof of an employee’s age. 

√ Proof of any military service. 

√ Proof of marriage if the spouse 

is eligible or will shortly become eligible 

for a spouse annuity. A divorced spouse must 

furnish proof of divorce from the 

employee. 

√ Proof of the spouse’s or divorced 

spouse’s age. 

√ Proof of a child’s relationship and age, 

if the spouse is applying for an annuity based 

on caring for the employee’s child. 

√ Notice of any social security benefit 

award or other social security claim determination. 

√ Information about any public service 

pension for which the applicant qualifies. 

√ Banking information for Direct Deposit 

of benefit payments. 

The best proof of age is a certified copy 

of a civil or church document recorded at or 

close to the time of birth. The best proof of 

marriage is a certified copy of the public or 

church record or the original marriage certificate. A divorced spouse would be expected 

to furnish a certified copy of the final divorce 

decree. Proof of military service may be a certificate of discharge, or any official military 

record that shows the dates of service. 

Employees are encouraged to file proofs 

of age, and especially of any military service, well in advance of retirement in order 

to expedite the annuity application process 

and avoid delays resulting from inadequate 

proofs. Information will be recorded and 

stored electronically and all proofs will be 

promptly returned. 

Applicants for disability annuities are 

required to submit supporting medical information and should have as much medical 

documentation and information available as 

possible at the time of filing. They are sometimes asked to take a special medical examination given by a doctor designated by the 

RRB. 

An annuity is effective as of the first full 

month throughout which the employee and/or 

spouse is age 60 with 30 years of service, or 

age 62 in the case of reduced annuities with 

less than 30 years of service. An annuity is 

effective the first day of the month full retirement age is attained in the case of unreduced 

annuities with less than 30 years of service. 

The retroactivity of a retirement annuity 

application is limited to 1 year for disability 

31
 
Railroad Retirement Handbook, 2015 

annuities and 6 months for full age annuities. There is generally no retroactivity for 

reduced age annuities. 

Any social security benefits due the 

retired employee or family member which 

begin after 1974 are paid through the RRB. 

Even though the RRB processes payment, 

the Social Security Administration is responsible for all adjudication. 

For survivors: 

A widow(er) must furnish proof of age, 

proof of marriage and proof of the employee’s 

death. A surviving divorced spouse must 

furnish proof of divorce from the employee. 

If applying for a disability annuity, the 

widow(er) must also provide supporting medical evidence. A parent must furnish proof 

of relationship to the employee and proof of 

support from the employee. 

If children are eligible for benefits, proof 

of the relationship and age of each child is 

needed. If a child is over age 18 and disabled, 

supporting medical evidence is required. 

Eighteen-year-old students must provide 

proof of full-time elementary or high school 

attendance. A stepchild of the employee must 

provide proof of dependency on the employee. 

Retroactivity of a survivor annuity application is 1 year for disabled widow(er)s and 

6 months for full retirement age widow(er) s, 

mothers (fathers), children and parents. 

Retroactivity for widow(er)s ages 60-61 is 6 

months if it does not increase the age reduction (this does not apply to surviving divorced 

spouses or remarried widow(er)s). Otherwise, 

there is generally no retroactivity for reduced 

age widow(er)s’ annuities. Lump-sum death 

benefit applications must be filed within 2 

years after the death of the employee. There 

is no time limit on filing for a residual payment. 

Garnishment/Property Settlements 

Garnishment.—Certain percentages of an 

employee, spouse or survivor annuity may be 

subject to legal process (i.e., garnishment) to 

enforce an obligation for child support and/or 

alimony payments. 

Property settlements.—Employee tier II 

benefits, vested dual benefits and supplemental annuities are subject to court-ordered 

property settlements in proceedings related 

to divorce, annulment or legal separation. 

Tier I benefits are not subject to property 

settlements. 

Representative Payees 

Railroad retirement or health insurance 

benefit payments can be made to a representative payee for a beneficiary if it would 

best serve the interests of the beneficiary. 

Payments made in this way are generally for 

a child, or an adult incapable of using the 

benefits in his or her own interest. The representative payee must use the benefits for 

the beneficiary’s best interest. The benefits 

are generally used to provide for basic needs. 

The representative payee must report events 

which could affect the payment of the benefits and be able to account for the benefits. 

If Requirements for Benefits are not Met 

Retirement annuities are not payable by 

the RRB unless the employee has 5 years (60 

months) of creditable service after 1995 or 

10 years (120 months) of service at any time. 

Service includes any creditable military 

service. 

Survivor annuities are not payable unless 

the employee had a current connection with 

the railroad industry and either 5 years (60 

months) of creditable service after 1995 or 10 

years (120 months) of service at any time. 

32
 
 

 

 

 

 

 

 

 

 

PROVISIONS ROVISIONS OF THE RAILROAD RETIREMENT ACT 

Table 3.--2015 Regular Railroad Retirement Taxes 

Tax rate 

Maximum 

annual taxable

 earnings 

Tier I 

Employees & Employers 7.65%* $118,500 

Tier II 

Employees 

Employers 

4.90% 

13.10% 

$88,200 

$88,200

 Annual regular taxes 

on employees earning $118,500

 Tier I Tier II Total 

Employees 

Employers 

$9,065.25 

$9,065.25 

$4,321.80 

$11,554.20 

$13,387.05 

$20,619.45 

* The tier I tax rate is divided into 6.20% for railroad retirement and 1.45% for Medicare hospital 

insurance. The 2015 maximum earnings base for railroad retirement is $118,500, and the Medicare 

hospital insurance tax is applied to all earnings. Consequently, employee and employer contributions continue to be made at the 1.45% rate, even after the employee has earned $118,500. 

An additional 0.9 percent in hospital insurance taxes (2.35 percent in total) applies to an individual’s 

income exceeding $200,000, or $250,000 for a married couple filing a joint tax return. While employers will begin withholding the additional Medicare tax as soon as an individual’s wages exceed the 

$200,000 threshold, the final amount owed or refunded will be calculated as part of the individual’s 

Federal income tax return. 

In either of the above circumstances, if Railroad Retirement Taxes 

the requirements are not met, the employee’s By law, railroad retirement tier I payroll railroad retirement credits are transferred taxes are coordinated with social security to the Social Security Administration and taxes and increase automatically when social treated as social security credits. Benefits security taxes rise. Employees and employers paid by that agency would accordingly take pay tier I taxes which are the same as social into account both railroad and social security security taxes. In addition, both employees covered earnings. and employers pay tier II taxes to finance

The Railroad Retirement Act does not railroad retirement benefit payments over allow a former railroad employee to with- and above social security levels.

draw his or her retirement taxes. Like social The tier I tax on employees and employ- security taxes, railroad retirement taxes are ers is 7.65 percent in 2015. The tier II tax on not refundable unless retirement tax with- employees is 4.90 percent, while the tier II holding has exceeded annual maximums (see tax rate on rail employers, rail labor organi- page 34). 

33
 
Railroad Retirement Handbook, 2015 

zations and rail employee representatives is 

13.10 percent in 2015. An employee representative is a labor official of a non-covered 

labor organization who represents employees 

covered under the Acts administered by the 

RRB. 

Railroad retirement taxes apply to earnings on an annual basis. The amounts of 

earnings subject to these taxes are determined annually on the basis of national wage 

levels. 

Dual Tax Payments 

Since 1975, railroad employees who also 

worked for a social security-covered employer 

in the same year may, under certain circumstances, receive a tax credit equivalent to any 

excess social security taxes withheld. 

Employees who worked for two or more 

railroads in a year, or who had tier I taxes 

withheld from their RRB sickness benefits 

in addition to their railroad earnings, may 

be eligible for a tax credit of any excess tier I 

or tier II railroad retirement taxes withheld. 

Employees who had tier I taxes withheld 

from their supplemental sickness benefits 

may also be eligible for a tax credit of any 

excess tier I tax. Such tax credits may be 

claimed on an employee’s Federal income tax 

return. 

Employees who worked for two or more 

railroads, or had both railroad retirement 

and social security taxes withheld from 

their earnings, should see Internal Revenue 

Service publication 505, Tax Withholding 

and Estimated Tax, for information on how 

to figure any excess railroad retirement or 

social security tax withheld. 

Dual Railroad Retirement-Social 

Security Taxes Paid, 1951-74
 

An employee with 10 or more years of 

railroad service who is not entitled to a 

vested dual benefit payment may be entitled 

to a refund of excess social security taxes if 

his or her combined taxable earnings from 

the railroad retirement and social security 

systems in any year in the period 1951-74 

exceeded a maximum annual amount creditable under the Railroad Retirement Act. 

Eligible employees will receive their refunds 

from the RRB at retirement without applying 

for them. In the event an employee should 

die before receiving the refund, payment will 

be made to the employee’s survivors. 

Separation or Severance Payments 

A lump-sum payment, equal to the individual’s railroad retirement tier II payroll 

taxes deducted from separation or severance 

payments, will be paid upon retirement to 

employees meeting minimum service requirements, or their survivors, to the extent that 

the separation or severance payments did 

not yield additional tier II railroad retirement service credits. The lump-sum provision 

applies to separation and severance payments made after 1984. 

Federal Income Tax and Railroad 

Retirement Benefits 

The tier I portion of a railroad retirement 

annuity equivalent to a social security benefit 

based on comparable earnings is treated as a 

social security benefit for Federal income tax 

purposes. The amount of these benefits that 

may be subject to Federal income tax, if any, 

depends on the beneficiary’s income. 

Tier I benefits exceeding social security 

benefits, such as retirement benefits payable 

between ages 60 and 62, and some occupational disability annuities, plus the tier II 

portions of railroad retirement annuities, 

vested dual benefits, and supplemental annuities paid by the RRB are treated like private 

34
 
PROVISIONS ROVISIONS OF THE RAILROAD RETIREMENT ACT 

pensions for Federal income tax purposes. 

The Railroad Retirement Act specifically 

exempts benefits paid by the RRB from State 

and local income tax. 

The RRB issues tax information statements to annuitants each January. In the 

absence of a request not to withhold, taxes 

are withheld from U.S. citizens or residents 

whose railroad retirement benefits in excess 

of the social security equivalent level total 

more than certain annual threshold amounts. 

Any amounts withheld during the taxable 

year are reflected on the annual statements. 

Monitoring Retirement and Survivor 

Benefit Payments 

Under several monitoring programs now 

in effect, the RRB maintains contact with 

retirement and survivor beneficiaries in 

order to ensure the reporting of events which 

would require suspension or termination of 

monthly benefits. The records of beneficiaries 

are also checked with the Social Security 

Administration because annuities may be 

affected by nonrailroad earnings and because 

entitlement to social security benefits affects 

the amount of all annuities. 

Representative payees.—Each person 

who is paid on behalf of another periodically 

receives a questionnaire. The purpose of the 

questionnaire is to determine whether the 

beneficiary is still living, how much of the 

benefits were used for support of the beneficiary and how any savings were invested. 

Disability annuitants.—Disability annuitants receive a notice annually reminding 

them of their obligation to report all events 

which may affect their continuing entitlement to a disability annuity. They must 

notify the RRB if they perform any work 

(including self-employment). They must also 

notify the RRB if their doctor tells them their 

condition has improved and they are able to 

work. 

If a disability annuitant had substantial 

earnings, his or her physical condition is 

reviewed in order to determine whether or 

not there was a recovery from the disability. 

Notices are sent annually until the annuitant 

reaches full retirement age. 

EMPLOYEE AND SPOUSE 

ANNUITY FORMULA COMPONENTS 

The following describes railroad retirement annuity formula components as applied 

to new awards. The cost-of-living adjustments applied to annuities are described in 

previous pages of this chapter. 

Employee Retirement Annuity 

The amount of a regular annuity is the 

total of portions which are computed separately under different formulas and called 

tiers, plus any vested dual benefit payment 

also due. 

Tier I 

The first tier is calculated in generally 

the same way as a social security benefit. 

Any social security credits of an employee are 

combined with his or her railroad retirement 

credits for tier I computational purposes. 

In computing tier I, an employee’s creditable earnings are adjusted to take into 

account the changes in wage levels over a 

worker’s lifetime. This procedure, called 

indexing, increases creditable earnings from 

past years to reflect average national wage 

levels just prior to the employee’s first year 

of eligibility. The adjusted earnings are used 

to calculate “average indexed monthly earnings,” and a formula is applied to determine 

the gross tier I amount. 

For employees with less than 10 years of

railroad service, tier I benefits are calculated 

only if the employee has at least 5 years of

service after 1995 and an “insured status” 

under social security rules (usually 40 quar35
 
 

Railroad Retirement Handbook, 2015 

Table 4.--Employee Retiring with Less Than 30 Years of Service 

Year of birth Full retirement age Annuity reduction at age 62 

1937 or earlier 

1938 

1939 

1940 

1941 

1942 

1943 through 1954 

1955 

1956 

1957 

1958 

1959 

1960 or later 

65 

 65 and 2 months 

 65 and 4 months 

 65 and 6 months 

 65 and 8 months 

 65 and 10 months 

66 

 66 and 2 months 

 66 and 4 months 

 66 and 6 months 

 66 and 8 months 

 66 and 10 months 

67 

20.00% 

20.833% 

21.667% 

22.50% 

23.333% 

24.167% 

25.00% 

25.833% 

26.667% 

27.50% 

28.333% 

29.167% 

30.00% 

ters of coverage), counting both railroad

retirement and social security covered

earnings. 

Delayed retirement credits 

Tier I benefits are increased by a certain percentage for each month an employee 

delays retirement past full retirement age, 

up until age 70. For those born 

January 2, 1943, or later, the delayed retirement credit is 2/3 of 1 percent per month 

(8 percent per year). Those born prior to 

January 2, 1943, earn a lesser percentage 

credit. Delayed retirement credits are not 

given to an employee with less than 10 years 

of railroad service, even if the employee is 

over full retirement age when retiring from 

his or her railroad job, if the employee is also 

entitled to an age-reduced social security 

retirement benefit and the beginning date 

of that social security benefit precedes the 

beginning date of his or her railroad retirement annuity. 

Age reductions.—For employees retiring 

between age 62 and full retirement age with 

less than 30 years of service, age reductions 

are applied separately to the components of 

an annuity. As mentioned earlier, the full 

retirement age is gradually rising from 65 to 

67, depending on the year of birth. The maximum annuity reduction for retirement at age 

62 is gradually increasing from 20 percent 

to 30 percent. This does not affect those who 

retire at ages 60 or 61 with 30 years of service. 

The full retirement age for employee 

and spouse benefits increases from 65 to 66 

and from 66 to 67 at the rate of two months 

per year over two separate six-year periods. 

These changes also affect how reduced benefits are computed for early retirement. The 

increase in full retirement age from age 65 

to age 66 affects those who were born in the 

years 1938 through 1942. The full retirement 

age will remain at age 66 for those born in 

the years 1943 through 1954. The increase 

in full retirement age from age 66 to age 

67 affects those who were born in the years 

1955 through 1959. For individuals who were 

born in 1960 or later, the full retirement age 

will be 67. 

36
 
PROVISIONS ROVISIONS OF THE RAILROAD RETIREMENT ACT 

Reduced benefits continue to be available but at greater reductions. The early 

retirement reduction factor for an employee 

is 1/180 for each of the first 36 months of 

the reduction period regardless of the age of 

initial entitlement and will decrease to 1/240 

for each month (if any) over 36, as mentioned 

earlier. This will result in a gradual increase 

in the reduction at age 62 to 30 percent for 

an employee once the age 67 retirement age 

is in effect. 

If an employee has less than 10 years of 

railroad service and is already entitled to an 

age-reduced social security benefit, the age 

reduction in his or her tier I will be based on 

the age reduction applicable on the beginning 

date of the employee’s social security benefit, 

even if the employee is already of full retirement age on the beginning date of his or her 

railroad retirement annuity. 

Age reductions are required in the tier 

I annuity amounts of 30-year employees 

who retired at ages 60-61 before 2002 and 

attained age 60 or completed 30 years of service after June 1984. The age reductions are 

applied only to the tier I annuity portion. If 

an employee affected by this provision was 

born before 1938 and attained 60/30 eligibility after December 1985, tier I is permanently reduced by approximately 20 percent. 

For those born after 1937 who retired before 

2002, the reduction gradually increased as 

described earlier. In both cases, the tier 

I amount is frozen until the first month 

throughout which the employee is age 62. It 

is then recomputed to reflect interim increases in national wage levels and will become 

subject to future cost-of-living increases. No 

reduction will apply if the employee retired 

at age 62 or older with 30 years of service, or 

at age 60 with 30 years of service and retirement is after 2001. 

Workers’ compensation or public disability benefit reductions.—For employees who 

are under age 65 and receiving a disability 

annuity, the tier I amount is, under certain 

circumstances, reduced for receipt of workers’ 

compensation or public disability benefits. 

Social security reductions.—After any 

required age reduction, the tier I amount is 

reduced by the amount of any social security 

benefits also payable but not to an amount 

below zero. 

Reductions for public, non-profit or 

foreign pensions.—For employees who attain 

eligibility for both tier I benefits and certain 

government pension or other payments after 

1985, a reduction may be required for receipt 

of a public pension based, in part or in whole, 

on employment not covered by railroad 

retirement or social security after 1956. This 

also applies to payments from a non-profit 

organization or from certain foreign governments or employers. Usually, an employee’s 

tier I benefit will not be reduced by more 

than 1/2 of his or her pension from noncovered employment. However, if the employee 

is under age 65 and is receiving a disability 

annuity, the tier I benefit may be reduced 

by an additional amount if the pension from 

noncovered employment is a public disability 

benefit. 

Tier II 

The second tier of a regular annuity is 

computed under a separate formula, and is 

based on railroad service alone. Tier II benefits are equal to 7/10 of 1 percent of the 

employee’s average monthly earnings using 

the tier II tax base in the 60 months of highest earnings, times his or her years of service 

in the rail industry. The tier II component is 

reduced by 25 percent of any gross employee 

vested dual benefit amount due. 

Age reductions.—Age reductions required 

for those employees retiring between age 62 

37
 
Railroad Retirement Handbook, 2015 

and their full retirement age with less than 

30 years of service are also applied to the 

tier II component of an annuity. The reduction is 1/180 for each of the first 36 months 

the employee is under full retirement age 

when his or her annuity begins and 1/240 for 

each additional month. 

Full retirement age is gradually rising as 

mentioned earlier. However, if an employee 

had any creditable railroad service before 

August 12, 1983, full retirement age for 

tier II purposes will remain 65. 

Employees with 5-9 years of creditable 

railroad service, if at least 5 years were after 

1995, are eligible for tier II benefits the first 

full month they are age 62. Their tier II benefits are subject to the same age reductions 

that apply to employees with 10 to 29 years 

of service. If they are eligible on the basis of 

total disability, a tier II benefit is not payable until age 62 and that amount is reduced 

for early retirement. 

Amount of Vested Dual Benefit Payment 

To determine this additional annuity 

amount for a retired employee meeting the 

vesting requirements, the RRB computes a 

social security benefit based solely on the 

individual’s railroad service before 1975, and 

a social security benefit based solely on social 

security covered earnings before 1975. The 

vested dual benefit is the amount by which 

the total of these two computations exceeds 

a social security benefit based on combined 

railroad and social security covered earnings 

before 1975. 

The vested dual benefit is increased by 

the cumulative cost-of-living percentage 

increases applicable to tier I benefits that 

occurred between January 1, 1975, and the 

date of retirement or January 1, 1982, 

whichever was earlier. The computed amount 

is then frozen; that is, no further cost-ofliving increases are applied thereafter. The 

amount of any vested dual benefit due is 

added to the tier portions and paid as part of 

the regular annuity. 

The same age reduction applied to the 

tier I component is applied to the vested dual 

benefit component of an annuity for those 

employees retiring before full retirement age 

with less than 30 years of service. 

Supplemental Annuity Formula 

The amount of a supplemental annuity 

awarded after 1974 is equal to $23 plus $4 

for each year of service over 25, up to a maximum of $43. A fraction of $4 is added for 

each fractional year of service. 

If a retired employee also receives a 

private pension paid for entirely or in part 

by a railroad, the supplemental annuity is 

subject to reduction. The reduction is equal 

to the amount of the pension paid for by the 

employer. If the employer reduces the private 

pension because of the supplemental annuity, 

the amount of the reduction is restored to the 

supplemental annuity but does not raise it 

over the $43 maximum. There is no reduction 

in the supplemental annuity for any part of 

a private pension paid by the employee alone 

nor is there a reduction for a pension paid by 

a railroad labor organization. 

Spouse Annuity 

The spouse annuity formula is based on 

certain percentages of the employee’s tier I 

and tier II amounts. 

Tier I 

The tier I portion of a spouse annuity, 

before any applicable reductions, is 50 percent of the railroad employee’s unreduced 

tier I amount. 

Spouse age reductions.—Age reductions 

required for those spouses (between age 62 

and full retirement age) of employees retiring 

38
 
PROVISIONS ROVISIONS OF THE RAILROAD RETIREMENT ACT 

with less than 30 years of service are applied employee may receive a reduced tier I beneseparately to each annuity component. Full fit, unless the spouse is already of full retireretirement age for a spouse is gradually ris- ment age. 

ing, just as for an employee. Actuarially 

reduced benefits continue to be available but 

at greater reductions. The tier I reduction 

is 1/144 for each of the first 36 months the 

spouse is under full retirement age when her 

or his annuity begins and will decrease to 

1/240 for each month (if any) over 36. This 

will result in a gradual increase in the reduction at age 62 from 25 percent to 35 percent 

for a spouse once the age 67 retirement age 

is in effect. 

If an employee has less than 10 years of 

railroad service and the spouse is already 

entitled to an age-reduced social security 

benefit, the age reduction in her or his tier I 

will be based on the age reduction applicable 

on the beginning date of the spouse’s social 

security benefit, even if the spouse is already 

of full retirement age on the beginning date 

of her or his railroad retirement annuity. 

December 2001 legislation eliminated the 

tier I age reduction for employees ages 60 or 

61 with 30 or more years of service whose 

railroad retirement annuities began 

January 1, 2002, or later. The spouses of 

these employees are also eligible for full 

annuities at age 60. 

Age reductions required for spouses 

of employees with 30 years of service who 

attained 60/30 eligibility after June 1984 

but whose annuities began before January 

2002 are applied only to the tier I portion of 

the spouse annuity. If the employee attained 

60/30 eligibility before July 1984, retired at 

age 62 with 30 years of service, or begins 

receiving an annuity at ages 60 or 61 after 

2001 with 30 years of service, the spouse 

tier I portion is not subject to these 

reductions. 

If the employee’s annuity is subject to 

60/30 age reductions, the spouse of such an 

In reduced 60/30 spouse cases, the tier I 

benefit is equal to 1/2 of the employee’s 

reduced tier I on the employee’s annuity 

beginning date and is also frozen until the 

first full month throughout which both the 

employee and spouse are age 62. Then, it is 

recomputed based on 1/2 of the employee’s 

age 62 gross tier I amount and reduced for 

each month the spouse is under her or his 

full retirement age at that time. If at the 

time of recomputation the spouse is already 

at full retirement age, or the spouse has a 

minor or disabled child in care, no age reduction would apply. 

The spouse of a disability annuitant who 

is otherwise eligible for a 60/30 age annuity receives an age reduction if the spouse’s 

annuity beginning date was before 2002. 

If the spouse’s annuity beginning date is 

January 1, 2002, or later, the spouse can 

receive an unreduced annuity as early as age 

60. If the spouse is entitled based on having 

a minor or disabled child in care, there is no 

age reduction. 

Reductions for other benefits.—After any 

applicable age reduction required for the 

spouse’s early retirement, the spouse tier I 

amount is reduced by the amount of any 

social security benefit to which the spouse is 

entitled. 

The tier I amount may also be reduced 

for certain Federal, State or local government 

pension payments based on the spouse’s own 

earnings. For spouses subject to the public 

pension reduction, the tier I reduction is 

equal to 2/3 of the public pension. 

The spouse tier I amount may also be 

reduced if the employee under age 65 is 

39
 
Railroad Retirement Handbook, 2015 

receiving a disability annuity and a workers’ 

compensation or public disability benefit. 

While these offsets can reduce or even 

completely wipe out the tier I benefit otherwise payable to a spouse, they do not affect 

the tier II benefit potentially payable to that 

spouse. 

Divorced spouse.—The annuity of a 

divorced spouse is limited to the tier I 

amount and thus equal to what social security would pay. 

Tier II 

The spouse tier II amount, before any 

applicable reductions, is 45 percent of the 

employee’s unreduced tier II amount. If the 

employee is awarded a vested dual benefit, 

the employee tier II amount used in computing the spouse benefit is the amount after 

the 25 percent reduction for the employee’s 

vested dual benefit entitlement. 

Age reductions.—As mentioned earlier, 

age reductions are gradually increasing. The 

tier II age reduction for spouses of employees 

retiring with less than 30 years of service 

is 1/144 for each of the first 36 months the 

spouse is under full retirement age when her 

or his annuity begins and decreases to 1/240 

for each month (if any) over 36. However, 

if a railroad employee had any creditable 

railroad service before August 12, 1983, the 

employee and spouse retirement age for tier 

II purposes remains age 65. Age reductions 

are not applied to spouse annuities based on 

the spouse’s caring for a child. 

Dual Annuities 

If both the employee and spouse are 

railroad employees and either one had some 

railroad service before 1975, the spouse tier I 

amount is reduced by the amount of the railroad employee tier I to which the spouse is 

entitled and that initial reduction is restored 

in the spouse tier II amount. The spouse 

tier I amount cannot be reduced to an 

amount below zero. 

If a spouse is also a railroad employee 

annuitant and both the employee and spouse 

started railroad employment after 1974, the 

amount of any spouse or divorced spouse 

annuity is reduced by the amount of the 

employee annuity to which the spouse is also 

entitled. 

A spouse who is also entitled to a survivor annuity on a different earnings record 

will receive only the higher benefit. 

SURVIVOR ANNUITY 

FORMULA COMPONENTS
 

Tier I 

The survivor tier I amount is based on 

the deceased employee’s combined railroad 

retirement and social security credits, and is 

computed using social security formulas. In 

general, the survivor tier I amount is equal 

to the amount of survivor benefits that would 

have been payable under social security. 

The gross survivor tier I amount (before 

reductions for early retirement, or other 

benefits) is generally equivalent to the unreduced tier I retirement benefit the deceased 

employee had, or would have, received. 

For surviving aged or disabled widow(er)s, remarried widow(er)s and surviving 

divorced spouses whose annuities begin a 

year or more after the employee’s death, the 

“average indexed monthly earnings,” upon 

which the tier I benefit is based, may be reindexed using a later year if it would result 

in a higher benefit, provided the employee 

died before age 62. The reindexing takes into 

account changes in national earnings levels which occur after the employee’s death 

but before the survivor becomes eligible for 

40
 
PROVISIONS ROVISIONS OF THE RAILROAD RETIREMENT ACT 

benefits. This provides a benefit consistent 

with earnings levels at the time of the survivor’s eligibility, rather than the time of the 

employee’s death. 

A widow(er), surviving divorced spouse or 

remarried widow(er) whose annuity begins at 

full retirement age or later receives the full 

tier I amount unless the deceased employee 

received an annuity that was reduced for 

early retirement. The eligibility age for a full 

widow(er)’s annuity is gradually rising from 

65 to 67. The maximum age reductions will 

range from 17.1 percent to 20.36 percent, 

depending on the widow(er)’s date of birth. 

For a surviving divorced spouse or remarried 

widow(er), the maximum age reduction is 

28.5 percent. For a disabled widow(er), disabled surviving divorced spouse or disabled 

remarried widow(er), the maximum reduction 

is 28.5 percent, even if the annuity begins at 

age 50. 

A widow(er) or surviving divorced spouse 

whose eligibility is based on caring for a 

child of the employee receives 75 percent of 

the full tier I amount. Benefits to a surviving divorced spouse end when the child is 16. 

An eligible child also receives 75 percent of 

the full tier I amount. The total amount the 

family can receive is subject to a maximum 

(usually applicable if there are three or more 

family members, not counting aged or disabled surviving divorced spouses, entitled to 

survivor annuities). 

A dependent parent can receive 82.5 

percent of the full tier I amount, but if both 

parents are eligible, the total amount cannot 

be more than 150 percent of the full tier I 

amount. 

Dual benefit reduction.—The tier I 

amount described above is reduced by the 

amount of any social security benefit or by 

the tier I amount of any railroad retirement 

employee annuity the survivor also receives. 

In the case of a widow or dependent widower 

who is also a railroad employee annuitant, 

and either the widow(er) or the deceased 

employee had 120 months of railroad service before 1975, the tier I reduction may 

be partially restored in the survivor tier II 

amount. If either the deceased employee 

or the widow(er) had some railroad service 

before 1975 but less than 120 months, the 

survivor tier I portion is payable only to the 

extent that it exceeds the tier I portion of the 

widow(er)’s own employee annuity. 

The tier I amount may also be reduced 

by certain Federal, State or local government 

pensions which are based on a widow(er)’s 

own earnings. For widow(er)s subject to 

the government pension reduction, the tier 

I reduction is equal to 2/3 of the public 

pension. 

Tier II 

Widow(er)s.—December 2001 legislation 

established an “initial minimum amount” 

which yields, in effect, a widow(er)’s tier 

II benefit equal to the tier II benefit the 

employee would have received at the time of 

the award of the widow(er)’s annuity, minus 

any applicable age reduction. It does this by 

providing an additional amount, initially set 

at 50 percent of the employee’s tier II, to the 

100 percent tier I and 50 percent tier II benefits provided under prior law. 

This additional amount is offset each year 

by the dollar amount of the cost-of-living 

increases payable in both the tier I and 

tier II benefits provided under prior law. 

Consequently, such a widow(er)’s net benefit 

payment will not increase until such time 

as the widow(er)’s annuity, as computed 

under prior law with all interim cost-of-living 

increases otherwise payable, exceeds the 

widow(er)’s annuity computed under the initial minimum amount formula. 

The initial minimum amount provision 

applies to all widow(er)s whose annuities 

41
 
Railroad Retirement Handbook, 2015 

begin February 1, 2002, or later, and to some, 

but not all, widow(er)s on the rolls before 

that date. If, because of previous cost-ofliving adjustments, annuities awarded before 

February 2002 were already higher than the 

annuity that would be payable under the 

December 2001 legislation, the provision did 

not apply. 

In most cases, the same age reductions 

that apply to tier I amounts also apply to 

tier II amounts. 

If the widow(er) qualifies for a railroad 

retirement employee annuity and neither the 

widow(er) nor the deceased employee had 

any railroad service before 1975, the survivor annuity (tier I and tier II) payable to the 

widow(er) is reduced by the total amount of 

the widow(er)’s own employee annuity. 

Other survivors.—Each child receives 15 

percent of the deceased employee’s tier II 

amount, and each surviving parent receives 

35 percent. The minimum total tier II 

amount payable to a family is 35 percent of 

the employee’s tier II amount, and the maximum, 130 percent. 

A tier II benefit is not provided for a 

surviving divorced spouse or a remarried 

widow(er). However, partition payments may 

be extended to surviving former spouses pursuant to divorce agreements. A tier II benefit 

is not payable to surviving parents if other 

family members may receive benefits or if 

the parent has remarried. 

Survivor-Spouse Guaranty 

A widow(er) who received a spouse annuity from the RRB is guaranteed that the 

amount of any widow(er)’s benefit payable 

will not be less than the annuity she or 

he was receiving as a spouse in the month 

before the employee died. If the survivorspouse guaranty applies, increases are not 

payable until the regular survivor formula 

produces more in benefits than the spouse 

guaranty. At that point, benefit components 

are based on the regular survivor formula 

and both tier I and tier II amounts are 

increased for the cost of living. 

APPEALS 

A railroad worker, spouse, or survivor 

whose application for a benefit under the 

Railroad Retirement Act is denied, or one 

who is dissatisfied with the decision, has the 

right of appeal; that is, he or she may ask for 

a reconsideration of the decision. The notification letter sent to the applicant at the time 

of the original award or denial of the claim 

informs him or her of the right to appeal. 

An individual has 60 days, from the date 

of the initial notice of a decision on his or her 

claim, to file a written statement requesting reconsideration from the RRB unit that 

denied the claim. This step is mandatory 

before a decision may be appealed to the 

RRB’s Bureau of Hearings and Appeals. In 

cases involving overpayments, requests for 

waiver of recovery of the overpayment must 

be filed within 60 days of the date of the 

overpayment notice. In such cases, recovery 

of the overpayment will be deferred and a 

personal conference may be held, if requested. A request for waiver received after 60 

days will be considered but will not defer collection of the overpayment, and any amount 

of the overpayment recovered prior to the 

date on which the waiver request is filed will 

not be subject to waiver. 

An individual has 60 days from the date 

of the reconsideration or waiver decision 

to file an appeal with the RRB’s Bureau of 

Hearings and Appeals, a bureau independent of the units responsible for reconsideration decisions. The Bureau of Hearings and 

Appeals may, if necessary, further investigate the case and obtain reports through the 

RRB’s field representatives, designated medical examiners, and others who may be in a 

42
 
PROVISIONS ROVISIONS OF THE RAILROAD RETIREMENT ACT 

position to furnish information pertinent to 

the appellant’s claim. If the appeal involves 

questions of fact, the appellant has the right 

to request an oral hearing. If one is held, it 

may be conducted in the RRB office closest to 

the appellant’s home. In some cases, videoconferencing or phone hearings are held. 

If an appellant is not satisfied with the 

Bureau of Hearings and Appeals’ decision, 

he or she may appeal to the three-member 

Board within 60 days from the date on 

which notice of the Bureau of Hearings and 

Appeals’ decision is mailed. The threemember Board will base its decision on the 

evidence before the hearings officer and ordinarily will not accept additional evidence 

or conduct a hearing. An appellant who is 

not satisfied with the Board’s final decision 

may apply for a review of the case by a U.S. 

Circuit Court of Appeals. The petition for 

review must be filed within one year after 

notice of the three-member Board’s decision 

has been mailed to the appellant. 

43
 

 

 

 

 

 

 

 

 

 

 

 

3
 

FINANCING OF THE
 

RAILROAD RETIREMENT SYSTEM
 

Railroad retirement and survivor 

benefits are financed by the 

following sources of income:

 1. Payroll taxes on railroad earnings 

paid by covered employees and 

employers.

 2. Income from a financial interchange 

with the social security trust funds.

 3. Earnings on investments. Funds not 

needed immediately for benefit payments or administrative expenses are 

transferred to the National Railroad 

Retirement Investment Trust for investment.

 4. Borrowing from general revenues 

related to certain features of the financial interchange mentioned in (2).

 5. Appropriations from general revenues. 

6. Revenues from Federal income taxes 

on retirement benefits. 

Each of these income sources is described 

briefly below and on the following pages. 

PAYROLL TAXES 

Payroll taxes levied on covered employers 

and their employees are the primary source 

of income to the Railroad Retirement 

Account. 

The tax rate equivalent to that which 

would be paid under social security is commonly called the tier I tax. In 2015, the 

employee and employer tier I tax rate of 

7.65 percent is divided into 6.20 percent for 

railroad retirement and 1.45 percent for 

Medicare hospital insurance. 

Payroll taxes in excess of the tier I rate 

are called tier II taxes. In 2015, tier II taxes 

are 4.90 percent on employees and 13.10 percent on employers and employee representatives. 

An additional 0.9 percent in Medicare 

hospital insurance taxes (2.35 percent in 

total) is withheld from employees on earnings 

above $200,000. 

The Railroad Retirement and Survivors’ 

Improvement Act of 2001 significantly 

revised the financing of the railroad retirement system through provisions for the 

investment of railroad retirement funds in 

nongovernmental assets, adjustments in 

the payroll tax rates paid by employers and 

employees, and the repeal of a supplemen45
 
Railroad Retirement Handbook, 2015 

tal annuity work-hour tax. Supplemental 

annuities continue to be payable and are 

funded by the National Railroad Retirement 

Investment Trust. 

Tier II taxes on both employers and 

employees are based on an “average account 

benefits ratio.” Depending on the average 

account benefits ratio, the tier II tax rate for 

employers ranges between 8.20 percent and 

22.10 percent, while the tier II tax rate for 

employees is between 0 percent and 

4.90 percent. 

The “account benefits ratio” is, with 

respect to any fiscal year, the amount 

determined by the RRB by dividing the fair 

market value of the assets in the Railroad 

Retirement Account and the National 

Railroad Retirement Investment Trust (and 

for years before 2002, the Social Security 

Equivalent Benefit Account) as of the close 

of such fiscal year by the total benefits 

and administrative expenses paid from 

the Railroad Retirement Account and the 

National Railroad Retirement Investment 

Trust during such fiscal year. If the ratio is 

not an exact multiple of 0.1, it is raised to the 

next highest multiple of 0.1. 

Likewise, the term “average account 

benefits ratio” means, with respect to any 

calendar year, the average determined by the 

Secretary of the Treasury of the account benefits ratios for the 10 most recent fiscal years 

ending before such calendar year. 

Tier I taxes are ultimately transferred 

to the social security and hospital insurance trust funds through the financial interchange. The tier II tax is used to finance 

tier II benefits, supplemental annuity benefits, and also the portion of tier I benefits 

not reimbursed through the financial interchange. 

Earnings Base 

The taxable amounts of an employee’s 

earnings are subject to tier I and tier II 

maximums, which are both indexed to annual 

increases in national wage levels. The tier I 

maximum is the same as the social security 

wage base. The tier II earnings limit is what 

the social security limit would be if the 1977 

social security amendments had not been 

enacted. 

FINANCIAL INTERCHANGE 

Purpose and History of Financial 

Interchange 

The financial interchange between the 

railroad retirement and social security systems is intended to put the Social Security 

Old-Age, Survivors, and Disability Insurance 

(OASDI) and Hospital Insurance (HI) trust 

funds in the same position they would have 

been had railroad employment been covered under the Social Security and Federal 

Insurance Contributions Acts. It follows 

that all computations under the financial 

interchange are performed according to social 

security law. The amount of benefits payable 

under the Railroad Retirement Act has no 

effect on the results. 

The financial interchange provision was 

introduced by the 1951 amendments to the 

Railroad Retirement Act and was made retroactive to January 1, 1937. The initial determination covered the period from January 1937 

through June 1952 and indicated a balance 

of $488.2 million in favor of the social security system. Only interest was paid on that 

amount until the debt was liquidated by subsequent offsets in favor of the railroad retire46
 
FINANCING OF THE RAILROAD RETIREMENT SYSTEM 

ment system. Since the liquidation of the 

original balance, annual transfers reflecting 

the experience of the preceding fiscal year 

have always favored railroad retirement. The 

2014 transfer alone amounted to $4.1 billon. 

The experience under the financial interchange proved to be more favorable to the 

railroad retirement system than was originally anticipated. There were two primary 

causes for this. The first was a series of successive amendments to the Social Security 

Act which raised benefits immediately while 

tax increases were deferred. The second factor was the decline in railroad employment, 

which reduced the taxes payable to social 

security but had little immediate effect on 

the benefit reimbursements. 

Financial Interchange Determinations 

Placing the social security trust funds in 

the same position they would have been had 

railroad employment been covered under 

social security since its inception involves 

computing the amount of social security payroll and income taxes relating to railroad 

employment and computing the amount of 

additional benefits which social security 

would have paid to railroad retirement beneficiaries during the same fiscal year. In the 

computation of the latter amount, credit is 

given for any social security benefits actually paid to railroad retirement beneficiaries. 

When benefit reimbursements exceed payroll and income taxes, the difference, with 

an allowance for interest and administrative expenses, is transferred from the social 

security trust funds to the Social Security 

Equivalent Benefit Account. If taxes exceed 

benefit reimbursements (this has not happened since 1951), a transfer would be made 

in favor of the social security trust funds. 

INVESTMENTS 

The National Railroad Retirement 

Investment Trust was established by 

the Railroad Retirement and Survivors’ 

Improvement Act of 2001. The Trust, a taxexempt entity independent from the Federal 

Government, became effective February 1, 

2002. 

The sole purpose of the Trust is to manage and invest railroad retirement assets. 

The Railroad Retirement and Survivors’ 

Improvement Act authorizes the Trust to 

invest the assets of the Railroad Retirement 

Account in a diversified investment portfolio 

in the same manner as those of private sector 

retirement plans. Prior to the Act, investment of Railroad Retirement Account assets 

was limited to U.S. Government securities. 

The Trust’s Board of Trustees is composed of seven individuals, three selected by 

railroad labor unions and three by railroad 

companies. The seventh is an independent 

Trustee selected by the other six Trustees. 

The terms are for 3 years and are staggered. 

The Trustees are required to discharge 

their duties solely in the interest of the RRB, 

and through it, the participants and beneficiaries of the programs funded under the 

Railroad Retirement Act. The Trustees are 

subject to fiduciary rules similar to those 

required by the Employee Retirement Income 

Security Act. 

The financial statements of the Trust 

are required to be audited annually by an 

independent public accountant. In addition, 

the Trust must submit an annual report 

to Congress on its operations, including 

a statement of financial position, a statement of cash flows, a statement on internal 

47
 
Railroad Retirement Handbook, 2015 

accounting and administrative control systems, the independent auditor’s report, and 

any other information necessary to inform 

Congress about the operations and financial 

condition of the Trust. All National Railroad 

Retirement Investment Trust annual management reports and quarterly updates are 

available on the RRB’s website at 

www.rrb.gov. 

BORROWING FROM GENERAL 

REVENUES RELATED TO THE 

FINANCIAL INTERCHANGE
	

Financial interchange transfers are 

made in a lump sum for a whole fiscal year 

in the June following the close of a fiscal 

year. For example, the transfer reflecting 

transactions which occurred from October 

2012 through September 2013 took place in 

June 2014. At any time, therefore, there are 

between 9 and 21 months’ worth of financial 

interchange transfers which, in a sense, are 

owed the RRB. The RRB receives interest on 

this money, so this practice does no longterm harm to the financial condition of the 

Railroad Retirement Account. The lag in the 

transfers, however, periodically caused shortterm cash-flow problems in past years. 

In order to avoid any further cash-flow 

problems from this lag, the 1983 amendments provided for monthly loans from U.S. 

Treasury general funds. Each loan is equal 

to an estimate of the transfer the RRB would 

have received in the preceding month if the 

financial interchange with social security 

were on an up-to-date basis, with interest 

adjustments. The RRB must repay these 

loans when it receives the transfer from 

social security against which the money 

was advanced. 

APPROPRIATIONS FROM 

GENERAL REVENUES
	

As previously noted, under the financial 

interchange, the railroad retirement system 

gives the social security system the taxes 

social security would have collected, and 

the social security system gives the railroad 

retirement system the additional benefits 

social security would have paid to railroad 

workers and their families over what it actually pays them. 

The word “additional” in the preceding 

sentence is important because it is possible 

for a railroad employee to be covered under 

both railroad retirement and social security. 

The social security coverage may be based 

on earnings from moonlighting while in a 

railroad job or from coverage under the two 

systems at different times. Fulfilling the 

purpose of the financial interchange requires 

deducting from social security’s fund only 

the difference between what social security 

would have paid had it covered railroad 

employment and what it actually pays the 

person based on his or her nonrailroad 

employment. Under the financial interchange, therefore, social security subtracts 

an employee’s social security benefit from the 

amount it would otherwise give to the railroad retirement system. 

This arrangement gave rise to problems 

that became acute in the early 1970s. The 

problems arose from the weighting in the 

social security formula in favor of lowearning, short-service workers. A railroad 

employee’s nonrailroad earnings usually 

added little to the benefit social security 

would have paid on combined railroad and 

nonrailroad earnings (called gross tier I 

48
 
FINANCING OF THE RAILROAD RETIREMENT SYSTEM 

today). However, the employee might qualify 

for the minimum social security benefit, 

receiving much more from social security 

than the nonrailroad earnings added to his or 

her gross tier I benefit. 

In order to improve the system’s financial condition, the Railroad Retirement Act 

of 1974 provided that the tier I component of 

the railroad retirement annuity be reduced 

by any social security benefit. This essentially integrated the two systems and eliminated the advantage of qualifying for benefits 

under both systems. 

It was generally considered unfair to 

eliminate this advantage entirely for those 

already retired or close to retirement when 

the 1974 Act became effective. The 1974 Act, 

therefore, provided for a restoration of social 

security benefits that were considered vested 

at the end of 1974. The restored amount is 

known as the “vested dual benefit.” This benefit was available to qualifying spouses and 

survivors as well as to qualifying employees. 

For employees retiring in 1975 or later, 

the vested dual benefit was to be equal to: 

 a social security benefit based on social 

security earnings, plus 

 a social security benefit based on railroad earnings, minus 

 a social security benefit based on combined railroad and social security earnings. 

Social security or railroad earnings after 

1974 were not to be included in this calculation, and the “social security benefit” 

referred to in the above calculation is the 

one which would have been calculated at the 

end of 1974. The resulting amount was to be 

increased by all the automatic social security 

cost-of-living adjustments between 1974 and 

the date the employee retired. 

For spouses and survivors, the formulas 

were different and more complicated than 

those for employees. 

The 1981 amendments made significant 

changes regarding vested dual benefits. 

Spouses and survivors were not to be awarded vested dual benefits after August 13, 

1981, though they would continue to receive 

these benefits if they were awarded before 

that date. Also, vested dual benefits awarded 

to employees would take into account costof-living increases only through 1981, rather 

than through the date of retirement. 

Since October 1981, vested dual benefits have been paid from a segregated Dual 

Benefits Payments Account, and appropriations have been made to that account. This 

means that, starting in fiscal year 1982, each 

annual appropriation is to be sufficient to 

pay the benefits for that year. If the appropriation for a fiscal year is less than required 

for full funding, the RRB must reduce benefits to a level that the amount appropriated 

will cover. 

The appropriation for vested dual benefits 

in fiscal year 1982 was less than required 

for full funding, resulting in a cutback in 

benefits during that year. Full funding was 

restored for the last two months of fiscal 

year 1982. The appropriation was less than 

required in fiscal year 1986, resulting in 

a cutback during April-September of that 

year. The appropriation was again less than 

required in fiscal year 1988, which resulted in a cutback during April-September. 

Benefits were cut back in January 1996 due 

to a lapse in government funding and then 

restored later that same month. For years 

other than those mentioned, full benefits 

have been paid. 

49
 
Railroad Retirement Handbook, 2015 

TAXATION OF RAILROAD to the railroad retirement system for an addiRETIREMENT BENEFITS tional year, fiscal year 1989. Subsequent legSocial security amendments in 1983 

subjected railroad retirement tier I benefits 

to Federal income taxes on the same basis 

as social security benefits, and subsequent 

railroad retirement legislation subjected benefits over and above social security levels to 

Federal income tax on the same basis as private pensions, beginning with taxable year 

1984. Revenues from income taxes on tier I, 

tier II and vested dual benefits are used for 

benefit payments. 

FINANCIAL POSITION OF THE 

RAILROAD RETIREMENT SYSTEM
	

The financial condition of the railroad 

retirement system is closely related to 

the size of the railroad work force. This is 

because, as mentioned previously, payroll 

taxes on covered employers and their employees are the primary source of income to the 

system. Clearly, a large labor force will generate more revenue for the system than a 

small labor force. Railroad employment has 

declined over the years and a drop in employment necessitated the strong corrective 

action taken in the 1981 and 1983 amendments. In the absence of these amendments, 

substantial reductions in payments would 

have been required. 

The omnibus budget legislation enacted 

December 22, 1987, increased railroad retirement payroll tax rates in January 1988 by 

a total of 2 percent, and it provided for revenues from Federal income taxes on certain 

railroad retirement benefits to be transferred 

islation extended these income tax transfers 

on a permanent basis. 

Legislation in 2001 provided for the 

investment of railroad retirement funds in 

non-governmental assets, adjustments in 

the payroll tax rates paid by employers and 

employees, and the repeal of a supplemental 

annuity work-hour tax. 

The RRB’s 26th triennial actuarial valuation, submitted to Congress in June 2015, 

contained generally favorable information 

concerning railroad retirement financing. 

It concluded that, barring a sudden, unanticipated, large decrease in railroad employment or substantial investment losses, the 

railroad retirement system will experience no 

cash-flow problems during the next 32 years. 

Cash-flow problems arise only under the 

most pessimistic employment assumption, 

and then not until 2047. However, the report 

also indicated that the long-term stability of 

the system is not assured. Under its current 

financing structure, actual levels of railroad 

employment and investment return over the 

coming years will determine whether corrective action is necessary. The report did not 

recommend any change in the rate of tax 

imposed by current law on employers and 

employees. 

As of September 30, 2014, total railroad 

retirement system assets, comprising assets 

managed by the National Railroad Retirement Investment Trust and the railroad 

retirement system accounts at the Treasury, 

equaled approximately $28 billion. 

50
 
4
 

HEALTH INSURANCE FOR THE
 

AGED AND DISABLED
 

A mendments to the Social Security 

Act enacted in 1965 established 

a broad program of health insurance, known popularly as “Medicare,” for 

people age 65 or older, including railroad 

workers and members of their families. 

Part A provides hospital insurance and 

related benefits financed through payroll 

taxes. Part B provides medical insurance 

benefits on a voluntary basis, with the cost 

shared by the participants and the Federal 

Government. Both parts of the program have 

been modified and liberalized several times 

since 1967, principally in the 1973 extension 

of coverage to persons under age 65 who are 

totally disabled or have permanent kidney 

failure. In 2003, legislation was enacted 

which provided prescription drug coverage 

for Medicare beneficiaries beginning in 2006, 

among other changes. 

Persons covered by the railroad retirement system participate in Medicare on the 

same basis as those under the social security 

system. Amendments to the railroad retirement laws in 1965 and to the social security 

laws in 1972 gave the RRB an important role 

in the administration of the health insurance program and made possible the collection of hospital insurance taxes on the same 

basis as retirement taxes under the Railroad 

Retirement Tax Act. The 1965 amendments 

also empowered the RRB to make payments 

from the Railroad Retirement Account for 

hospital insurance services provided anywhere in Canada to persons receiving or 

qualified to receive railroad retirement benefits. Such payments apply only to the charges 

in excess of the amounts payable for hospital 

and related services under Canadian public 

health insurance laws. 

Social security legislation in 1972 gave 

the RRB direct legislative authority to collect 

Medicare premiums from railroad retirement 

beneficiaries and to select a carrier to process medical insurance claims for all railroad 

retirement beneficiaries. Previously, authority in these areas had been delegated to the 

RRB by the Social Security Administration. 

ELIGIBILITY 

All railroad retirement beneficiaries 

age 65 or over and other persons who are 

directly or potentially eligible for railroad 

retirement benefits are covered by the program. Although the age requirements for 

some unreduced railroad retirement benefits have risen just like the social security 

requirements, beneficiaries are still eligible 

for Medicare at age 65. Coverage before age 

51
 
Railroad Retirement Handbook, 2015 

65 is available for disabled employee annuitants who have been entitled to monthly 

benefits based on total disability for at least 

24 months and have a disability insured 

status under social security law. There is no 

24-month waiting period for those who have 

ALS (Amyotrophic Lateral Sclerosis), also 

known as Lou Gehrig’s disease. If entitled to 

monthly benefits based on an occupational 

disability, and the individual has been 

granted a disability freeze, he or she is eligible for Medicare 29 months after the freeze 

date. If receiving benefits due to occupational 

disability and the person has not been granted a disability freeze, he or she is generally 

eligible for Medicare at age 65. The standards for a disability freeze determination 

follow social security law and are comparable 

to the medical criteria for granting total disability. Disabled widow(er)s under 65, disabled surviving divorced spouses under 65, 

and disabled children may also be eligible for 

Medicare, usually after a 24-month waiting 

period. 

Medicare coverage at any age on the 

basis of permanent kidney failure is also 

available to employee annuitants, employees who have not retired but meet certain 

minimum service requirements, spouses, and 

dependent children who suffer from permanent kidney failure requiring hemodialysis 

or a kidney transplant. The Social Security 

Administration usually has jurisdiction of 

Medicare for those eligible on the basis of 

permanent kidney failure. 

PART A AND PART B 

ENROLLMENT
	

If a retired employee or a family member 

is receiving a railroad retirement annuity, 

enrollment for both hospital and medical 

insurance is generally automatic and coverage begins when the person reaches age 65. 

For beneficiaries who are totally and permanently disabled, Medicare hospital and 

medical insurance starts automatically with 

the 30th month after the beneficiary became 

disabled or, if later, the 25th month after the 

beneficiary became entitled to monthly benefits. Even though enrollment is automatic, 

an individual may decline medical insurance, 

if so desired; this does not preclude him or 

her from applying for medical insurance at a 

later date. However, premiums may be higher if enrollment is delayed. 

If an individual is eligible for but not 

receiving an annuity, he or she should contact an RRB office before attaining age 65 

and apply for both hospital and medical 

insurance. (This does not mean that the 

individual must retire if presently working.) The best time to apply is during the 3 

months before the month in which the individual reaches age 65. He or she will then 

have both hospital and medical insurance 

protection beginning with the month age 65 

is reached. If the individual does not enroll 

for medical insurance in the 3 months before 

attaining age 65, he or she can enroll in the 

month age 65 is reached or during the next 

3 months, but there will be a delay of 1 to 

3 months before medical insurance is effective. Individuals who do not enroll during 

this Initial Enrollment Period may sign up 

in any General Enrollment Period (January 

1 - March 31 each year). Coverage for such 

individuals begins July 1 of the year of 

enrollment. 

Premiums for medical insurance are 

increased 10 percent for each 12-month 

period the individual could have been, but 

was not, enrolled. However, individuals 

age 65 or older who wait to enroll in Part B 

because they have group health plan coverage based on their own or their spouse’s 

current employment may not have to pay 

52
 
HEALTH INSURANCE FOR THE AGEDAND DISABLED 

higher premiums because they may be eligible for special enrollment periods. The 

same special enrollment period rules apply 

to disabled individuals, except that the group 

health insurance may be based on the current employment of the individual, his or her 

spouse, or a family member. 

Individuals deciding when to enroll in 

Medicare Part B must consider how this will 

affect eligibility for health insurance policies 

which supplement Medicare coverage. These 

include “Medigap” insurance and prescription 

drug coverage and are explained later in this 

chapter. 

For information on coverage for kidney 

disease, a social security office should be 

contacted. 

EXPLANATION OF HOSPITAL
	

INSURANCE BENEFITS
	

(Part A of Medicare) 

The hospital insurance program is 

designed to help pay the bills when an 

insured person is hospitalized. The program 

also provides payments for required professional services in a skilled nursing facility 

(but not for custodial care) following a hospital stay, home health services, and hospice 

care. 

Benefits under this program cover medically necessary care in hospitals and skilled 

nursing facilities, home health visits and 

hospice care. Coverage also includes blood, 

after the first three pints, when the person is 

an inpatient at a hospital or skilled nursing 

facility during a covered stay. 

There is a limit on how many days of 

hospital or skilled nursing care Medicare 

helps pay for in each “benefit period.” A benefit period begins the day a patient goes to 

a hospital or skilled nursing facility. It ends 

after a person has not received any hospital 

or skilled nursing care for 60 days in a row. 

There is no limit to the number of benefit 

periods a person can have. 

Benefits are ordinarily paid only for 

services received in the United States or 

Canada. Hospital insurance also covers 

hospital stays in Mexico under very limited 

conditions. 

What Medicare Part A Covers 

1. If a patient is hospitalized, Medicare 

will pay for all covered hospital services 

during the first 60 days of a benefit period 

except for a deductible. From the 61st 

through the 90th day, Medicare hospital 

insurance pays for all covered services except 

for a coinsurance charge. A lifetime reserve 

of 60 days may be used if a patient is in the 

hospital for more than 90 days in a benefit 

period; the patient pays a coinsurance charge 

for these additional days. Covered hospital 

services include almost all those ordinarily 

furnished by a hospital to its patients. 

(More information on specific services is 

available by calling 1-800-MEDICARE 

(1-800-633-4227) or by visiting www.medicare.gov. However, payments will not be 

made for private-duty nursing or personal 

comfort items. Inpatient psychiatric hospital 

services are covered, but there is a lifetime 

limitation of 190 days. 

2. Under certain conditions, the cost of 

skilled nursing care in a facility approved by 

Medicare for services of a professional level 

(not custodial care) is covered for the first 

20 days in each benefit period plus up to 80 

additional days with the patient paying a 

coinsurance charge for the 21st through the 

100th day. These benefits are payable only 

if the patient was in a hospital for at least 

3 days in a row, not counting the day of discharge, before transferring to a skilled nursing facility. 

53
 
Railroad Retirement Handbook, 2015 

3. Under certain conditions, Medicare 

pays the cost of medically necessary home 

health care services. This is limited to reasonable and necessary part-time or intermittent skilled nursing care and home health 

aide services as well as physical therapy, 

occupational therapy, and speech-language 

therapy which are ordered by a doctor. It 

also includes medical social services, durable 

medical equipment (such as wheelchairs, 

hospital beds, oxygen, and walkers), medical 

supplies, and other services. 

4. Hospice care is a service provided to 

terminally-ill persons. It includes drugs for 

symptom control and pain relief, medical and 

support services from a Medicare-approved 

hospice, and other services not otherwise covered by Medicare. 

Financing 

Railroad employers and employees each 

pay hospital insurance taxes with their railroad retirement taxes. The hospital insurance tax on each is 1.45 percent on all earnings. An additional 0.9 percent in hospital 

in surance taxes (2.35 percent in total) applies 

to an individual’s income ex ceeding $200,000, 

or $250,000 for a married couple filing a joint 

tax return. 

EXPLANATION OF 

MEDICAL INSURANCE BENEFITS 

(Part B of Medicare) 

The medical insurance program is 

designed to help pay the bills for doctors’ 

services and for a number of other medical 

costs not covered by the hospital insurance 

program. 

The medical insurance program is voluntary, but eligible persons who wish to participate pay a monthly premium. For persons 

who are receiving railroad retirement benefits (including those also in receipt of social 

security benefits), the monthly premium 

is deducted from their railroad retirement 

checks; others make payments or, in some 

cases, have their premiums paid under a 

State assistance program. 

The medical insurance plan covers physicians’ services, outpatient medical and surgical services, and many other medical and 

health services in and out of medical institutions. It also helps cover some preventive 

services. 

There is an annual deductible for Part 

B services. After the deductible is paid, 

Medicare will generally pay 80 percent of the 

approved charges for covered services during 

the rest of the year; the beneficiary is responsible for paying the remaining 20 percent of 

the cost. 

Medicare provides basic protection 

against the high cost of illness, but it will not 

pay all health care expenses. Some of the services and supplies Medicare cannot pay for 

are custodial care, such as help with bathing, 

eating, and taking medicine; dentures and 

routine dental care; most eyeglasses, hearing 

aids and routine examinations to prescribe or 

fit them, and long-term care (nursing homes). 

What Medicare Part B Covers 

Medical and Other Services 

Medically-necessary doctors’ services (not 

routine physical exams), outpatient medical 

and surgical services and supplies, diagnostic tests, ambulatory surgery center facility 

fees for approved procedures, and durable 

medical equipment are usually covered, if 

ordered from a Medicare-approved provider. 

Clinical Laboratory Services 

Blood tests, urinalysis, and some screening tests can be covered. 

54
 
HEALTH INSURANCE FOR THE AGEDAND DISABLED 

Home Health Care 

This is limited to reasonable and necessary part-time or intermittent skilled nursing care and home health aide services as 

well as physical therapy, occupational therapy, and speech-language therapy ordered by 

a doctor, and some other services. 

Outpatient Hospital Services 

This includes hospital services and supplies received as an outpatient as part of a 

doctor’s care. 

Blood 

Part B helps pay for blood as an outpatient or as part of a Part B covered service. 

Preventive Services 

These include bone mass measurements, 

cardiovascular screening, colorectal cancer 

screening, diabetes services, glaucoma testing, screening mammograms, Pap test and 

pelvic examination, prostate cancer screening, some shots (Flu, Pneumococcal and 

Hepatitis B) and a one-time “Welcome to 

Medicare” physical examination. 

Many other services are covered. More 

information on specific services is available 

by calling 1-800-MEDICARE (1-800-633-4227) 

or by visiting www.medicare.gov. 

Medical insurance generally does not 

pay for services outside the United States. 

There are rare emergency cases where medical insurance can pay for care in Canada or 

Mexico. 

Financing 

Part B medical insurance is paid for by 

premiums from persons who enroll in the 

program and by Federal general revenue 

funds. Monthly premiums for some beneficiaries are greater, depending on a beneficiary’s 

or married couple’s modified adjusted gross 

income. Some individuals also pay premium 

surcharges because they enrolled late for 

Part B. 

MEDICARE PLAN CHOICES 

Medicare beneficiaries have choices for 

receiving health care services. The Original 

Medicare Plan is the traditional fee-forservice Medicare plan that is available 

nationwide. A beneficiary can see any doctor or provider who accepts Medicare and is 

accepting new Medicare patients. Or a beneficiary can choose a Medicare Advantage 

Plan (Part C). Medicare Advantage Plans 

combine Part A and Part B and, in some 

cases, Part D prescription drug coverage. 

In limited instances, other Medicare Health 

Plans may be available. To find out which 

plans are available in an area, go to www. 

medicare.gov, or call 1-800-MEDICARE 

(1-800-633-4227). 

A beneficiary must have both Medicare 

Part A and Part B to join a Medicare 

Advantage Plan, and the individual must live 

in the plan’s service area. Under a Medicare 

Advantage Plan, a beneficiary may pay lower 

copayments and receive extra benefits. 

Original Medicare Plan 

Under the Original Medicare Plan, 

patients visit the hospital, doctor, or health 

care provider of their choice who accepts 

Medicare patients. Medicare pays a set percentage of the expenses, and patients are 

responsible for certain deductible and coinsurance payments. 

Persons enrolled in the Original Medicare 

Plan who want prescription drug coverage 

must join a Medicare Prescription Drug 

Plan (as described on page 57), unless they 

already have drug coverage from a current or 

former employer or union that is at least as 

55
 
 

Railroad Retirement Handbook, 2015 

good as the standard Medicare prescription 

drug coverage. 

When a patient receives hospital insurance benefits, he or she is billed by the hospital only for the deductible amount, any 

coinsurance amount and any noncovered services. The remainder of the bill from the hospital, as well as bills for services in skilled 

nursing facilities or home health visits, is 

sent to Medicare to pay its share. 

Claims for medical insurance benefits 

filed on behalf of railroad retirement beneficiaries in the Original Medicare Plan are 

generally handled by Palmetto GBA on a 

nationwide basis. Palmetto GBA is a private company that contracts with the RRB 

and Medicare to pay Part B claims for railroad retirement beneficiaries, and can be 

reached at: 

Palmetto GBA
 

Railroad Medicare Part B Office
 

P.O. Box 10066
 

Augusta, GA 30999-0001
 

1-800-833-4455
 

www.palmettogba.com/medicare
 

Medigap 

Many private insurance companies sell 

insurance, called “Medigap” for short, that 

helps pay for services not covered by the 

Original Medicare Plan. Policies may cover 

deductibles, coinsurance, copayments, health 

care outside the United States and more. 

Generally, individuals need Medicare Part A 

and Part B to enroll, and a monthly premium 

is charged. 

When someone first enrolls in Medicare 

Part B at age 65 or older, he or she has a 

6-month “Medigap open enrollment period.” 

During this period, an insurance company 

cannot deny coverage, place conditions on a 

policy, or charge more for a policy because of 

past or present health problems. 

More detailed information about Medigap 

policies is presented in the publication 

Choosing a Medigap Policy: A Guide to Health 

Insurance for People with Medicare, available 

by calling the Medicare toll-free number 

1-800-633-4227 or at www.medicare.gov. 

Medicare Advantage Plans (Part C) 

Medicare Advantage Plans combine 

Medicare Part A and Part B coverage, and 

are available in most areas of the country. A 

beneficiary must have both Medicare Part A 

and Part B to join a Medicare Advantage Plan, 

and the individual must live in the plan’s service area. Medicare Advantage Plan choices 

include regional preferred provider organizations (PPOs), health maintenance organizations (HMOs), private fee-for-service plans and 

others. A PPO is a plan under which a beneficiary uses doctors, hospitals, and providers belonging to a network; beneficiaries can 

use doctors, hospitals, and providers outside 

the network for an additional cost. Under a 

Medicare Advantage Plan, a beneficiary may 

pay lower copayments and/or Part B premiums, and receive extra benefits. Most plans 

include prescription drug coverage (Part D). 

Advantage Plans are managed by private 

insurance companies approved by Medicare. 

The monthly Part C premium can be 

deducted from railroad retirement or social 

security benefits paid by the RRB, if the beneficiary contacts his or her Part C plan and 

requests that the RRB withhold Part C premiums. For those in a Medicare Advantage Plan, 

information on out-of-pocket costs is available 

by calling 1-800-633-4227 or by 

visiting www.medicare.gov. 

56
 
HEALTH INSURANCE FOR THE AGEDAND DISABLED 

MEDICARE PRESCRIPTION DRUG 

COVERAGE (PART D) 

Medicare contracts with private companies to offer beneficiaries prescription drug 

coverage. These companies offer a variety 

of options, with different covered prescriptions, and different costs. Beneficiaries pay 

a monthly premium, a yearly deductible and 

part of the cost of prescriptions. Those with 

limited income and resources may qualify for 

help in paying some prescription drug costs. 

The Affordable Care Act requires some 

Part D beneficiaries to also pay a monthly 

adjustment amount, depending on a beneficiary’s or married couple’s modified adjusted 

gross income. 

The monthly Part D premium can be 

deducted from railroad retirement or social 

security benefits paid by the RRB, if the 

beneficiary contacts his or her Part D plan 

and requests that the RRB withhold Part D 

premiums. In January 2015, the RRB began 

withholding Part D income-related adjustment amounts from benefit payments. 

Medicare prescription drug plans are 

voluntary. To enroll, individuals must have 

Medicare Part A, and must live in the prescription drug benefit plan’s service area. 

Beneficiaries can join during the period 

that starts 3 months before Medicare coverage starts and ends 3 months after the first 

month of Medicare coverage. There may be 

a higher premium if an individual doesn’t 

join a Medicare drug plan when first eligible, 

and he or she does not have other prescription drug coverage that, on average, covers at 

least as much as standard Medicare prescription drug coverage. 

In most cases, there is no automatic 

enrollment to get a Medicare prescription 

drug plan. Individuals enrolled in Medicare 

Advantage Plans will generally get their prescription drug coverage through their plan. 

More information about Medicare prescription drug plans is available in the publication Your Guide to Medicare Prescription 

Drug Coverage. The Medicare & You 

handbook (described on page 58) lists the 

Medicare prescription drug plans available 

in a beneficiary’s area. Free personalized 

information is available online at www.medicare.gov, or by calling the Medicare toll-free 

number, 1-800-633-4227. Free personalized 

counseling is also available from the local 

State Health Insurance Assistance Program 

(SHIP) and other local and community-based 

organizations. Beneficiaries can visit the 

Medicare website to find the organization 

nearest them. 

APPEALS 

If a patient disagrees with a decision on 

the amount Medicare will pay on a claim 

or whether services received are covered by 

Medicare, he or she has the right to appeal 

the decision. Under the Original Medicare 

Plan, the notice received from Medicare 

stating the decision made on a claim tells a 

patient what appeal steps can be taken. This 

information is also available in Medicare 

Advantage Plan materials. 

ADVANCE DIRECTIVES 

Individuals have the right to make a 

health care “advance directive.” This directive contains written instructions stating 

the person’s choices for health care or names 

someone to make those choices. The instructions are to be used if the person is unable to 

make his or her own health care decisions. 

Laws governing advance directives vary from 

State to State. 

57
 
Railroad Retirement Handbook, 2015 

OTHER MEDICARE PUBLICATIONS 

Medicare & You is mailed to Medicare 

beneficiary households each fall by the 

Centers for Medicare & Medicaid Services 

and is also available at www.medicare.gov. 

It describes the Medicare benefits, costs and 

health service options available. 

Another publication, Medicare for 

Railroad Workers and Their Families (Form 

RB-20) provides general information on 

Medicare and is available at any RRB field 

office, or at www.rrb.gov. 

Toll-Free Numbers/Websites
 

Medicare
	

1-800-MEDICARE (1-800-633-4227)
	

TTY/1-877-486-2048
	

www.medicare.gov
	

Palmetto GBA
	

1-800-833-4455
	

TTY/TDD 1-877-566-3572

www.palmettogba.com/medicare
	

58
 
DEVELOPMENT OF THE RAILROAD 

UNEMPLOYMENT INSURANCE SYSTEM
 

T he railroad unemployment insurance system, like the railroad 

retirement system, was established in the 1930s. The Great Depression 

demonstrated the need for unemployment 

compensation programs, and State unemployment programs had been established 

under the Social Security Act in 1935. While 

the State unemployment programs generally 

covered railroad workers, railroad operations which crossed State lines caused special 

problems. Unemployed railroad workers were 

denied compensation by one State because 

they became unemployed while working in 

another State or because their employers had 

paid unemployment taxes in another State. 

Although there were cases where employees 

appeared to be covered in more than one 

State, they often did not qualify in any. 

RAILROAD UNEMPLOYMENT 

INSURANCE ACT OF 1938
	

A Federal study commission, which 

reported on the nationwide State plans for 

unemployment insurance, recommended 

that railroad workers be covered by a 

separate plan because of the complications 

their coverage had caused the State plans. 

Congress subsequently enacted the Railroad 

Unemployment Insurance Act in June 1938. 

The Act established a system of benefits for 

5
 

unemployed railroad workers, plus a free 

placement service, to be financed by a payroll 

tax of 3 percent payable entirely by employers, and administered by the RRB. After 

some minor changes in the following year, 

the law went into operation on July 1, 1939. 

Sickness benefits were added in 1946. 

Benefits were payable to qualified railroad employees according to a scale of daily 

rates geared to base-year earnings. Initially, 

the daily rates ranged from $1.75 to $3 and 

were payable for a maximum of 80 days in 

each benefit year, after an initial waiting 

period. In 1940, the maximum daily rate was 

raised to $4 and the maximum duration to 

100 days in 20 weeks; the waiting period was 

reduced from 15 days to 7 days and a uniform benefit year was established. 

MAJOR AMENDMENTS TO THE 

RAILROAD UNEMPLOYMENT 

INSURANCE ACT
	

The first set of major amendments 

was enacted in 1946. The maximum duration was increased to 26 weeks and the 

maximum daily benefit rate to $5. The most 

important feature of these amendments was 

the program of cash sickness benefits (including maternity benefits) for railroad workers, paralleling unemployment benefits and 

59
 
Railroad Retirement Handbook, 2015 

financed from the same taxes. At that time, 

only two States, Rhode Island and California, 

had sickness plans. Three additional States 

(New Jersey, New York and Hawaii ) and 

Puerto Rico later adopted similar plans. 

As a result of the very low rate of unemployment and relatively high payrolls during 

the war years, the balance in the Railroad 

Unemployment Insurance Account increased 

rapidly. Consequently, in 1948 the principle 

of a fixed contribution rate was abandoned 

and a sliding scale of contribution rates 

substituted. The rates were to range from 

0.5 percent to 3 percent of taxable payroll, 

depending on the current balance in the 

Railroad Unemployment Insurance Account. 

1950s.—Amendments enacted in 1952 

and 1954 raised the maximum daily benefit 

rate to $7.50 and then to $8.50, the base-year 

earnings needed by an employee to qualify 

for benefits to $300 and then to $400, and 

the taxable limit on monthly earnings from 

$300 to $350. The amendments also provided 

that the benefit rate, subject to the maximum 

amount, should not be less than half the 

claimant’s daily wage rate. In addition, normal benefits for unemployment or sickness 

in a benefit year were each limited in total to 

the employee’s creditable base-year earnings. 

Legislation in 1959 increased the maximum daily benefit rate to $10.20, raised the 

benefit rate guaranty to 60 percent of the 

daily wage rate, and provided extended 

unemployment benefits for 13 weeks to 

employees with at least 10 years of service and 26 weeks of extended benefits to 

15-year employees. These amendments also 

raised the base-year qualifying amounts 

from $400 to $500, and the limit on creditable and taxable earnings from $350 to $400 

a month. They removed the waiting period 

for unemployment benefits and the Sunday 

and holiday disqualification provision, and 

increased the maximum contribution rate to 

3.75 percent. In addition, the RRB received 

authority to borrow money from the Railroad 

Retirement Account when necessary in order 

to pay benefits when due. Such loans were 

to bear the same interest rate as was being 

earned by other investments of the Railroad 

Retirement Account and were to be repaid as 

funds became available. 

1960s.—Amendments enacted in 1963 

were designed to improve the financing of 

the system. The maximum contribution rate 

was increased to 4 percent, and the amount 

of base-year earnings needed by an employee 

to qualify for benefits was raised from $500 

to $750. Also, a minimum base-year service requirement of 7 months was added 

for employees having no previous railroad 

service, and the disqualification for quitting 

work voluntarily without good cause was 

made more stringent. 

In 1968, legislation increased the maximum daily benefit rate to $12.70 and provided extended benefits for sickness on 

essentially the same basis as for unemployment, except that these extended sickness 

benefits could not be paid to employees age 

65 or older. These amendments also raised 

the base-year qualifying amount to $1,000, 

eliminated the special maternity benefit 

provisions (benefits were still payable for 

pregnancy and childbirth under the sickness 

benefit provisions), and added a disqualification for employees who receive separation 

allowances. 

1970s.—Amendments in 1975 increased 

the maximum daily benefit rate to $24 beginning on July 1, 1975, and to $25 starting on 

July 1, 1976. The 60 percent daily benefit 

rate guaranty was retained in the amended 

law up to the amount of the new daily maximum, and a new daily minimum rate of 

$12.70 was established. The amendments 

liberalized the basic eligibility requirements 

for new employees by lowering the 7-month 

60
 
DEVELOPMENT OF THE RAILROAD UNEMPLOYMENT INSURANCE SYSTEM 

base-year service requirement to 5 months. 

In addition, the 1975 amendments mandated 

a 7-day waiting period for benefit payments 

resulting from strikes. The tax rate schedule 

was increased, starting in 1976, from a maximum of 4 percent to a maximum of 8 percent, 

depending on the balance in the account, in 

order to finance the increased benefits. This 

legislation also lowered the waiting period for 

sickness benefits. 

The 1975 legislation also provided 

extended unemployment benefit periods of 

up to 13 weeks for employees with less than 

10 years of service during “periods of high 

unemployment.” Under the pre-existing 

law, extended benefits were payable only to 

employees with 10 or more years of service. 

However, subsequent 1981 legislation repealing the “high unemployment” extended benefit provisions in the State unemployment 

programs nullified the related railroad unemployment insurance provisions, and the RRB 

was required to cease awarding extended 

benefits to employees with less than 10 years 

of service. 

The Revenue Act of 1978 made unemployment benefits and sickness benefits paid 

in lieu of unemployment benefits subject to 

Federal income tax. 

1980s.—Amendments enacted in 1981 

subjected the first six months of sickness 

benefits to tier I railroad retirement taxes, 

provided the benefits did not result from 

on-the-job injury. Legislation enacted in 

March 1983 provided unemployed railroad 

workers with less than 10 years of service, 

who exhausted normal railroad unemployment benefits, up to 10 weeks of temporary 

supplemental extended unemployment 

benefits, but these temporary benefits were 

financed from Federal general revenue funds. 

The national economic recession of the 

early 1980’s caused large-scale railroad layoffs. The layoffs increased unemployment 

benefit payments to record levels which far 

exceeded unemployment tax income and 

necessitated high levels of loans from the 

Railroad Retirement Account. The Railroad 

Unemployment Insurance Account owed the 

Railroad Retirement Account a peak amount 

of over $850 million at the end of fiscal 

year 1986. Financial measures to assist the 

Railroad Unemployment Insurance Account 

were included in the Railroad Retirement 

Solvency Act enacted August 12, 1983. 

The Railroad Retirement Solvency 

Act of 1983 raised the taxable limit on 

monthly earnings from $400 to $600 and the 

base-year qualifying amount from $1,000 to 

$1,500. Also, the waiting period for benefits 

during strikes was increased from 7 to 14 

days. In addition, a temporary repayment tax 

on railroad employers was scheduled to begin 

July 1, 1986, to initiate repayment of the 

loans made by the Railroad Retirement 

Account. And sickness benefits, other than 

those resulting from on-the-job injuries, were 

made subject to Federal income tax. 

The legislation also mandated the establishment of a Railroad Unemployment 

Compensation Committee to review the 

unemployment and sickness benefit programs and submit a report to Congress. The 

Committee reviewed all aspects of the railroad unemployment insurance system, in 

particular, repayment of the system’s debt 

to the Railroad Retirement Account, and the 

viability of transferring railroad unemployment benefit payments to State programs. 

The Consolidated Omnibus Budget 

Reconciliation Act of April 1986 revised 

the 1983 law which had set a temporary 

unemployment insurance loan repayment 

tax beginning July 1, 1986, at a 2 percent 

rate with increases of 0.3 percent a year until 

1990. The amended schedule required rates 

of 4.3 percent on wages up to $3,500 beginning July 1986, 4.7 percent in calendar year 

61
 
Railroad Retirement Handbook, 2015 

1987 on wages up to $7,000, and 6 percent 

in 1988. This budget legislation also continued authority for borrowing by the Railroad 

Unemployment Insurance Account from the 

Railroad Retirement Account, but provided 

for an automatic unemployment insurance 

surtax on rail employers of 3.5 percent on 

annual wages up to $7,000 if further borrowing took place. 

As a result of the Gramm/Rudman Act, 

unemployment and sickness benefits were 

reduced in fiscal year 1986 and were reduced 

periodically in subsequent years. 

The 1986 Tax Reform Act made all 

unemployment benefits subject to Federal 

income tax, beginning with taxable year 

1987. 

1988 LEGISLATION 

AND LATER AMENDMENTS
	

The Railroad Unemployment 

Insurance and Retirement Improvement 

Act, based on the recommendations of the 

Railroad Unemployment Compensation 

Committee, was included in the Technical 

and Miscellaneous Revenue Act of 1988, 

enacted November 10, 1988. The legislation 

raised the unemployment and sickness daily 

benefit rate from $25 to $30 retroactively 

to July 1988 and indexed benefit rates and 

earnings requirements to national wage levels. The daily benefit rate subsequently rose 

to $31 in July 1989, $33 in July 1992, and 

$36 in July 1994. (Legislation enacted in 

1996 raised the rate to $42 effective October 

9, 1996. By July 2014, the rate had increased 

to $70. It rises to $72 in July 2015 and 

remains $72 in July 2016.) A 2-week waiting period was established and employers 

were provided the right to appeal claims of 

their employees after 1989. Also, the amount 

of subsidiary remuneration from part-time 

work which unemployment benefit claimants 

can earn without affecting their benefits was 

increased from $10 to $15 a day. 

Under the indexing provisions of the 

1988 amendments, the taxable earnings 

base in calendar year 1989 increased from 

$600 to the first $710 of each employee’s 

monthly earnings, and in 2015 is $1,455. For 

1989 and 1990, the contribution rate for all 

employers except certain public commuter 

railroads was set at 8 percent. Experiencebased tax rates were phased in during 1991, 

with rates ranging from 5.55 percent to 12 

percent. In 2015, they range from 2.15 percent (the minimum basic rate of 0.65 percent 

plus a 1.5 percent surcharge as explained on 

page 63) to 12 percent. The surcharge does 

not apply to new employers, who pay 4.09 

percent in 2015. 

The amendments exempted public commuter railroads covered by the Railroad 

Unemployment Insurance Act from paying 

the 8 percent tax in 1989 and 1990; instead 

they reimbursed the unemployment insurance system for the amount of benefits paid 

during the year to their employees, plus certain administrative costs. Since 1991, these 

railroads again pay taxes on the same basis 

as other railroads. 

The 1988 amendments assured repayment of the unemployment system’s debt 

to the retirement system by fixing the loan 

repayment tax at 4 percent in January 1989, 

with that rate remaining in force until the 

debt was fully repaid with interest. And the 

previous $7,000 annual base for this tax was 

changed to conform to the indexed monthly 

taxable compensation base. In June 1993 the 

$180 million loan balance was repaid in its 

entirety from cash reserves in the Railroad 

Unemployment Insurance Account and the 

loan repayment tax was terminated. 

A contingency surtax of 3.5 percent, effective in the event of further borrowing by the 

Railroad Unemployment Insurance Account, 

62
 
DEVELOPMENT OF THE RAILROAD UNEMPLOYMENT INSURANCE SYSTEM 

was eliminated in 1991. Instead, a surcharge 

can be added to employers’ unemployment 

insurance taxes for a calendar year if the balance in the unemployment insurance account 

on the previous June 30 goes below $100 million (as indexed). The surcharge rate would 

be 1.5, 2.5 or 3.5 percent depending on the 

balance in the account. If a 3.5 percent surcharge went into effect for a given year, the 

maximum rate for any em ployer would be 

12.5 percent rather than 12 percent. A 1.5 

percent surcharge is in effect during 2015. 

Credits would be provided to employers if 

a large balance accumulates in the account. 

If the account balance on the preceding 

June 30 were above $250 million (as 

indexed), the excess would be refunded to the 

employers in the form of a rate reduction for 

the year through a pooled credit. 

The 1988 amendments also require the 

RRB to make annual financial reports to 

Congress on the status of the unemployment 

insurance system. The reports have been 

favorable. 

The Omnibus Budget Reconciliation 

Act of 1989 revised Federal indexing procedures, which raised the maximum on monthly compensation subject to railroad unemployment insurance taxes and the qualifying 

earnings requirement. This legislation also 

revised fiscal year 1990 unemployment and 

sickness benefit sequestrations under the 

Gramm/Rudman Act. 

1990s.—Under 1991, 1992 and 1993 

emergency unemployment compensation legislation providing temporary 

extended State unemployment benefits, 

unemployed railroad workers were made eligible for extended benefits, on a temporary 

basis, regardless of years of service. These 

temporary extended benefits were made 

available for specified periods in 1991, 1992, 

1993 and 1994 if previous benefit rights 

were exhausted by certain dates. (Temporary 

extended unemployment benefits were also 

provided under legislation enacted in 2009, 

2010, 2011, and 2012.) 

The Railroad Unemployment 

Insurance Amendments Act of 1996, 

signed into law on October 9, 1996, increased 

the railroad unemployment and sickness 

insurance daily benefit rate and revised the 

formula for indexing future benefit rates. It 

also reduced the waiting period for initial 

benefit payments and eliminated duplicate 

waiting periods in continuing periods of 

unemployment and sickness. In addition, 

the Act applied an earnings test to claims 

for unemployment and reduced the duration 

of extended benefit periods for long-service 

employees. The Act’s provisions were based 

on joint recommendations to Congress negotiated by rail labor and management in order 

to update the railroad unemployment insurance system along the lines of State unemployment insurance systems. The following 

provisions were effective upon the October 9, 

1996, enactment date. 

The maximum railroad unemployment 

and sickness insurance daily benefit rate 

increased to $42 from $36. The formula for 

indexing future benefit rates was modified so 

that rates increase more frequently, generally with the start of each new benefit year 

in July. The daily benefit rate increased to 

$43 in July 1997, and gradually increased to 

$70 in July 2014. It rises to $72 in July 2015, 

and will remain $72 in July 2016. 

The law made benefits payable for each 

day of unemployment or sickness in excess 

of 7 during an employee’s first 14-day registration period in a benefit year. Under prior 

law, no benefits were payable for the first 

14-day claim in a benefit year in order to 

satisfy a 2-week waiting period requirement. 

Also, a second waiting period is no longer 

required when a new benefit year begins dur63
 
Railroad Retirement Handbook, 2015 

ing a continuing period of unemployment or 

sickness. 

An earnings test was made applicable 

to claims for intermittent unemployment. If 

an employee’s earnings for days worked in a 

14-day registration period are more than a 

certain indexed amount, no benefits are payable for any days of unemployment in that 

period. 

The Act also eliminated the second 

13-week period of extended benefits for those 

with 15 or more years of service. 

2000s.—Under the Budget Control 

Act of 2011 and a subsequent sequestration order, railroad unemployment and 

sickness insurance benefits were reduced by 

9.2 percent beginning in March 2013. Based 

on revised projections of benefit claims and 

pay ments, the reduction amount was adjusted to 7.2 percent in October 2013, and to 7.3 

percent effective October 1, 2014. As this 

publication went to press, the reduction was 

to remain in effect through September 30, 

2015, the end of the fiscal year. Reductions in 

future fiscal years, should they occur, will be 

calcu lated based on applicable law. 

64
 
6
 

PROVISIONS OF THE RAILROAD 

UNEMPLOYMENT INSURANCE ACT
 

BENEFIT PROVISIONS 

T he Railroad Unemployment 

Insurance Act provides benefits 

for qualified railroad employees. 

The Act is designed to restore part of their 

wage loss arising from unemployment or 

sickness (including maternity). Payments are 

made for days of unemployment or sickness 

in a benefit year, which generally begins on 

July 1, to employees who had sufficient earnings in the preceding calendar year (called 

the base year) to meet the qualifying conditions. 

Qualifications 

Qualified employee.—A qualified employee 

is one who earns qualifying creditable compensation in a base year counting no more 

than a certain amount in any month. In 

addition, a new employee must have some 

employment in at least 5 months of the first 

year worked in the railroad industry in order 

to draw benefits in the following benefit year. 

General eligibility requirements.—To be 

eligible for unemployment benefits, a qualified employee must be able to work and be 

available for work. A day of unemployment 

is a day on which he or she meets these conditions and does not receive any pay, is not 

disqualified, and has properly registered for 

unemployment benefits. Any calendar day 

on which the employee does not work solely 

because of mileage-limitation or workrestriction agreements or solely because he 

or she is between regularly assigned trips or 

tours of duty or because a turn in pool service was missed is not considered a day of 

unemployment. An extra-board employee can 

receive unemployment benefits between jobs 

if the miles and/or hours actually worked 

were less than the equivalent of normal fulltime work in his or her class of service during the 14-day claim period. Entitlement to 

benefits would also depend on earnings. 

To be eligible for sickness benefits, a 

qualified employee must be unable to work 

because of sickness or injury. A day of sickness is a day on which the employee meets 

these conditions and for which he or she does 

not receive any pay and has filed an application for sickness benefits and a statement of 

sickness providing evidence of the employee’s 

medical condition and its expected duration 

signed by the employee’s doctor (or other 

authorized individual). 

Benefits 

The maximum daily benefit payable in 

benefit year 2014-2015 (July 1, 2014 -

June 30, 2015) is $70; and, for biweekly 

65
 
Railroad Retirement Handbook, 2015 

claims, maximum benefits can total $700. 

The maximum daily benefit rate increases to 

$72 in July 2015, and remains $72 in July 

2016. It may increase at the beginning of 

each future benefit year depending on the 

growth in average national wages. 

Sickness benefits payable for the first 6 

months after the employee last worked are 

subject to tier I railroad retirement payroll 

taxes, unless benefits are being paid for an 

on-the-job injury. 

Registration and waiting periods.—Benefits are normally paid for the number of days 

of unemployment or sickness over 4 in 14-day 

registration periods. Initial sickness claims 

must also begin with 4 consecutive days of 

sickness. However, during the first 14-day 

claim period in a benefit year, benefits are 

only payable for each day of unemployment 

or sickness in excess of 7 which, in effect, 

provides a 1-week waiting period. Separate 

waiting periods are required for unemployment and sickness benefits. However, only 

one 7-day waiting period is required during 

any period of continuing unemployment or 

sickness, even if that period continues into a 

subsequent benefit year. 

If an employee has at least 5 days of 

unemployment or 5 days of sickness in a 

14-day period, he or she should still file for 

benefits. 

Strike benefits.—If someone is unemployed because of a strike conducted in 

accordance with the Railway Labor Act, benefits are not payable for days of unemployment during the first 14 days of the strike, 

but benefits are payable during subsequent 

14-day periods. If a strike is in violation of 

the Railway Labor Act, no unemployment 

benefits are payable to employees participating in the strike; however, employees not 

among those participating in such an illegal 

strike, but who are unemployed on account of 

the strike, may receive benefits after the first 

two weeks of the strike. 

While a benefit year waiting period cannot count toward a strike waiting period, 

the 14-day strike waiting period may count 

as the benefit year waiting period if the 

employee subsequently becomes unemployed 

for reasons other than a strike later in the 

benefit year. 

Normal benefits.—Normal benefits are 

paid for up to 130 days (26 weeks) in a benefit year. Benefit rights are exhausted when 

a benefit year ends (normally June 30) or 

earlier if benefit payments equal base year 

creditable earnings. 

Maximum normal benefits payable in 

the benefit year beginning July 2014 cannot 

exceed an employee’s railroad earnings in 

base year 2013, counting monthly earnings 

up to $1,815. In the benefit year beginning 

July 2015, monthly earnings up to $1,860 for 

base year 2014 will be counted, and in the 

benefit year beginning July 2016, monthly 

earnings up to $1,879 for base year 2015 will 

be counted. This allows employees who qualify with relatively low earnings to be eligible 

for more days of benefits. 

In order to qualify for normal unemployment benefits, the employee must not have 

voluntarily quit work without good cause and 

not have voluntarily retired. 

Extended benefits.—If an employee has 

at least 10 years of service (120 or more 

cumulative service months) and exhausts 

normal unemployment or sickness benefits, 

he or she may be eligible to receive extended 

benefits for up to 65 days (during 7 consecutive 14-day registration periods). Also, if the 

employee is not qualified for normal benefits 

in the current benefit year, but received normal benefits in the previous year, he or she 

may still be eligible for extended benefits. 

In order to qualify for extended unemployment benefits, a claimant must not have 

voluntarily quit work without good cause 

and not have voluntarily retired. To qualify 

66
 
PROVISIONS OF THE RAILROAD UNEMPLOYMENT INSURANCE ACT 

for extended sickness benefits, a beneficiary 

must not have voluntarily retired and must 

be under age 65. 

Accelerated benefits.—Employees with 10 

or more years of service (120 or more cumulative service months) whose earnings do not 

qualify them for unemployment or sickness 

benefits in the current benefit year, but will 

qualify them in the next benefit year, may 

be able to receive normal unemployment or 

sickness benefits before the regular beginning date of the next benefit year. To be 

eligible for these accelerated benefits, they 

must have 14 or more consecutive days of 

unemployment or sickness and not have voluntarily retired, or quit work without good 

cause if claiming unemployment benefits, 

and be under age 65 when claiming sickness 

benefits. 

A benefit year that is started early for 

one type of benefit also starts early for benefits of the other type. Also, an employee may 

receive sickness benefits in a benefit period 

extended for unemployment, or unemployment benefits in a benefit period extended 

for sickness, and it is possible to have benefit 

periods extended for both unemployment and 

sickness with respect to the same benefit 

year. 

Maternity benefits.—Maternity benefits 

are not payable as such. However, a qualified employee may receive sickness benefits if 

she is unable to work or if working would be 

injurious to her health because of pregnancy, 

miscarriage, or childbirth. Such benefits are 

paid in the same amounts as any other sickness benefits. 

Effects of Work and Earnings 

A claimant may not receive benefits 

for any day for which pay is received. This 

includes railroad and nonrailroad wages, 

salary, pay for time lost, pay while sick, dismissal allowances, most wage guaranty 

payments, vacation pay, holiday pay, 

military reservist pay, earnings from selfemployment, or remuneration other than 

subsidiary remuneration. However, payments received under an RRB-approved nongovernmental supplemental unemployment 

or sickness insurance plan, an employee’s 

own health or accident insurance policy or a 

group insurance policy will not affect entitlement to benefits and should not be reported 

on claims. 

An earnings test is applied to unemployment claims. If a claimant’s earnings for days 

worked, and/or days of vacation, paid leave, 

or other pay, in a 14-day registration period 

are more than a certain indexed amount, no 

benefits are payable for any days of unemployment in that period. That registration 

period, however, can be used to satisfy the 

waiting period requirement described earlier. 

Earnings include pay from self-employment 

and railroad, nonrailroad, and part-time 

work. Earnings also include pay that would 

have been earned except for failure to mark 

up or report for duty on time, or because the 

employee missed a turn in pool service or 

was otherwise not ready or willing to work. 

For the benefit year that began July 2014, 

the amount is $1,405; for the benefit year 

that begins July 2015, the amount will be 

$1,440; and for the benefit year that begins 

July 2016, the amount will be $1,455. These 

amounts correspond to the base year monthly 

compensation amounts used in determining 

eligibility for benefits in each year. Also, even 

if an earnings test applies on the first claim 

in a benefit year, this will not prevent the 

first claim from satisfying the waiting period 

in a benefit year. 

On the other hand, earnings of no more 

than $15 a day from work which is substantially less than full-time and not inconsistent 

with the holding of normal full-time employment may be considered subsidiary remuner67
 
Railroad Retirement Handbook, 2015 

ation and may not prevent payment of any 

days in a claim. However, a claimant must be 

sure to report all full and part-time work on 

each claim, regardless of the amount of earnings, so the RRB can determine whether the 

work affects benefits. 

Disqualifications 

A claimant for unemployment benefits 

may be disqualified for 30 days if he or she 

refuses to accept suitable work or fails to 

follow instructions to apply for work or to 

report to an RRB office or State unemployment office for an interview. 

A claimant who leaves either railroad or 

nonrailroad work voluntarily without good 

cause is disqualified, starting with the day 

he or she leaves work, until he or she has 

returned to railroad employment and earned 

wages sufficient to qualify for benefits again. 

This disqualification also applies to a claimant who leaves work voluntarily with good 

cause, but only with respect to periods in 

which he or she could receive unemployment 

benefits under another law. 

A claimant is also disqualified for any 

day on which he or she takes part in a strike 

begun in violation of the Railway Labor Act 

or in violation of the established rules and 

practices of a labor organization of which he 

or she is a member. This disqualification only 

applies to claimants who work on the premises where the strike occurs and who do the 

same kind of work as the employees participating or directly involved in the strike. 

An employee who is paid a separation 

allowance is disqualified for both unemployment and sickness benefits for roughly the 

period of time it would have taken to earn 

the amount of the allowance. 

A claimant may be disqualified for sickness benefits if he or she fails to take a medical examination when required by the RRB. 

If a claimant makes a false or fraudulent 

statement or claim to obtain unemployment 

or sickness benefits, he or she will be disqualified for 75 days and may also be subject 

to a fine or imprisonment. The RRB checks 

with Federal agencies and all 50 States, the 

District of Columbia, and Puerto Rico as well 

as railroads in order to detect fraudulent 

benefit claims. The RRB also checks with 

physicians to verify the accuracy of medical statements supporting sickness benefit 

claims. 

Payments Under Other Laws or Systems 

If an employee receives a retirement, disability or survivor benefit under the Railroad 

Retirement Act, Social Security Act, or any 

other social insurance law for days for which 

he or she is also entitled to benefits under 

the Railroad Unemployment Insurance Act, 

unemployment or sickness benefits are payable only to the extent to which they exceed 

the other payments for those days. Examples 

of other such social insurance payments are 

military pensions other than VA benefits, 

firefighters’ and police pensions, or certain 

workers’ compensation payments. Claimants 

should report all such other payments 

promptly to avoid having to refund benefits 

later. 

There is no reduction in unemployment 

or sickness benefits for benefits paid under 

an RRB-approved nongovernmental sickness 

insurance plan, such as a supplemental sickness plan established by a railroad. Similarly, there is no reduction in benefits if an 

employee receives supplemental unemployment benefits under an RRB-approved nongovernmental unemployment benefit plan. 

But unemployment and sickness benefits 

provided under the Railroad Unemployment 

Insurance Act are not payable if Federal/ 

State unemployment or sickness benefits 

68
 
PROVISIONS OF THE RAILROAD UNEMPLOYMENT INSURANCE ACT 

under other laws, including Canadian law, 

are paid for the same period of time. 

If an employee is awarded damages or 

receives a settlement because of an injury, 

any sickness benefits already paid for the 

same injury will have to be deducted from 

the settlement and refunded to the RRB. 

Any benefits due for the same injury for later 

periods may be withheld. The amount recoverable or withheld in such cases cannot, however, exceed the net amount of the damages 

or settlement after medical (even if covered 

by insurance) and legal expenses have been 

deducted. 

Unemployment benefits are normally not 

paid if an employee is fully protected by a 

wage guaranty plan. If an employee receives 

unemployment or sickness benefits and later 

is paid for time lost for the same period, 

the employer will be asked to withhold an 

amount equal to the unemployment or sickness benefits. The employer must then pay 

this amount to the RRB. 

PAYMENT PROCESS 

Claiming Unemployment Benefits 

Claimants can apply for unemployment 

benefits by mail or online. 

To apply by mail, claimants must obtain 

an application from their labor organization, 

employer, local RRB office or the RRB’s website at www.rrb.gov. The completed application should be mailed to the local RRB office 

as soon as possible and, in any case, must be 

filed within 30 days of the date on which the 

claimant became unemployed or the first day 

for which he or she wishes to claim benefits. 

Benefits may be lost if the application is filed 

late. 

Claimants with RRB online accounts can 

apply electronically by visiting the Benefit 

Online Services section of the www.rrb.gov 

home page. Instructions for establishing an 

online account are available by clicking on 

the link for requesting a Password Request 

Code (PRC) located in that same section. 

For security purposes, first-time users must 

apply for a PRC. The agency automatically 

mails a PRC to any employee who files a 

paper application for unemployment or 

sickness benefits. If an individual has not 

received a PRC, one can be requested by 

clicking the appropriate box on the home 

page. Employees are encouraged to establish 

online accounts while still employed so the 

account is ready if they ever need to apply 

for these benefits or use other select Internet 

services . 

The local RRB office reviews the completed application, whether it was submitted 

by mail or online, and notifies the claimant’s 

current railroad employer, and base-year 

employer if different. The employer has the 

opportunity to provide information about the 

benefit application. 

After the RRB processes the application, 

biweekly claim forms are mailed to the claimant, and are also available online, as long as 

he or she remains unemployed and eligible 

for benefits. Claim forms should be signed 

and sent on or after the last day of the claim. 

This can be done by mail or electronically. 

The completed claim must be received by an 

RRB office within 15 days of the end of the 

claim or the date the claim was mailed to the 

claimant or made available online, whichever 

is later. Claimants must not file both a paper 

and online claim form for the same claim 

period(s). 

Only one application need be filed during 

a benefit year, even if a claimant becomes 

unemployed more than once. However, a 

claimant must, in such a case, request a 

69
 
Railroad Retirement Handbook, 2015 

new claim form from an RRB office within 

30 days of the first day for which he or she 

wants to resume claiming benefits. These 

claims may then be filed by mail or online. 

Claiming Sickness Benefits 

An application for sickness benefits can 

be obtained from railroad employers, railroad 

labor organizations, any RRB office or the 

RRB’s website at www.rrb.gov. An application and a doctor’s statement of sickness are 

required at the beginning of each period of 

continuing sickness for which benefits are 

claimed. The RRB suggests that employees 

keep an application form on hand for use in 

claiming sickness benefits and that family 

members know where the form is kept and 

how to use it. If an employee becomes unable 

to work because of sickness or injury, the 

employee should complete the application 

and then have his or her doctor complete 

the statement of sickness. If the employee is 

too sick to complete the application, someone else may do so. In such cases, a family 

member should also complete form SI-10, 

Statement of Authority to Act for Employee, 

which accompanies the statement of sickness. 

The forms should be completed and 

mailed to the RRB’s headquarters in Chicago 

by the 7th day of illness or injury for which 

benefits are claimed. After the RRB receives 

the application and statement of sickness 

and determines eligibility, biweekly claim 

forms are mailed to the claimant for completion and return to an RRB field office for 

processing. Employees with RRB online 

accounts can complete claim forms electronically by visiting the Benefit Online Services 

Login section of the www.rrb.gov home 

page. Instructions for establishing an online 

account are available by clicking in the link 

for requesting a Password Request Code 

(PRC) located in that same section. For security purposes, first-time users must apply 

for a PRC. The agency automatically mails a 

PRC to any employee who files a paper application for unemployment or sickness benefits. 

If an individual has not received a PRC, one 

can be requested by clicking the appropriate 

box on the home page. 

The claim forms must be received at the 

RRB within 30 days of the last day of the 

claim period, or within 30 days of the date 

the claim form was mailed to the claimant 

or made available online, whichever is later. 

Benefits may be lost if an application or 

claim is filed late. 

Claimants are reminded that while claim 

forms for sickness benefits can be submitted 

online, applications and statements of sickness must be returned to the RRB by mail. 

Payments 

Applicants for unemployment and sickness benefits can check with their local RRB 

field office as to when they can expect their 

first payment. Customer service standards 

and progress reports are available in field 

offices and online at www.rrb.gov. 

Some claims for benefits may take longer 

to handle than others if they are more complex, or if an RRB office has to get information from other people or organizations. If 

a decision notice or payment is not re ceived 

within the specified time period, claimants 

can call the RRB toll-free at 1-877-772-5772 

to obtain their current status. 

Railroad unemployment and sickness insurance benefits are paid by Direct 

Deposit. With Direct Deposit, benefit payments are made electronically to an employee’s bank, savings and loan, credit union, or 

other financial institution. New applicants 

for unemployment and sickness benefits will 

be asked to provide information needed for 

Direct Deposit enrollment. 

70
 
PROVISIONS OF THE RAILROAD UNEMPLOYMENT INSURANCE ACT 

Free Placement Service 

The Railroad Unemployment Insurance 

Act authorizes the RRB to operate a free 

placement service. The primary purpose 

of the placement service is to secure new 

employment for experienced railroad workers 

who have lost their jobs. 

When a claimant applies for unemployment benefits, he or she also applies for 

employment service. The claimant will probably be interviewed by an RRB representative who will try to help secure employment 

if he or she does not have good prospects of 

returning to his or her former job. The claimant may be referred by the representative to 

a suitable railroad job; otherwise, an effort 

will be made towards placement in a nonrailroad job for which the claimant appears 

qualified. 

As part of its placement service, the RRB 

maintains a list of job openings reported by 

railroads. The list is available for review 

at all offices of the RRB and online at 

www.rrb.gov. The booklet, Guide to Finding 

the Right Job (Form UB-12), is also available 

from any RRB field office and online. 

APPEALS 

Employees 

If a claimant disagrees with a decision 

made on a claim, he or she has 60 days from 

the date of the initial notice of the decision 

in which to file a written statement requesting reconsideration from the RRB office that 

made the decision. This step is mandatory 

before a decision may be appealed to the 

RRB’s Bureau of Hearings and Appeals. 

Failure to request reconsideration within 

60 days will result in forfeiture of further 

appeal rights. 

If the case involves a benefit overpayment of more than 10 times the maximum 

daily benefit rate, the claimant may request 

a waiver of recovery. In order for recovery of 

the overpayment to be deferred while a waiver request is pending, the waiver request 

must be in writing and filed within 60 days 

from the date on which notice of the overpayment was mailed to the beneficiary. If waiver 

is requested, the claimant may be asked to 

complete a financial statement on a form provided by the RRB. 

If dissatisfied with the reconsideration 

or waiver decision, a claimant may, within 

60 days, appeal to the RRB’s Bureau of 

Hearings and Appeals. This appeal must 

be filed using RRB Form HA-1, which may 

be obtained from the RRB’s field offices or 

online at www.rrb.gov. 

If not satisfied with the Bureau of 

Hearings and Appeals’ decision, a claimant 

may further appeal, within 60 days, to the 

three-member Board. 

If not satisfied with the three-member 

Board’s decision, a claimant may file a petition for a review of the decision by the appropriate U.S. Court of Appeals. A petition for 

review must be filed within 90 days of the 

notice of the Board’s decision. 

Employers 

When an employer is a party to a claim 

for benefits, that employer may protest the 

payment of benefits, but such protests do 

not prevent the timely payment of benefits. 

However, employees may be required to 

repay benefits if their employers’ protests are 

ultimately successful. The employer also has 

the right to appeal an unfavorable decision to 

the RRB’s Bureau of Hearings and Appeals. 

INCOME TAXES 

Unemployment benefits paid by the RRB 

are subject to Federal income taxes, just like 

unemployment benefits paid under State government programs. 

71
 
Railroad Retirement Handbook, 2015 

Sickness benefits paid by the RRB, except 

for sickness benefits resulting from on-thejob injuries, are subject to Federal income 

tax under the same limitations and conditions that apply to the taxation of sick pay 

received by workers in other industries. 

The Railroad Unemployment Insurance 

Act specifically provides that railroad unemployment and sickness benefits are not subject to State income taxes. In January of 

each year, the RRB sends railroad employees 

Form 1099-G showing the total amount of 

unemployment benefits paid during the previous year and/or Form W-2 showing the net 

amount of sickness benefits paid. 

72
 
7
 

FINANCING UNEMPLOYMENT AND
 

SICKNESS INSURANCE
 

U nder the Railroad Unemployment 

Insurance Act, an employee’s eligibility for benefits is based on 

taxable earnings in a calendar year and normally applies only to benefits in the benefit 

year starting the following July 1. For example, qualifying earnings in calendar year 

2014 ordinarily give rise to normal benefits 

only in the benefit year beginning 

July 1, 2015. Given this limited period of 

potential benefits, the financing of railroad unemployment and sickness benefits 

is essentially a short-term proposition in 

comparison to the financing of retirement 

benefits. An employee’s eligibility for unemployment or sickness benefits ceases within 

2 years after he or she leaves railroad work, 

while eligibility for railroad retirement annuities continues for decades after an employee 

leaves the industry. Consequently, in a given 

series of benefit years, gradually declining rail employment is less of a factor than 

major recessions or work stoppages causing 

industry-wide unemployment on a temporary 

basis. 

CONTRIBUTIONS 

The railroad unemployment and sickness 

benefit programs are financed exclusively by 

contributions of railroad employers, based on 

the taxable earnings of their employees. The 

employees themselves do not contribute. 

Experience-based tax rates were phased 

in during 1991. Each employer pays contributions at a rate which takes into consideration the employer’s actual incidence of 

benefit usage. Under experience rating, 

employers whose employees have low incidences of unemployment and sickness pay 

contributions at a lower rate than employers with higher levels of benefit usage. Each 

employer’s rate also has a component for 

administrative expenses and a component to 

cover costs shared by all employers. 

In 2015, the basic tax rates on railroad 

employers, including covered commuter 

railroads, range from a minimum of 0.65 

percent to a maximum of 12 percent. Also, a 

surcharge of 1.5 percent is added to the basic 

tax rate, as the Railroad Unemployment 

Insurance Account accrual balance of $140.8 

million was less than the indexed threshold 

of $141.2 million but greater than a threshold of $70.6 million on June 30, 2014. Some 

77 percent of employers are being assessed 

2.15 percent in 2015 (the 0.65 percent minimum rate plus the 1.5 percent surcharge). 

New employers initially pay a tax of 4.09 percent in 2015, which represents the average 

73
 
Railroad Retirement Handbook, 2015 

rate paid by all employers in the period 2011-

2013. 

A surcharge is added to each employer’s 

tax rate during any calendar year in which 

the balance in the Railroad Unemployment 

Insurance Account on the preceding June 30 

is less than an indexed threshold amount. 

If the account balance is less than $100 million (as indexed), but at least $50 million (as 

indexed), the surcharge will be 1.5 percent. If 

the account balance is less than $50 million 

(as indexed), but greater than zero, the surcharge will be 2.5 percent. A maximum surcharge of 3.5 percent applies if the account 

balance is less than zero. If the account 

balance on the preceding June 30 is above 

$250 million (as indexed), the excess will be 

refunded to the employers in the form of a 

rate reduction for the year through a pooled 

credit. Each employer’s tax rate (prior to 

application of individual maximum and minimum limitations) will be reduced by the ratio 

of the excess amount to the taxable payroll of 

all employers. 

The experience-based tax rates have a 

12 percent maximum, or a 12.5 percent maximum if a 3.5 percent surcharge is in effect. 

Included in the rate is the basic rate, an 

administration tax rate of 0.65 percent, and, 

if either is applicable, the surcharge rate or 

the rate of the pooled credit. Since the basic 

employer tax rate plus any pooled credit 

cannot be less than zero, 0.65 percent is the 

minimum rate which any employer can pay. 

RAILROAD UNEMPLOYMENT 

INSURANCE ACCOUNT
	

Railroad unemployment insurance funds 

not needed immediately for the payment 

of benefits are deposited in the Railroad 

Unemployment Insurance Account maintained by the Treasury. This account, 

together with similar accounts for each State, 

forms a national unemployment trust fund. 

Deposits in the unemployment trust fund 

are invested by the Treasury in securities 

of the U.S. Government. Every quarter, the 

Railroad Unemployment Insurance Account 

and the Railroad Unemployment Insurance 

Administration Fund each receive a proportionate share of the interest earnings of the 

trust fund, based on average daily balances. 

The Railroad Unemployment Insurance 

Administration Fund, separate from the 

Railroad Unemployment Insurance Account, 

pays the costs of administering the railroad unemployment insurance system. An 

amount equal to 0.65 percent of taxable 

payroll is set aside from railroad contributions for the Railroad Unemployment 

Insurance Administration Fund. Any amount 

in the Railroad Unemployment Insurance 

Administration Fund in excess of $6 million (on an accrual basis) on September 30 

of any year is transferred to the Railroad 

Unemployment Insurance Account. 

Borrowing Authority 

To ensure adequate funds in periods of 

high unemployment, Congress gave the RRB 

authority in 1959 to borrow money from the 

Railroad Retirement Account for the payment 

of benefits from the Railroad Unemployment 

Insurance Account. 

FINANCIAL REPORT 

The RRB is required to report annually 

to the Congress on the financial status of the 

railroad unemployment insurance system. 

The reports must include any recommendations for financing changes which might be 

advisable, including any adjustment the RRB 

recommends regarding the rates of employer 

contributions. 

The RRB’s 2015 railroad unemployment 

insurance financial report was generally 

favorable. Even as projected maximum benefit 

rates increase 39 percent (from $70 to $97) 

74
 
FINANCING UNEMPLOYMENT AND SICKNESS INSURANCE 

from 2014 to 2025, experience-based contribution rates maintain solvency. The report 

also predicted average employer contribution 

rates well below the maximum throughout 

the projection period. A surcharge of 1.5 percent is in effect in calendar year 2015. The 

report projects a 1.5 percent surcharge in 

2016 and 2017, with a surcharge of 1.5 percent likely to occur thereafter. No financing 

changes were recommended by the RRB. 

75
 

8
 

ADMINISTRATION OF THE
 

RAILROAD RETIREMENT SYSTEM
 

ADMINISTRATION 

T he railroad retirement system 

is based on three Federal laws: 

the Railroad Retirement Act, the 

Railroad Unemployment Insurance Act, and 

the Railroad Retirement Tax Act. The first 

two of these Acts are administered by the 

RRB, and the third, by the Internal Revenue 

Service of the U.S. Treasury. The RRB also 

participates in the administration of the 

Federal Medicare health insurance program. In past years, the RRB assisted in the 

administration of certain employee protection 

provisions of the Regional Rail Reorganization Act, the Northeast Rail Service Act, the 

Milwaukee Railroad Restructuring Act, and 

the Bankrupt Railroad Service Preservation 

and Employee Protection Act. 

An independent agency in the executive branch of the Federal Government, 

the RRB is administered by three members 

appointed by the President, with the advice 

and consent of the Senate. By law, the Labor 

Member is appointed upon recommendation of railroad labor organizations, the 

Management Member upon recommendation 

of railroad employers, and the third member, the Chairman, is, in effect, independent 

of employees and employers and represents 

the public interest. The terms of office are 

5 years and are arranged so as to expire in 

different calendar years. The President also 

appoints an Inspector General for the RRB. 

The primary function of the RRB is the 

determination and payment of benefits under 

the retirement-survivor and unemploymentsickness programs. To this end, the agency 

employs field representatives to assist railroad personnel and their families in filing 

claims for benefits, examiners to adjudicate 

the claims, and information technology staff, 

equipment and programs to maintain earnings records, calculate benefits and process 

payments. 

The RRB also employs actuaries to predict the future income and outlays of the 

railroad retirement trust funds, statisticians 

and economists to provide vital data, and 

attorneys to interpret legislation and represent the agency in litigation. The Inspector 

General employs auditors and investigators 

to detect any waste, fraud or abuse in the 

benefit programs. 

The headquarters of the RRB is located 

in the William O. Lipinski Federal Building 

at 844 North Rush Street, Chicago, Illinois 

60611-2092. The agency also maintains field 

offices across the country in localities easily 

77
 
Railroad Retirement Handbook, 2015 

accessible to large numbers of railroad 

workers. 

Relations Between the RRB 

and Other Agencies 

As an independent agency in the executive branch of the Federal Government, the 

RRB has many dealings with a number of 

other Federal agencies and with some State 

agencies. Its dealings with some of these 

agencies, such as the President’s Office 

of Management and Budget, the Office of 

Personnel Management, the Government 

Accountability Office, and the Department 

of the Treasury, are similar to the dealings 

of other executive branch agencies with these 

units. The RRB’s relations with certain 

others—principally, the Social Security 

Administration, the Centers for Medicare & 

Medicaid Services, State employment security departments and, on a smaller scale, the 

Department of Labor—are related directly 

or indirectly to the various benefit programs. 

The RRB participates in the Treasury Offset 

Program which reduces benefit payments 

to recover delinquent debts owed to other 

Federal agencies. 

The RRB’s relationship with the Social 

Security Administration is particularly extensive because of the coordination between 

the two systems. Railroad retirement annuities may be based in part on social security 

credits, and social security benefit amounts 

awarded after 1974 to railroad retirement 

annuitants are paid through the RRB as part 

of combined railroad retirement-social security monthly benefit payments. 

The RRB and the Social Security 

Administration have an interagency agreement providing for system-to-system access 

between the two agencies. This allows RRB 

computer systems to access information as it 

is needed, thus improving customer service 

and reducing errors. 

Relations Between the RRB 

and Congress 

The RRB has numerous contacts with 

the Congress as a whole and with its individual members and committees. It sends 

the President and Congress an annual report 

on its operations and, on request, supplies 

additional information on the RRB’s programs. Officials of the RRB testify at congressional hearings on proposed legislation to 

amend the Railroad Retirement and Railroad 

Unemployment Insurance Acts, and the 

agency prepares reports on such legislation. 

Congress has jurisdiction over the amounts 

available to the railroad retirement system 

for benefit payments and for administration. 

Relations Between the RRB 

and Railroads 

The administrative organization of the 

RRB fosters close relations with railroad 

employers, employees and their representatives. As mentioned earlier, two of the 

RRB’s three members are appointed on the 

recommendations of railway labor and management associations, and labor and management officials have been active in the 

development of the railroad retirement and 

unemployment insurance programs since 

their inception. 

In addition, the RRB relies on labor 

groups and railroad employers for assistance 

in keeping railroad personnel informed about 

the agency’s benefit programs. The RRB conducts informational programs for railroad 

labor and management officials to acquaint 

them with the details of the benefit programs. These officials, in turn, educate railroad workers as to their benefit rights and 

responsibilities. 

Railroad employers and railway labor 

groups also cooperate with the RRB in a joint 

placement program to find jobs for unem78
 
ADMINISTRATION OF THE RAILROAD RETIREMENT SYSTEM 

ployed personnel. These joint placement 

efforts help to reduce the costs of the unemployment insurance program. 

The RRB has direct contact with railroad employees through its field offices 

where its personnel explain benefit rights 

and responsibilities on an individual basis, 

assist employees in applying for benefits, 

provide related services for annuitants and 

answer any questions related to the benefit 

programs. 

Through various publications and press 

releases, the RRB disseminates, as widely as 

possible, information on its operations and 

the provisions of the laws it administers. Its 

publications include annual reports, triennial 

actuarial valuations, and benefit booklets 

and leaflets. 

Relations Between the RRB and the 

National Railroad Retirement Investment 

Trust 

The National Railroad Retirement 

Investment Trust was established by the 

Railroad Retirement and Survivors’ Improvement Act of 2001. The sole purpose of the 

Trust is to manage and invest railroad retirement assets. The Trust is a tax-exempt 

entity independent from the Federal 

Government. 

The Act authorizes the Trust to invest the 

assets of the Railroad Retirement Account in 

a diversified investment portfolio in the same 

manner as those of private sector retirement 

plans. Prior to the Act, investment of Railroad Retirement Account assets was limited 

to U.S. Government securities. 

The Trust has no powers or authority 

over the administration of benefits under the 

Railroad Retirement Act. While the Act does 

not delegate any authority to the RRB with 

respect to day-to-day activities of the Trust, 

the Act does provide that the RRB may bring 

a civil action to enjoin any act or practice of 

the Trust that violates the provisions of the 

Act or to enforce any provision of the Act. 

Budget Estimates 

Each year, Congress specifies in an 

appropriation act how much of the money 

derived from employer and employee taxes 

the RRB may spend to administer the benefit programs. The appropriation is based 

on budget estimates prepared by the RRB. 

The requested appropriation is sent to the 

Congress at the same time it is sent to 

the President’s Office of Management and 

Budget. In addition, as explained in the 

retirement financing chapter, the level of certain dual benefit payments for a fiscal year is 

determined by the Federal budget and appropriations process. 

Relation of Administrative Costs 

to Benefit Payments 

The RRB has always had an exceptionally good record of administrative economy. 

Total administrative expenses currently 

average about one percent of benefit payments, despite the complexity of the agency’s 

programs. 

KEEPING BENEFICIARIES 

INFORMED
	

The RRB conducts informational programs to keep railroad employees informed 

of their benefit rights and responsibilities 

under the Railroad Retirement and Railroad 

Unemployment Insurance Acts, with emphasis on the necessity of prompt application for 

benefits. Yet cases still occur in which qualified railroad employees or their family members forfeit benefits either because they do 

not know that these benefits are available or 

because they are unaware of the steps they 

themselves must take to claim them. 

The Railroad Retirement Act limits the 

retroactivity of retirement and survivor 

79
 
Railroad Retirement Handbook, 2015 

annuity applications. Depending on the type 

of annuity application, the retroactivity can 

be as long as one year or there can be no 

retroactivity at all. The RRB’s regulations 

do allow the granting of an earlier annuity 

beginning date if an annuitant can establish that he or she was deterred from filing 

an application at an earlier date by some 

action or statement of an agency employee. 

However, while the RRB attempts to keep 

potential annuitants informed of their rights 

under the Railroad Retirement Act through 

press releases, informational bulletins and 

booklets, that information might not reach 

everyone. This is especially true when an 

individual left the railroad industry well in 

advance of retirement. Ultimately, the burden falls on the individual to secure benefit 

information. 

Likewise under the Railroad Unemployment Insurance Act, while the RRB may 

permit retroactive registration beyond the 

normal period when it can be shown that the 

employee was not at fault and that failure to 

apply for benefits was due to circumstances 

beyond the employee’s control, it cannot 

approve delayed claims if the only reason for 

a delay in filing was lack of knowledge of the 

law. 

PROGRAM INTEGRITY 

Railroad employees, by and large, are 

honest and law-abiding, but any large group 

may include a few persons who either deliberately or through lack of knowledge seek 

benefits to which they are not entitled. 

Various procedures for detecting and discouraging such actions include reviews of 

employer records for work on days claimed 

as days of unemployment or sickness and 

checks with State agencies to detect duplication of benefit payments. The RRB has wage 

matching agreements with all 50 States, the 

District of Columbia and Puerto Rico, covering the entire rail population. Electronic data 

exchange programs with railroads as well as 

Federal and State agencies have significantly 

enhanced the RRB’s capability to detect fraud 

and abuse of the railroad unemployment and 

sickness insurance system. A 75-day disqualification is applied in all cases in which fraud is 

discovered. In some cases, prosecution is also 

recommended. 

Other program activities designed to protect 

the railroad retirement trust funds include the 

investigation of uncashed annuity payments, 

matches with the Social Security Administration and the Centers for Medicare & Medicaid 

Services, and development of an online system 

to monitor railroad retirement/social security 

trust fund transfers. In addition to conducting 

audits of the RRB’s operations, the Inspector 

General’s Office identifies and refers cases for 

prosecution of individuals who commit fraud 

against the agency’s benefit programs. 

OFFICE OF INSPECTOR GENERAL 

The RRB’s Office of Inspector General is 

responsible for promoting economy, efficiency 

and effectiveness, and for identifying and 

preventing fraud, waste and abuse in agency 

programs. The Office of Inspector General conducts audits, investigations and management 

reviews of agency operations. 

The Office of Inspector General identifies 

current and potential program weaknesses, 

and provides findings and recommendations 

for corrective action to management. It works 

with the agency’s staff to ensure delivery of the 

highest quality service to the railroad community. It also aggressively pursues individuals 

who engage in activities to fraudulently receive 

monies from the RRB. The Office of Inspector 

General endeavors to ensure the integrity of 

the trust funds through nationwide investigations of fraud and abuse. 

80
 
ADMINISTRATION OF THE RAILROAD RETIREMENT SYSTEM 

Information about the Office of Inspector 

General and reports issued by that office are 

available by accessing the Office of Inspector 

General web pages at www.rrb.gov. The 

Office of Inspector General also maintains a 

fraud and abuse Hotline: 1-800-772-4258 or 

via e-mail at hotline@oig.rrb.gov. Information 

on using the Hotline can be found on the 

inside back cover of this Handbook. 

81
 
Index
 

Account, 

dual benefits payments, pp. 48-49

railroad retirement, pp. 45-50

railroad unemployment

insurance, pp. 74-75

social security equivalent

benefit, pp. 45-50
 

Administration, pp. 77-81
 

Annuities, see Benefits, RRA
 

Appeals,

Medicare, p. 57

RRA, pp. 42-43

RUIA, p. 71
 

BA-6, p. 16
 

Base year, RUIA, p. 65
 

Benefit year, RUIA, pp. 65-66
 

Benefits, RRA,
 

child’s annuity, pp. 26-27, 40, 41

computation of, pp. 35-42

disability annuity, pp. 17-18, 25

employee annuity, pp. 10-11, 15-19,

20-25, 35-38
 

lump-sum, pp. 29-30

parent’s annuity, pp. 27, 41, 42

residual payment, p. 30

spouse annuity, pp. 19-20, 22-25, 38-40

supplemental annuity,

pp. 18, 38

survivor, pp. 11, 26-32, 40-42

widow(er)’s annuity,

pp. 11, 26-29, 40-42
 

Benefits, RUIA, 

accelerated, p. 67

claims for, pp. 69-70

disqualifications for, p. 68

eligibility for, p. 65

extended, pp. 66-67

normal, p. 66

registration period, p. 66

sickness, pp. 65-72

unemployment, pp. 65-72
 

Board, Railroad Retirement, 

pp. 77-81
 

Certificate of Service Months
 

and Compensation, p. 16
 

Child’s annuity, pp. 26-27, 40, 41
 

Compensation,

creditable under RRA, pp. 15-16

creditable under RUIA, pp. 65,

71-72
 

military service, pp. 13-14
 

Contributions, under RUIA, 

pp. 73-74
 

Current connection, pp. 18-19
 

Disability annuity, pp. 17-18, 25
 

Divorced spouses, pp. 19-20, 25, 26-27
 

Dual Benefits Payments
 

Account, pp. 48-49
 

Earnings,

effect on benefits, pp. 23-25,

29, 67-68
 

Employee annuity, pp. 10-11, 15-19,

20-25, 35-38
 

Employee annuity, supplemental,

pp. 18, 38
 

Employment,

effect on RRA benefits, pp. 23-25,29

effect on RUIA benefits, pp. 67-68
 

Financial interchange, pp. 46-47
 

Financing, RRA, pp. 45-50
 

Financing, RUIA, pp. 73-75
 

Health insurance, pp. 51-58
 

Help lines, pp. 53, 55, 56, 58, 70, 81
 

Income taxes, 

retirement-survivor benefits,
 

pp. 34-35, 50

unemployment-sickness benefits,

pp. 71-72
 

82
 
Lump-sum death benefits, pp. 29-30 

Medicare, pp. 51-58
 

National Railroad Retirement
 

Investment Trust, pp. 11-12, 45, 46,

47-48, 79
 

Parent’s annuity, pp. 27, 41, 42
 

Placement service, p. 71
 

Railroad Retirement Account, 

pp. 45-50
 

Railroad Retirement Act, 

appeals, pp. 42-43

benefits, types of, pp. 17-30

history, pp. 1-13

provisions, pp. 15-43
 

Railroad Retirement and 

Survivors’ Improvement Act,

pp. 10-12, 39, 41, 45-48, 79
 

Railroad Unemployment 

Insurance Account, 

p. 74
 

Railroad Unemployment 

Insurance Act, 

appeals, p. 71

history, pp. 59-64

provisions, pp. 65-72
 

Registration period, RUIA, p. 66
 

Residual payment, p. 30
 

Retirement benefits, pp. 17-25,

35-40
 

Service, pp. 15-16
 

Sickness benefits, pp. 65-72
 

Social Security Equivalent
 

Benefit Account, pp. 45-50
 

Spouse annuity, pp. 19-20, 22-25,

38-40
 

Strike benefits, p. 66
 

Supplemental annuity, pp. 12, 18, 38
 

Survivor benefits, pp. 11, 26-32, 40-42
 

Taxes, income, 

retirement-survivor benefits,
 

pp. 34-35, 50

unemployment-sickness benefits,

pp. 71-72
 

Taxes, railroad payroll,

regular railroad retirement, pp. 12,

33-34, 45-46
 

RUIA, pp. 73-74

supplemental annuity, p. 12
 

Tier I, see Benefits, RRA, computation of 

Tier II, see Benefits, RRA, computation of 

Unemployment benefits, pp. 65-72
 

Vested dual benefits, pp. 20, 40, 48-49
 

Waiting period, RUIA, p. 66
 

Websites, pp. 16, 30, 48, 53, 55, 56, 57, 69
 

Widow(er)’s annuity, pp. 11, 26-29, 40-42
 

Widow(er)’s Initial Minimum Amount,

pp. 11, 28, 41-42
 

83
 
Railroad Retirement Handbook, 2015 

NONDISCRIMINATION ON THE BASIS 

OF DISABILITY
	

Under Section 504 of the Rehabilitation Act of 1973 and Railroad 

Retirement Board regulations, no qualified person may be discriminated against on the basis of disability. The RRB’s programs and

activities must be accessible to all qualified applicants and beneficiaries, including those with impaired vision and/or hearing. Individuals

with disabilities needing assistance (including auxiliary aids or program information in accessible formats) should contact the nearest

RRB office. Complaints of alleged discrimination by the RRB on the

basis of disability must be filed within 90 days in writing with the

Director of Administration, Railroad Retirement Board, 

844 North Rush Street, Chicago, Illinois 60611-2092. Questions

about individual rights under this regulation may be directed to the

RRB’s Director of Equal Opportunity at the above address. 

Comments? If you have any comments or suggestions regarding the presentation of information in this publication, please let us 

know. You can fax us at 312-751-7154, e-mail us at opa@rrb.gov 

or write us at the following address: Public Affairs, U.S. Railroad 

Retirement Board, 844 North Rush Street, Chicago, IL 60611-2092. 

84
 
 

 

FRAUD, WASTE AND ABUSE HOTLINE
 

1-800-772-4258
 

The Railroad Retirement Board’s Office of Inspector General established its 

Hotline as a public service. The Hotline provides individuals with a means to 

report or discuss any suspected misconduct relating to the Railroad Retirement 

Board, its programs or employees. 

If you believe a doctor, hospital or other health care provider is billing 

Medicare for services not provided or for unnecessary medical procedures or supplies; someone is illegally receiving Railroad Retirement Board benefits; or you 

wish to report or discuss any other suspected misconduct relating to the Railroad 

Retirement Board, its programs or employees, please contact the Office of 

Inspector General at:

 Toll-Free Hotline: 1-800-772-4258

 U.S. Mail:

 RRB-OIG Hotline Officer 

844 North Rush Street, 4th Floor 

Chicago, IL 60611-2092

 Fax: (312) 751-4342

 E-mail: hotline@oig.rrb.gov 

Please review the Railroad Retirement Board’s e-mail notice and Internet 

privacy policy at www.rrb.gov before submitting information online. 

Note: Please do not contact the Office of Inspector General’s Hotline with 

questions regarding benefit eligibility requirements, delayed payments or similar 

issues. These types of matters should be directed to a Railroad Retirement Board 

office. 
U.S. Railroad Retirement Board
 

844 North Rush Street
 

Chicago, IL 60611-2092
 

www.rrb.gov