UNITED STATES

RAILROAD RETIREMENT BOARD

2007 Annual Report

For Fiscal Year Ended September 30, 2006
U.S. Railroad Retirement Board

Mission Statement

The Railroad Retirement Board’s mission is to administerretirement/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.

www.rrb.gov

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.
UNITED STATES

RAILROAD RETIREMENT BOARD

2007 Annual Report

For Fiscal Year Ended September 30, 2006

THE REPORT IN BRIEF 1

A REVIEW OF OPERATIONS 7

LEGISLATIVE AND ADMINISTRATIVE DEVELOPMENTS 35

LEGAL RULINGS 43

STATISTICAL TABLES 47
THE REPORT IN BRIEF

1

Benefits and Beneficiaries

B

enefits paid under the Railroad Retirement and Railroad Unemployment

Insurance Acts totaled over $9.5 billion in the fiscal year ending 

September 30, 2006. Retirement and survivor benefits were paid by the

Railroad Retirement Board to about 619,000 beneficiaries during the fiscal year, of

whom 578,000 were on the Board’s annuity rolls at the end of the year. More than

28,000 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 $9.4 billion during the 2006 fiscal year

were $260 million more than payments in the prior year. Employee and spouse annuitants were paid approximately $7.3 billion, accounting for 77 percent of the total payments. Employees received about $4.2 billion in age annuities, $2.0 billion in disability

annuities and $61 million in supplemental annuities, while spouses and divorced 

spouses received over $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 nearly 15,000 from fiscal year 2005.

Railroad retirement and unemployment insurance benefits totaling approximately

$9.5 billion were paid by the Railroad Retirement Board to more than 

643,000 beneficiaries in fiscal year 2006. Financial reports issued in 2007 on the

solvency of the railroad retirement and railroad unemployment insurance systems

were both favorable. Total railroad retirement system assets equaled 

approximately $30.6 billion as of September 30, 2006. 

Statistics are presented on the cash basis of accounting instead of the accrual

basis of accounting for much of the Report. However, with the exception of the

first paragraph on page 2, the Federal Income Tax Transfers section on page 10

and the accompanying table on page 11, which are also presented as cash, the

information on pages 2, 7-15 and 27-29 is presented on the accrual basis of

accounting. The primary difference between the two bases of accounting is that

the cash basis recognizes revenue and expenditures only when cash is received

and paid. The accrual basis, on the other hand, recognizes revenue when it is

earned and expenses when they are incurred.
Gross unemployment and sickness benefits paid in fiscal year 2006 totaled 

$105.6 million. Net benefits totaled over $72.8 million after adjustment for recoveries

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

years. Total gross benefit payments decreased by some $5.6 million from the preceding

year, while net benefit payments decreased by about $50,000. Net unemployment benefits totaling $30.8 million were paid to 9,200 claimants, while net sickness benefits of

$42.1 million were paid to 20,100 claimants.

Financial Reports

The Board’s 2007 railroad retirement financial report to Congress, which addressed

the period 2007-2031, was generally favorable, concluding that, barring a sudden, 

unanticipated, large decrease in railroad employment, or substantial investment losses,

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

25 years. The long-term stability of the system, however, is still questionable. Under

the current financing structure, actual levels of railroad employment and investment

return over the coming years will largely determine whether corrective action is 

necessary.

The Board’s 2007 railroad unemployment insurance financial report was also generally favorable. Even as projected maximum benefit rates increase 49 percent from $57

to $85 from 2006 to 2017, experience-based contribution rates maintain solvency. 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 2007 will likely remain in effect through

2010, 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 2006 stated that, as of September 30, 2006, the market value of the

Trust-managed assets had increased to $29.4 billion, reflecting a 9.82% rate of return.

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

equaled approximately $30.6 billion.

The 2007 railroad retirement and railroad unemployment insurance financial

reports and the National Railroad Retirement Investment Trust’s 2006 annual 

management report are available at www.rrb.gov.

Service

Customer Satisfaction Survey

The Board earned a score of 85 out of a possible 100 in a 2006 American Customer

Satisfaction Index survey which focused on railroad workers who were recently awarded disability benefits from the Board. The score was 14 points higher than the overall

2 2007 Annual Report, U.S. Railroad Retirement Board
THE REPORT IN BRIEF 3

Federal government mark. 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. 

Customer Service Plan

During fiscal year 2006, customers received benefit services within the timeframes

promised in the Board’s Customer Service Plan 98.6 percent of the time.

Other Developments

Legislation

The Pension Protection Act of 2006 (Public Law 109-280) was signed into law 

August 17, 2006. The Act, effective August 17, 2007, provides divorced spouses a railroad

retirement annuity independent of the employee’s actual entitlement. The employee must

be fully insured under the Social Security Act using combined railroad retirement and

social security earnings and the former spouse must be divorced from the employee for a

period of not less than 2 years. The law also extends tier II benefits to surviving former

spouses pursuant to divorce agreements. 

The Railroad Retirement Disability Earnings Act (Public Law 109-478), enacted

January 12, 2007, increased the amount employees receiving railroad retirement disability

annuities can earn without losing any benefits. Effective January 1, 2007, the monthly

allowable amount a disability annuitant can earn increased to $700, after deduction of 

disability-related work expenses, from the previous statutory amount of $400. The annual

earnings limitation likewise increased in 2007 to $8,400, after deduction of disabilityrelated work expenses, from the previous limit of $4,800. These limits will be indexed

annually.

Database Conversion Project

In 2006 the Board continued work on a major information technology initiative to convert its existing IDMS database management system to a more flexible and efficient 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 2006, the Office of Inspector General continued its independent oversight of agency operations and its efforts to combat fraud, waste, and abuse. Twelve audit

reports issued during the year identified operational weaknesses and recommendations for

corrective action to program managers.

Investigative activities resulted in 62 criminal convictions, 35 indictments and 

informations, 43 civil judgments and $3.7 million in recoveries, restitutions, fines, civil

damages and penalties. 
4 2007 Annual Report, U.S. Railroad Retirement Board

Selected Data on Benefit Operations

Fiscal Year Fiscal Year

Retirement-Survivor 2006 2005

Employee age annuities

Number awarded 7,900 8,000

Number being paid at end of period 195,400 199,800

Average being paid at end of period $1,789 $1,693

Employee disability annuities

Number of total disability annuities awarded 1,200 1,300

Number of total occupational disability

annuities awarded 2,900 3,100

Number of total disability annuities being paid 

at end of period 20,300 20,200

Number of occupational disability annuities

being paid at end of period 64,000 63,800

Average total disability annuity

being paid at end of period $1,286 $1,218

Average occupational disability annuity

being paid at end of period $2,121 $2,018

Supplemental employee annuities

Number awarded 5,700 5,700

Number being paid at end of period 121,400 123,600

Average being paid at end of period 1

$42 $42

Spouse and divorced spouse annuities

Number awarded, total 8,800 2

10,400

Number being paid to divorced

spouses at end of period 3,500 3,500

Number being paid at end of period, total 138,500 141,300

Average being paid to divorced spouses

at end of period $416 $394

Average being paid at end 

of period, total $671 $638

Survivor annuities

Number awarded to aged widow(er)s 6,800 7,000

Number awarded, total 8,500 9,000

Number being paid to aged widow(er)s

at end of period 134,800 140,600

Number being paid at end of period, total 166,600 173,000

Average being paid at end of period to

Aged widow(er)s $1,122 $1,069

Disabled widow(er)s $946 $902

Widowed mothers (fathers) $1,423 $1,388

Remarried widow(er)s $747 $704

Divorced widow(er)s $740 $703

Children $823 $789

Lump-sum survivor benefits awarded

Number of lump-sum death benefits 4,500 4,700

Average lump-sum death benefit $905 $904

Number of residual payments 3/ 3/

Average residual payment $2,981 $3,733
THE REPORT IN BRIEF 5

Selected Data on Benefit Operations (Continued)

Fiscal Year Fiscal Year

Employees and Earnings4 2006 2005

Average employment 236,000 231,000

Creditable earnings, Railroad Retirement

Act (billions):

Tier I $15.15 $14.44

Tier II $13.91 $13.19

Creditable earnings, Railroad

Unemployment Insurance Act (billions) $3.43 $3.25

Benefit Year Benefit Year

Unemployment-Sickness 2005-2006 2004-2005

Qualified employees 244,600 242,200

Unemployment benefits

Net amount paid (millions) $30.6 5

($30.8) $30.2

Beneficiaries 8,900 5

(9,200) 9,300

Number of payments 54,000 62,000

Normal benefit accounts exhausted 1,900 2,200

Average payment per 2-week registration period $490 $489

Sickness benefits

Net amount paid (millions) $43.8 5

($42.1) $43.4

Beneficiaries 19,700 5

(20,100) 20,200

Number of payments 135,500 140,200

Normal benefit accounts exhausted 3,700 3,900

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

1 Includes 500 supplemental annuities, averaging $65, 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 2005 employment, all figures in this section are preliminary.

5 Data in parentheses are for the fiscal year (October 1, 2005 - September 30, 2006).
A REVIEW OF OPERATIONS

RAILROAD RETIREMENT AND 

SURVIVOR PROGRAM

As of September 30, 2006, 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 $30.6 billion, an increase of over $1.6 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 2006, 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. Supplemental benefit payments are also paid

from the RR Account. The Dual Benefits Payments (DBP) Account and Federal

Payments (FP) Account, funded by congressional 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 $9.5 billion in benefit obligations (excluding $1.2 billion in social security benefits which were reimbursed by the

Social Security Administration) during fiscal year 2006.

At the end of fiscal year 2006, total railroad retirement system assets equaled 

approximately $30.6 billion. During fiscal year 2006, benefits totaling 

approximately $9.5 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 $72.6 million. 

7
8 2007 Annual Report, U.S. Railroad Retirement Board

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 $4.7 billion, 41.1 percent of total financing sources and $200.2 million more than in

fiscal year 2005.

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 2006 was $94,200, and all earnings were subject to the 1.45 percent Medicare tax. In calendar year 2005, the maximum amount subject to the 6.20 percent tax was $90,000, 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 $69,900 in 2006 and $66,900 in 2005, was 4.4 percent on

employees in 2006 and 2005. It was 12.6 percent on employers in 2006 and 2005.

Tier I and tier II taxes for fiscal year 2006 amounted to $2.3 billion and $2.4 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

would be made in favor of the Social Security Trust Funds. The net financial interchange transfer to the SSEB Account during fiscal year 2006 amounted to $3.5 billion.
A REVIEW OF OPERATIONS 9

Financing Sources - Fiscal Year 2006 (In Millions) 

Costs - Fiscal Year 2006 (In Millions)

RETIREMENT AND SURVIVOR PROGRAM

GROSS TOTAL: $9,719.01

TOTAL: $9,742.6

Payroll Taxes 48.4%

$4,700.3

Financial Interchange 35.7%

$3,467.8

National Railroad

Retirement Investment Trust

Transfers-in 9.7%

$947.0

General Appropriations 1.0%

$98.1

Benefit Payments 97.1%

$9,461.1

Salaries and Expenses 1.1%

$108.6

Other < .1%

$.2

Interest Expense 1.8%

$172.7

Federal Income

Taxes 4.7%

$452.0

Interest on 

Investments 0.6%

$53.8

1Excludes $1,717.6 million as detailed under Other Financing Sources on page 14.

Note.--Percentages may not add to 100 due to rounding.
Interest on Investments and Other Revenue

Interest revenue increased from $44.5 million in fiscal year 2005 to $53.8 million in

fiscal year 2006. 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 2006 amounted to $441 million during the year.

Original transfers for fiscal year 2005 totaled $430 million. Net income tax transfers

after adjustments were $473 million for fiscal year 2006, including a $32 million adjustment for calendar year 2001. Net transfers in fiscal year 2005 were $451 million, 

including $21 million in reconciliation adjustments.

The information in the preceding paragraph is on a fiscal year basis, while the table

on the next page shows income tax transfers to the Accounts for taxable (calendar)

years 1997 through 2006, including reconciliation adjustments through 2001.

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 $98 million for fiscal year 2006 and 

$108 million for fiscal year 2005. These amounts include Federal income tax transfers

for 2006 and 2005. The amount appropriated for fiscal year 2006 was 9.3 percent less

than fiscal year 2005, reflecting the continuing decrease in eligibility for these benefits,

which are not increased for the cost of living. The total amounts appropriated by the

* 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.

(text continued on page 14)

10 2007 Annual Report, U.S. Railroad Retirement Board
A REVIEW OF OPERATIONS 11

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. 

Federal Income Tax Transfers by Recipient Account and 

Benefit Component, Taxable Years 1997-2006 (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

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

2006 125 312 7

Reconciliation adjustments4

1997 (2000, 20015) +25 +43 +3

1998 (2002) +14 +47 +2

1999 (2003) +15 +22 +2

2000 (2004) +3 +17 +1

2001 (2006) +6 +25 +1
Railroad Retirement and Survivor Program 

Consolidated Financing Sources, 

Costs and Net Position (Millions)1

For the Fiscal Year Ended September 30 2006 Restated 2005

Financing Sources:

Payroll Taxes $4,700.3 $4,500.0

Financial Interchange 3,467.8 3,368.9

Interest on Investments and Other Revenue 53.8 44.5

Federal Income Taxes 452.0 466.4

General Appropriations 98.1 108.0

Other 1,717.6 2,548.3

Transfers to the National 

Railroad Retirement Investment Trust --- ---

Transfers from the National 

Railroad Retirement Investment Trust 947.0 809.0

Total Financing Sources 11,436.6 11,845.1

Costs:

Benefit Payments 9,461.1 9,196.1

Interest Expense 172.7 163.8

Salaries and Expenses2 108.6 105.4

Other 0.2 0.3

Total Costs 9,742.6 9,465.6

Financing Sources over Costs 1,694.0 2,379.5

Net Position - Beginning of Period 28,085.4 25,705.9

Net Position - End of Period $29,779.4 $28,085.4

1 Prepared on an accrual basis of accounting. 

2 Includes unemployment and sickness insurance salaries and expenses of approximately 

$15.8 million and $15.2 million for fiscal years 2006 and 2005, respectively.

12 2007 Annual Report, U.S. Railroad Retirement Board
A REVIEW OF OPERATIONS 13

Market value of assets managed 

by NRRIT on September 30, 2006 $29.4 billion

Rate of return of investment portfolio 

managed by NRRIT for full year 

ended September 30, 2006 9.82%

Source: NRRIT 

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

Retirement Board’s Web site at www.rrb.gov.

National Railroad Retirement Investment Trust (NRRIT)

Fiscal Year 2006 Highlights
14 2007 Annual Report, U.S. Railroad Retirement Board

Congress for interest on unnegotiated checks were $150,000 for fiscal years 2006/2007

and also $150,000 for fiscal years 2005/2006.

Other Financing Sources

Other financing sources consisted of $8.4 million to be provided by the Office of

Personnel Management to pay future retirement benefits to Railroad Retirement Board

employees, $13.3 million from the railroad unemployment trust funds in transfers-in for

current budget fiscal year salaries and expenses, and the increase in NRRIT net assets

of $1,706.2 million. These financing sources were offset by transfers-out of $5.4 million

for salaries and expenses of the Board’s Office of Inspector General, and a $4.9 million

decrease in unexpended appropriations.

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 $108.6 million and $105.4 million shown on page 12 for salaries and expenses in fiscal years 2006 and 2005, respectively, about $15.8 million for fiscal year 2006 and 

$15.2 million for fiscal year 2005 were for the unemployment and sickness insurance

program. 

Excluding $17.0 million from total costs of $9.7 billion for fiscal year 2006 and 

$16.4 million from total costs of $9.5 billion for fiscal year 2005, total costs for the railroad retirement and survivor program for fiscal year 2006 increased $276.4 million or 

2.9 percent.

Benefit Payments

During fiscal year 2006, railroad retirement benefit payments increased 

$265.0 million or almost 2.9 percent to about $9.5 billion on an accrual basis, including

$96.0 million in vested dual benefits and $61.3 million in supplemental annuities.

Interest Expense

Interest expense of $172.7 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 

$15.8 million for fiscal year 2006 and $15.2 million for fiscal year 2005, salaries and

expenses for the railroad retirement and survivor program were about $92.8 million for

fiscal year 2006 and about $90.2 million for fiscal year 2005, a $2.6 million or 

2.9 percent increase. Adjusted by the $15.8 million in salaries and expenses and 

$1.2 million in other costs for the unemployment and sickness insurance program, 
A REVIEW OF OPERATIONS 15

fiscal year 2006 administrative expenses for the railroad retirement and survivor program were about 0.9 percent of total costs.

Other Costs

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

Board employees of $7.2 million for the railroad retirement and survivor program and

$1.2 million for the unemployment and sickness insurance program. In addition, carrier refunds of $0.2 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 $0.8 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 2006 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, 2006, the market

value of Trust-managed assets had increased to $29.4 billion, reflecting a 9.82% rate of

return for the fiscal year, compared to a 9.96% return for its composite benchmark. In

addition, during fiscal year 2006 the Trust transferred $947 million to the Railroad

Retirement Account for the payment of railroad retirement benefits. 

As of September 30, 2006, total railroad retirement system assets (Trust-managed

assets and reserves held in the Treasury accounts) equaled approximately 

$30.6 billion, an increase of over $1.6 billion during the fiscal year.

Trust operations are described in detail in the National Railroad Retirement

Investment Trust Annual Management Report for fiscal year 2006, which is available

on the Board’s Web site at www.rrb.gov.
BENEFIT OPERATIONS

Retirement and survivor benefits paid, including vested dual benefits and supplemental employee annuities, totaled $9.4 billion in fiscal year 2006, $260 million more

than in fiscal year 2005. Benefits were paid to over 618,700 beneficiaries in fiscal year

2006. Some 577,600 beneficiaries were being paid at the end of the year. The table

shown below presents retirement and survivor benefit payments for fiscal years 2006

and 2005, 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

32.5 percent of the social security percentage. Effective December 2004, tier I portions

increased by 2.7 percent

while tier II portions increased by 0.9 percent.

Increases of 4.1 percent for

tier I and 1.3 percent for 

tier II were effective

December 2005.

The December 2004 and

December 2005 cost-of-living

increases provided additional

benefit payments of about

$234 million in fiscal year

2006, compared to payments

in fiscal year 2005.

Monthly retirement and

survivor benefits being paid

numbered nearly 706,200 at

the end of the 2006 fiscal

year, about 15,500 less than at the end of the prior year. Monthly beneficiaries on the

rolls declined by almost 13,300 over the year, from 590,900 to 577,600. 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 2006 numbered 279,700, about 4,100 less than at the end of the previous fiscal year. The number

of age annuities being paid dropped from 199,800 to 195,400 over the year, while disability annuities rose 300 to over 84,300. Supplemental annuities being paid dropped

16 2007 Annual Report, U.S. Railroad Retirement Board

Type of benefit

Amount

(in millions)

Percent

change

Fiscal year 

2006

Fiscal year 

2005

Retirement benefits

Employee annuities

Age $4,160.0 $4,041.2 +2.9

Disability 1,956.1 1,859.0 +5.2

Supplemental 61.4 62.7 -2.0

Spouse and divorced

spouse annuities 1,116.5 1,088.7 +2.6

Total 7,294.0 7,051.6 +3.4

Survivor benefits

Annuities 2,142.5 2,125.0 +0.8

Lump-sum benefits 4.3 4.5 -3.3

Total 2,146.9 2,129.5 +0.8

Grand total $9,440.9 $9,181.1 +2.8

Note.--Detail may not add to total due to rounding.
A REVIEW OF OPERATIONS 17

some 2,100, numbering 121,400 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 together declined by more than 2,800, totaling 138,500 at year-end. Nearly

166,600 monthly survivor benefits were being paid at the end of fiscal year 2006, a

decrease of 6,500 from the previous year.

Retirement

Regular employee annuities

Awards of regular employee annuities numbered 12,000 in fiscal year 2006, 

400 less than in fiscal year 2005. 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 service at age 60. Certain early retirement reductions are applied if

the employee first became eligible for a 60/30 annuity July 1, 1984, or later and retired

at ages 60 or 61 before 2002. Employees who retire at 60 or older with at least 30

years of railroad service are referred to as 60/30 retirees.

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, 

Average

Employee annuities

awarded in 

fiscal year 2006 Number

PercentMonthly

amount

Years 

of

service

Age at

retirement

Age

Beginning at full retirement age 

or over 700 6 $1,850 22.4 67.2

Unreduced, beginning

at age 60 to under full retirement age 5,100 42 2,910 35.5 60.7

Reduced, beginning at age 62 

to under full retirement age 2,100 17 1,317 17.4 62.7

Disability 4,100 34 2,308 24.4 54.3

Total 12,000 100 $2,361 27.7 59.3

Note.--Detail may not add to total due to rounding.
18 2007 Annual Report, U.S. Railroad Retirement Board

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 4,100 disability awards, 

1,200 averaging $1,498 per month were for

total disability and 2,900 averaging $2,648

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.

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.

Number of monthly beneficiaries,

September 30, 2001, and 2006 (Thousands)

Amount of benefits paid,

fiscal years 2001 and 2006 (Millions)

1

Without supplemental annuity. 2Includes divorced spouses.

1

Includes $68.8 million in fiscal year 2001 and $61.4 million in fiscal

year 2006 for supplemental annuities. 2

Includes divorced spouses.

Average monthly amount,

September 30, 2001, and 2006

Aged widow(er)
A REVIEW OF OPERATIONS 19

Of the employees who were awarded regular annuities in fiscal year 2006, nearly

8,400, or 70 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 $2,715 per month, compared to $1,548 for the 3,600 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, 54 percent of

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

immediate, only 16 percent of the reduced age awards to employees with less than 30

years of service were immediate. Immediate retirements accounted for 77 percent of the

year’s disability awards.

The 279,700 retired employees on the rolls as of September 30, 2006, were being paid

regular monthly annuities averaging $1,829. The table on this page gives data by type

of annuity for these benefits.

Of the 84,300 disability annuities being paid,

20,300 were for total disability and 64,000 for

occupational disability.

The two types of disability annuities averaged

$1,286 and $2,121,

respectively. In fiscal

year 2006, over $315

million was paid in total

disability annuities and

$1,641 million in occupational disability annuities.

Some 193,300 employees on the rolls at the end of fiscal year 2006 were immediate

retirees and their regular annuities averaged $2,151 per month. Annuities of the 86,400

deferred retirees averaged $1,107. Although their average railroad retirement annuity

was much lower, a greater proportion of the deferred annuitants also received social

security benefits--33 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 $1,327, while combined

benefits to immediate retirees averaged $1,830. The table on the next 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.

Employee annuities in 

current-payment status 

on September 30, 2006 Number

Percent

Average

monthly

amount

Percent

immediate

retirements

Age

Beginning at full retirement 

age or over 26,600 9 $1,343 44

Unreduced, beginning

at age 60 to under full retirement age 89,200 32 2,350 93

Reduced, beginning

at age 60 to under full retirement age 79,700 28 1,310 38

Disability 84,300 30 1,920 81

Total 279,700 100 $1,829 69

Note.--Detail may not add to total due to rounding.
20 2007 Annual Report, U.S. Railroad Retirement Board

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 earnings, and is reduced by the amount of any

social security benefit that the employee

receives. The gross

tier I amounts of

employees on the

rolls at the end of fiscal year 2006 averaged $1,444 per

month. Tier I

amounts of nearly

8,300 employees

were completely offset by social security

benefits. Tier I amounts being paid averaged $1,299.

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

amounts being paid at the end of fiscal year 2006 averaged $559. 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.

Nearly 44,200 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.

More than 5,700 supplemental annuities were awarded in fiscal year 2006, about

50 more than in fiscal year 2005. About 4,200 of the awards (74 percent) began concurrently with the employee’s regular annuity, while the remaining 1,500 were to

employees already receiving a regular annuity. Supplemental annuity awards averaged over $41 per month; 84 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, 1,400 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. 

Type of retirement

Dual benefit

status Total Immediate Deferred

Receiving social security benefit

Number 38,400 9,500 28,900

Average monthly amount:

Railroad retirement (regular) $525 $1,134 $325

Social security 926 696 1,002

Combined benefit 1,452 1,830 1,327

Not receiving social security benefit

Number 241,300 183,800 57,500

Average monthly amount $2,036 $2,204 $1,501

Note.--Detail may not add to total due to rounding.
Supplemental annuities were being paid to over 121,400, or 43 percent, of the

retired employees on the rolls at the end of the 2006 fiscal year. These annuities averaged $42; some 500 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

8,800 in fiscal year 2006, 1,600 less 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 2,600 reduced spouse annuities awarded in fiscal year 2006, 200 averaging

$729 per month were to spouses of 30-year employees and almost 2,400 averaging 

$405 were to spouses of employees with less than 30 years of service.

At the end of fiscal year 2006, about 135,000 spouse annuities averaging $678 per

month were being paid. More than 3,500 divorced spouse annuities averaging $416 per

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

paid combined railroad retirement benefits averaging $2,587. This included $1,909 in

regular and supplemental employee annuities and $678 in spouse annuities.

A REVIEW OF OPERATIONS 21
22 2007 Annual Report, U.S. Railroad Retirement Board

Approximately 54,700, or 40 percent, of the spouses and divorced spouses on the rolls

were also

receiving

social security benefits.

Combined

railroad

retirement

and social

security benefits to these

annuitants

averaged

$1,031 per

month,

including

$265 in railroad retirement benefits and $766 in social security benefits. Railroad retirement annuities to the 81,900 spouses not receiving social security benefits averaged $945, while

railroad retirement annuities to the 1,900 divorced spouses not receiving social security

benefits averaged $588.

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 135,000 spouses on the rolls at the end of fiscal year 2006, 93,900 were being

paid tier I amounts averaging $589 per month. The tier I amounts of 41,100 spouses

were completely offset by other benefits also due. Spouse tier II amounts averaged $284.

Vested dual benefits averaging $133 were being paid to 1,700 spouses. The 3,500

divorced spouses on the rolls at the end of fiscal year 2006 were being paid tier I amounts

averaging $427 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 serMonthly 

spouse benefits

Awarded in

fiscal year 2006

In current-payment 

status on 

September 30, 2006

Number

Average

amount Number

Average

amount

Beginning at full retirement age or over 1,200 $394 19,900 $366

With minor or disabled child in care 300 970 1,500 952

Unreduced, beginning at age 60 

to under full retirement age 4,200 1,164 56,500 966

Reduced rate 2,600 431 57,100 495

Total 8,400 814 135,000 678

Divorced spouse annuities 500 441 3,500 416

Grand total 8,800 $794 138,500 $671

Note.--Detail may not add to total due to rounding.
A REVIEW OF OPERATIONS 23

vice credits for retirement. Approximately $0.5 million was paid in separation/severance

lump-sum benefits during fiscal year 2006.

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 2006 fiscal year, the Board paid nearly 2,100 dual

retirement tax refunds averaging $83. Most of the payments were to employees retiring

during the year. Less than 100 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 8,500 during

fiscal year 2006, 500 less than the previous year. About 166,600 survivor annuities were

being paid at the end of the fiscal year, including 300 temporarily paid at spouse or

divorced spouse annuity rates pending recomputation to widow(er)s’ rates. Some

134,800, or 81 percent, of the survivor annuities were to aged widows and widowers. 

The table on

this page presents

numbers 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.

Monthly 

survivor benefits

Awarded in

fiscal year 2006

In current-payment status

on September 30, 2006

Number

Average

amount Number

Average

amount

Aged widow(er)s’ 6,800 $1,493 134,800 $1,122

Disabled widow(er)s’ 200 1,334 4,700 946

Widowed mothers’ (fathers’) 100 1,492 900 1,423

Remarried widow(er)s’ 200 865 4,900 747

Divorced widow(er)s’ 700 822 9,700 740

Children’s:

Under age 18 300 1,132 2,300 1,110

Student * 1,168 100 1,190

Disabled 200 874 9,000 746

Parents’ * $749 100 $802

Total 8,500 . . . 166,600 . . .

* Fewer than 50.

Note.--Detail may not add to total due to rounding.
24 2007 Annual Report, U.S. Railroad Retirement Board

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 2006 fiscal year

included 61,500 which were reduced for age. Aged widow(er)s’ tier I amounts being

paid averaged $954 per month. In over 9,100 cases, the tier I amount was wholly offset

by reductions for other benefits. There were 48,000 aged widow(er)s also receiving

social security benefits, and these averaged $717. Tier II amounts averaged $233.

More than 3,200 vested dual benefits averaging $67 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 2006 averaged $792 (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 $690. Tier II amounts averaged

$189, while the 200 vested dual benefits being paid averaged $81.

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
A REVIEW OF OPERATIONS 25

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 2006

averaged $1,044 for widowed mothers and fathers and $755 for children. Fewer than

50 mothers (fathers) and nearly 2,500 children received social security benefits averaging $825 and $498, respectively. Tier II amounts paid mothers (fathers) and children

averaged, respectively, $404 and $92. 

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. More than 4,500 lump-sum death benefits averaging $905 were awarded during fiscal year 2006. About 600 benefits were to widow(er)s,

while 3,900 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 

2006 fiscal year averaged $2,981. 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, a few payments

went to individuals 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.

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 21,800
26 2007 Annual Report, U.S. Railroad Retirement Board

beneficiaries for Medicare during fiscal year 2006. As of the end of the fiscal year,

approximately 514,700 persons were enrolled in the Part A plan, and about 499,100 

(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 $901 million in the 2006 fiscal year.

The regular monthly premium for medical insurance during fiscal year 2006 was

$78.20 for coverage through December 2005 and $88.50 thereafter. (Beginning in 

calendar year 2007, beneficiaries with modified adjusted gross incomes above certain

thresholds pay higher Part B premiums.) The Board generally withholds Medicare premiums for annuitants from their benefit payments, and at the end of the fiscal year

some 467,800 annuitants were having their premiums withheld. Of the remaining 

Part B enrollees, approximately 6,800 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

Financing sources for the railroad unemployment and sickness insurance program

during fiscal year 2006 exceeded costs by $5.0 million and the net position increased by

$5.0 million from $101.7 million at the end of fiscal year 2005 to $106.7 million at the

end of fiscal year 2006. For fiscal year 2006 as compared to fiscal year 2005, total

financing sources for the railroad unemployment and sickness insurance program

decreased by $8.5 million (9.9 percent) to $77.6 million.

Unemployment and Sickness Insurance Program

Consolidated Financing Sources, 

Costs and Net Position (Millions)1

For the Fiscal Year Ended September 30 2006 2005

Financing Sources:

Employer Payroll Taxes $72.6 $80.9

Interest Income 5.0 5.2

Other --- ---

Total Financing Sources 77.6 86.1

Costs:

Benefit Payments:

Unemployment 30.7 29.1

Sickness 41.9 42.8

Total Costs 72.6 71.9

Financing Sources over Costs 5.0 14.2

Net Position - Beginning of Period 101.7 87.5

Net Position - End of Period $106.7 $101.7

1 Prepared on an accrual basis of accounting. 

(text continued on p. 29)
28 2007 Annual Report, U.S. Railroad Retirement Board

Financing Sources - Fiscal Year 2006 (In Millions) 

UNEMPLOYMENT AND SICKNESS 

INSURANCE PROGRAM

GROSS TOTAL $77.6

Costs - Fiscal Year 2006 (In Millions)

TOTAL $72.6

Interest Income 6.4%

$5.0

Employer Payroll Taxes 93.6%

$72.6

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 2006,

the taxable earnings base was the first $1,195 of each employee’s monthly earnings.

The earnings base is indexed each year by a rate which is equal to approximately twothirds of the annual rate of increase in the maximum base for railroad retirement tier I

taxes.

In 2006, 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 2006. New employers in 2006 paid an initial rate of 4.03 percent.

Employer Payroll Taxes

Payroll taxes by employers totaled $72.6 million during fiscal year 2006. This was a

decrease of 10.3 percent or $8.3 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

4.7 percent in fiscal year 2006, of which the Railroad Retirement Board earned 

$5.0 million as its pro rata share.

Costs

Total costs for the railroad unemployment and sickness insurance program

increased by $0.7 million (0.9 percent) to $72.6 million. These costs consisted solely of

benefit payments.

Benefit Payments

During fiscal year 2006, unemployment insurance benefit payments increased by

$1.6 million (5.5 percent) to $30.7 million. Sickness insurance benefit payments

decreased $0.9 million (2.1 percent) to $41.9 million.
30 2007 Annual Report, U.S. Railroad Retirement Board

BENEFIT OPERATIONS

Net unemployment and sickness benefits totaling $74.4 million were paid in the

2005-2006 benefit year, $0.8 million more than in the prior year. Beneficiaries numbered 27,600 in comparison to the previous year’s total of nearly 28,700. Approximately 1,000 employees received both unemployment and sickness benefits during the

2005-2006 benefit year. The number of unemployment benefit claimants decreased by

over 5 percent, while sickness benefit claimants decreased by about 3 percent. Total

unemployment benefit payments increased by over 1 percent, while net sickness benefits increased almost 1 percent. The number of employees qualified for benefits under

the Railroad Unemployment Insurance Act rose about 1 percent to 244,600.

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 2005-2006,

there were 7,400 and 15,900 unemployment and sickness benefit waiting period claims,

respectively.

Unemployment

About 8,900 railroad workers were paid $30.6 million in unemployment benefits

during the 2005-2006 benefit year. The number of benefit claimants decreased by 500

from the prior year total of 9,300, while the benefit amount rose $0.4 million from the

year-earlier total of $30.2 million. The claimant count was the lowest since benefit

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

claimant was 61 in benefit year 2005-2006 as compared to 66 in the previous benefit

year. This was the lowest number of compensable days since benefit year 2001-2002.

The mid-month unemployment count in the 2005-2006 benefit year began with a

July count of 1,800 claimants. The count peaked at 3,800 in January, then dropped

down to 1,500 in June 2006. For the 2005-2006 benefit year as a whole, the weekly

number of claimants averaged 2,300 in comparison to an average of 2,500 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, remained at the previous year’s level of 4 per 100 qualified. The median age of all unemployment benefit

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

Sickness

The number of sickness benefit claimants during the 2005-2006 benefit year was

19,700, some 500 lower than in the previous year. The claimant count was the lowest

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

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

$76.0 million were paid, $2.5 million less than in the prior benefit year. Net sickness benefits totaled $43.8 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

increased by $0.4 million in comparison with the previous year.

After experiencing no decreases during benefit years 1995-1996 through 2003-2004,

the utilization rate for

sickness benefits

decreased for the second

consecutive year. The

average duration of sickness remained at the

lowest duration in the

last 6 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 (8 percent), and mental disorders, including drug and alcohol

addictions (12 percent). The median age of all sickness benefit claimants was 51 years,

the same as in the previous benefit year.

Utilization Per Average

Benefit 100 Qualified Compensable

Year Employees Days

2002-2003 8.7 71

2003-2004 8.7 70

2004-2005 8.4 69

2005-2006 8.1 69

Major unemployment and sickness benefit operations,

benefit years 2005-2006 and 2004-2005

Item

Benefit year 2005-2006 Benefit year 2004-2005

Total

Unemployment Sickness TotalUnemployment Sickness

Applications 37,800 11,400 26,400 36,700 11,700 25,100

Claims 222,800 65,000 157,800 236,400 73,700 162,700

Claimants 1

27,600 8,900 19,700 128,700 9,300 20,200

Net amount of benefits $74,387,900 $30,586,500 $43,801,400 $73,583,600 $30,179,000 $43,404,600

Number of payments

Normal 170,400 48,800 121,600 181,500 55,800 125,800

Extended 19,200 5,300 13,900 20,700 6,200 14,500

Total 189,600 54,000 135,500 202,200 62,000 140,200

Average amount per 2-week registration period

Normal $498 $494 $499 $497 $492 $499

Extended 459 452 462 459 458 459

Total 494 490 496 494 489 496

1

Benefits for both unemployment and sickness were paid to approximately 900 employees in benefit year 2004-2005 

and 1,000 employees in benefit year 2005-2006. Those claimants who had only a non-compensable waiting period 

are not included in the beneficiary counts since no benefits were paid.
32 2007 Annual Report, U.S. Railroad Retirement Board

Unemployment and Sickness Benefit Claimants By Age, 

Benefit Year 2005-2006

Claimants under the Railroad Unemployment Insurance Act, 

Benefit Years 2001-2002 through 2005-2006
A REVIEW OF OPERATIONS 33

RAILROAD EMPLOYMENT

Average monthly railroad employment in fiscal year 2006 rose over 2 percent to

236,000 from the 231,000 average of the previous year. September 2006 had the 

highest level of employment in fiscal year 2006 with 239,000 and October 2005 had 

the low of 232,000. Average employment was the highest since fiscal year 2000-2001.

Average Railroad Employment

Fiscal Years 2002 through 2006

Sep-06

0

Note.--Numbers for 2006 are preliminary.
LEGISLATIVE AND ADMINISTRATIVE

DEVELOPMENTS

35

Service

Customer Satisfaction Survey

The Board earned a score of 85 out of a possible 100 in a 2006 American Customer

Satisfaction Index (ACSI) survey, 14 points higher than the overall Federal government

score.

The ACSI survey focused on railroad workers who were recently awarded disability

benefits from the Board. The survey found the Board scoring highest (89) in the area of

customer service, with respondents particularly praising the courtesy and professionalism of agency employees.

The disability benefit application process received a score of 76, with those surveyed

most content with the guidance they received from the agency, but concerned with the

amount of information required and the time involved in completing their applications.

Instructional material provided to customers for assistance in filing their benefit applications was found to be helpful, with the 59 percent of respondents who actually used

agency publications reporting it easier to complete the application process. However,

respondents felt some of the benefit information could be clearer. 

The Board earned a confidence index score of 90, indicating that its customers are

satisfied with the service provided by the agency and are confident they will continue to

be well served in the future.

Produced through a partnership of the University of Michigan’s Ross School of

Business, the American Society for Quality and the CFI Group, the ACSI regularly 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

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 fourth time the Board has participated in the survey. In 2005, the

The following describes some major issues addressed in 2006 and 2007 

as the Railroad Retirement Board continued efforts 

to improve agency operations and better serve its customers. 
36 2007 Annual Report, U.S. Railroad Retirement Board

agency earned a score of 90 in an ACSI survey that focused on its survivor benefit

process. The Board also earned a score of 75 in a 2002 survey of railroad unemployment and sickness benefit claimants, and a score of 82 in a 2001 survey of recently

retired railroad workers.

Customer Service Plan

The Board’s Customer Service Plan promotes the principles and objectives of customer-driven quality service agency-wide. 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 2006, customers received benefit services within the timeframes

promised in the Board’s plan 98.6 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 Board’s Office of Inspector General has found several technical problems with performance tracking for retirement applications. System changes anticipated in fiscal

year 2008 will correct these problems.

During fiscal year 2006, the plan required that persons who filed in advance for a

railroad retirement employee or spouse annuity would receive their first payment, or a

decision, within 35 days of their annuity beginning date. Persons who did not file in

advance would receive their first payment, or a decision, within 65 days of the date they

filed their application. Of the cases processed during fiscal year 2006, 92.9 percent of

both employee and spouse applicants who filed in advance received a payment, or a

decision, within 35 days of their annuity beginning date. Also, 98.1 percent of employee

and 95.1 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, 96.2 percent of these

cases met the agency’s standard.

The Board’s plan required that those who filed for a disability annuity receive a

decision within 105 days of the date they filed their application. If entitled, the first

payment would 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 2006, 

65.9 percent of those filing for a disability annuity received a decision within 105 days

of the date they filed an application. Average processing time was 92.1 days. Of those

entitled to disability benefits, 95.2 percent received their first payment within the

plan’s time frame.
LEGISLATIVE AND ADMINISTRATIVE DEVELOPMENTS 37

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

lump-sum benefit, would 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 would receive their first payment, or a decision,

within 35 days of the date the Board received notice of the employee’s death. Of the

cases considered during fiscal year 2006, 93.2 percent of the applicants for an initial

survivor annuity were issued a payment or a decision within 65 days. In addition, 97.5

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,

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

the Board being notified of the employee’s death.

Under the plan, persons who filed an application for unemployment or sickness

insurance benefits would 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 would receive a payment, or a decision, within 15

days of the date the Board received their claim forms. During fiscal year 2006, 99.5

percent of unemployment benefit applications sampled for timeliness and 99.5 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 2006.

In fiscal year 2006, 98.4 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.

Legislative Developments

The Pension Protection Act of 2006, enacted on August 17, 2006, as Public Law

109-280, contains provisions which impact payments made by the Board to the former

spouses of railroad employees. The provisions are effective August 17, 2007, which is

one year from the enactment date.

The legislation amended the Railroad Retirement Act by eliminating the requirement that an employee be entitled to an annuity in order for his or her former spouse

to be entitled to a divorced spouse annuity. However, the employee must still be age 62

and fully insured under the Social Security Act using combined railroad retirement

and social security earnings, and a divorced spouse must have been divorced from the

employee for a period of not less than 2 years in order to be entitled to a divorced

spouse annuity where the employee is not yet entitled to an annuity.

The Pension Protection Act also amended a provision of law which provided that, if

an employee annuitant’s monthly annuity is not payable for a work-related 

reason (i.e., the employee annuitant has performed work in the railroad industry or the

disabled employee annuitant has earned in excess of the amount allowed by the

statute), then any spouse annuity or divorced spouse annuity paid by the Board based
38 2007 Annual Report, U.S. Railroad Retirement Board

on that employee’s earnings was also not payable for that month. The legislation

amended the Railroad Retirement Act so that the annuity paid to the divorced spouse

may continue despite the employee’s work activity. Effective August 17, 2007, this

change applies to all divorced spouse annuitants.

In addition to modifying the provisions governing eligibility to a divorced spouse

annuity, the Act also added a provision to the Railroad Retirement Act related to payments made pursuant to the division of the tier II portion of an employee’s annuity pursuant to a court order that characterizes such portions as property subject to distribution. Payments made pursuant to such court orders are commonly referred to as partition payments and currently terminate upon the death of either party, whichever

occurs first, unless the court order provides for termination at an earlier date. The

amendment provides that partition payments will only terminate upon the employee’s

death when the court order requires such termination. Consequently, unless the court

order requires termination of payments upon the employee’s death, effective August 17,

2007, tier II partition payments to divorced spouses may continue beyond the employee’s death. (This change in the law does not allow for the reinstatement of payments

terminated prior to August 17, 2007, due to the death of the employee.)

The Railroad Retirement Disability Earnings Act, enacted on January 12, 2007, as

Public Law 109-478, increased the amount employees receiving railroad retirement disability annuities can earn without losing any benefits. The law also provided a mechanism for annually indexing these disability earnings limits to average national wage

increases.

Effective January 1, 2007, the monthly allowable amount a disability annuitant can

earn increased to $700, after deduction of disability-related work expenses, from the

previous statutory amount of $400. The annual earnings limitation likewise increased

in 2007 to $8,400, after deduction of disability-related work expenses, from the previous

limit of $4,800.

If a disabled annuitant’s earnings in a year (after deduction of disability-related

work expenses) exceed the annual limit, the annuity is not payable for the number of

months derived by dividing the amount by which those earnings exceed the annual

limit by the amount of the monthly limit. Any resulting fraction of a month equal to or

greater than one-half (0.5) is rounded up, increasing the number of months in which

the annuity is not payable by one.

As under prior law, these disability work restrictions cease upon a disabled employee annuitant’s attainment of full retirement age. This transition is effective no earlier

than full retirement age even if the annuitant had 30 years of service. Earnings deductions continue to apply to those working for their last pre-retirement nonrailroad

employer.

The Railroad Retirement Technical Improvement Act of 2006, which was enacted

October 6, 2006, as Public Law 109-305, provides for continued payment of railroad

retirement benefits through the Treasury Department. Prior law contained a provision
LEGISLATIVE AND ADMINISTRATIVE DEVELOPMENTS 39

that provided for payment of railroad retirement benefits by a nongovermental disbursing agent to be selected by the Railroad Retirement Board. This would have been more

costly, would have made more difficult the collection of overpaid benefits, and would

have diminished the level of service provided to beneficiaries.

Technology and Automation

Database Conversion Project

In 2006 the Board continued work on a major information technology initiative to

convert its existing IDMS database management system to a more flexible and efficient

DB2 database system. The conversion will place the agency in a better position to provide service more efficiently in the coming years.

The project has required major changes in the Board’s infrastructure environment,

including installation of new software for the agency’s mainframe, creation of DB2 test

areas on the mainframe, and installation of new testing, analysis, and programming

tools. Extensive training was also provided to business analysts, software developers,

database administrators, systems engineers, and supervisors.

Because of their high volume, systems to be converted were categorized and

grouped. The first group was converted in February 2007, and the last group is 

scheduled to be converted in August 2007.

Conversion of the database management 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.

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 has begun developing an additional phase of this system to modify certain existing forms and add additional ones to the system. This measure will provide

an option for over 300 employers who file paper reports to use an automated process

and improve report timeliness and accuracy.

The Medicare Prescription Drug, Improvement, and 

Modernization Act of 2003

In 2006, the Board implemented provisions of the Act that require beneficiaries

with modified adjusted gross incomes above certain thresholds to pay higher Medicare

Part B premiums beginning in 2007. An income-related monthly adjustment amount is

added to the standard Part B premium paid by beneficiaries who are subject to the
40 2007 Annual Report, U.S. Railroad Retirement Board

higher premiums. Approximately 1.5 percent of railroad retirement beneficiaries with

Medicare Part B are paying these adjustment amounts in 2007.

The agency will resume work with the Centers for Medicare & Medicaid Services in

2007 on automated system changes that will allow railroad retirement beneficiaries to

have prescription drug premiums deducted from their monthly benefits.

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 fiscal year 2006, 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 conducted several cultural enrichment events 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, the Employees with Disabilities Advisory

Council sponsored an informational session on emergency preparedness for people with

disabilities.

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

An equal employment opportunity Strategic Plan was implemented during fiscal

year 2006. The plan focuses on areas that will ensure all agency employees can conduct

their daily activities to meet the agency’s mission in an environment that is discrimination-free and characterized by respect, cooperation and mutual commitment to the

Board’s stakeholders.

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. During the fiscal year, several new disability recruitment sources were identified.
LEGISLATIVE AND ADMINISTRATIVE DEVELOPMENTS 41

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 1,616 railroad labor union officials attended 31 informational conferences held in cities throughout the United States during 2006. In addition, railroad

labor unions frequently request that Board representatives speak before their meetings, seminars and conventions. In 2006, the Labor Member’s Office was represented

at six union gatherings attended by 1,142 railroad labor officials. Field personnel

addressed 119 local union meetings with 5,467 members in attendance.

At seminars for railroad executives and managers, Board representatives review

programs, financing, and administration, with special emphasis on those areas which

require cooperation between railroads and Board offices. During 2006, the

Management Member’s Office conducted two seminars for railroad officials, as well as

pre-retirement counseling seminars attended by railroad employees and their spouses,

and benefit update presentations.

Office of Inspector General

During fiscal year 2006, the Office of Inspector General continued its oversight

efforts to review program operations, identify weaknesses, and provide recommendations for improvement to management. Auditors completed twelve audits and reported

findings with a financial impact totaling $457,000. Special agents investigated over

450 potential criminal matters, representing approximately $14 million in fraud

against the agency.

The Office of Inspector General completed the audit of the Board’s fiscal year 2005

financial statements, related internal controls and compliance with laws and regulations, and issued a clean opinion on the financial statements. The agency’s Chairman

coordinated the timely submission of investment information from the National

Railroad Retirement Investment Trust.

Auditors identified material weaknesses in the agency’s information security program, performance measurement program, and the actuarial projection process. They

also cited two reportable conditions related to the agency compliance with the Prompt

Payment Act and accounting for leases. Auditors also summarized six serious manage-
42 2007 Annual Report, U.S. Railroad Retirement Board

ment challenges that the agency faces: internal control, the statement of social insurance, the financial reporting entity, performance measures, improper payments and

information technology security.

The annual evaluation of the agency’s information security program in order to

meet the requirements of the Federal Information Security Management Act of 2002

indicated that the agency continues to experience difficulty in achieving an effective,

compliant security program. However, auditors noted that the agency is in the process

of forming an agency-wide Security and Privacy Committee that will be responsible for

providing direction and oversight for implementation of actions to ensure compliance

with all mandated requirements. An evaluation of the agency’s disaster recovery plan

indicated that the plan provides assurance that major information technology functions

will be operational in the event of a disaster.

Other audits completed during the year examined the application of work deductions, the reliability of performance measures, compliance with the provisions of the

Railroad Retirement Act in the initial award of benefits, the termination and suspension of benefits, and actions to deny or cancel applications for benefits.

Investigative activities resulted in 62 convictions, 35 indictments and informations,

43 civil judgments and $3.7 million in recoveries, restitutions, fines, civil damages and

penalties. Investigative staff also provided program managers with a number of recommendations concerning program processes and record management operations.

Program officials agreed to review current procedures to determine the feasibility of

implementing recommended changes.
LEGAL RULINGS

43

Court Cases

Four 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 2006, and seven cases were opened during the fiscal year. Three

cases were resolved during fiscal year 2006. Eight cases were pending at the end of the

fiscal year. The following describes the cases of most significance to railroad employers

and employees. 

On May 31, 2006, the United States Court of Appeals for the Eleventh Circuit

issued a decision affirming the decision of the Board in the case of Stockman v. 

U.S. Railroad Retirement Board. The petitioner filed for review of the Board’s decision

that the agency had jurisdiction of the survivor benefits payable on the earnings of the

railroad employee and that the widow’s annuity paid was computed correctly. The petitioner contended that the employee had broken his current connection with the railroad

industry and therefore the Board did not have jurisdiction of survivor benefits. The

Court concluded that substantial evidence supported the Board’s decision that survivor

benefits were payable under the Railroad Retirement Act and affirmed the decision of

the Board.

On October 23, 2006, in a published opinion, the United States Court of Appeals for

the Eighth Circuit affirmed the decision of the Board in the case of Reter v. Railroad

Retirement Board. This was an appeal from the denial of a total and permanent disability application. The court found that there was substantial evidence in the record

for the Board’s conclusion that the railroad employee could perform his past relevant

work, and that, therefore, under Board regulations, the sequential disability evaluation

process warranted a determination of not disabled. The Court also commented on the

fact that the employee did not meet his burden of showing that he had any additional

listed impairment or medically equivalent listed impairment other than that which the

Board had already found.

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

during fiscal year 2006, and several significant legal opinions were issued.
44 2007 Annual Report, U.S. Railroad Retirement Board

Legal Opinions

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

Legal Opinion L-2006-2 concerned whether payment by a railroad union of membership dues owed to the union by a Secretary-Treasurer of a local lodge would constitute

creditable compensation from a covered labor organization. The General Counsel

analogized the situation presented to the treatment of dues payment under the provisions of the Internal Revenue Code, and ruled that payment of the dues would not constitute creditable compensation because it represented payment of an employee

expense.

Legal Opinion L-2006-10 addressed the question of whether the Board may use the

Social Security Administration’s Master Beneficiary Record (MBR) database in order to

prove age. The MBR shows the date of birth of a social security beneficiary and the

type of proof used to establish the date of birth.

Section 219.6(c) of the Board’s regulations provides, in pertinent part, as follows:

Certified copies of original records. The Board will accept

copies of original records or extracts from records if they are certified

as true and exact copies of the original by--

* * * * *

(3) A Social Security Administration employee, if the 

evidence was given to that agency to obtain social security 

benefits* * *.

The General Counsel advised that the intent of the Board’s regulations is that a

Board examiner be entitled to rely on information obtained by the Social Security

Administration, and that, although it would appear from the wording of the regulation

that it was contemplated that such information would take the form of paper copies of

records with a certification attached or imprinted, the recording of the information in a

Social Security Administration database would seem to constitute the equivalent both

of a certification of that information and of “extracts of records.” Accordingly, the

General Counsel ruled that it is permissible for the Board to establish the age of an

applicant or beneficiary by reference to the MBR.

Legal Opinion L-2006-14 addressed the question of whether the agency may pay

interest on retroactive benefit payments.

The General Counsel advised that, as payments by a Federal agency, railroad

retirement annuities are consequently subject to a long-standing rule of law, which

holds that in the absence of a contractual or statutory provision specifically authorizing

payment of interest, no interest is payable on a claim against the United States. The

source of the rule is not a specific statute, but rather a principle set forth in court decisions which apply broadly to the Federal Government.
LEGAL RULINGS 45

The question arose following a decision by a hearings officer of the Board’s Bureau

of Hearings and Appeals that a widow applicant was entitled to an earlier annuity

beginning date on grounds that she had been deterred from filing an annuity application at an earlier date. The General Counsel advised that, while regulations of the

Board permit an applicant to establish an earlier application filing date under certain

specified criteria, no regulation of the Board or provision of the Railroad Retirement Act

authorizes payment of interest on any retroactive payment due by operation of those

regulations. Accordingly, no interest may be paid as a result of the decision of the hearings officer.

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 2006, 508 appeals were filed with the Bureau of Hearings and

Appeals under the Railroad Retirement Act, and the Bureau rendered decisions in 629

appeals, including some carried over from the previous year. The initial or reconsideration decision was sustained in 157 cases. In 472 appeals the decision was favorable to

the claimant in whole or in part.

Eighty-one appeals were filed with the Board in fiscal year 2006, which, added to

the 29 appeals carried over from the previous year, brought the total to be considered to

110. Of 71 decisions, 64 sustained previous rulings of the hearings officer, one was

reversed, two were remanded to the Office of Programs, two were remanded to the

Bureau of Hearings and Appeals, and two were dismissed. At the end of the year,

39 appeals were pending before the Board.

Railroad Unemployment Insurance Act

During fiscal year 2006, 47 appeals were filed with the Bureau of Hearings and

Appeals under the Railroad Unemployment Insurance Act, and the Bureau rendered

decisions in 48 appeals, including some carried over from the previous year. The initial

or reconsideration decision was sustained in 34 cases. In 14 appeals the decision was

favorable to the claimant in whole or in part.

Seven appeals were filed with the Board in fiscal year 2006, which, added to the six

carried over from the previous year, brought the total to be considered to 13. The Board

rendered decisions in eight cases of appeals from the decision of the referee, affirming

the decision in six cases, reversing one, and remanding one to the Bureau of Hearings

and Appeals. At the end of the year, five appeals were pending before the Board.
STATISTICAL

TABLES
Total1 Retirement2 Survivor2 Unemployment 

BENEFICIARIES (in thousands)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 2006....................................................... 643 441 187 9 BENEFIT PAYMENTS (in millions)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 2006....................................................... 9,513.7 7,294.0 2,146.9 30.8 

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.

Table 1.--Beneficiaries and benefits paid under the Railroad Retirement Act and the Railroad Unemployment Insurance Act, by fiscal year

Fiscal year

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 2006, 8,800 individuals received both retirement and survivor benefits, 1,000 employees reunemployment and sickness benefits, and 3,900 employees received benefits under both the Railroad Retirement Act and the Railroad Unemploymenfigures are partly estimated, and totals for earlier years are similarly adjusted.
Item 1997 1998 1999 2000 2001 2002 2003 

RAILROAD RETIREMENT ACCOUNT

Receipts

Tax transfers1..................................................................... $2,518.7 $2,660.8 2$2,932.4 $2,928.6 $2,819.2 $2,743.1 $2,651.4 $2,

Interest and profit on investments3....................................... 1,104.1 1,724.3 312.8 1,298.9 2,027.2 1,875.8 291.8 

Transfers from the National RR Investment Trust4.................. ........ ........ ........ ........ ........ ........ 300.0 1,

Transfers from the SSEB Account4.......................................

... ........ ........ ........ ........ ........ ........ ........ 

Loan repayments from RRS or RUI Accounts5........................ 27.1 33.9 ........ ........ ........ ........ 8.2 

Transfer from RR Supplemental Account6.............................. ........ ........ ........ ........ ........ 0.1 ........ 

Expenditures

Benefit payments7............................................................... $2,902.3 $2,897.7 $2,906.4 $2,958.8 $2,971.4 $3,240.7 $3,504.1 $3,

Financial Interchange adjustment8.......................................

... 9(918.3) (13.9) (29.0) (50.5) (52.9) 140.9 72.1 

Net transfers to administration............................................. 47.1 49.5 51.2 55.9 54.7 64.9 64.0 Transfers to the National RR Investment Trust4.....................

... ........ ........ ........ ........ ........ 1,431.6 17,750.0 

Loans to RUI Account......................................................... ........ ........ ........ ........ ........ 7.8 ........ 

Balance at end of period10.........................................................

...$13,972.3 $15,451.2 $15,768.9 $17,032.9 $18,907.2 $18,640.4 $502.2 $

SOCIAL SECURITY EQUIVALENT BENEFIT ACCOUNT11

Receipts

Tax transfers1..................................................................... $2,046.5 $2,208.7 2$2,000.1 $2,208.5 $2,134.0 $2,134.7 $2,128.0 $2,

Interest and profit on investments3....................................... 125.4 95.3 94.7 118.8 105.5 71.6 59.1 

Transfers under financial interchange12................................. 3,747.2 3,819.1 3,816.0 3,697.6 3,282.8 3,646.8 3,747.3 3,

Advances against financial interchange13.............................. 3,183.9 3,145.1 2,992.3 3,005.1 3,145.2 3,153.9 3,236.1 3,

Expenditures

Benefit payments................................................................ $5,004.6 $5,069.4 $5,078.7 $5,091.4 $5,215.2 $5,243.8 $5,229.5 $5,Financial Interchange adjustment8.......................................

... 9918.3 13.9 29.0 50.5 52.9 (140.9) (72.1) 

Net transfers to administration............................................. 25.3 26.2 25.2 27.1 25.0 26.1 22.8 Transfers under financial interchange12................................. 419.1 419.4 429.9 465.3 469.7 424.7 426.3 

Repayment of advances against financial interchange14.........

... 3,399.0 3,430.0 3,370.8 3,190.1 3,222.2 3,385.3 3,342.4 3,

Transfers to the National RR Investment Trust/RR Account4

...

... ........ ........ ........ ........ ........ ........ 1,438.0 

Balance at end of period............................................................ $1,656.1 $1,965.2 $1,934.7 $2,140.3 $1,822.7 $1,890.9 $674.6 $See footnotes at end of table.

Fiscal Year

Table 2.--

Status of the Railroad Retirement Act accounts and trust funds, 

by fiscal year, 1997-2006 (In millions), cash basis
Item 1997 1998 1999 2000 2001 2002 2003 

NATIONAL RAILROAD RETIREMENT INVESTMENT TRUST15

Cash and investment balance at end of period16........................... ........ ........ ........ ........ ........ $1,420.7 $23,016.5 $25,0

RAILROAD RETIREMENT SUPPLEMENTAL ACCOUNT6

Receipts

Tax transfers1..................................................................... $103.6 $118.1 $90.4 $76.7 $67.8 $23.5 ........ ...

Interest and profit on investments3....................................... 2.3 2.0 2.5 3.5 3.1 2.9 ........ ...

Expenditures

Benefit payments7............................................................... $82.4 $78.6 $75.1 $72.9 $68.8 $16.8 ........ ...

Net transfers to administration............................................. 2.2 2.0 2.1 2.3 2.0 0.7 ........ ...Loan repayments to RR Account14.......................................

... 27.1 33.9 ........ ........ ........ ........ ........ ...

Transfers to the National RR Investment Trust4.....................

... ........ ........ ........ ........ ........ 70.4 ........ ...

Transfer to Railroad Retirement Account..............................

... ........ ........ ........ ........ ........ 0.1 ........ ...

Balance at end of period............................................................ $35.3 $41.0 $56.8 $61.7 $61.7 ........ ........ ...DUAL BENEFITS PAYMENTS ACCOUNT17

Dual benefit transfers18............................................................

... $223.0 $205.5 $189.0 $173.3 $160.0 $146.0 $131.1 $1

Benefit payments.....................................................................

... 216.4 200.9 188.4 171.4 156.0 142.2 129.4 1

Balance at end of period10.........................................................

... $6.6 $4.6 $0.6 $1.9 $4.0 $3.9 $1.8 

See footnotes at end of table.

Fiscal Year

Table 2.--Status of the Railroad Retirement Act accounts and trust funds, 

by fiscal year, 1997-2006 (In millions), cash basis - Continued
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 sec

Revenue Code as amended.

2 Reflects transfer of $83.1 million from the Social Security Equivalent Benefit Account to the Railroad Retirement Account for reallocation of fiscal year 1998 payro

Retirement Account also reflects special Treasury income tax adjustment of $146 million for calendar years 1988-1994.

3 Net of interest on U.S. Treasury adjustments for payroll tax refunds (see note 1).4 Under the Railroad Retirement and Survivors' Improvement Act of 2001, as amended, the portion of the Railroad Retirement Account not needed to pay current a

to be transferred to the National Railroad Retirement Investment Trust (Trust). The Trust may transfer funds back to the Railroad Retirement Account for payment othe 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 RailThe SSEB Account transferred funds to the Trust in fiscal year 2003 and to the Railroad Retirement Account thereafter.

5 Includes interest. FY 1997-1998 loan repayments from the Railroad Retirement Supplemental Account. FY 2003 loan repayment from the Railroad Unemployme6 Under the Railroad Retirement and Survivors' Improvement Act of 2001, the supplemental work-hour tax was repealed for years after 2001, and the separate Rai

Supplemental Account was eliminated. The balance remaining in the Railroad Retirement Supplemental Account was transferred to the Railroad Retirement Accoun

7 Effective January 1, 2002, supplemental benefits are paid from the Railroad Retirement Account.8 Adjustments in benefit payments charged to the Social Security Equivalent Benefit Account as compared to actual financial interchange benefits, with interest.9 Reflects adjustment in benefit payments (Railroad Retirement Account -$676.8 million, Social Security Equivalent Benefit Account +$676.8 million) charged to the 

Benefit Account for October 1984 - December 1995, as compared to actual financial interchange benefits, with interest (Railroad Retirement Account +$241.6 millionEquivalent Benefit Account -$241.6 million) through August 1, 1997.

10 The Railroad Retirement Account balance reflects (a) the current net difference between Board payments of social security benefits and the receipt of reimbursem

(b) liabilities for uncashed check credits received from U.S. Treasury, and (c) credits for undistributed payment returns and recoveries. The Dual Benefits Payments carry over to the following year.

11 Established October 1, 1984, to keep track of the financing and payment of social security level portions of railroad retirement benefits.12 Transfers to or from OASDHI Trust Funds under section 7(c)(2) of the 1974 Railroad Retirement Act.13 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 Act a14 Includes interest.15 Established February 1, 2002, for investment of railroad retirement assets.16 Source: National Railroad Retirement Investment Trust.17 Established October 1, 1981, to keep track of the financing and payment of vested dual benefits.18 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 Rev
Table 3.--Status of the Railroad Unemployment Insurance Account, by fiscal year (In thousands), cash basis

Fiscal year

 Ite

m 2002 2003 2004 2005 

RECEIPTS Taxes............................................................

... $75,696 $122,638 $109,191 $76,179 

 Interest.........................................................

... 3,444 5,148 5,796 

1,582

 Transfer from Administration fund under sec. 11(d) of the RUI Act.....................

... 6,734 5,645 6,608 6,544 

 Undistributed recoveries of benefit payments

1

...

... (900) 788 (1,037) (327) 

 Loan from the RR Account..............................

... 7,800 .... .... .... 

 Total............................................................ $90,912 $132,515 $119,910 $88,192 EXPENDITURES Benefit payments............................................. $98,580 $94,389 $82,975 $72,861  Repayment of RRA Loan.................................

... .... 8,181 .... .... 

 Funding for Office of Inspector General............

... 1,372 1,392 1,318 1,686 

 Total............................................................ $99,953 $103,962 $84,293 $74,547 Cash balance end of period..............................

... $19,368 $47,921 $83,537 $97,183 

LOANS DUE RAILROAD RETIREMENT ACCOUNT 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, 1997-2006 (In thousands), ca

Transfer to

Railroad

Unemployment

Insurance

Taxes and Administrative Account under 

Fiscal year interest expenditures1 Sec. 11d2 

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 2006...................................... 21,980 10,610 6,664 

1 Expenditures for each year included encumbrances as of end of year. FY 2006 reflects reallocation of fiscal y

 administrative expenses between the Railroad Retirement Act and Railroad Unemployment Insurance Act prog

2 Transfers to the Railroad Unemployment Insurance Account are based on the amount the accrual balance on 

 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 YEAR1997 ............................ 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 2006 ............................ 706,158 195,380 84,321 121,407 138,492 134,811 4,733 927 11,448 AVERAGE AMOUNT

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 2006 ............................ ......... 1,789 1,920 42 671 1,122 946 1,423 823 

1 Includes annuities to parents. On September 30, 2006, there were 50 parents' annuities in current-payment status averaging $802. 2 Numbers include annuities temporarily being paid at spouse annuity rates, pending final adjudication of survivor annuities. 

NOTE.--Data exclude survivor (option) annuities, last payable in December 2005. 

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, 1997-2006
Retired employees Spouses

and Widowed

Supple- divorced Aged Disabled mothers R

 Total1 Age Disability mental spouses widow(er)s widow(er)s (fathers) Children w

NUMBER AWARDED

1997......................... 38,293 7,422 4,872 4,494 9,175 9,868 240 222 855 1998......................... 36,508 6,756 4,620 4,399 8,739 9,566 248 236 851 1999......................... 36,205 6,846 5,140 4,496 8,157 9,317 246 199 719 2000......................... 35,818 7,186 4,709 4,749 8,316 8,699 204 159 714 2001......................... 33,289 6,285 4,630 4,339 7,648 8,372 217 157 611 2002......................... 44,485 11,127 5,206 8,337 9,764 8,104 199 161 590 2003......................... 37,841 8,261 4,955 6,124 8,749 7,800 244 162 645 2004......................... 36,083 7,801 4,764 5,590 8,579 7,320 218 186 660 20052........................ 37,405 7,958 4,399 5,671 10,380 7,020 239 176 581 2006........................ 35,137 7,919 4,128 5,717 8,830 6,820 204 107 504 

Cumulative 1937-2006 4,857,729 1,422,414 500,549 454,207 1,113,298 991,653 17,413 84,382 234,706 AVERAGE AMOUNT

1997......................... ........ $1,506 $1,593 $41 $521 $888 $782 $868 $760 

1998......................... ........ 1,579 1,649 41 545 920 810 908 805 1999......................... ........ 1,654 1,751 41 567 945 825 993 831 2000......................... ........ 1,745 1,871 41 584 998 901 1,049 858 2001......................... ........ 1,842 1,971 41 613 1,044 927 996 932 2002......................... ........ 2,243 2,051 42 697 1,286 1,148 1,319 961 2003......................... ........ 2,201 2,092 41 733 1,346 1,262 1,384 953 2004......................... ........ 2,247 2,168 41 744 1,378 1,257 1,550 998 20052........................ ........ 2,285 2,210 41 655 1,416 1,288 1,397 1,023 

2006......................... ........ 2,389 2,308 41 794 1,493 1,334 1,492 1,056 

1 Includes annuities to parents. Fiscal year 2006 total includes 2 annuities to parents averaging $749. Cumulative total includes 3,524 annuities to par2 An unusually large number of spouse awards were made with small or no tier 1 amounts, resulting in larger than normal numbers of spouse awards 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 made bthe year.

Fiscal year

Table 6.--Number and average amount of retirement and survivor annuities awarded during year, by type of annuitant and fiscal ye
Total Retirement benefits2 

 Monthly Monthly 

State1 Number amount Number amount 

Alabama........................................................................... $13,755 9,000 11,800 $10,718 

Alaska.............................................................................. 235 300 200 179 

Arizona............................................................................. 13,791 12,600 9,800 10,777 

Arkansas......................................................................... 14,105 11,700 9,300 11,542 

California.......................................................................... 40,906 38,400 29,300 31,547 

Colorado........................................................................... 10,945 9,500 7,300 8,626 

Connecticut........................................................................ 3,973 3,500 2,600 3,018 Delaware.......................................................................... 2,684 2,300 1,700 2,053 

Washington DC................................................................... 572 700 500 410 

Florida.............................................................................. 42,021 38,100 30,000 33,837 

Georgia............................................................................. 22,499 19,300 15,000 17,951 

Hawaii............................................................................... 216 300 200 166 

Idaho................................................................................. 6,695 5,800 4,500 5,306 

Illinois............................................................................... 48,609 45,000 34,900 37,956 

Indiana.............................................................................. 23,269 20,600 15,900 18,109 

Iowa.................................................................................. 12,594 11,600 8,900 9,683 

Kansas............................................................................. 20,319 17,700 14,100 16,251 

Kentucky........................................................................... 21,325 18,600 14,500 16,816 

Louisiana........................................................................... 10,929 9,600 7,200 8,369 

Maine................................................................................ 4,063 3,700 2,800 3,016 Maryland........................................................................... 13,121 11,800 8,800 9,872 

Massachusetts.................................................................... 5,701 5,500 4,100 4,161 

Michigan........................................................................... 20,601 18,700 14,600 16,166 

Minnesota.......................................................................... 21,685 20,100 15,500 16,716 

Mississippi......................................................................... 8,935 8,000 6,200 7,085 

Missouri............................................................................ 26,528 24,100 18,700 20,833 

Montana........................................................................... 8,560 7,400 5,900 6,771 

Nebraska........................................................................... 16,602 14,000 11,300 13,456 

Nevada............................................................................. 4,855 4,400 3,500 3,900 

New Hampshire................................................................... 1,152 1,100 800 836 

New Jersey........................................................................ 12,932 11,600 8,400 9,593 

New Mexico....................................................................... 6,458 5,900 4,500 4,993 

New York.......................................................................... 32,383 28,400 21,100 25,092 

North Carolina..................................................................... 14,444 13,000 9,800 11,239 

North Dakota....................................................................... 4,668 4,100 3,100 3,595 

See footnotes at end of table.

Table 7.--Retirement and survivor benefits in current-payment status on September 30, 2006, by class and state (Amoun
Total Retirement benefits2 

 Monthly Monthly 

State1 Number amount Number amount 

Ohio.................................................................................. $40,210 27,600 36,700 $30,253 

Oklahoma......................................................................... 7,325 6,500 5,000 5,729 

Oregon............................................................................. 12,039 10,800 8,300 9,435 

Pennsylvania...................................................................... 52,830 47,500 34,100 38,254 

Rhode Island....................................................................... 734 700 500 526 

South Carolina..................................................................... 9,380 8,100 6,200 7,383 

South Dakota...................................................................... 1,791 1,700 1,300 1,388 Tennessee......................................................................... 17,080 15,100 11,400 13,257 

Texas................................................................................ 47,356 41,400 31,900 37,000 Utah.................................................................................. 7,893 6,900 5,300 6,069 

Vermont............................................................................ 1,104 1,100 800 784 Virginia.............................................................................. 25,265 22,100 16,800 19,611 

Washington....................................................................... 16,425 14,700 11,500 12,928 

West Virginia....................................................................... 13,496 12,000 8,900 10,060 

Wisconsin......................................................................... 14,144 13,400 10,300 10,905 

Wyoming.......................................................................... 4,498 3,700 3,000 3,590 

Outside United States:Canada............................................................................. 2,062 3,200 2,100 1,141 

Mexico.............................................................................. 289 400 200 136 

Other................................................................................. 715 800 500 426  Total3............................................................................... $786,794 539,600 706,200 $609,517 

Table 7.--Retirement and survivor benefits in current-payment status on September 30, 2006, by class and state (Amounts in 

1 State of residence of beneficiary on September 30, 2006.2 Includes 121,400 supplemental annuities to employees receiving regular annuities. In a relatively small number of cases, employees were also receiving sp3 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 disabled widow(er)s, widowed mothers and fathers, remarried and divorced widow(er)s, children, parents, and widow(er)s annuities temporarily being paid at 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 2001-2002 through 2005-2006, cash basis

Item 2001-2002 2002-2003 2003-2004 2004-2005 

Qualified employees................................. 269,900 259,100 248,800 242,200 Maximum daily benefit rate...................... $50 $52 $55 $56 

UNEMPLOYMENT BENEFITS

Net amount of benefits paid (thousands) $47,383 $45,614 $38,264 $30,179 Payments:1

 Number................................................... 103,600 96,700 76,400 62,000  Average amount per two week claim period......................................... $429 $449 $477 $489 Beneficiaries............................................... 17,800 15,400 11,700 9,300 Applications received................................ 22,000 18,300 14,400 11,700 Claims received.......................................... 128,500 116,400 91,700 73,700 Normal benefit accounts exhausted........ 2,700 2,900 2,400 2,200 Non-compensable waiting period only2.. (3) (3) (3) (3) 

SICKNESS BENEFITS

Net amount of benefits paid (thousands) $50,904 $49,891 $46,413 $43,405 

Payments:1

 Number................................................... 168,400 160,700 152,700 140,200  Average amount per two week claim period......................................... $445 $461 $486 $496 Beneficiaries............................................... 23,000 22,400 21,600 20,200 Applications received................................ 28,100 27,900 26,600 25,100 Claims received.......................................... 194,000 185,700 176,800 162,700 Normal benefit accounts exhausted........ 5,100 4,700 4,500 3,900 Non-compensable waiting period only2.. 100 100 200 100 

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 i3 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 Creditable Co

With

With 12 months sufficient Qualified Qualified

of service service for for RUIA for RUIA

Class or name of employer Total in 2005 RRA annuity benefits Total benefits Tier I 

CLASS OF EMPLOYERClass I railroads.................................................................. 206,856 165,665 156,086 198,228 17,821 12,209 $11,431,293 $Class II railroads................................................................. 7,839 5,920 5,597 7,210 760 484 372,168 Class III railroads................................................................ 35,400 27,914 25,131 32,857 2,674 1,332 1,875,252 Switching and terminal companies.................................. 6,554 5,024 4,773 6,035 567 313 322,681 Car-loan companies........................................................... 2,160 1,749 1,536 2,041 209 126 101,998 Miscellaneous employers1.......................................

... 4,651 3,639 3,311 3,801 402 178 266,825 

 Total................................................................................... 263,460 209,911 196,434 250,172 22,433 14,642 $14,370,218 $SELECTED EMPLOYERSBNSF Railway Company.................................................... 44,987 36,539 34,181 43,116 4,332 3,121 $2,672,886 Canadian National, U.S. Operations Bessemer and Lake Erie Railroad Co.......................... 174 121 148 157 6 ..... 8,866  Chicago Central and Pacific Railroad Co.................... 263 215 224 260 13 12 15,303  Duluth Missabe and Iron Range Railway Co.............. 350 284 332 339 10 9 21,162  Duluth, Winnipeg and Pacific Railway Co................... 127 109 117 122 7 3 8,880  Grand Trunk Western Railroad Incorporated............. 1,536 1,218 1,395 1,482 33 20 94,963  Illinois Central Railroad Company................................ 3,305 2,732 2,522 3,237 124 104 210,223  Pittsburgh and Conneaut Dock Co.............................. 94 79 73 92 ..... ..... 4,904  Sault Ste. Marie Bridge Company................................. 60 52 59 60 ..... ..... 3,320  Wisconsin Central LTD.................................................. 1,625 1,298 1,525 1,580 37 22 96,927 CSX Transportation Incorporated.................................... 35,793 27,842 27,258 34,217 2,915 1,938 1,903,046 Kansas City Southern Railway Company....................... 3,138 2,446 2,092 2,997 316 239 166,355  IC & E - Kansas City Southern Joint Agency.............. 2 ..... 2 1 ..... ..... 24 National Railroad Passenger Corp. (Amtrak)................. 21,348 16,827 17,803 20,571 962 489 1,012,450 Norfolk Southern Corporation.......................................... 32,986 26,726 24,275 31,747 3,712 2,898 1,743,412 Soo Line Railroad Company.............................................. 3,278 2,475 2,441 3,087 313 189 169,791 Union Pacific Railroad Company...................................... 57,790 46,702 41,639 55,163 5,041 3,165 3,298,779 

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