UNITED STATES

RAILROAD RETIREMENT BOARD

2006 Annual Report

For Fiscal Year Ended September 30, 2005 
U.S. Railroad Retirement Board 

Mission Statement 

The 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. 

I

n 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. 

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.

www.rrb.gov
UNITED STATES

RAILROAD RETIREMENT BOARD

2006 Annual Report

For Fiscal Year Ended September 30, 2005 

THE REPORT IN BRIEF 1

A REVIEW OF OPERATIONS 7

ADMINISTRATIVE DEVELOPMENTS 35

LEGAL RULINGS 43

STATISTICAL TABLES 49
THE REPORT IN BRIEF

Railroad retirement and unemployment insurance benefits totaling almost 

$9.3 billion were paid by the Railroad Retirement Board to more than 

659,000 beneficiaries in fiscal year 2005. Financial reports issued in 2006 

on the solvency of the railroad retirement and railroad unemployment 

insurance systems were both favorable. Total railroad retirement system 

assets equaled approximately $29 billion as of September 30, 2005. 

Benefits and Beneficiaries 

B

enefits paid under the Railroad Retirement and Railroad Unemployment 

Insurance Acts totaled almost $9.3 billion in the fiscal year ending 

September 30, 2005. Retirement and survivor benefits were paid by the 

Railroad Retirement Board to about 634,000 beneficiaries during the fiscal year, of 

whom 591,000 were on the Board’s annuity rolls at the end of the year. More than 

29,000 railroad employees were paid unemployment and/or sickness insurance benefits. 

Approximately 4,000 beneficiaries received payments under both the Railroad 

Retirement Act and the Railroad Unemployment Insurance Act. 

Retirement and survivor benefit payments of $9.2 billion during the 2005 fiscal year 

were $173 million more than payments in the prior year. Employee and spouse annuitants were paid approximately $7.1 billion, accounting for 77 percent of the total payments. Employees received over $4.0 billion in age annuities, $1.9 billion in disability 

annuities and $63 million in supplemental annuities, while spouses and divorced spouses received about $1.1 billion. Survivors were paid $2.1 billion in annuities and some 

$4 million in lump-sum benefits. The total number of beneficiaries who received retirement and survivor benefits declined by more than 15,000 from fiscal year 2004. 

Gross unemployment and sickness benefits paid in fiscal year 2005 totaled 

$111.2 million. Net benefits totaled nearly $72.9 million after adjustment for recoveries 

of benefit payments, including injury settlements, some of which were made in prior 

years. Total gross and net benefit payments decreased by some $12.1 million and 

$10.1 million, respectively, from the preceding year. Gross unemployment benefits 

totaling $33.5 million ($29.2 million net) were paid to 9,700 claimants, while gross 

sickness benefits of $77.8 million ($43.7 million net) were paid to 20,700 claimants. 

1
2 2006 Annual Report, U.S. Railroad Retirement Board 

Financial Reports 

The Board’s 23rd triennial actuarial valuation, submitted to Congress in June 

2006, was generally favorable. The valuation concluded that, barring a sudden, 

unanticipated, large drop in railroad employment, or substantial investment losses, the 

railroad retirement system will experience no cash-flow problems during the next 36 

years. The long-term stability of the system, however, is not assured. Under the current financing structure, actual levels of railroad employment and investment return 

over the coming years will determine whether additional corrective action is necessary. 

The Board’s 2006 railroad unemployment insurance financial report was also generally favorable. Even as projected maximum benefit rates increase 46 percent from $56 

to $82 from 2005 to 2016, experience-based contribution rates maintain solvency, except 

for small, short-term cash-flow problems in 2008 and 2009 under the most pessimistic 

assumption. Projections show quick repayment of any loans to the Railroad Unemployment Insurance Account. The report also predicted average employer contribution 

rates well below the maximum throughout the projection period. A 1.5 percent 

surcharge required to maintain a minimum account balance in effect in calendar year 

2006 will likely be followed by no surcharge in calendar year 2007, a 1.5 percent 

surcharge in calendar year 2008, and a 2.5 percent surcharge in 2009, according to the 

report. 

No financing changes were recommended by the Board for the railroad retirement 

or unemployment insurance systems. 

The National Railroad Retirement Investment Trust’s annual management report 

for fiscal year 2005 stated that, as of September 30, 2005, the market value of the 

Trust-managed assets had increased to $27.7 billion, reflecting a 14.0% rate of return. 

Total railroad retirement system assets, including those maintained at the Treasury, 

equaled approximately $29 billion. 

The 23rd triennial actuarial valuation, the 2006 railroad unemployment insurance 

financial report and the National Railroad Retirement Investment Trust’s 2005 annual 

management report are available at www.rrb.gov. 

Service 

Customer Satisfaction Survey 

The Board earned a score of 90 in a 2005 American Customer Satisfaction Index 

survey which focused on the agency’s survivor benefit process. It was the highest score 

for any government agency surveyed during the year and 18 points higher than the 

overall Federal Government score. The survey annually measures national customer 

satisfaction with corporate and government goods and services. Government agencies 

use the survey to gauge their level of service and benchmark their performance for comparison with similar organizations in the private sector. 
THE REPORT IN BRIEF 3 

Customer Service Plan 

During fiscal year 2005, customers received benefit services within the timeframes 

promised in the Board’s Customer Service Plan 98.7 percent of the time. 

Other Developments 

Database Conversion Project 

In 2005 the Board started work on a major information technology initiative to convert its existing non-relational IDMS database management system to a relational DB2 

database system. The conversion will place the agency in a better position to provide 

service more efficiently in the coming years. 

Office of Inspector General 

During fiscal year 2005, the Office of Inspector General continued its independent 

oversight of agency operations and its efforts to combat fraud, waste, and abuse. 

Eleven audit reports issued during the year identified operational weaknesses and recommendations for corrective action to program managers. 

Investigative activities resulted in 55 criminal convictions, 52 indictments and 

informations, 30 civil judgments and nearly $2.8 million in recoveries, restitutions, 

fines, civil damages and penalties. 
4 2006 Annual Report, U.S. Railroad Retirement Board 

Selected Data on Benefit Operations

Retirement-Survivor Fiscal Year Fiscal Year 

2005 2004 

Employee age annuities 

Number awarded 8,000 7,800 

Number being paid at end of period 199,800 204,700 

Average being paid at end of period $1,693 $1,619 

Employee disability annuities 

Number of total disability annuities awarded 1,300 1,400 

Number of total occupational disability 

annuities awarded 3,100 3,400 

Number of total disability annuities being paid 

at end of period 20,200 20,000 

Number of occupational disability annuities 

being paid at end of period 63,800 63,300 

Average total disability annuity 

being paid at end of period $1,218 $1,165 

Average occupational disability annuity 

being paid at end of period $2,018 $1,937 

Supplemental employee annuities 

Number awarded 5,700 5,600 

Number being paid at end of period 123,600 126,000 

Average being paid at end of period 1

$42 $42 

Spouse and divorced spouse annuities 

Number awarded, total 2

10,400 8,600 

Number being paid to divorced 

spouses at end of period 3,500 3,500 

Number being paid at end of period, total 141,300 142,900 

Average being paid to divorced spouses 

at end of period $394 $378 

Average being paid at end 

of period, total $638 $620 

Survivor annuities 

Number awarded to aged widow(er)s 7,000 7,300 

Number awarded, total 9,000 9,300 

Number being paid to aged widow(er)s 

at end of period 140,600 146,900 

Number being paid at end of period, total 173,000 180,000 

Average being paid at end of period to 

Aged widow(er)s $1,069 $1,026 

Disabled widow(er)s $902 $865 

Widowed mothers (fathers) $1,388 $1,337 

Remarried widow(er)s $704 $673 

Divorced widow(er)s $703 $674 

Children $789 $766 

Lump-sum survivor benefits awarded 

Number of lump-sum death benefits 4,700 5,100 

Average lump-sum death benefit $904 $898 

Number of residual payments 3/ 100 

Average residual payment $3,733 $2,927 
THE REPORT IN BRIEF 5 

Selected Data on Benefit Operations (Continued) 

Employees and Earnings4 Fiscal Year Fiscal Year 

2005 2004 

Average employment 232,000 225,000 

Creditable earnings, Railroad Retirement 

Act (billions): 

Tier I $14.61 $13.66 

Tier II $13.36 $12.57 

Creditable earnings, Railroad 

Unemployment Insurance Act (billions) $3.26 $3.12 

Unemployment-Sickness Benefit Year Benefit Year 

2004-2005 2003-2004 

Qualified employees 242,200 248,800 

Unemployment benefits 

Net amount paid (millions) $30.2 5

($29.2) $38.3 

Beneficiaries 9,300 5

(9,700) 11,700 

Number of payments 62,000 76,400 

Normal benefit accounts exhausted 2,200 2,400 

Average payment per 2-week registration period $489 $477 

Sickness benefits 

Net amount paid (millions) $43.4 5

($43.7) $46.4 

Beneficiaries 20,200 5

(20,700) 21,600 

Number of payments 140,200 152,700 

Normal benefit accounts exhausted 3,900 4,500 

Average payment per 2-week registration period $496 $486 

1

Includes 800 supplemental annuities, averaging $66, awarded under the 1937 Act.

2 During fiscal year 2005, unusually large numbers of spouse awards were made with small or no tier I amounts, 

resulting in larger than normal numbers of spouse awards and smaller than normal award amounts. 

3

Fewer than 50. 

4 Except for fiscal year 2004 employment, all figures in this section are preliminary. 

5

Data in parentheses are for the fiscal year (October 1, 2004 - September 30, 2005). 
A REVIEW OF OPERATIONS

At the end of fiscal year 2005, total railroad retirement system assets equaled 

approximately $29 billion. During fiscal year 2005, benefits totaling over $9.2 billion

were paid under the Railroad Retirement and Railroad Unemployment Insurance Acts.

Retirement and survivor benefits accounted for almost all of this amount. 

Net unemployment and sickness benefits totaled over $71.9 million. 

RAILROAD RETIREMENT AND 

SURVIVOR PROGRAM

As of September 30, 2005, total railroad retirement system assets, including 

those maintained in U.S. Treasury accounts and those maintained by the 

National Railroad Retirement Investment Trust (the “Trust” or “NRRIT”), equaled 

approximately $29 billion, an increase of over $2.5 billion during the fiscal year. 

Amounts in the Railroad Retirement (RR) Account not needed to pay current administrative expenses and amounts in the Social Security Equivalent Benefit (SSEB) 

Account not needed to pay current benefits and administrative expenses are transferred to the NRRIT 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. 

FINANCIAL OPERATIONS - U.S. TREASURY ACCOUNTS 

During fiscal year 2005, railroad retirement and survivor benefit payments were 

financed through four U.S. Treasury accounts. 

The SSEB Account, established in fiscal year 1985, pays the portion of railroad 

retirement benefits equivalent to a social security benefit from various income sources 

related to these benefits. The RR Account funds retirement, survivor and disability 

benefits, in excess of social security equivalent benefits, from payroll taxes on 

employers and employees and other income sources. Effective January 1, 2002, supplemental benefit payments are paid from the RR Account. The Dual Benefits Payments 

(DBP) Account and Federal Payments (FP) Account, funded by congressional 

Financial information (other than when the term “paid” or “collected” is used) is presented on the accrual

basis of accounting instead of the cash basis of accounting, except for the Federal income tax transfer

explanation on pages 10 and 11 and the Trust information on pages 7, 13, and 15. Benefit operations data

presented on pages 16-25 for the railroad retirement and survivor program and pages 30-32 for the railroad

unemployment and sickness insurance program are on a cash basis of accounting. The primary difference

between the two bases of accounting is that the accrual basis recognizes revenue when it is earned and

expenditures when they are incurred. The cash basis, on the other hand, recognizes revenue and expenditures only when cash is received or paid. 

7
8 2006 Annual Report, U.S. Railroad Retirement Board 

appropriations from general revenues, finance the phase-out costs of certain vested 

dual benefits and interest on unnegotiated checks, respectively. The four accounts 

together incurred $9.2 billion in benefit obligations (excluding $1.2 billion in social 

security benefits which were reimbursed by the Social Security Administration) during 

fiscal year 2005. 

Financing Sources 

Payroll Taxes 

The primary source of income to the railroad retirement and survivor program is 

payroll taxes levied on covered employers and their employees. Payroll taxes amounted 

to $4.5 billion, 48.4 percent of total financing sources and $83.2 million more than in 

fiscal year 2004. 

Railroad employees and employers pay tier I taxes which, by law, are the same as 

social security taxes. The rate of 7.65 percent is divided into 6.20 percent for retirement and 1.45 percent for Medicare hospital insurance. The maximum amount of earnings subject to the 6.20 percent rate in calendar year 2005 was $90,000, and all earnings were subject to the 1.45 percent Medicare tax. In calendar year 2004, the maximum amount subject to the 6.20 percent tax was $87,900, with all earnings subject to 

the 1.45 percent Medicare tax. Both employees and employers also pay a tier II tax to 

finance railroad retirement benefit payments over and above social security levels. 

This tax, on earnings up to $66,900 in 2005 and $65,100 in 2004, was 4.4 percent on 

employees in 2005 and 4.9 percent in 2004. It was 12.6 percent on employers in 2005 

and 13.1 percent in 2004. 

Tier I and tier II taxes for fiscal year 2005 amounted to $2.2 billion and $2.3 billion, 

respectively. 

Financial Interchange Transfers 

The second major source of income to the railroad retirement and survivor program 

consists of transfers from the social security trust funds under a financial interchange 

between the two systems. The financial interchange is intended to place the Social 

Security Old-Age, Survivors and Disability Insurance and Hospital Insurance Trust 

Funds in the same position in which they would have been had railroad employment 

been covered by the Social Security and Federal Insurance Contributions Acts. This 

involves computing the amount of social security taxes that would have been collected 

on 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 taxes, the difference, with an allowance for interest and administrative 

expenses, is transferred from the Social Security Trust Funds to the SSEB Account. If 

taxes exceed benefit reimbursements (this has not happened since 1951), a transfer 

(text continued on page 10) 
A REVIEW OF OPERATIONS 9 

RETIREMENT AND SURVIVOR PROGRAM

Financing Sources - Fiscal Y ear 2005 (In Millions) 

GROSS TOTAL: $9,296.81 

Financial Interchange 

Payroll Taxes 48.4% 36.2% 

$4,500.0 $3,368.9 

National Railroad 

Retirement 

Investment Trust 

Transfers-in 

8.7% 

$809.0 

General 

Interest on 

Investments 0.5% 

$44.5 

Federal Income 

Taxes 5.0% 

$466.4 

Appropriations 1.2% 

$108.0 

1 Excludes $85.3 million as detailed under Other Financing Sources on page 14.


Note.--Percentages may not add to 100 due to rounding.


Costs - Fiscal Y ear 2005 (In Millions) 

TOTAL: $9,465.5 

Benefit Payments 97.2% Salaries and Expenses 1.1% 

$9,196.1 $105.3 

Other <.1% 

$.3 

Interest Expense 1.7% 

$163.8 
10 2006 Annual Report, U.S. Railroad Retirement Board 

would be made in favor of the Social Security Trust Funds. The net financial interchange transfer to the SSEB Account during fiscal year 2005 amounted to $3.4 billion. 

Interest on Investments and Other Revenue 

Interest revenue increased from $41.1 million in fiscal year 2004 to $44.5 million in 

fiscal year 2005. The RR Account also earned interest revenue from financial interchange advances. 

Federal Income Tax Transfers 

Legislation enacted in 1983 subjecting social security and railroad retirement benefits to Federal income taxes also provided for a transfer of the tax revenues to the social 

security and railroad retirement systems for the payment of benefits. Revenue from 

income taxes on social security equivalent railroad retirement benefits is transferred to 

the SSEB Account.* Revenue derived from taxing regular railroad retirement benefits 

in excess of social security equivalent benefits is transferred to the RR Account. 

Revenue from taxing the vested dual benefits funded by the general revenue appropriations previously described is transferred to the DBP Account. 

At the beginning of each quarter, income tax transfers are made from Treasury 

general funds to the SSEB, RR and DBP Accounts. These transfers are estimates of 

expected tax revenues for the quarter. Adjustments are made later to reconcile the 

estimates for a taxable year with actual tax revenues for the year. On a cash basis, 

original tax transfers for fiscal year 2005 amounted to $430 million during the year. 

Original transfers for fiscal year 2004 totaled $406 million. Net income tax transfers 

after adjustments were $451 million for fiscal year 2005, including a $21 million adjustment for calendar year 2000. Net transfers in fiscal year 2004 were $445 million, 

including $39 million in reconciliation adjustments. 

The table on the next page shows income tax transfers to the Accounts for taxable 

years 1996 through 2005, including reconciliation adjustments through 2000. 

General Appropriations 

General revenue appropriations were provided by the Railroad Retirement Act of 

1974 to fund the phase-out costs of certain dual railroad retirement/social security benefits considered vested prior to 1975, and by the Railroad Retirement Solvency Act of 

1983 to fund interest on unnegotiated checks. The total amounts appropriated by the 

Congress for vested dual benefits were $108 million for fiscal year 2005 and 

$119 million for fiscal year 2004. These amounts include $9 million and $10 million in 

Federal income tax transfers for 2005 and 2004, respectively. The amount appropriated for fiscal year 2005 was 9.2 percent less than fiscal year 2004, reflecting the 

(text continued on page 14) 

* Legislation enacted in 1993 subjected a larger amount of social security benefits and social security

equivalent railroad retirement benefits to Federal income tax for taxpayers in higher income brackets.

This provision was effective beginning with taxable year 1994, and the additional revenue raised is

transferred to the Federal Hospital Insurance Trust Fund. 
A REVIEW OF OPERATIONS 11 

Federal Income Tax Transfers by Recipient Account and 

Benefit Component, Taxable Years 1996-2005 (Millions)

Revenue from taxes on 

RRA benefits 

treated as RRA benefits treated as 

SSA benefits private or public pensions 

Taxable year SSEB Tier II and 

tier I non-SSEB Vested 

benefits tier I benefits1 dual benefits 

SSEB Account2 RR Account DBP Account3 

Original transfers during the year 

1996 $57 $192 $14 

1997 61 195 12 

1998 74 196 12 

1999 79 227 11 

2000 102 245 12 

2001 94 229 10 

2002 97 252 9 

2003 97 283 9 

2004 109 294 8 

2005 117 301 7 

Reconciliation adjustments 4 

1996 (1999) +18 +34 +1 

1997 (2000, 20015

) +25 +43 +3 

1998 (2002) +14 +47 +2 

1999 (2003) +15 +22 +2 

2000 (2004) +3 +17 +1 

1 Includes non-SSEB portion of tier I.

2 Receives taxes on social security equivalent benefit (SSEB) portion of tier I.

3 Receives taxes on vested dual benefit component beginning October 1, 1988.

4 The year in parentheses is the year the adjustments were made.

5 Reconciliation of benefits made in October 2001. 
12 2006 Annual Report, U.S. Railroad Retirement Board 

Railroad Retirement and Survivor Program - U.S. Treasury Accounts 

Consolidated Financing Sources, 

Costs and Net Position (Millions)1 

For the Fiscal Year Ended September 30 2005 2004 

Financing Sources: 

Payroll Taxes $4,500.0 $4,416.8 

Financial Interchange 3,368.9 3,421.3 

Interest on Investments and Other Revenue 44.5 41.1 

Federal Income Taxes 466.4 435.0 

General Appropriations 108.0 119.2 

Other (85.3) 17.5 

Transfers to the National 

Railroad Retirement Investment Trust --- (586.0) 

Transfers from the National 

Railroad Retirement Investment Trust 809.0 1,564.0 

Total Financing Sources 9,211.5 9,428.9 

Costs: 

Benefit Payments 9,196.1 9,023.5 

Interest Expense 163.8 170.5 

Salaries and Expenses2 105.3 108.7 

Other 0.3 4.2 

Total Costs 9,465.5 9,306.9 

Financing Sources over Costs (254.0) 122.0 

Net Position - Beginning of Period 673.0 551.0 

Net Position - End of Period $419.0 $673.0 

1

Prepared on an accrual basis of accounting. 

2

Includes unemployment and sickness insurance salaries and expenses of approximately 

$15.2 million and $15.6 million for fiscal years 2005 and 2004, respectively. 
A REVIEW OF OPERATIONS 13 

National Railroad Retirement Investment Trust (NRRIT) 

Fiscal Year 2005 Highlights 

Market value of assets managed 

by NRRIT on September 30, 2005 $27.7 billion 

Rate of return of investment portfolio 

managed by NRRIT for full year 

ended September 30, 2005 14.0% 

Source: NRRIT 

All NRRIT annual management reports and quarterly updates are available on the Railroad 

Retirement Board’s Web site at www.rrb.gov. 
14 2006 Annual Report, U.S. Railroad Retirement Board 

continuing decrease in eligibility for these benefits, which are not increased for the 

cost of living. The total amounts appropriated by the Congress for interest on 

unnegotiated checks were $150,000 for fiscal years 2005/2006 and also $150,000 

for fiscal years 2004/2005. 

Other Financing Sources 

Other financing sources consisted of $8.2 million to be provided by the Office of 

Personnel Management to pay future retirement benefits to Railroad Retirement Board 

employees, and $14.6 million from the railroad unemployment trust funds in transfersin for current budget fiscal year salaries and expenses. These financing sources were 

offset by transfers-out of $5.3 million for salaries and expenses of the Board’s Office of 

Inspector General, a $2.8 million decrease in unexpended appropriations, and the 

recording of a contingent liability in the amount of $100 million related to the financial 

interchange for military service credits. 

Costs 

The Railroad Retirement Board pays all salaries and expenses under a single 

administrative fund (Limitation on Administration) for both the railroad retirement 

and survivor program and the unemployment and sickness insurance program. 

Consequently, of the $105.3 million and $108.7 million shown on page 12 for salaries 

and expenses in fiscal years 2005 and 2004, respectively, about $15.2 million for fiscal 

year 2005 and $15.6 million for fiscal year 2004 were for the unemployment and sickness insurance program. About $1.2 million of the amount shown in other costs for fiscal year 2005 and $1.4 million for fiscal year 2004 were for the unemployment and sickness insurance program. 

Excluding $16.4 million from total costs of $9.5 billion for fiscal year 2005 and $17.0 

million from total costs of $9.3 billion for fiscal year 2004, total costs for the railroad 

retirement and survivor program for fiscal year 2005 increased $159.2 million or 

1.7 percent. 

Benefit Payments 

During fiscal year 2005, railroad retirement benefit payments increased $172.6 

million or almost 1.9 percent to about $9.2 billion, including $106 million in vested dual 

benefits and $62.6 million in supplemental annuities. 

Interest Expense 

Interest expense of $163.8 million represents interest on the financial interchange 

advances made by the U.S. Treasury during the fiscal year. 

Salaries and Expenses 

Excluding unemployment and sickness insurance salaries and expenses of 

$15.2 million for fiscal year 2005 and $15.6 million for fiscal year 2004, salaries and 
A REVIEW OF OPERATIONS 15 

expenses for the railroad retirement and survivor program were about $90.1 million for 

fiscal year 2005 and about $93.1 million for fiscal year 2004, a $3.0 million or 

3.2 percent decrease. Adjusted by the $15.2 million in salaries and expenses and 

$1.2 million in other costs for the unemployment and sickness insurance program, 

fiscal year 2005 administrative expenses for the railroad retirement and survivor program were about 1 percent of total costs. 

Other Costs 

Other costs consisted primarily of post-retirement benefits for Railroad Retirement 

Board employees of $7.0 million for the railroad retirement and survivor program and 

$1.2 million for the unemployment and sickness insurance program. In addition, carrier refunds of $0.6 million were incurred. These costs were offset by a nearly 

$7.2 million reimbursement from the Centers for Medicare & Medicaid Services for 

Part B Medicare costs, as well as a reimbursement of approximately $0.4 million from 

the Board’s Office of Inspector General for Board-incurred expenses, and various other 

revenues of approximately $0.9 million. 

NATIONAL RAILROAD RETIREMENT 

INVESTMENT TRUST OPERATIONS 

Funds not needed immediately for benefit payments or administrative expenses are 

invested. The National Railroad Retirement Investment Trust was established pursuant to section 105 of the Railroad Retirement and Survivors’ Improvement Act of 

2001. The sole purpose of the Trust is to manage and invest railroad retirement 

assets. 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 railroad retirement benefits. The Trust is a tax-exempt 

entity independent from the Federal Government. It is domiciled in and subject to the 

laws of the District of Columbia. 

Fiscal year 2005 was a year of continued growth for the Trust. Assets were invested in an indexed portfolio of equity and debt securities with an asset allocation consistent with the Trust’s investment guidelines. As of September 30, 2005, the market 

value of Trust-managed assets had increased to $27.7 billion, reflecting a 14.0% rate of 

return for the fiscal year, compared to a 13.0% return for its composite benchmark. In 

addition, during fiscal year 2005 the Trust transferred $809 million to the Railroad 

Retirement Account for the payment of railroad retirement benefits. 

As of September 30, 2005, total railroad retirement system assets (Trust-managed 

assets and reserves held in the Treasury accounts) equaled approximately $29 billion, 

an increase of over $2.5 billion during the fiscal year. 

Trust operations are described in detail in the National Railroad Retirement 

Investment Trust Annual Management Report for fiscal year 2005, which is available 

on the Board’s Web site at www.rrb.gov. 
16 2006 Annual Report, U.S. Railroad Retirement Board 

BENEFIT OPERATIONS 

Retirement and survivor benefits paid, including vested dual benefits and supplemental employee annuities, totaled $9.2 billion in fiscal year 2005, 

$173 million more than in fiscal year 2004. Benefits were paid to about 

633,700 beneficiaries in fiscal year 2005. Nearly 590,900 beneficiaries were being paid 

at the end of the year. The table shown below presents retirement and survivor benefit 

payments for fiscal years 2005 and 2004, by type of benefit, and the percent changes in 

payments between the 2 years. 

Under the two-tier railroad retirement formulas, the tier I annuity portion approximates a social security benefit and increases by the cost-of-living percentage applied to 

social security benefits. The tier II portion, which is comparable to retirement benefits 

paid over and above social security benefits to workers in other industries, increases by 

Note.-- Detail may not add to total due to rounding. 

32.5 percent of the social security 

percentage. Effective December (in millions) 

2003, tier I portions increased by 

2.1 percent while tier II portions 

increased by 0.7 percent. Increases 

of 2.7 percent for tier I and 

Retirement benefits 

Employee annuities

 Age 

Type of benefit 

Fiscal year 

2005 

$4,041.2 

Fiscal year 

2004 

$3,965.8 +1.9

Percent 

change 

0.9 percent for tier II were effective 

December 2004. 

 Disability 

 Supplemental 

Spouse and divorced

1,859.0 

62.7 

1,775.6 

63.9 

+4.7

-1.9 

The December 2003 and 

December 2004 cost-of-living 

increases provided additional benefit payments of about $155 million 

 spouse annuities 

 Total 

Survivor benefits 

Annuities 

Lump-sum benefits 

1,088.7 

7,051.6 

2,125.0 

4.5 

1,071.6 

6,876.9 

2,126.5 

4.8 

+1.6

+2.5 

-0.1 

-7.2

in fiscal year 2005, compared to Total 2,129.5 2,131.3 -0.1

payments in fiscal year 2004. Grand total $9,181.1 $9,008.3 +1.9 

Monthly retirement and survivor benefits being paid numbered 

nearly 721,700 at the end of the 

2005 fiscal year, about 15,100 less than at the end of the prior year. Monthly beneficiaries on the rolls declined by some 12,600 over the year, from 603,500 to 590,900. The 

number of monthly benefits paid is always greater than the number of beneficiaries on 

the rolls, since many annuitants receive more than one type of benefit. Although the 

second benefit is usually a supplemental employee annuity, some employees also 

receive a spouse or widow(er)’s annuity. 

Regular employee annuities in payment status at the end of fiscal year 2005 numbered 283,800, about 4,200 less than at the end of the previous fiscal year. The number 

of age annuities being paid dropped from 204,700 to 199,800 over the year, while disability annuities rose 700 to 84,000. Supplemental annuities being paid dropped some 

2,400, numbering 123,600 at the end of the year. The number of divorced spouse annuities being paid remained the same at 3,500. Spouse and divorced spouse annuities 
A REVIEW OF OPERATIONS 17 

together declined by almost 1,600, totaling 141,300 at year-end. Some 173,000 monthly survivor benefits were being paid at the end of fiscal year 2005, a decrease of 7,000 

from the previous year. 

Retirement 

Regular employee annuities 

Awards of regular employee annuities numbered 12,400 in fiscal year 2005, 200 

less than in fiscal year 2004. Data by type of annuity awarded during the year are 

given in the table on this page. 

Railroad employees with 10 to 29 years of creditable service, or 5 to 9 years of service if at least 5 years were after 1995, are eligible for regular annuities based on age 

and service at age 62. Early retirement annuity reductions are applied to annuities 

awarded before full retirement age--the age at which an employee can receive full benefits with no reduction for early retirement. This 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. 

If an employee had any creditable railroad service before August 12, 1983, the retirement age for tier II purposes will remain 65. The reduction for early retirement 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. 

Rail employees with 30 or more years of service are eligible for regular annuities 

based on age and Average 

service at age 60. Employee 

Certain early annuities 

awarded in Per- Monthly Years of 

Age at 

retireretirement fiscal year 2005 Number cent amount service ment 

reductions are Age 

applied if the Beginning at full 

employee first retirement age or over 800 6 $1,702 22.4 67.0 

became eligible Unreduced, beginning 

for a 60/30 annu- at age 60 to under full 

ity July 1, 1984, retirement age 5,100 41 2,796 35.6 60.7 

or later and Reduced, beginning at 

retired at ages 60 age 62 to under full 

retirement age 2,100 17 1,263 17.4 62.6 

or 61 before 2002. 

Employees who Disability 4,400 36 2,210 24.3 54.0 

retire at 60 or Total 12,400 100 $2,258 27.6 59.0 

older with at least 

30 years of rail- Note.-- Detail may not add to total due to rounding. 

road service are referred to as 60/30 retirees. 
18 2006 Annual Report, U.S. Railroad Retirement Board 

Disability awards are based either on total disability or on occupational disability. 

A total disability annuity is based on disability for all employment and is payable at any 

age to employees with at least 10 years of 

railroad service. Employees with 5-9 years 

of service, if at least 5 years were after 

1995, may qualify for tier I only before 

retirement age on the basis of total disability if they also meet certain social security 

earnings requirements. An employee is 

considered totally disabled if medical evidence shows that a permanent physical or 

mental condition exists which prevents the 

performance of any regular work. A condition is considered to be permanent if it has 

lasted or may be expected to last for at 

least 12 months. 

An occupational disability annuity is 

based on disability for the employee’s regular railroad occupation and is payable to 

employees with a current connection with 

the rail industry at age 60 if the employee 

has 10 years of service, or at any age if 

the employee has at least 20 years of service. An employee is considered occupationally disabled if the physical or mental 

condition is such that the employee is permanently disabled for work in his or her 

regular railroad occupation, even though 

the employee may be able to perform 

other kinds of work. 

Of the year’s 4,400 disability awards, 

1,300 averaging $1,438 per month were for 

total disability and 3,100 averaging $2,533 

were for occupational disability. Many 

employees who are disabled for all employment but are otherwise qualified for an 

occupational disability annuity are initially 

awarded occupational disability annuities 

in order to expedite payment. 

Number of monthly beneficiaries, 

September 30, 2000, and 2005 (Thousands) 

309 

284 

2000 

2005 

211 

173 161 

141 

Employee Spouse Survivor

(includes

divorced

spouses)

Amount of benefits paid, 

fiscal years 2000 and 2005 (Millions) 

$5,963 

$5,211 2000 

2005 

$2,040 $2,129 

$1,043 $1,089 

Employee 1 Spouse 2 Survivor 

1

Includes $72.9 million in fiscal year 2000 and $62.7 million in 2

fiscal year 2005 for supplemental annuities. Includes divorced 

spouses. 

Average monthly amount,

September 30, 2000, and 2005

$1,732 

$1,381 

2000 

2005 

$1,069 

$826 

$638 $530 

Employee 1 Spouse 2 Aged widow(er) 

1 2

Without supplemental annuity. Includes divorced spouses. 
A REVIEW OF OPERATIONS 19 

An estimated three-fifths of all employees awarded disability annuities will meet the 

medical criteria for a disability freeze determination. The standards for freeze determinations follow social security law and are comparable to the criteria for granting total 

disability. Also, an employee granted a disability freeze may qualify for early Medicare 

coverage and lower Federal income taxes on his or her annuity. 

Of the employees who were awarded regular annuities in fiscal year 2005, more than 

8,500, or 69 percent, last worked for a railroad either in the calendar year their annuity 

began or in the preceding year. Such retirements are termed “immediate,” while those 

that occur 2 or more calendar years after the year of last railroad employment are called 

“deferred.” As a group, immediate retirees represent career railroad employees who 

worked in the industry until retirement. Awards based on immediate retirement averaged $2,610 per month, compared to $1,479 for the 3,900 awards based on deferred 

retirement. Immediate retirees averaged 31 years of railroad service, considerably more 

than the average of 19 years for deferred retirees. Of the year’s awards, 56 percent of 

normal age retirements were immediate. While 88 percent of all 60/30 retirements were 

immediate, only 14 percent of the reduced age awards to employees with less than 30 

years of service were 

immediate. Immediate Employee 

retirements accounted annuities in 

current-payment status 

Average 

monthly 

Percent 

immediate 

for 75 percent of the on September 30, 2005 Number Percent amount retirements 

year’s disability Age 

awards. Beginning at 

The 283,800 retired 

employees on the rolls 

full retirement age or over 

Unreduced, beginning 

at age 60 to under full 

28,200 10 $1,275 45 

as of September 30, retirement age 89,600 32 2,220 93 

2005, were being paid 

regular monthly annuReduced, beginning 

at age 60 to under full 

retirement age 82,000 29 1,261 39 

ities averaging $1,732. 

The table on this page Disability 84,000 30 1,825 81 

gives data by type of Total 283,800 100 $1,732 69 

annuity for these benefits. 

Note. --Detail may not add to total due to rounding. 

Of the 84,000 disability annuities being paid, 20,200 were for total disability and 63,800 for occupational 

disability. The two types of disability annuities averaged $1,218 and $2,018, respectively. In fiscal year 2005, approximately $299 million was paid in total disability annuities 

and $1,560 million in occupational disability annuities. 

Some 195,900 employees on the rolls at the end of fiscal year 2005 were immediate 

retirees and their regular annuities averaged $2,043 per month. Annuities of the 87,900 

deferred retirees averaged $1,038. Although their average railroad retirement annuity 

was much lower, a greater proportion of the deferred annuitants also received social 
20 2006 Annual Report, U.S. Railroad Retirement Board 

security benefits--35 percent compared to 5 percent for the immediate retirees. 

Moreover, the average social security benefit paid to deferred retirees was higher than 

that paid to immediate retirees. Combined railroad retirement and social security 

benefits to deferred retirees who were dual beneficiaries averaged $1,261, while combined benefits to immediate retirees averaged $1,727. The table on this page gives 

numbers of beneficiaries and average benefit amounts for employees on the rolls who 

were receiving social security benefits, and for those who were not, by type of retirement. 

Regular employee annuities consist of as many as three components: tier I, tier II, 

and a vested dual benefit. Reductions for early age retirement are made in all components in cases where the employee retired before full retirement age with less than 30 

years of railroad service. The tier I component is based on the employee’s combined 

railroad and social 

security covered earn- Type of retirement 

ings, and is reduced by Dual benefit 

the amount of any status Total Immediate Deferred 

social security benefit Receiving social security benefit 

that the employee Number 40,700 10,200 30,600 

receives. The gross Average monthly amount:

tier I amounts of Railroad retirement (regular) $499 $1,078 $307

employees on the rolls Social security 878 649 955

at the end of fiscal year Combined benefit 1,378 1,727 1,261 

2005 averaged $1,369 

per month. Tier I 

amounts of some 8,400 

employees were comNot receiving social security benefit 

Number 

Average monthly amount 

243,000 

$1,939 

185,800 

$2,096 

57,300 

$1,429 

pletely offset by social Note. -- Detail may not add to total due to rounding. 

security benefits. Tier I 

amounts being paid averaged $1,225. 

The employee tier II component is based solely on railroad earnings. Tier II 

amounts being paid at the end of fiscal year 2005 averaged $531. Employees are eligible for vested dual benefits if, based on their own earnings, they met certain vesting 

requirements and qualified for both railroad retirement and social security benefits at 

the end of 1974, or, in some cases, at the end of an earlier year of last railroad service. 

More than 48,700 retirees were receiving vested dual benefits averaging $160 at the 

end of the fiscal year. 

Supplemental employee annuities 

A supplemental annuity is payable to employees with a current connection with the 

rail industry at age 60 if the employee has at least 30 years of service, or at age 65 if 

the employee has 25-29 years of service. The employee must also have had some rail 

service before October 1981. 

Nearly 5,700 supplemental annuities were awarded in fiscal year 2005, about 100 
A REVIEW OF OPERATIONS 21 

more than in fiscal year 2004. About 4,300 of the awards (75 percent) began concurrently with the employee’s regular annuity, while the remaining 1,400 were to employees already receiving a regular annuity. Supplemental annuity awards averaged over 

$41 per month; 85 percent were at the current maximum rate of $43. Supplemental 

annuities are reduced for any part of a private railroad pension attributable to employer contributions. During the fiscal year, 1,300 supplemental annuities were not awarded because they were entirely offset by private pensions. In a few cases, the supplemental annuity was partially offset by the pension, or the supplemental annuity was 

not offset because the pension was reduced. 

Supplemental annuities were being paid to about 123,600, or 44 percent, of the 

retired employees on the rolls at the end of the 2005 fiscal year. These annuities averaged $42; about 800 of them were paid under 1937 Act amendments, which stipulated 

a maximum rate of $70. 

Spouse and divorced spouse annuities 

Annuity awards to spouses and divorced spouses of retired employees numbered 

10,400 in fiscal year 2005, 1,800 more than in the previous year. During fiscal year 

2005, unusually large numbers of spouse awards were made with small or no tier I 

amounts, resulting in larger than normal numbers of spouse awards and smaller than 

normal award amounts. The table on the next page presents numbers and average 

amounts of spouse and divorced spouse annuities awarded during the year and being 

paid at the end of the year, by type of annuity and whether subject to age reduction. 

If an employee is at least age 62 and retires with 10-29 years of railroad service, or 

has 5-9 years of service and at least 5 years were after 1995, the employee’s spouse is 

eligible for an annuity at age 62. Full retirement age for a spouse is gradually rising 

from 65 to 67, depending on the year of birth. Early retirement reductions are applied 

to the spouse annuity if the spouse retires before full retirement age. The reduction for 

early retirement is 1/144 for each of the first 36 months the spouse is under full retirement age when her or his annuity begins and 1/240 for each month (if any) over 36. 

If an employee retires with at least 30 years of service and is at least age 60, the 

employee’s spouse is eligible for an annuity at age 60. Prior to 2002, certain early 

retirement reductions were applied to the tier I component of such a spouse annuity if 

the employee retired before age 62, unless the employee attained age 60 and completed 

30 years of service prior to July 1, 1984. If a 30-year employee retired at age 62, no age 

reduction applied to the spouse annuity. December 2001 legislation liberalized early 

retirement benefits for 30-year employees retiring at ages 60 or 61 after 2001 and their 

spouses. A spouse of an employee qualified 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 the child became disabled before age 22. 

Of the 2,900 reduced spouse annuities awarded in fiscal year 2005, 300 averaging 

$675 per month were to spouses of 30-year employees and some 2,600 averaging $354 

were to spouses of employees with less than 30 years of service. 
22 2006 Annual Report, U.S. Railroad Retirement Board 

At the end of fiscal year 2005, some 137,800 spouse annuities averaging $645 per 

month were being paid. Approximately 3,500 divorced spouse annuities averaging $394 

per month were also being paid. Families with an employee and spouse on the rolls were 

paid combined railroad retirement benefits averaging $2,455. This included $1,810 in 

regular and supplemental employee annuities and $645 in spouse annuities. 

Approximately 56,000, or 40 percent, of the spouses and divorced spouses on the rolls 

were also receiving In current-payment 

social security bene- Monthly spouse Awarded in status on 

fits. Combined rail- benefits fiscal year 2005 September 30, 2005 

road retirement and Average Average 

Number amount Number amount 

social security benefits to these annui- Beginning at full 

tants averaged $977 retirement age or over 2,600 $233 20,800 $350 

per month, including With minor or disabled 

$255 in railroad child in care 300 919 1,400 898 

retirement benefits 

Unreduced, beginning and $722 in social at age 60 to under full 

security benefits. retirement age 4,100 1,129 56,900 913 

Railroad retirement Reduced rate 2,900 383 58,700 483

annuities to the

83,500 spouses not Total 9,900 666 137,800 645

receiving social secu- Divorced spouse 

rity benefits aver- annuities 500 427 3,500 394

aged $898, while

railroad retirement Grand total 10,400 $655 141,300 $638

annuities to the Note.-- Detail may not add to total due to rounding.

1,900 divorced

spouses not receiving social security benefits averaged $562.

Like regular employee annuities, spouse annuities consist of up to three components. 

The tier I component equals one-half of the employee’s tier I amount before any reduction for the employee’s social security benefit. The spouse tier I amount is reduced for 

the spouse’s receipt of a social security benefit and may be reduced for a spouse’s public 

service pension. The tier I portion may also be reduced if the spouse receives a railroad 

retirement employee annuity, but this reduction is usually restored through an addition 

to the spouse tier II amount. Divorced spouses receive only a tier I benefit. 

The spouse tier II component equals 45 percent of the employee’s tier II amount. 

Railroad retirement amendments in 1981 precluded further awards of vested dual 

benefits to spouses. 

Of the 137,800 spouses on the rolls at the end of fiscal year 2005, 96,400 were being 

paid tier I amounts averaging $554 per month. The tier I amounts of 41,400 spouses 

were completely offset by other benefits also due. Spouse tier II amounts averaged $270. 

Vested dual benefits averaging $130 were being paid to 2,400 spouses. The 3,500 
A REVIEW OF OPERATIONS 23 

divorced spouses on the rolls at the end of fiscal year 2005 were being paid tier I 

amounts averaging $402 per month. 

Lump-sum retirement benefits 

A lump-sum benefit may be payable at retirement to employees who received separation or severance payments after 1984. This benefit approximates the tier II payroll 

taxes deducted from separation or severance payments that did not yield additional service credits for retirement. Approximately $0.8 million was paid in separation/severance 

lump-sum benefits during fiscal year 2005. 

Employees who have at least 10 years of railroad service and are not entitled to a 

vested dual benefit may be eligible for a dual retirement tax refund if they had concurrent railroad retirement and social security earnings within the period 1951-74. The 

refund is equal to the social security taxes that the employee paid on the combined railroad and social security earnings in excess of the annual railroad retirement creditable 

earnings maximum. During the 2005 fiscal year, the Board paid some 2,500 dual retirement tax refunds averaging $91. Most of the payments were to employees retiring during the year. More than 50 refunds were to survivors, mostly widows, of employees who 

died before receiving the refund. Employees entitled to dual retirement tax refunds for 

years after 1974 may claim them on their Federal income tax returns. 

Survivor 

Monthly benefits 

Annuity awards to survivors of deceased railroad employees numbered 9,000 during 

fiscal year 2005, 400 In current-payment 

less than the previous Monthly survivor Awarded in status on 

benefits fiscal year 2005 September 30, 2005 

year. Some 173,000 Average Average 

survivor annuities were Number amount Number amount 

being paid at the end of Aged widow(er)s' 7,000 $1,416 140,600 $1,069

the fiscal year, includ- Disabled widow(er)s' 200 1,288 4,800 902

ing 300 temporarily Widowed mothers'

paid at spouse or (fathers') 200 1,397 1,000 1,388

divorced spouse annuity Remarried widow(er)s' 200 821 5,100 704 

rates pending recompu- Divorced widow(er)s' 800 796 9,700 703 

tation to widow(er)s’ Children's:

 Under age 18 400 1,079 2,400 1,061

rates. Almost 140,600, Student * 1,214 100 1,184

or 81 percent, of the Disabled 100 822 9,200 713 

survivor annuities were Parents' * $1,032 100 775 

to aged widows and Survivor option . . . . . . * $76 

widowers. Total 9,000 . . . 173,000 . . . 

*Fewer than 50. 

The table on this 

page presents numbers Note.-- Data may not add to total due to rounding. 
24 2006 Annual Report, U.S. Railroad Retirement Board 

and average monthly amounts of survivor annuities, by type, for those awarded in the 

year and those being paid at the end of the year. 

Survivor annuities, like regular employee and spouse annuities, consist of as many 

as three components: tier I, tier II and, for widows and widowers only, a vested dual 

benefit. As with spouses, legislation in 1981 precluded new awards of vested dual benefits to widow(er)s. 

The tier I component is computed according to social security formulas and is based 

on the deceased employee’s combined railroad and social security earnings. A reduction 

is made for the survivor’s receipt of a social security benefit. There may also be a tier I 

reduction if the survivor receives a railroad retirement employee annuity or public pension. Remarried and divorced widow(er)s receive a tier I benefit only. A dependent parent receives only a tier I amount if another family member is also receiving benefits or 

if the parent has remarried. 

Survivor tier II amounts are figured as a percentage of an employee tier II benefit. 

Prior to 2002, the percentages were 50 percent for a widow(er), 15 percent for a child, 

and 35 percent for a parent. The total tier II amount for a survivor family was subject 

to a minimum of 35 percent and a maximum of 80 percent of the employee tier II benefit, and all survivor tier II amounts were proportionately adjusted when either limit 

applied. December 2001 legislation established an “initial minimum amount” for 

widow(er)s which provides a tier II benefit equal to 100 percent of the tier II amount of 

the deceased employee, effective February 2002. The maximum tier II amount payable 

to a family rose to 130 percent of the employee’s tier II amount. Widows and widowers 

are guaranteed a total tier I and tier II amount not less than what they were paid as a 

spouse, any necessary increase being added to tier II. 

Aged widow(er)s, who are eligible for benefits at age 60, have their tier I and tier II 

amounts reduced if the annuity begins before full retirement age. The eligibility age 

for unreduced annuities is gradually rising from age 65 to age 67. The maximum age 

reductions will range from 17.1 percent to 20.36 percent, depending on the widow(er)’s 

date of birth. Excluding about 300 annuities temporarily paid at spouse or divorced 

spouse rates, aged widow(er)s’ annuities being paid at the end of the 2005 fiscal year 

included 63,800 which were reduced for age. Aged widow(er)s’ tier I amounts being 

paid averaged $903 per month. In nearly 9,700 cases, the tier I amount was wholly offset by reductions for other benefits. Some 51,300 aged widow(er)s were also receiving 

social security benefits, and these averaged $680. Tier II amounts averaged $228. 

About 4,000 vested dual benefits averaging $66 were being paid to aged widow(er)s. 

The tier I and tier II amounts of disabled widow(er)s’ annuities, which begin at ages 

50-59, are reduced 28.5 percent for age. Tier I amounts being paid to disabled 

widow(er)s on the rolls at the end of fiscal year 2005 averaged $749 (in more than 200 

cases, the tier I amount was wholly offset by reductions). Social security benefits being 

paid to about 1,500 disabled widow(er)s averaged $652. Tier II amounts averaged 

$185, while the 300 vested dual benefits being paid averaged $79. 
A REVIEW OF OPERATIONS 25 

Tier I amounts paid to widowed mothers and fathers (widows and widowers caring 

for children) generally equal 75 percent of the full amount payable to an aged 

widow(er) before any reductions, similar to a social security mother’s or father’s benefit. 

Eligible children and grandchildren are paid this same tier I amount. However, if the 

sum of the tier I amounts of all members of a survivor family exceeds the social security family maximum, then tier I amounts are proportionately reduced so that the total 

equals the maximum. Reductions for the family maximum usually occur when the 

family includes three or more beneficiaries. Tier I amounts being paid as of the end of 

fiscal year 2005 averaged $999 for widowed mothers and fathers and $723 for children. 

Fewer than 50 mothers (fathers) and nearly 2,500 children received social security benefits averaging $736 and $475, respectively. Tier II amounts paid mothers (fathers) 

and children averaged, respectively, $413 and $90. 

Lump-sum survivor benefits 

A lump-sum death benefit can be payable at the time of an employee’s death only if 

there are no survivors immediately eligible for monthly benefits. For survivors of 

employees who had at least 10 years of railroad service before 1975, the lump-sum 

death benefit is based on the employee’s earnings through 1974, with a maximum 

amount of approximately $1,200. If the employee completed the 10th year of service 

after 1974, the lump-sum death benefit is limited to $255, the maximum benefit 

payable under social security law, and only the widow or widower living in the same 

household is eligible for the benefit. Approximately 4,700 lump-sum death benefits 

averaging $904 were awarded during fiscal year 2005. About 600 benefits were to 

widow(er)s, while 4,100 were to other individuals who paid the funeral expenses. 

Lump-sum benefits may also be payable to survivors of employees with less than 10 

years of service, but at least 5 years after 1995, if the employee met the social security 

insured status requirements. 

Another lump-sum survivor benefit, the residual payment, can be made if no other 

benefits based at least in part on an employee’s railroad service will be payable in the 

future, and the total of prior benefit payments is less than what the employee paid in 

pre-1975 railroad retirement taxes. The 40 residual payments awarded in the 

2005 fiscal year averaged $3,733. Nearly all of the awards were to widow(er)s of 

employees not insured for monthly benefits under the Railroad Retirement Act, other 

relatives, designated beneficiaries, or the employee’s estate. However, one payment 

went to an individual who elected to waive future monthly benefits in order to receive a 

residual benefit. 

Medicare Enrollments 

The Medicare program provides health insurance to persons ages 65 and older, as 

well as persons under age 65 who have been entitled to monthly benefits based on total 

disability for at least 24 months or who suffer from chronic kidney disease requiring 

hemodialysis or transplant. In addition to the basic hospital insurance, or Part A, plan, 

which is financed through payroll taxes, there is an elective supplementary medical 

insurance, or Part B, plan for which monthly premiums are charged. 
26 2006 Annual Report, U.S. Railroad Retirement Board 

Eligible railroad retirement annuitants and social security beneficiaries whose benefits are payable by the Railroad Retirement Board are automatically enrolled under 

both plans, but Part B may be declined. Eligible nonretired persons must apply in 

order to obtain Medicare coverage. The Board automatically enrolled nearly 21,400 

beneficiaries for Medicare during fiscal year 2005. As of the end of the fiscal year, 

approximately 527,700 persons were enrolled in the Part A plan, and about 512,600 

(97 percent) of them were also enrolled in Part B. 

Except for benefits for services in Canada, which are paid from the Railroad 

Retirement Account, railroad enrollees are paid Part A benefits from the Federal 

Hospital Insurance Trust Fund, the same as persons covered under the social security 

system. Part B benefits are paid from the Federal Supplementary Medical Insurance 

(SMI) Trust Funds. The carrier for Part B claims of railroad Medicare enrollees made 

payments totaling $870 million in the 2005 fiscal year. 

The regular monthly premium for medical insurance during fiscal year 2005 was 

$66.60 for coverage through December 2004 and $78.20 thereafter. The Board generally withholds Medicare premiums for annuitants from their benefit payments, and at the 

end of the fiscal year some 481,100 annuitants were having their premiums withheld. 

Of the remaining Part B enrollees, almost 7,000 were paying premiums to the Board, 

either directly or through an intermediary, and 24,500 had their premiums paid by 

State agencies. The Board periodically transfers premiums to the SMI Trust Funds. 
A REVIEW OF OPERATIONS 27 

RAILROAD UNEMPLOYMENT AND SICKNESS 

INSURANCE PROGRAM 

FINANCIAL OPERATIONS 

F

inancing sources for the railroad unemployment and sickness insurance program during fiscal year 2005 exceeded costs by $14.2 million and the net position increased by $14.2 million from $87.5 million at the end of fiscal year 2004 

to $101.7 million at the end of fiscal year 2005. For fiscal year 2005 as compared to fiscal year 2004, total financing sources for the railroad unemployment and sickness 

insurance program decreased by $32.5 million (27.4 percent) to $86.1 million. 

(text continued on p. 29) 

Unemployment and Sickness Insurance Program 

Consolidated Financing Sources, 

Costs and Net Position (Millions)1 

For the Fiscal Year Ended September 30 2005 2004 

Financing Sources: 

Employer Payroll Taxes $80.9 $114.1 

Interest Income 5.2 4.7 

Other --- (0.2) 

Total Financing Sources 86.1 118.6 

Costs: 

Benefit Payments: 

Unemployment 29.1 37.8 

Sickness 42.8 44.8 

Total Costs 71.9 82.6 

Financing Sources over Costs 14.2 36.0 

Net Position - Beginning of Period 87.5 51.5 

Net Position - End of Period $101.7 $87.5 

1Prepared on an accrual basis of accounting. 
28 2006 Annual Report, U.S. Railroad Retirement Board 

UNEMPLOYMENT AND SICKNESS 

INSURANCE PROGRAM

Financing Sources - Fiscal Y ear 2005 (In Millions) 

GROSS TOTAL $86.1 

Interest Income 6.0% 

$5.2 

Employer Payroll 

Taxes 94.0% 

$80.9 

Costs - Fiscal Y ear 2005 (In Millions) 

TOTAL $71.9 

Benefit Payments 100% 
A REVIEW OF OPERATIONS 29 

Financing Sources

The primary financing source of the railroad unemployment and sickness insurance 

program is a payroll tax on railroad employers, based on the taxable earnings of their 

employees. The employees themselves are not taxed. 

Each employer pays taxes at a rate which takes into consideration its employees’ 

actual incidence of benefit usage. Under experience rating, employers whose employees 

have low incidences of unemployment and sickness pay taxes at a lower rate 

than those 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. The rate applies to monthly earnings up to an indexed maximum. In calendar 

year 2005, the taxable earnings base was the first $1,150 of each employee’s monthly 

earnings. The earnings base is indexed each year by a rate which is equal to approximately two-thirds of the annual rate of increase in the maximum base for railroad 

retirement tier I taxes. 

In 2005, the basic tax rates on railroad employers, including covered commuter 

railroads, ranged from a minimum of 2.15 percent (which includes a surcharge of 

1.5 percent) to a maximum of 12 percent. Most employers were assessed the minimum 

rate in 2005. New employers in 2005 paid an initial rate of 3.43 percent. 

Employer Payroll Taxes 

Payroll taxes by employers totaled $80.9 million during fiscal year 2005. This was a 

decrease of 29.1 percent or $33.2 million less than the previous year. 

Interest 

Cash not needed immediately for unemployment and sickness insurance benefits 

or operating expenses is held in the Federal Unemployment Insurance Trust Fund and 

invested by the Secretary of the Treasury. The fund earned an average rate of return of 

5.30 percent in fiscal year 2005, of which the Railroad Retirement Board earned 

$5.2 million as its pro rata share. 

Costs 

Total costs for the railroad unemployment and sickness insurance program 

decreased by $10.7 million (13.0 percent) to $71.9 million. These costs consisted solely 

of benefit payments. 

Benefit Payments 

During fiscal year 2005, unemployment insurance benefit payments decreased by 

$8.7 million (23.0 percent) to $29.1 million. Sickness insurance benefit payments 

decreased $2.0 million (4.5 percent) to $42.8 million. 
30 2006 Annual Report, U.S. Railroad Retirement Board 

BENEFIT OPERATIONS 

Net unemployment and sickness benefits totaling $73.6 million were paid in 

the 2004-2005 benefit year, $11.1 million less than in the prior year. 

Beneficiaries numbered 28,700 in comparison to the previous year’s total of 

some 32,100. Approximately 900 employees received both unemployment and sickness 

benefits during the 2004-2005 benefit year. The number of unemployment benefit 

claimants decreased by almost 20 percent, while sickness benefit claimants decreased 

by over 6 percent. Total unemployment benefit payments decreased by over 

21 percent, while net sickness benefits decreased by more than 6 percent. The number 

of employees qualified for benefits under the Railroad Unemployment Insurance Act 

fell approximately 3 percent to 242,200. 

Benefits are payable for each day of unemployment or sickness in excess of 7 during 

the first 14-day registration period in a benefit year. During benefit year 2004-2005, 

there were 7,500 and 16,300 unemployment and sickness benefit waiting period claims, 

respectively. 

Unemployment 

Some 9,300 railroad workers were paid $30.2 million in unemployment benefits 

during the 2004-2005 benefit year. The number of benefit claimants decreased by 

2,300 from the prior year total of 11,700, while the benefit amount fell $8.1 million 

from the year-earlier total of $38.3 million. The claimant count was the lowest since 

benefit year 1944-1945. The average number of compensable days per unemployment 

benefit claimant was 66 in benefit year 2004-2005 as compared to 64 in the previous 

benefit year. This was the highest number of compensable days since benefit year 

1995-1996. 

The mid-month unemployment count in the 2004-2005 benefit year began with a 

July count of 2,100 claimants. The count peaked at 3,900 in January, then dropped 

down to 1,500 in May 2005. For the 2004-2005 benefit year as a whole, the weekly 

number of claimants averaged 2,600 in comparison to an average of 3,300 in the previous benefit year. The overall unemployment benefit claimant rate, measured in relation to numbers of employees qualified to receive benefits under the Railroad 

Unemployment Insurance Act during a particular time period, decreased to 4 per 100 

qualified from the previous year’s level of 5 per 100 qualified. The median age of all 

unemployment benefit claimants was 46 years; it was 45 in the previous benefit year. 

Sickness 

The number of sickness benefit claimants during the 2004-2005 benefit year was 

20,200, about 1,400 lower than in the previous year. The claimant count was the 

NOTE.--Railroad unemployment and sickness benefits are paid on the basis of benefit years beginning

July 1 and ending June 30 of the following year. Consequently, operational data in this “Benefit

Operations” section are generally presented for this time span, rather than fiscal years beginning October 1

and ending September 30. 
A REVIEW OF OPERATIONS 31 

Major unemployment and sickness benefit operations, 

benefit years 2004-2005 and 2003-2004 

Benefit year 2004-2005 Benefit year 2003-2004 

Item Total 

Unemployment Sickness Total Unemployment Sickness 

Applications 36,700 11,700 25,100 41,000 14,400 26,600 

Claims 236,400 73,700 162,700 268,600 91,700 176,800 

Claimants 1

28,700 9,300 20,200 132,100 11,700 21,600 

Net amount of benefits $73,583,600 $30,179,000 $43,404,600 $84,676,600 $38,263,900 $40,412,800 

Number of payments

 Normal 181,500 55,800 125,800 206,800 70,300 136,500

 Extended 20,700 6,200 14,500 22,300 6,100 16,300

 Total 202,200 62,000 140,200 229,100 76,400 152,700 

Average amount per 

2-week registration period

 Normal $497 $492 $499 $486 $478 $489

 Extended 459 458 459 451 454 450

 Total 494 489 496 483 477 486 

1 Benefits for both unemployment and sickness were paid to approximately 1,200 employees in benefit year 2003-2004 and 900 

employees in benefit year 2004-2005. Those claimants who had only a non-compensable waiting period are not included in the 

beneficiary counts since no benefits were paid. 

lowest since sickness benefits began in benefit year 1947-1948. Gross sickness benefits 

of $78.5 million were paid, $5.2 million less than in the prior benefit year. Net sickness 

benefits totaled $43.4 million, reflecting repayment of a large amount of benefits following settlements of suits for injuries. Benefits payable for an injury are recoverable if the 

claimant is awarded damages or receives a settlement for the injury. Net benefits 

decreased by $3.0 million in comparison with the previous year. 

After continual increases since benefit year 1995-1996, the utilization rate for sickness benefits remained the same during the previous two years, then declined in the 

2004-2005 benefit year. The average duration of sickness decreased slightly to the lowest duration in the last 5 years. 

Among the most common causes of sickness 

were injuries that 

included fractures or 

wounds (affecting 25 percent of beneficiaries), 

arthritis and disk disorders (22 percent), circulatory and heart disease 

(9 percent), and mental disorders, including drug and alcohol addictions (11 percent). 

The median age of all sickness benefit claimants was 51 years, the same as in the 

previous benefit year. 

Benefit 

Year 

Utilization Per 

100 Qualified 

Employees 

Average 

Compensable 

Days 

2001-2002 8.5 73 

2002-2003 8.7 71 

2003-2004 8.7 70 

2004-2005 8.4 69 
32 2006 Annual Report, U.S. Railroad Retirement Board 

Claimants under the Railroad Unemployment Insurance Act, 

Benefit Years 2000-2001 through 2004-2005

9,345 

11,667 

15,396 

17,796

16,727 

20,246 

21,608

22,445 23,046 22,996 

Unemployment 

Sickness 

2000-2001 2001-2002 2002-2003 2003-2004 2004-2005

Unemployment and Sickness Benefit Claimants By Age, 

Benefit Year 2004-2005

53 

1,773 

3,226 

2,386 

1,756 

151 

7,863 

197 

6,610 

3,529 

1,936 

111 

Unemployment 

Sickness 

Under 25 25-34 35-44 45-54 55-64 65 & Over
215,000 

Oct-2000

Dec-00 

Jun-01 

Dec-01 

Jun-02 

Dec-02 

Jun-03 

Dec-03 

Jun-04 

Dec-04 

Jun-05 

Sep-05 

A REVIEW OF OPERATIONS 33

RAILROAD EMPLOYMENT 

Average monthly railroad employment in fiscal year 2005 rose by nearly 3 percent to 

232,000 from the 225,000 average of the previous year. September 2005 had the highest 

level of employment in fiscal year 2005 with 235,000 and January 2005 had the low of 

228,000. Average employment was the highest since fiscal year 2000-2001. 

Average Railroad Employment 

Fiscal Years 2001 through 2005 

220,000 

225,000 

230,000 

235,000 

240,000 

245,000 

250,000 

0 

Note.--Numbers for 2005 are preliminary. 
ADMINISTRATIVE DEVELOPMENTS

The following describes some major issues addressed in 2005 and 2006 

as the Railroad Retirement Board continued efforts 

to improve agency operations and better serve its customers. 

Service 

Customer Satisfaction Survey 

The Board earned a score of 90 in a 2005 American Customer Satisfaction Index 

(ACSI) survey, the highest score for any government agency surveyed during the year 

and 18 points higher than the overall Federal Government score. 

The ACSI survey focused on the Board’s survivor benefit process. The survey included initial widow(er)s and spouse-to-widow(er) conversions who received a payment 

between January 1, 2005, and May 31, 2005. Initial widow(er) cases are those where a 

widow(er) was not receiving a spouse benefit at the time she or he became eligible for a 

widow(er)’s benefit. Spouse-to-widow(er) conversion cases are those where a retired 

employee and his or her spouse were both receiving retirement benefits prior to the 

employee’s death. 

The survey found the RRB scoring highest (94) in the area of customer service, with 

respondents particularly praising the courtesy, professionalism, and responsiveness of 

agency employees, along with the accuracy of the information provided. The survivor 

benefit application process received a score of 88, with most respondents pleased with 

the ease of the process and with the amount of supporting documentation required. 

The RRB also earned a confidence index score of 92, indicating that its customers 

are quite satisfied with the service provided by the agency and are very confident they 

will continue to be well-served in the future. The survey did note that those in the initial widow(er) segment were less satisfied with the survivor benefit process than those 

in the spouse-to-widow(er) segment, and an opportunity for improvement lies with that 

segment of the survivor population. 

Produced through a partnership of the University of Michigan Business School, the 

American Society for Quality and Claes Fornell International, the ACSI annually measures national customer satisfaction with corporate and government goods and services. 

Working with the Department of the Treasury’s Federal Consulting Group, government 

agencies participating in the survey use the ACSI to gauge their level of service and 

benchmark their performance for comparison with similar organizations in the private 

35
36 2006 Annual Report, U.S. Railroad Retirement Board 

sector. The ACSI also helps agencies focus on those processes, based on customer feedback, that will have the biggest impact on an agency’s ability to deliver the highest 

quality products and services. 

This marks the third time that the Board has participated in the survey. The 

agency earned a score of 75 in a 2002 ACSI survey of railroad unemployment and sickness benefit claimants, and a score of 82 in a 2001 ACSI survey of recently retired railroad workers. 

Customer Service Plan 

The Railroad Retirement Board’s Customer Service Plan promotes the principles 

and objectives of customer-driven quality service agency-wide and is benchmarked to 

service levels in both government agencies and private industries performing similar 

functions. The Board’s plan specifies the level of service customers can expect, measures performance, and obligates the Board to report annually on its performance. 

The plan is reviewed and updated periodically on the basis of the Board’s experience, 

comparisons of the Board’s service with the best in business, and feedback received 

from customers. 

During fiscal year 2005, customers received benefit services within the timeframes 

promised in the Board’s plan 98.7 percent of the time. This figure represents overall 

timeliness of customer service in four benefit areas: retirement applications; survivor 

applications; disability applications and payments; and railroad unemployment and 

sickness benefit applications and claims. The Board believes that using this composite 

indicator, based on a weighted average, allows for a more concise and meaningful presentation of its customer service efforts in these benefit areas. It should be noted that 

the RRB’s Office of Inspector General has found some discrepancies in the performance 

measurement process which will be corrected in 2006. 

The plan requires that persons who file in advance for a railroad retirement employee or spouse annuity will receive their first payment, or a decision, within 35 days of 

their annuity beginning date. Persons who do not file in advance will receive their first 

payment, or a decision, within 65 days of the date they filed their application. Of the 

cases processed during fiscal year 2005, 93.5 percent of employee and 92.7 percent of 

spouse applicants who filed in advance received a payment, or a decision, within 35 

days of their annuity beginning date. Taking these employee and spouse cases together, 93.1 percent of this group met the agency’s standard for fiscal year 2005. Also, 

97.0 percent of employee and 97.4 percent of spouse applicants who had not filed in 

advance received a payment or a decision within 65 days of their filing date. Taken 

together, 97.3 percent of these cases met the agency’s standard. 

The Board’s plan requires that those who file for a disability annuity receive a decision within 105 days of the date they filed their application. If entitled, the first payment will be within 25 days of the date of the Board’s decision, or the earliest possible 

payment date, whichever is later. Of the cases processed during fiscal year 2005, 

67.9 percent of those filing for a disability annuity received a decision within 105 days 
ADMINISTRATIVE DEVELOPMENTS 37 

of the date they filed an application. Average processing time was 90.6 days. Of those 

entitled to disability benefits, 94.4 percent received their first payment within the 

plan’s time frame. 

The plan requires that those filing for monthly survivor benefit payments, or a 

lump-sum benefit, will receive their first payment, or a decision, within 65 days of the 

date they filed their application, or became entitled to benefits, if later. Those already 

receiving a spouse annuity will receive their first payment, or a decision, within 35 

days of the date the Board receives notice of the employee’s death. Of the cases 

processed during fiscal year 2005, 92.8 percent of the applicants for an initial survivor 

annuity were issued a payment or a decision within 65 days. In addition, 96.9 percent 

of the applicants for a lump-sum benefit were issued a payment or a decision within 65 

days. In cases where the survivor was already receiving a spouse annuity, 94.6 percent 

of the applicants were issued a payment or a decision within 35 days of the Board 

being notified of the employee’s death. 

Persons who file an application for unemployment or sickness insurance benefits 

will receive a claim form, or a decision, within 15 days of the date the application was 

filed, and persons filing claims for subsequent biweekly unemployment or sickness 

insurance benefits will receive a payment, or a decision, within 15 days of the date the 

Board receives their claim forms. During fiscal year 2005, 99.8 percent of unemployment benefit applications sampled for timeliness and 99.6 percent of sickness benefit 

applications processed met the Board’s standard. In addition, 99.8 percent of subsequent claims processed for unemployment and sickness benefits met the Board’s standard for fiscal year 2005. 

In fiscal year 2005, 98.5 percent of all correspondence the Board received was 

responded to, either with an acknowledgement or with a final reply, within the 

agency’s 15-day standard. 

Hurricane Katrina 

In the wake of Hurricane Katrina, the Board’s New Orleans district office was 

closed and its six employees relocated to other locations. Beneficiary claims processing, 

phone calls and mail delivery were forwarded to other Board offices as agency employees worked to maintain service to customers in the gulf coast region. The agency expedited the processing of all claims for non-receipt of benefit payments and new or temporary changes of address. The New Orleans district office reopened in December 2005. 

Technology and Automation 

Database Conversion Project 

In 2005 the Board started work on a major information technology initiative to convert its existing non-relational IDMS database management system to a relational 

DB2 database system. The conversion will place the agency in a better position to provide service more efficiently in the coming years. 
38 2006 Annual Report, U.S. Railroad Retirement Board 

The decision to convert the existing database was several years in the making and 

one that required extensive research. IDMS was a dependable database and served the 

agency well for many years, but it was not designed to support Web-based application 

development. Conversion of the system will play a paramount role in reducing the 

agency's dependency on technologies with a limited, shrinking experience base. The 

project will also position the Board for the next generation of IT integrators/developers 

who have the experience and knowledge of newer technologies. 

Internet Services 

Employer Reporting System.--The Employer Reporting System, available on the 

Board’s Web site at www.rrb.gov, allows rail and labor employers to electronically file 

information related to the reporting of employee service and compensation data. 

The Board is currently working to enhance the system to allow for filing of additional forms, including those for prepayment and postpayment verification for unemployment and sickness claims. When completed in fiscal year 2006, this measure will position the agency to replace about 180,000 paper documents sent to rail employers each 

year and will improve benefit accuracy and timeliness. 

RUIAnet.--Railroad employees have the option of filing applications and biweekly 

claims for railroad unemployment benefits over the Internet through the Board’s 

RUIAnet service. During fiscal year 2005, additional features were added to the service 

to provide automatic processing of certain unemployment claims without intervention 

by agency personnel, and to allow railroad employees to view the status of their unemployment and sickness applications and claims. 

Although claimants cannot currently file applications or biweekly claims for railroad sickness benefits over the Internet, the Board is planning to add the online filing 

of sickness claims to RUIAnet in fiscal year 2007. 

RRBVision 

Through a Windows-based communications system, Board employees are able to 

view video presentations with accompanying training materials, such as PowerPoint 

presentations or on-line screens. Presentations can be viewed in real-time or saved to a 

server for later viewing. 

In 2005, 61 presentations (referred to as “RRBVision” programs) were developed 

and placed on the agency’s Intranet for viewing by employees. Topics included technical training for claims examiners, presentations from the Board’s National Managers 

Meeting, and various non-technical sessions. 

The benefits of RRBVision include consistency in training, a greater number of 

training programs available to offsite staff, availability of training on-demand, and 

reduced travel costs when programs can be done via RRBVision instead of in person. 

The Board is pursuing efforts to make the system available on the agency Web site to 

provide training and instructions to rail employers, beneficiaries and claimants. 
ADMINISTRATIVE DEVELOPMENTS 39 

Health Insurance Portability and Accountability Act 

The October 2003 implementation of the Health Insurance Portability and 

Accountability Act requires that all claims for reimbursement (except for small 

providers) under the Medicare programs be submitted electronically. The percentage of 

claims submitted electronically to Palmetto GBA, the agency’s Part B Medicare carrier, 

increased from 34.7 percent in October 2004 to 57 percent in December 2005. 

System Processing Excess Earnings Data (SPEED) 

SPEED is an automated system that provides a single source for both retirement 

and survivor annuitant earnings information. Recent enhancements to the system provide the ability to mechanically reinstate survivor benefit payments previously suspended for excess earnings, and allow for an address verification process in cases where 

benefit payments have been suspended for 6 or more months. 

The Medicare Prescription Drug, Improvement, and 

Modernization Act of 2003 

Railroad employees and railroad retirement beneficiaries who are eligible for 

Medicare are covered by provisions of this new law in the same manner as beneficiaries 

under the Social Security Act. Although the Centers for Medicare & Medicaid Services 

(CMS) and the Social Security Administration (SSA) have primary responsibilities for 

implementing and administering provisions of the Act, several of the major provisions 

require the Board to make changes to its procedures and automated systems. In addition, many railroad beneficiaries have sought assistance from the Board’s field office 

claims representatives in answering questions about the new Medicare prescription 

drug benefits. 

The Board implemented new programs to ensure that railroad retirement beneficiaries are considered for prescription drug subsidies. The agency was unable, however, to 

implement system changes by January 2006 needed to withhold monthly prescription 

drug premiums from the benefits of individuals who prefer this method of premium 

payment. In November 2005, letters were mailed to 530,000 railroad retirement beneficiaries with Medicare to assure them that they were eligible to enroll in prescription 

drug plans, and to explain the alternative options available for paying monthly premiums. The Board expects to complete work in 2007 on the system changes that will 

allow beneficiaries to have premiums deducted from their monthly benefits. As of 

February 2006, approximately 225,000 railroad retirement beneficiaries were enrolled 

in Medicare prescription drug plans. 

The Board is also working with CMS and SSA to implement system changes necessitated by section 811 of the Medicare legislation, which increases Part B premiums 

effective January 2007 for higher income beneficiaries. 

Intrusion Detection System (IDS) 

While the Board relies on a sophisticated hardware and software defense of its computer systems, even the best firewall technology, anti-virus software, and intrusion 
40 2006 Annual Report, U.S. Railroad Retirement Board 

detection systems require careful monitoring and maintenance. In the event of a successful malware attack, the agency has implemented an incident response capability. 

Also, a Forensic Analysis Workstation is now operational, providing the Board’s 

Computer Emergency Response Team with the ability to conduct forensic collection and 

analysis of electronic evidence from almost any type of digital media in use today (USB 

drives, desktop, notebook and server hard drives, flash media cards, etc.). 

Security Awareness and Training 

Federal agencies are required to provide annual computer security awareness training for employees and contractors. Security awareness efforts are designed to change 

behavior or reinforce good security practices. The purpose of awareness presentations 

is simply to focus attention on security. The Board continues to develop new approaches for refreshing the awareness initiative by providing new and innovative presentations for its employees. 

The agency’s computer security training program strives to produce relevant and 

needed security skills and competencies. The Board utilizes the Office of Personnel 

Management-sponsored USALearning Center Web-based training. In 2005, all agency 

staff that had significant IT responsibilities for developing and maintaining agency systems were enrolled in this educational program. The agency will take further advantage of this cost-effective training source in 2006 by enrolling an additional number of 

business and technical analysts with specific responsibilities for the protection of automated information resources. 

Officials 

Michael S. Schwartz continues to serve as Chairman of the Railroad Retirement 

Board. V. M. Speakman, Jr. continues to serve as Labor Member, and Jerome F. Kever 

continues to serve as Management Member. 

Office of Equal Opportunity 

Diversity Program 

During 2005, the Office of Equal Opportunity’s employee committees sponsored 

many events and activities at the Board to foster a diverse work environment and 

enhance the understanding of disability issues. 

Throughout the year, the Workplace Diversity Committee held various activities 

including an International Food Festival and several programs to commemorate 

African American History Month, Asian Pacific American Heritage Month, Hispanic 

Heritage Month, Native American Heritage Month and Women’s History Month. In 

addition, during Disability Awareness Month, members of the Employees with 

Disabilities Advisory Council served as mentors for several disabled high school students who visited the agency on National Disability Mentoring Day. 
ADMINISTRATIVE DEVELOPMENTS 41 

The Office of Equal Opportunity also distributed its employee publication, 

Working Together, which featured articles on diversity-related topics and the discrimination complaint process. 

Equal Opportunity Policy and Procedure 

Equal employment opportunity (EEO) training was conducted for new supervisors, 

and an OEO Letter to New Supervisors was developed to ensure that new supervisors 

will be promptly informed of their EEO responsibilities. All Board employees were provided online training covering their rights and remedies under the No FEAR Act, and 

an OEO Welcome Letter for new employees was created to transmit the No FEAR 

notice and other anti-discrimination-related documents. Statistical data pertaining to 

discrimination complaints filed by agency employees and applicants for employment 

were posted on the Board’s Web site, along with the agency’s reasonable accommodation procedures. 

Recruitment 

The Office of Equal Opportunity worked cooperatively with the Board’s Bureau of 

Human Resources to create a diverse pool of qualified candidates for employment by 

identifying sources to recruit minorities, individuals with disabilities and disabled veterans. 

Public Information Activities 

The Board maintains direct contact with railroad retirement beneficiaries through 

its field offices located across the country. Field personnel explain benefit rights and 

responsibilities on an individual basis, assist railroad employees in applying for benefits and answer any questions related to the benefit programs. The Board also relies 

on railroad labor groups and employers for assistance in keeping railroad personnel 

informed about its benefit programs. 

At informational conferences sponsored by the Labor Member of the Board for railroad labor union officials, Board representatives describe and discuss the benefits 

available under the railroad retirement-survivor, unemployment-sickness and 

Medicare programs, and the attendees are provided with comprehensive informational 

materials. A total of 1,825 railroad labor union officials attended 30 informational conferences held in cities throughout the United States during 2005. In addition, railroad 

labor unions frequently request that Board representatives speak before their meetings, seminars and conventions. In 2005, the Labor Member’s Office was represented 

at eight union gatherings attended by 1,391 railroad labor officials. Field personnel 

addressed 111 local union meetings with 4,648 members in attendance. 

In May 2006, the Board’s Management Member’s Office welcomed over 130 

reporting officials from across the nation to its sixth National Rail Employer Training 

Seminar in Chicago. The seminar offered a variety of instructional sessions providing 

information and guidance for those railroad officials responsible for preparing and filing reports of service, compensation, contributions and other business interactions with 

the Board. 
42 2006 Annual Report, U.S. Railroad Retirement Board 

Office of Inspector General 

During fiscal year 2005, the Office of Inspector General conducted eleven audits to 

identify operational weaknesses and provide recommendations for corrective action to 

agency management. The financial impact of audit findings exceeded $5.4 million. 

Auditors continued to focus on financial management issues and information system 

security activities at the agency. In addition, a contractor retained by the Office of 

Inspector General conducted information systems security control tests and evaluations. 

The agency realized additional monies in the annual financial interchange with the 

Social Security Administration as a result of an earlier audit that recommended unrecovered overpayments be included in the financial interchange calculation. To account 

for uncollectible benefit overpayments written off in calendar years 1997-2003, a total 

of $8 million was added to the fiscal year 2004 transfer. 

An audit of the Railroad Retirement Board’s fiscal year 2004 financial statements, 

related internal controls and compliance with laws and regulations was completed, and 

a clean opinion on the financial statements was issued. A material weakness in the 

agency’s information security program and a reportable condition in controls over 

implementation of changes to laws and regulations were cited. The audit also cited 

four serious management challenges facing the agency: control environment, asset 

stewardship, managing for change and information technology security. 

In accordance with the provisions of the Federal Information Security Management 

Act (FISMA) of 2002, auditors conducted the annual evaluation of information security 

and assessed the effectiveness of the agency’s information system security program and 

practices. They identified two new significant deficiencies in the agency’s security program as a result of delays in meeting FISMA requirements. The agency has not implemented an effective risk assessment process, and efforts to implement a consistent, 

compliant testing and evaluation process have not been successful. Without completion 

of corrective actions, the Office of Inspector General warned that the agency will be 

unable to eliminate information security as a material weakness in agency operations. 

Other issues examined during the year included the processing of disability earnings cases, retired employee work deductions, competitive sourcing compliance, internal controls in selected areas, annuity payment issues and compliance with the Prompt 

Payment Act. 

Investigative activities resulted in 55 criminal convictions, 52 indictments and 

informations, 30 civil judgments and $2.8 million in recoveries, restitutions, fines, civil 

damages, and penalties. Various schemes used by annuitants to conceal their earnings 

to avoid the earnings restrictions of the RRB disability program were identified. The 

Office of Inspector General continues to focus the majority of its efforts investigating 

fraud related to the RRB’s disability program. These cases typically involve sophisticated fraud schemes disguised as legitimate business arrangements. 
LEGAL RULINGS

Four cases involving the Railroad Retirement Board were resolved by the courts 

during fiscal year 2005. Several significant legal opinions were issued. 

Court Cases 

Five cases of various types involving petitions for review of decisions of the 

Railroad Retirement Board were pending in the courts at the beginning of 

fiscal year 2005, and three cases were opened during the fiscal year. Four 

cases were resolved during fiscal year 2005; each decided in the Board’s favor. Four 

cases were pending at the end of the fiscal year. 

Legal Opinions 

The following Legal Opinions are presented here because of their special significance or interest. 

Legal Opinion L-2005-4 concerned a proposed allocation as pay for time lost compensation of damages awarded by a jury verdict in a personal injury action. The 

General Counsel ruled that the entire amount of damages for past lost compensation 

should be allocated equally among months following the date of injury and through the 

date of entry of judgment, and that compensation may not be allocated to months after 

entry of judgment. 

The railroad employee was injured September 12, 2001, and brought a suit for damages against his railroad employer. After trial the State court on October 28, 2004, 

entered a judgment on the jury’s verdict in the amount of $130,835 for “past loss, 

including lost earnings” and $760,872 for “future loss, including lost earnings, medical 

expenses, pension loss, ability to provide household services.” The jury found 20 percent of the above damages to result from the plaintiff railroad employee’s own negligence, which reduced the total damages recoverable by the plaintiff employee to 80 percent of the total, or $104,668 for “past loss” and $608,697 for “future loss.” 

The regulations of the Board allow parties to agree that the employer file a return of 

compensation allocating pay to the months in which the time was actually lost. A reasonable relationship to the employee’s normal monthly pay is ordinarily no less than 10 

times the employee’s daily pay rate. 

The evidence in the case is that although a total judgment of $713,365 is payable to 

the employee in October 2004 based on factors including pay for time lost, no compensa43
44 2006 Annual Report, U.S. Railroad Retirement Board 

tion was allocated to specific months. The Board’s compensation records for the 

employee show a total of 34 months for which no compensation had been reported during the period following the September 2001 date of injury and through the date of 

entry of judgment in October 2004. The General Counsel advised that, in the absence 

of allocation to other factors, the Railroad Retirement Act requires that the entire 

$104,668 of damages, including past lost compensation, must be allocated equally 

among the 34 months following the date of injury and through the date of entry of judgment. 

Additional service months may be credited after entry of judgment or conclusion of 

a settlement agreement to the extent that the employee retains an employment relation 

with the railroad employer and that the judgment or settlement agreement clearly 

intends that the employment relation is to continue into the future. Though future 

earnings were explicitly included in the verdict in the subject case, the General Counsel 

pointed out that it cannot be shown that the parties intended to credit compensation to 

an identifiable period beyond the date of judgment. Accordingly, in the case, none of 

the $608,697 in damages awarded for factors including loss of future earnings may be 

credited as compensation to months beyond the date of the October 2004 judgment and 

verdict. 

Legal Opinion L-2005-5 concerned the effect under the Railroad Retirement and 

Railroad Unemployment Insurance Acts of payments under the provisions of the 

Burlington Northern and Santa Fe (BNSF) Voluntary Reserve Board Program of March 

2005. The General Counsel advised that payments made under that program are creditable as railroad compensation for benefit entitlement purposes under the Acts for 

months through the month in which the employee’s resignation takes effect. 

Under the program, an eligible employee may file an election to be placed on a 

“Voluntary Reserve Board.” The employee will be paid $2,500 per month for a period of 

3 years, except that payments end before expiration of 3 years if the employee becomes 

eligible for a full annuity under the Railroad Retirement Act, or if the employee dies. 

During the period of payment, the employee retains health insurance coverage and the 

right to participate in the BNSF 401(k) plan, and the employee remains subject to 

recall. BNSF will withhold health insurance premiums, union dues, and employment 

taxes under the Railroad Retirement Tax Act. The employee agrees to not reapply for 

any position at BNSF while on the reserve board, nor to perform service for BNSF in 

any capacity other than recall to service. The employee’s resignation becomes effective 

at the conclusion of the payments. 

An alternative offers employees eligible for the reserve board to elect immediate resignation and payment of a lump sum equal to $2,500 per month multiplied by the number of months in what would otherwise be the employee’s maximum period of reserve 

board eligibility (i.e., the lesser of 36 months or the number of months through eligibility for full retirement) for a gross lump sum not to exceed $90,000. The employer will 

deduct “federal, state and railroad retirement taxes, and union dues, etc.” but employees electing the lump sum are not subject to recall, and are not eligible for continuing 

health and welfare benefits or for 401(k) contributions. 
LEGAL RULINGS 45 

The General Counsel advised that payments made to employees electing placement 

on the voluntary reserve board under the BNSF Voluntary Reserve Board Program of 

March 2005 are creditable as compensation for benefit entitlement purposes under the 

Railroad Retirement Act and Railroad Unemployment Insurance Act, including calculation of the tier II annuity component, during the period the employee remains on the 

reserve board. The lump-sum payment made under the program to those who elect 

immediate resignation is creditable only through the date of resignation, except with 

respect to the tier I annuity calculation. 

Legal Opinion L-2005-14 concerned whether an individual retained a current connection with the railroad industry following transfer from the Transportation Security 

Administration (TSA) to the Department of Homeland Security. 

The employee, who was born in February 1947, has been credited with a total of 366 

months of service in the railroad industry through April 2001, when he left railroad service. In April 2002, he was hired by the TSA. The employee indicated that he intends 

to retire at age 60 in 2007, and requested advice as to whether his continued employment for TSA will break his current connection with the railroad industry. 

Assuming the employee’s continued employment for the TSA after November 2002 

to be regular and substantial, it would break his current connection unless that employment falls within a specified exception. 

Congress on November 19, 2001, created the TSA as an agency within the 

Department of Transportation. Service with the Department of Transportation is 

excluded from that which will break a current connection. 

The Homeland Security Act established a new Department of Homeland Security as 

an executive department of the United States government. That Act also established 

the post of Under Secretary for Border and Transportation Security, and transferred to 

that official “the functions, personnel, assets and liabilities of *** the Transportation 

Security Administration of the Department of Transportation ***.” The Act required 

that the TSA continue to be maintained as a distinct entity within the Department of 

Homeland Security for at least 2 years after the date of enactment, and also provided 

that with respect to any function transferred under the Act, reference in any other 

Federal law to any department the functions of which are transferred shall be deemed 

to refer to the Secretary. 

The General Counsel advised that the Homeland Security Act quoted above requires 

that the reference to the Department of Transportation in the Railroad Retirement Act 

must be deemed to refer by name to any former component of the Department of 

Transportation, such as the TSA, which the Homeland Security Act transferred to the 

Department of Homeland Security. This means that section 1(o) of the Railroad 

Retirement Act must be read as if it explicitly lists the Transportation Security 

Administration among those Federal entities for which employment is disregarded 

when determining the existence of a current connection. 
46 2006 Annual Report, U.S. Railroad Retirement Board 

Accordingly, the General Counsel ruled that the employee has not lost his regular 

current connection by reason of his continued employment for the Transportation 

Security Administration. A final determination as to whether he retains a current connection at the time his annuity begins to accrue must be made after he files his annuity 

application, and must consider any other employment he might have performed. 

Legal Opinion L-2005-20 concerned whether work classified as “seasonal” employment by a Federal agency is exempt from the last pre-retirement non-railroad 

employment (LPE) provisions of the Railroad Retirement Act. The question arose 

when an employee annuitant worked as a seasonal employee for the Internal Revenue 

Service (IRS) for a period of a little more than 4 years. 

Prior to 1988, the Railroad Retirement Act provided that an employee must terminate all employment, railroad and nonrailroad, in order to be entitled to an annuity 

and no annuity was payable for any month an individual worked for such employers 

after his annuity began. In 1988 the restrictions related to nonrailroad employment 

were revised such that an individual was no longer required to terminate nonrailroad 

employment, but was subject to work deductions for such work after the annuity 

began. 

Employment of a seasonal nature falls outside the scope of the LPE restrictions. 

However, application of the “seasonal employment” exception requires the satisfaction 

of the following three factors: 1) the employee possesses no reemployment rights and 

must reapply each year for the position, 2) the employment relationship is terminated 

at the end of each period of employment, and 3) such employment has terminated prior 

to the annuity beginning date for a reason not related to the application for an annuity 

under the Railroad Retirement Act. 

In the case at issue, the employee’s annuity beginning date was August 1, 2000. 

His seasonal employment for the IRS ran from January 31, 2000, through March 17, 

2004, and included several furloughs during that period. The employee did not possess 

reemployment rights and did not reapply each year. His employment relationship did 

not terminate at the end of each period of employment. The employee started with the 

IRS on January 31, 2000, as a seasonal employee and resigned March 17, 2004. A 

table provided by the IRS indicates that the employee worked 8 months in 2000, 

9 months in 2001, essentially all of 2002, 5 months in 2003 and one month in 2004. 

That an employer categorizes certain types of employment as seasonal is not sufficient to warrant application of the seasonal employment exception for LPE work 

restrictions. The General Counsel ruled that, based on the available information, it did 

not appear that any of the three conditions enumerated above were satisfied. Although 

the IRS indicates that the employee does not possess any reemployment rights, the IRS 

also advises that the employee did not have to reapply each year. Furthermore, the 

IRS indicated that the employee was in furlough status when he was not working and 

that his employment relationship with the IRS did not terminate until he resigned in 

March of 2004. Finally, the employment did not terminate before the employee’s annu-
LEGAL RULINGS 47 

ity beginning date as the IRS indicated that the employee was first placed on furlough 

on August 26, 2000, which is after his annuity beginning date of August 1, 2000. 

Accordingly, the General Counsel found that the employee’s employment with the IRS 

was subject to the LPE work restrictions. 

Appeals 

Any claimant for benefits under the Railroad Retirement or Railroad Unemployment Insurance Acts may appeal a determination he or she feels is not justified. This 

appeal must be filed within certain time frames. Appeals are heard and decided by the 

Bureau of Hearings and Appeals. An appellant who is dissatisfied with the decision on 

his or her appeal may further appeal the case to the three-member Board within a prescribed period of time. 

Railroad Retirement Act 

During fiscal year 2005, 626 appeals were filed with the Bureau of Hearings and 

Appeals under the Railroad Retirement Act, and the Bureau rendered decisions in 631 

appeals, including some carried over from the previous year. The initial or reconsideration decision was sustained in 224 cases. In 407 appeals the decision was favorable to 

the claimant in whole or in part. 

Seventy-seven appeals were filed with the Board in fiscal year 2005, which, added 

to the 22 appeals carried over from the previous year, brought the total to be considered 

to 99. Of 70 decisions, 59 sustained previous rulings of the hearings officer, three were 

reversed, one was remanded to the Office of Programs, two were remanded to the 

Bureau of Hearings and Appeals, and five were dismissed. At the end of the year, 

29 appeals were pending before the Board. 

Railroad Unemployment Insurance Act 

During fiscal year 2005, 51 appeals were filed with the Bureau of Hearings and 

Appeals under the Railroad Unemployment Insurance Act, and the Bureau rendered 

decisions in 61 appeals, including some carried over from the previous year. The initial 

or reconsideration decision was sustained in 44 cases. In 17 appeals the decision was 

favorable to the claimant in whole or in part. 

Twelve appeals were filed with the Board in fiscal year 2005, which, added to the 

two carried over from the previous year, brought the total to be considered to 14. The 

Board rendered decisions in eight cases of appeals from the decision of the referee, 

affirming the decision in seven cases, and remanding one to the Bureau of Hearings 

and Appeals. At the end of the year, six appeals were pending before the Board. 
STATISTICAL

TABLES
Table 1.--Beneficiaries and benefits paid under the Railroad Retirement Act and the Railroad Unemployment Insurance Act, by fisc

Fiscal year Total1 Retirement2 Survivor2 Unemployment 

BENEFICIARIES (in thousands) 1996....................................................... 849 565 272 17 1997....................................................... 830 549 263 15 1998....................................................... 800 530 254 11 1999....................................................... 777 514 246 13 2000....................................................... 755 499 237 14 2001....................................................... 737 483 228 18 2002....................................................... 719 475 219 17 2003....................................................... 699 465 211 15 2004....................................................... 677 456 203 12 2005....................................................... 659 448 194 10 BENEFIT PAYMENTS (in millions) 1996....................................................... $8,179.1 $6,089.1 $2,024.4 $40.7 1997....................................................... 8,278.6 6,166.3 2,039.4 37.5 1998....................................................... 8,305.9 6,199.0 2,047.5 25.9 1999....................................................... 8,317.7 6,207.2 2,041.3 33.0 2000....................................................... 8,373.3 6,254.1 2,040.3 36.4 2001....................................................... 8,506.2 6,352.6 2,058.8 43.2 2002....................................................... 8,742.1 6,535.9 2,107.5 49.2 2003....................................................... 8,957.3 6,726.0 2,136.9 44.3 2004....................................................... 9,091.3 6,876.9 2,131.3 37.7 2005....................................................... 9,254.0 7,051.6 2,129.5 29.2 

1 Benefit payments include a small amount of payments for hospital insurance benefits for services in Canada.2 Retirement benefits include vested dual benefit and supplemental annuity payments. Survivor benefits include vested dual benefit payments.

NOTE.-- Number of beneficiaries represents all individuals paid benefits in year. In total number for each year, beneficiaries are counted only once, ehave received more than one type of benefit. In fiscal year 2005, 9,100 individuals received both retirement and survivor benefits, 1,000 employees reunemployment and sickness benefits, and 3,800 employees received benefits under both the Railroad Retirement Act and the Railroad Unemploymen

figures are partly estimated, and totals for earlier years are similarly adjusted.
Table 2.--Status of the Railroad Retirement Act accounts and trust funds, by fiscal year, 1996-2005 (In mil

Fiscal Year 

Item 1996 1997 1998 1999 2000 2001 2002 

RAILROAD RETIREMENT ACCOUNT 

Receipts 

Tax transfers1 ..................................................................... 2$2,474.7 $2,518.7 $2,660.8 3$2,932.4 $2,928.6 $2,819.2 $2,743.1 $2,

Interest and profit on investments4 ....................................... 5913.0 61,348.9 1,730.2 316.0 1,316.0 2,038.9 1,832.0 

Transfers from the National RR Investment Trust7 .................. ........ ........ ........ ........ ........ ........ ........ Transfers from the SSEB Account7 .......................................... ........ ........ ........ ........ ........ ........ ........ 

Expenditures 

Benefit payments8 ............................................................... $2,854.5 6$2,225.5 $2,888.3 $2,880.6 $2,925.3 $2,930.2 $3,337.8 $3,

Net transfers to administration............................................. 50.8 47.1 49.5 51.2 55.9 54.7 64.9 Transfers to the National RR Investment Trust7 ........................ ........ ........ ........ ........ ........ ........ 1,431.6 17,

Balance at end of period9 ......................................................... $12,352.5 $13,972.3 $15,451.2 $15,768.9 $17,032.9 $18,907.2 10$18,640.4 11$

SOCIAL SECURITY EQUIVALENT BENEFIT ACCOUNT12 

Receipts 

Tax transfers1 ..................................................................... 2$1,918.3 $2,046.5 $2,208.7 3$2,000.1 $2,208.5 $2,134.0 $2,134.7 $2,

Interest and profit on investments4 ....................................... 5123.3 6(116.2) 90.7 91.5 101.7 93.8 115.4 

Transfers under financial interchange13 ................................. 3,556.3 3,747.2 3,819.1 3,816.0 3,697.6 3,282.8 3,646.8 3,

Advances against financial interchange14 .............................. 3,150.1 3,183.9 3,145.1 2,992.3 3,005.1 3,145.2 3,153.9 3,

Expenditures 

Benefit payments8 ............................................................... $4,939.4 6$5,681.4 $5,078.8 $5,104.5 $5,124.8 $5,256.5 $5,146.7 $5,

Net transfers to administration............................................. 23.3 25.3 26.2 25.2 27.1 25.0 26.1 Transfers under financial interchange13 ................................. 401.3 419.1 419.4 429.9 465.3 469.7 424.7 

Repayment of advances against financial interchange15 ............ 3,329.5 3,399.0 3,430.0 3,370.8 3,190.1 3,222.2 3,385.3 3,

Transfers to the National RR Investment Trust/RR Account7 

...... ........ ........ ........ ........ ........ ........ ........ 1,

Balance at end of period......................................................... $2,319.4 $1,656.1 $1,965.2 $1,934.7 $2,140.3 $1,822.7 $1,890.9 $See footnotes at end of table. 
Table 2.--Status of the Railroad Retirement Act accounts and trust funds, by fiscal year, 1996-2005 (In millions) 

Fiscal Year 

Item 1996 1997 1998 1999 2000 2001 2002 

NATIONAL RAILROAD RETIREMENT INVESTMENT TRUST16 

Cash and investment balance at end of period17 ........................... ........ ........ ........ ........ ........ ........ $1,420.7 $23,

RAILROAD RETIREMENT SUPPLEMENTAL ACCOUNT18 

Receipts 

Tax transfers1..................................................................... 2$68.3 $103.6 $118.1 $90.4 $76.7 $67.8 $23.5 

Interest and profit on investments4....................................... 5(20.5) (0.9) 0.7 2.5 3.5 3.1 2.9 

Expenditures 

Benefit payments8............................................................... $86.2 $82.4 $78.6 $75.1 $72.9 $68.8 $16.8 

Net transfers to administration............................................. 2.2 2.2 2.0 2.1 2.3 2.0 0.7 Transfers to the National RR Investment Trust7........................ ........ ........ ........ ........ ........ ........ 70.4 

Balance at end of period9......................................................... $41.2 $35.3 $41.0 $56.8 $61.7 $61.7 10........ 

DUAL BENEFITS PAYMENTS ACCOUNT19 

Dual benefit transfers20 ............................................................... $239.0 $223.0 $205.5 $189.0 $173.3 $160.0 $146.0 $

Benefit payments................................................................... 233.4 216.4 200.9 188.4 171.4 156.0 142.2 Balance at end of period9 ......................................................... $5.3 $6.6 $4.6 $0.6 $1.9 $4.0 $3.9 

See footnotes at end of table. 
Footnotes - Table 2

 1 Net of U.S. Treasury adjustments for payroll tax refunds to certain carriers and their employees for prior periods. Includes Federal income tax transfers under s

Revenue Code as amended. 

2

 Reflects adjustment for misclassified supplemental annuity tax refunds for fiscal year 1996 and prior fiscal years: Railroad Retirement Account -$13.4 million, S

Benefit Account -$14.5 million, and Railroad Retirement Supplemental Account +$27.9 million. 

3 Reflects transfer of $83.1 million from the Social Security Equivalent Benefit Account to the Railroad Retirement Account for reallocation of fiscal year 1998 pay

Retirement Account also reflects special Treasury income tax adjustment of $146 million for calendar years 1988-1994. 

4

 Net of interest on U.S. Treasury adjustments for payroll tax refunds (see note 1). Railroad Retirement and Social Security Equivalent Benefit Accounts reflect a

benefit payment adjustments related to the financial interchange (see note 8). 

5

 Reflects adjustment for misclassified supplemental annuity tax refunds for fiscal year 1996 and prior fiscal years: Railroad Retirement Account -$11.0 million, S

Benefit Account -$10.8 million, and Railroad Retirement Supplemental Account +$21.8 million. 

6 Reflects adjustment in benefit payments (Railroad Retirement Account -$676.8 million, Social Security Equivalent Benefit Account +$676.8 million) charged to t

Benefit Account for October 1984 - December 1995, as compared to actual financial interchange benefits, with interest (Railroad Retirement Account +$241.6 milEquivalent Benefit Account -$241.6 million) through August 1, 1997. 

7 Under the Railroad Retirement and Survivors' Improvement Act of 2001, as amended, the portion of the Railroad Retirement Account not needed to pay curren

to be transferred to the National Railroad Retirement Investment Trust (Trust). The Trust may transfer funds back to the Railroad Retirement Account for paymenthe Social Security Equivalent Benefit (SSEB) Account not needed to pay current benefits and administrative expenses is to be transferred to the Trust or to the RThe SSEB Account transferred funds to the Trust in fiscal year 2003 and to the Railroad Retirement Account thereafter. 

8 Railroad Retirement and Social Security Equivalent Benefit Accounts reflect adjustments in benefit payments charged to the Social Security Equivalent Benefit 

actual financial interchange benefits. Effective January 1, 2002, supplemental benefits are paid from the Railroad Retirement Account.

 9 The Railroad Retirement Account balance reflects (a) the current net difference between Board payments of social security benefits and the receipt of reimburs

(b) liabilities for uncashed check credits received from U.S. Treasury, (c) credits for undistributed payment returns and recoveries, and (d) loans to and repaymentUnemployment Insurance or the Railroad Retirement Supplemental Accounts. The Railroad Retirement Supplemental Account balance reflects loans from and reto the Railroad Retirement Account. The Dual Benefits Payments Account balance does not carry over to the following year. 

10 Reflects transfer of $124,000 from the Railroad Retirement Supplemental Account to the Railroad Retirement Account. The Railroad Retirement Account bala

$7.8 million to the Railroad Unemployment Insurance Account. 

11 Reflects payment during the year of the entire debt balance from the Railroad Unemployment Insurance Account, $7.8 million in principal and $0.4 million in int12 Established October 1, 1984, to keep track of the financing and payment of social security level portions of railroad retirement benefits. 13 Transfers to or from OASDHI Trust Funds under section 7(c)(2) of the 1974 Railroad Retirement Act. 14 Advances, including interest, from U.S. Treasury to offset lag in receipt of financial interchange funds under section 7(c)(4) of the 1974 Railroad Retirement Ac15

 Includes interest. 

16

 Established February 1, 2002, for investment of railroad retirement assets. 17 Source: National Railroad Retirement Investment Trust. 

18 Under the Railroad Retirement and Survivors' Improvement Act of 2001, the supplemental work-hour tax was repealed for years after 2001, and the separate R

Supplemental Account was eliminated. 

19

 Established October 1, 1981, to keep track of the financing and payment of vested dual benefits. 20 Transfers from U.S. Treasury under section 15(d) of the Railroad Retirement Act of 1974 and Federal income tax transfers under section 72(r) of the Internal R
Table 3.--Status of the Railroad Unemployment Insurance Account, by fiscal year, 2001-2005 (In thousands)

Fiscal year

 Item 2001 2002 2003 2004 RECEIPTS Taxes............................................................

... $30,575 $75,696 $122,638 $109,191 

 Interest............................................................ 1,582 3,444 5,148 

4,204

 Transfer from Administration fund under sec. 11(d) of the RUI Act........................

... 6,048 6,734 5,645 6,608 

 Undistributed recoveries of benefit payments1

...

... 865 (900) 788 (1,037

 Loan from the RR Account................................. .... 7,800 .... ....  Total............................................................

... $41,692 $90,912 $132,515 $119,910 

EXPENDITURES Benefit payments.............................................

... $94,823 $98,580 $94,389 $82,975 

 Repayment of RRA Loan.................................... .... .... 8,181 ....  Funding for Office of Inspector General............... 1,233 1,372 1,392 1,318  Total............................................................

... $96,057 $99,953 $103,962 $84,293 

Cash balance end of period.................................

... $28,409 $19,368 $47,921 $83,537 

LOANS DUE RAILROAD RETIREMENT ACCOUN

T

 Loans............................................................

... .... $7,800 .... .... 

 Interest accrued................................................ .... 208 $173 ....  Repayment from RUI Account...........................

... .... .... 8,181 .... 

Due RR Account end of period...........................

... .... $8,008 .... .... 

1 Net of distributed payments.
Table 4.--Status of the RUIA Administration Fund, by fiscal year, 1996-2005 (In thousands) 

Transfer to 

Railroad 

Unemployment 

Insurance 

Taxes and Administrative Account under 

Fiscal year interest expenditures1 Sec. 11d2 

1996...................................... $17,373 $16,497 $689 1997...................................... 16,891 16,136 694 1998...................................... 19,081 13,123 2,993 1999...................................... 20,235 13,188 5,814 2000...................................... 19,941 14,847 6,546 2001...................................... 20,434 14,004 6,048 2002...................................... 20,032 13,266 6,734 2003...................................... 21,313 15,407 5,645 2004...................................... 20,787 15,846 6,608 2005...................................... 21,126 15,761 6,544 

1 Expenditures for each year included encumbrances as of end of year. 2 Transfers to the Railroad Unemployment Insurance Account are based on the amount the accrual balance on the 

 September 30 exceeded $6,000,000. 
Retired employees Spouses

and Widowed

Supple- divorced Aged Disabled mothers 

 Total1 Age Disability mental spouses widow(er)s2 widow(er)s (fathers)2 Children 

NUMBER AT END OF YEAR1996 ............................ 936,428 265,030 78,647 161,806 188,281 204,969 6,371 1,525 14,960 

1997 ............................ 906,741 255,664 79,063 155,721 181,399 197,447 6,202 1,462 14,665 1998 ............................ 875,905 245,900 79,017 149,260 174,467 190,222 6,031 1,427 14,347 1999 ............................ 846,687 236,741 79,617 143,515 167,478 182,839 5,893 1,327 13,964 2000 ............................ 819,327 228,439 80,158 138,158 161,283 175,464 5,679 1,245 13,561 2001 ............................ 790,711 219,646 80,574 132,799 154,710 167,840 5,460 1,165 13,233 2002 ............................ 775,638 216,044 81,653 132,066 151,006 160,490 5,236 1,114 12,804 2003 ............................ 756,176 210,363 82,572 129,201 146,740 153,673 5,105 1,035 12,472 2004 ............................ 736,787 204,650 83,302 125,992 142,881 146,943 4,936 1,050 12,176 2005 ............................ 721,659 199,767 84,000 123,550 141,330 140,595 4,835 999 11,795 AVERAGE AMOUNT

1996 ............................ ......... $1,175 $1,228 $43 $471 $708 $628 $882 $608 

1997 ............................ ......... 1,223 1,291 43 487 740 650 916 627 1998 ............................ ......... 1,264 1,346 43 502 768 672 957 646 1999 ............................ ......... 1,300 1,398 43 514 792 687 991 659 2000 ............................ ......... 1,351 1,465 42 530 826 711 1,029 678 2001 ............................ ......... 1,414 1,548 42 550 870 746 1,076 706 2002 ............................ ......... 1,496 1,624 42 579 948 799 1,228 728 2003 ............................ ......... 1,554 1,683 42 598 985 831 1,279 744 2004 ............................ ......... 1,619 1,751 42 620 1,026 865 1,337 766 2005 ............................ ......... 1,693 1,825 42 638 1,069 902 1,388 789 

1 Includes annuities to parents. On September 30, 2005, there were 53 parents' annuities in current-payment status averaging $775. 2 Numbers include annuities temporarily being paid at spouse annuity rates, pending final adjudication of survivor annuities. 

NOTE.--Data exclude survivor (option) annuities. On September 30, 2005, there was one survivor (option) annuity of $76 in current-payment st

Fiscal year

Table 5.--Number and average amount of retirement and survivor annuities in current-payment status at end of y

by type of annuitant and fiscal year, 1996-2005
 Table 6.--Number and average amount of retirement and survivor annuities awarded during year, by type of annuitant and 

Retired employees Spouses 

and Widowed 

Supple- divorced Aged Disabled mothers 

Fiscal year Total 1 Age Disability mental spouses widow(er)s widow(er)s (fathers) Childre

NUMBER AWARDED 

1996......................... 38,635 7,415 4,878 4,414 9,576 9,979 233 204 821997......................... 38,293 7,422 4,872 4,494 9,175 9,868 240 222 851998......................... 36,508 6,756 4,620 4,399 8,739 9,566 248 236 851999......................... 36,205 6,846 5,140 4,496 8,157 9,317 246 199 712000......................... 35,818 7,186 4,709 4,749 8,316 8,699 204 159 712001......................... 33,289 6,285 4,630 4,339 7,648 8,372 217 157 612002......................... 44,485 11,127 5,206 8,337 9,764 8,104 199 161 592003......................... 37,841 8,261 4,955 6,124 8,749 7,800 244 162 642004......................... 36,083 7,801 4,764 5,590 8,579 7,320 218 186 6620052........................ 37,405 7,958 4,399 5,671 10,380 7,020 239 176 58

Cumulative 1937-2005 4,839,987 1,414,548 496,439 448,501 1,104,584 1,002,040 17,209 84,275 234,20AVERAGE AMOUNT 

1996......................... ........ $1,435 $1,527 $41 $505 $858 $770 $955 $74

1997......................... ........ 1,506 1,593 41 521 888 782 868 761998......................... ........ 1,579 1,649 41 545 920 810 908 801999......................... ........ 1,654 1,751 41 567 945 825 993 832000......................... ........ 1,745 1,871 41 584 998 901 1,049 852001......................... ........ 1,842 1,971 41 613 1,044 927 996 932002......................... ........ 2,243 2,051 42 697 1,286 1,148 1,319 962003......................... ........ 2,201 2,092 41 733 1,346 1,262 1,384 952004......................... ........ 2,247 2,168 41 744 1,378 1,257 1,550 9920052........................ ........ 2,285 2,210 41 655 1,416 1,288 1,397 1,02

1 Includes annuities to parents. Fiscal year 2005 total includes 9 annuities to parents averaging $1,032. Cumulative total includes 3,522 annuit

An unusuall y large number of spouse awards were made with small or no tier 1 amounts, resulting in larger than normal numbers of spouse a

 than normal award amounts. NOTE.--Cumulative figures reflect adjustments not made in yearly data, but average amounts for each year include effects of changes in rates m

the year. 

2
Total Retirement benefits2 

 Monthly Monthly 

State1 Number amount Number amount 

Alabama........................................................................ $13,079 8,900 11,900 $10,104 

Alaska........................................................................... 223 200 200 169 

Arizona.......................................................................... 13,407 13,000 10,100 10,443 Arkansas........................................................................ 13,299 11,700 9,200 10,802 

California........................................................................ 40,432 40,000 30,400 31,067 Colorado........................................................................ 10,512 9,700 7,400 8,169 

Connecticut..................................................................... 3,879 3,600 2,600 2,898 

Delaware........................................................................ 2,457 2,200 1,600 1,838 

Washington DC................................................................ 565 700 500 401 Florida........................................................................... 41,115 39,300 30,900 32,898 Georgia.......................................................................... 21,275 19,300 14,800 16,779 

Hawaii............................................................................ 215 300 200 164 Idaho.............................................................................. 6,454 5,900 4,600 5,111 

Illinois............................................................................. 47,420 46,200 35,700 36,867 

Indiana........................................................................... 22,365 20,900 16,000 17,300 Iowa............................................................................... 12,121 11,800 9,000 9,243 Kansas........................................................................... 19,477 17,900 14,100 15,480 Kentucky........................................................................ 20,530 18,800 14,600 16,149 Louisiana........................................................................ 10,675 9,800 7,400 8,109 

Maine............................................................................. 4,036 3,900 2,900 3,012 

Maryland........................................................................ 12,848 12,200 9,000 9,582 Massachusetts................................................................. 5,660 5,800 4,200 4,133 

Michigan........................................................................ 19,777 18,900 14,700 15,496 Minnesota....................................................................... 21,198 20,700 15,900 16,334 

Mississippi...................................................................... 8,501 8,000 6,200 6,712 

Missouri......................................................................... 25,764 24,700 19,000 20,098 Montana......................................................................... 8,356 7,600 6,000 6,586 

Nebraska........................................................................ 15,525 13,900 11,000 12,419 

Nevada........................................................................... 4,668 4,400 3,500 3,742 

New Hampshire................................................................ 1,116 1,200 900 805 

New Jersey..................................................................... 12,575 12,000 8,700 9,259 New Mexico..................................................................... 6,228 6,000 4,600 4,796 

New York........................................................................ 31,338 29,300 21,500 23,965 

North Carolina................................................................... 13,891 13,100 9,900 10,759 North Dakota.................................................................... 4,570 4,200 3,200 3,525 

See footnotes at end of table.

Table 7.--Retirement and survivor benefits in current-payment status on September 30, 2005, by class and state (Amount
Total Retirement benefits2 S

 Monthly Monthly 

State1 Number amount Number amount Numb

Ohio............................................................................... $39,408 28,300 37,800 $29,486 9,5Oklahoma....................................................................... 6,990 6,500 5,000 5,420 1,6

Oregon........................................................................... 11,696 11,000 8,500 9,142 2,5

Pennsylvania................................................................... 52,452 49,600 35,500 37,831 14,1Rhode Island.................................................................... 726 700 500 516 2

South Carolina.................................................................. 8,926 8,100 6,100 6,967 2,0

South Dakota................................................................... 1,665 1,700 1,300 1,291 4

Tennessee...................................................................... 16,342 15,200 11,400 12,532 3,8Texas............................................................................. 45,304 41,800 31,900 35,076 9,9Utah............................................................................... 7,681 7,100 5,400 5,832 1,7

Vermont......................................................................... 1,084 1,200 800 761 3Virginia........................................................................... 24,507 22,500 16,900 18,869 5,6

Washington..................................................................... 15,788 14,900 11,600 12,379 3,3West Virginia.................................................................... 13,268 12,400 9,200 9,873 3,2Wisconsin....................................................................... 13,784 13,700 10,600 10,575 3,1Wyoming........................................................................ 4,362 3,800 3,000 3,500 8

Outside United States:Canada.......................................................................... 2,096 3,400 2,200 1,150 1,2

Mexico........................................................................... 293 400 200 139 2Other.............................................................................. 701 800 500 405 4

 Total3............................................................................ $762,647 548,600 721,700 $586,955 173,0

Table 7.--Retirement and survivor benefits in current-payment status on September 30, 2005, by class and state (Amounts in thous

1 State of residence of beneficiary on September 30, 2005.2 Includes 123,600 supplemental annuities to employees receiving regular annuities. In a relatively small number of cases, employees were also receiving spouse or 3 Includes beneficiaries whose state of residence was unknown.

NOTE.--Retirement benefits include regular and supplemental employee annuities, spouse annuities and divorced spouse annuities. Survivor benefits include annuit

widow(er)s, widowed mothers and fathers, remarried and divorced widow(er)s, children, parents, survivor (option) annuities, and widow(er)s annuities temporarily bei

annuity rates pending final adjudication of survivor annuities. Benefit amounts exclude social security payments to dual beneficiaries.
Table 8.--Principal administrative data for the unemployment and sickness benefit programs, benefit years 2000-2001 thro

Item 2000-2001 2001-2002 2002-2003 2003-2004 

Qualified employees................................. 277,400 269,900 259,100 248,800 Maximum daily benefit rate...................... $48 $50 $52 $55 

UNEMPLOYMENT BENEFITS

Net amount of benefits paid (thousands) $43,008 $47,383 $45,614 $38,264 

Payments:1

 Number................................................... 96,100 103,600 96,700 76,400  Average amount per two week claim period......................................... $415 $429 $449 $477 Beneficiaries............................................... 16,700 17,800 15,400 11,700 Applications received................................ 20,100 22,000 18,300 14,400 Claims received.......................................... 118,800 128,500 116,400 91,700 Normal benefit accounts exhausted........ 2,200 2,700 2,900 2,400 Non-compensable waiting period only2.. (3) (3) (3) (3) 

SICKNESS BENEFITS

Net amount of benefits paid (thousands) $49,512 $50,904 $49,891 $46,413 Payments:1

 Number................................................... 163,200 168,400 160,700 152,700  Average amount per two week claim period......................................... $426 $445 $461 $486 Beneficiaries............................................... 23,000 23,000 22,400 21,600 Applications received................................ 28,700 28,100 27,900 26,600 Claims received.......................................... 189,000 194,000 185,700 176,800 Normal benefit accounts exhausted........ 4,500 5,100 4,700 4,500 Non-compensable waiting period only2.. 100 100 100 200 

1 Not adjusted for recoveries or settlements of underpayments.2 Benefits are payable for each day of unemployment or sickness in excess of 7 during the first 14-day registration period in a ben3 Less than 50.

NOTE.--Data covered program activities during the year, regardless of when unemployment or sickness occurred. 
...

Table 9.--All employees, new entrants, employees qualified for RUIA benefits, and related data, by employer, 

All employees New entrants Creditab

With

With 12 months sufficient Qualified Qualified

of service service for for RUIA for RUIA

Class or name of employer Total in 2004 RRA annuity benefits Total benefits Tier I 

CLASS OF EMPLOYER

Class I railroads................................................................. 202,273 160,294 159,866 192,280 17,290 10,793 $10,833,529 Class II railroads................................................................ 8,388 6,266 6,299 7,688 763 440 384,154 Class III railroads................................................................ 36,016 28,686 25,579 33,644 2,607 1,492 1,876,526 Switching and terminal companies................................... 5,276 3,921 3,782 4,743 537 266 247,069 Car-loan companies........................................................... 2,117 1,653 1,579 1,971 283 168 97,484 Miscellaneous employers1.......................................... 4,859 3,621 3,306 4,282 454 224 260,281 

 Total................................................................................ 258,929 204,441 200,411 244,608 21,934 13,383 $13,699,043 SELECTED EMPLOYERSBNSF Railway Company.................................................... 43,035 35,067 35,546 41,266 3,455 2,351 $2,464,632 Canadian National, U.S. Operations Chicago Central and Pacific Railroad Co....................... 274 222 230 270 5 5 15,248  Duluth, Winnipeg and Pacific Railway Co..................... 177 153 157 174 ..... ..... 11,346  Grand Trunk Western Railroad Incorporated................ 1,625 1,277 1,470 1,590 17 9 98,418  Illinois Central Railroad Company................................. 3,372 2,816 2,460 3,269 123 63 209,634  Sault Ste. Marie Bridge Company.................................. 57 53 57 56 ..... ..... 3,166  Wisconsin Central LTD.................................................. 1,536 1,288 1,447 1,510 3 ..... 91,231 CSX Transportation Incorporated...................................... 35,778 28,367 27,678 34,396 2,186 1,504 1,891,338 Kansas City Southern Railway Company.......................... 2,937 2,232 2,016 2,692 376 214 144,539  IC & E - Kansas City Southern Joint Agency................. 132 112 108 125 8 4 6,481 National Railroad Passenger Corp. (Amtrak)..................... 22,190 17,155 18,200 21,285 1,181 717 1,038,198 Norfolk Southern Corporation............................................ 31,185 25,108 24,906 29,097 2,642 1,087 1,597,192 Soo Line Railroad Company.............................................. 3,156 2,394 2,488 2,970 279 150 156,142 Union Pacific Railroad Company....................................... 56,819 44,050 43,103 53,580 7,015 4,689 3,105,963 

1 Includes labor organizations, lessor companies, employer associations and miscellaneous carrier affiliates.

NOTE.--Tier I compensation excludes miscellaneous compensation taxable at the tier I tax rate.
United States 

Railroad Retirement Board 

844 North Rush Street 

Chicago, Illinois 60611-2092 

RRB Website: www.rrb.gov