U.S. Railroad Retirement Board 

RAILROAD

RETIREMENT

HANDBOOK

2009
U.S. Railroad Retirement Board

 

MISSION STATEMENT 

The Railroad Retirement Board’s mission is to administer retirement/ survivor and unemployment/sickness insurance benefit programs for 

railroad workers and their families under the Railroad Retirement Act and 

the Railroad Unemployment Insurance Act. These programs provide income 

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

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

under the Social Security Act and the Internal Revenue Code. 

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

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

Railroad Retirement Board will treat every person who comes into contact 

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

promptly, accurately and clearly. 
Railroad Retirement and 

Unemployment Insurance 

Systems 

Handbook

U.S. Railroad Retirement Board 

844 North Rush Street 

Chicago, Illinois 60611-2092 

www.rrb.gov 
INTRODUCTION
 

T

his publication describes the history, operations and financing

of the retirement, disability, survivor, and health insurance

programs provided under Federal law for railroad workers and

their families, as well as the unemployment and sickness insurance program provided for railroad employees. 

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

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

students of social insurance programs and pension systems. It was 

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

the railroad retirement/survivor and unemployment/sickness benefit 

programs. 

This edition reflects the laws in effect as of July 2009. Certain limitations, exceptions and special cases are not covered. Further information 

may be obtained by contacting the Railroad Retirement Board

toll-free at 1-877-772-5772 or by visiting the agency’s Web site at

www.rrb.gov. 

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

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

Jerome F. Kever 

Management Member 

Michael S. Schwartz 

Chairman 

V. M. Speakman, Jr. 

Labor Member 
CONTENTS
 

Page

1 DEVELOPMENT OF THE RAILROAD RETIREMENT SYSTEM 1
 

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

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

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

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

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

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

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

Legislation Enacted 2006-2008 . ................................................ 11 

2 PROVISIONS OF THE RAILROAD RETIREMENT ACT 13
 

Creditable Service and Earnings................................................ 13 

Employee and Spouse Annuities ................................................ 14 

Survivor Benefits. . . . . ......................................................... 23 

Retirement-Survivor Information ............................................... 28 

Employee and Spouse Annuity Formula Components ............................. 33 

Survivor Annuity Formula Components ......................................... 38 

Appeals. . . . . .................................................................. 40 

3 FINANCING OF THE RAILROAD RETIREMENT SYSTEM 41
 

Payroll Taxes . . . . . ............................................................ 41 

Financial Interchange . . . ...................................................... 42 

Investments . ................................................................. 43 

Borrowing from General Revenues Related to the 

Financial Interchange . . . .................................................... 43 

Appropriations from General Revenues.......................................... 44 

Taxation of Railroad Retirement Benefits ....................................... 45 

Financial Position of the Railroad Retirement System . . . ......................... 45 

4 HEALTH INSURANCE FOR THE AGED AND DISABLED 47
 

Eligibility. . . . . . ............................................................... 47 

Part A and Part B Enrollment.................................................. 48 

Explanation of Hospital Insurance Benefits...................................... 49 

Explanation of Medical Insurance Benefits ...................................... 50 

Medicare Plan Choices . . . ...................................................... 51 

Prescription Drug Coverage . . . ................................................. 52 

Appeals. . . . . .................................................................. 53 

Advance Directives . . . . . ....................................................... 53 

Other Medicare Publications ................................................... 53 

Help Lines/Web Sites . . . . . ..................................................... 53 
Page

5 DEVELOPMENT OF THE RAILROAD UNEMPLOYMENT INSURANCE SYSTEM 55
 

Railroad Unemployment Insurance Act of 1938 . . . ............................... 55 

Major Amendments to the Railroad Unemployment 

Insurance Act . . . . . . ......................................................... 55 

1988 Legislation and Later Amendments . . ...................................... 58 

Railroad Unemployment Insurance Amendments Act of 1996 . . . . . . . . . . . . . . . . . . . . . 59 

6 PROVISIONS OF THE RAILROAD UNEMPLOYMENT INSURANCE ACT 61
 

Benefit Provisions ............................................................. 61 

Payment Process . . . . . ......................................................... 65 

Appeals . . . . . ................................................................. 66 

Income Taxes . ................................................................ 67 

7 FINANCING UNEMPLOYMENT AND SICKNESS INSURANCE 69
 

Contributions . ................................................................ 69 

Railroad Unemployment Insurance Account . .................................... 70 

Financial Report . . . . . ......................................................... 70 

8 ADMINISTRATION OF THE RAILROAD RETIREMENT SYSTEM 73
 

Administration . .............................................................. 73 

Keeping Beneficiaries Informed. ................................................ 75 

Program Integrity ............................................................. 76 

Office of Inspector General . . . .................................................. 77 

INDEX ....................................................................... 78 
1
 

DEVELOPMENT OF THE 

RAILROAD RETIREMENT SYSTEM 

Private pension plans originated in 

the railroad industry in 1874 when 

the first formal industrial pension 

plan in North America was established. By 

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

only a small proportion of the employees ever 

received benefits under these plans. The 

pension plans had a number of serious 

defects. They generally paid inadequate benefits and had limited provisions for disability 

retirement. Credits could not be transferred 

freely from employer to employer, and the 

employers could terminate the plans at will. 

With few exceptions, the plans were inadequately financed and could not withstand 

even temporary difficulties. 

The Great Depression of the early 1930’s 

led to movements for retirement plans on a 

national basis because few of the nation’s 

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

pension plans could not keep up with the 

demands made upon them by the general 

deterioration of employment conditions and 

by the great accumulation of older workers in 

the industry. While the social security system was in the planning stage, railroad 

workers sought a separate railroad retirement system which would continue and 

broaden the existing railroad programs 

under a uniform national plan. The proposed 

social security system was not scheduled to 

begin monthly benefit payments for several 

years and would not give credit for service 

performed prior to 1937, while conditions in 

the railroad industry called for immediate 

benefit payments based on prior service. 

Legislation was enacted in 1934, 1935 

and 1937 to establish a railroad retirement 

system separate from the social security program legislated in 1935. Such legislation, 

taking into account the particular circumstances of the rail industry, was not without 

precedent. Numerous laws pertaining to rail 

operations and safety had already been 

enacted since the Interstate Commerce Act of 

1887. Since passage of the Railroad 

Retirement Acts of the 1930’s, numerous 

other railroad laws have subsequently been 

enacted. 

RAILROAD RETIREMENT ACTS 

OF THE 1930’S 

The Railroad Retirement Act of 1934 set 

up the first retirement system for nongovernmental workers in this country to be administered by the Federal Government. How1
 
Railroad Retirement Handbook, 2009
 

ever, the Act was declared unconstitutional 

by a Federal district court, and this decision 

was sustained by the Supreme Court. The 

Railroad Retirement and Carriers’ Taxing 

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

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

court held that neither the employees nor 

their employers could be compelled to pay 

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

and the Railroad Retirement Board began 

awarding annuities in July 1936 under the 

provisions of the 1935 Act. 

While an appeal was pending, railroad 

management and labor, at the request of 

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

was a memorandum of agreement which led 

to the Railroad Retirement and Carriers’ 

Taxing Acts of 1937 establishing the railroad 

retirement system. The pensions of retired 

employees on the railroads’ private pension 

rolls were transferred to the Board’s rolls 

with pension reductions restored. The benefit payments of almost 50,000 pensioners 

were taken over by the Board in July 1937. 

There followed an immediate reduction in 

both the number of employed and unemployed older railroad workers. By the end of 

1938, the number of workers age 65 and over 

in active railroad service was less than onehalf of the number two years earlier. Almost 

100,000 employees had retired under the system by that date, 80 percent of them under 

the nondisability annuity provisions. 

Features of the 1937 Act 

The 1937 Act set up a staff retirement 

plan which provided annuities to aged retired 

employees based on their creditable railroad 

earnings and service. The amounts of retirement annuities awarded were directly related to the employee’s earnings and length of 

service, with a maximum of $120 a month. 

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

30 years of service could be credited when 

service before 1937 was counted. Annuities 

could be paid at age 65 or later, regardless of 

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

reduced basis) after 30 years of service. 

The conditions for paying annuities based 

on disability were severely restricted. The 

disability had to be total and permanent and 

30 years of service were required for full 

annuities. Employees could receive disability 

annuities at ages 60-64 after less than 30 

years of service, but on a reduced basis. 

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

for spouse annuities. A survivor could 

receive a lump sum equal to 4 percent of the 

employee’s creditable earnings after 1936, 

less any annuity payments already made. In 

addition, a retiring employee could elect to 

receive a reduced annuity in order to provide 

an annuity to his surviving spouse. 

The system was financed by a schedule of 

taxes beginning with 2.75 percent each on 

employers and employees applicable to the 

first $300 of monthly compensation. 

AMENDMENTS TO THE 1937 ACT 

Numerous amendments after 1937 

increased benefits and added, to what began 

as a staff retirement system, social insurance 

features similar to those provided by the 

social security system. 

The first significant sets of amendments 

were enacted in 1946 and 1951. By initiating 

coordination in certain areas with the social 

security system, they laid the foundation for 

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

survivor benefits to the railroad retirement 

system which were similar to those provided 

under social security coverage, but approximately 25 percent higher. 

2
 
DEVELOPMENT OF THE RAILROAD RETIREMENT SYSTEM 

These amendments also introduced the 

first step of coordination with the social security system by dividing jurisdiction over individual survivor benefits between the Board 

and the Social Security Administration. 

Benefits to survivors were thereafter based 

on combined railroad retirement and social 

security earnings credits. 

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

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

who were not totally disabled could be prevented from earning a living because they 

could not perform their regular jobs. The 

1946 amendments also reduced the service 

requirements for total disability annuities, 

making it possible for comparatively young 

disabled employees to receive benefits. 

In addition, the amounts of disability 

retirement annuities were increased through 

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

extension of new minimum provisions of the 

law to annuities based on disability. In 1954, 

annuities were provided for disabled children 

of deceased employees. And in 1968, disabled widows ages 50-59 were added to those 

who could receive benefits. 

Amendments enacted in 1951 added 

annuities for the spouses of retired railroad 

employees. This legislation completed the 

addition of social insurance features to the 

railroad retirement system and expanded the 

coordination of the railroad retirement and 

social security systems. 

Provision was made for social security to 

assume jurisdiction of benefits for employees 

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

to ensure that railroad retirement benefits 

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

would have paid on the basis of the railroad 

service involved. In addition, a financial 

interchange was established between the two 

systems to apportion the costs of benefits and 

taxes, related to railroad service, between the 

two systems on an equitable basis. 

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

rate with those of the social security system. 

This provision and the existing provisions for 

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

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

social security beneficiaries. The addition of 

a strictly staff benefit for career employees 

was provided in 1966 in the form of supplemental railroad retirement annuities. 

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

the amount provided under the original formula. The amounts of earnings creditable 

and taxable were $650 a month in 1970 compared with $300 originally. Tax rates had 

substantially increased in order to finance 

the new types of benefits, the increases in 

benefit amounts and other liberalizations in 

the program. The rate of regular railroad 

retirement taxes, still divided equally 

between employees and employers in 1971, 

was 9.95 percent on each as compared with 

3.5 percent in 1946. 

The annuities being paid in 1970 included 

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

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

national economy, social security and railroad retirement benefits were again substantially increased, by 10 percent in 1971 and 20 

percent in 1972. However, these three 

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

3
 
Railroad Retirement Handbook, 2009
 

The costs of making these three increases, 

aggregating 51.8 percent, permanent without 

adequate financing would have jeopardized 

the solvency of the system. Congress directed that a Commission on Railroad 

Retirement be formed to study the railroad 

retirement system and its financing for the 

purpose of recommending to Congress 

changes in the system that would ensure 

adequate benefit levels on an actuarially 

sound basis. 

Report of the Commission 

The Commission’s 1972 report proposed a 

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

tier I being a social security-type benefit and 

tier II a supplemental staff benefit. It also 

recommended a phaseout of dual railroad 

retirement-social security benefits with some 

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

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

Retirement Act and the Social Security Act 

was entitled to separate benefits under both 

Acts, assuming he or she met at least the 

minimum requirements for benefit eligibility. 

By the early 1970’s, approximately 40 percent of all beneficiaries on the Board’s rolls 

were also receiving social security benefits. 

Because of certain duplications in their dual 

benefits, considered a windfall element, the 

total of their benefits from both systems 

averaged more than the annuities of railroad 

employees who worked in the rail industry 

exclusively, and who had paid proportionally 

higher retirement taxes for the purpose of 

receiving higher benefits. At the same time, 

dual benefits were a cost to the railroad 

retirement system because they reduced the 

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

the mid-1970’s, the costs to the railroad 

retirement system of dual benefits exceeded 

$450 million per year and would have been a 

major factor in bankrupting the railroad 

retirement system if allowed to continue. 

The cumulative total loss to the system by 

1974 had been about $4 billion.) 

Upon the release of the Commission’s 

report, Congress ordered that representatives 

of employees and representatives of carriers 

negotiate mutual recommendations for a 

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

basis, taking into account the report and recommendations of the Commission on 

Railroad Retirement. 

Preliminary Agreement 

The preliminary recommendations of 

management and labor for revision of the 

railroad retirement system, recorded in a 

Memorandum of Understanding, were enacted by the Congress in 1973. The major provisions, which reflected components of an 

industry-wide wage settlement, effected a 

redistribution of railroad retirement taxes 

and earlier retirement as follows. Generally 

effective October 1, 1973, employee and 

employer tax rates under the Railroad 

Retirement Tax Act were revised so as to 

reduce the employee rate to the percentage 

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

the program was maintained at the level in 

effect before the change. Employee rates 

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

employer rates correspondingly increased 

from 10.60 percent to 15.35 percent. 

Effective July 1, 1974, all employees at least 

60 years of age and having 30 years or more 

of creditable railroad service could retire 

without their annuities being subject to 

reduction for retirement before age 65. 

Under previous law, only female employees 

were granted this advantage. 

4
 
DEVELOPMENT OF THE RAILROAD RETIREMENT SYSTEM 

RAILROAD RETIREMENT ACT  credits were acquired after December 31, 

OF 1974 1974. 

The Railroad Retirement Act of 1974, 

reflecting the basic principles of the 

Commission Report and incorporating the 

subsequent management-labor agreement, 

was enacted on October 16, 1974. 

Two-tier Formulas 

The 1974 Act provided a tier I formula 

yielding amounts equivalent to social security benefits, taking into account both railroad 

retirement and nonrailroad social security 

credits. A tier II formula, based on railroad 

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

security benefits by other industrial pension 

systems. The total annuity yielded by the 

tier formulas continued traditional levels of 

railroad retirement benefits and reflected the 

three cost-of-living increases aggregating 

51.8 percent, which had been provided 

between 1970 and 1972 on a temporary 

basis. 

Dual Benefit Phase-out 

The 1974 Act eliminated duplications in 

dual railroad retirement-social security benefits for new hires and individuals not vested 

as of December 31, 1974, under both programs. Dual benefits for vested employees 

were protected through provision for payment of an amount in their annuities 

referred to as a “vested dual benefit.” 

However, such vested dual benefit amounts 

were not allowed to increase because of any 

social security credits earned after 

December 31, 1974. 

For career employees, vesting was 

defined as having 10 years of railroad service 

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

social security program to be entitled to a 

benefit at age 62 if no further social security 

Vesting for employees who had fully qualified for benefits under both systems but had 

left the industry prior to 1974 presented a 

difficult problem. The 1974 Act favored 

employees who had remained in the railroad 

industry more than those who left railroad 

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

sense, were placed in the same situation as 

employees who had already retired, while 

former employees were made subject to more 

stringent requirements. The resulting vesting provisions were subsequently tested in 

the courts and upheld by the U.S. Supreme 

Court in 1980. 

Cost-of-living Increases 

The 1972 amendments to the Social 

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

on the basis of changes in the Consumer 

Price Index. Under the two-tier plan, the 

first tier railroad retirement benefit increases automatically the same way social security 

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

the six-year period commencing January 1, 

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

Benefit Improvements 

The 1974 Act also provided improvements 

in existing benefits. The initial agreement of 

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

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

could not receive a supplemental annuity 

until age 65 nor could a spouse receive a 

spouse annuity until the employee reached 

age 65. The 1974 Act revised the eligibility 

5
 
Railroad Retirement Handbook, 2009
 

requirements for these benefits so that they 

were coordinated directly with the employee 

annuity requirements. 

And under the 1937 Act, the vast majority of widows and other survivors received 

benefits based upon 110 percent of the comparable social security benefit, and the 

resulting amount was generally felt to be 

inadequate in relation to the level of other 

railroad benefits. The 1974 Act survivor formula increased the calculation basis to 130 

percent from the former 110 percent. 

Financing 

It was anticipated that the changes in the 

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

Government to pay the phase-out costs of 

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

sound basis. However, the cost estimates 

made at that time did not anticipate the 

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

retirement system. 

With regard to financing the phase-out 

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

cost of vested dual benefit payments be paid 

out of the social security trust funds, as this 

element was basically a social security benefit. However, Congress concluded that the 

cost should be borne by the General 

Treasury. It was thought that it would be 

unfair to impose this cost upon current and 

future employees who would not (except 

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

or upon the railroads since the excess benefit 

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

the General Treasury was supported by a 

precedent regarding military service and by 

the fact that the dual benefit problem had 

been brought about by prior congressional 

action repealing past dual benefit restrictions 

over the objections of the railroads. 

1981 RAILROAD RETIREMENT 

AMENDMENTS 

By 1980, recurring inflation and recession 

combined with other factors placed financial 

stresses on the railroad retirement system 

which made it clear that further financial 

action was needed to maintain the system. 

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

part of an Omnibus Budget Reconciliation 

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

These amendments increased railroad 

retirement taxes on both rail employers and 

employees. While tier I taxes on employers 

and employees remained at the same rate as 

social security taxes, 6.65 percent in 1981, 

the 9.5 percent tier II tax paid by employers 

was increased by 2.25 percent to 11.75 percent and employees assumed a tier II tax of 2 

percent. The amendments also gave the 

Railroad Retirement Board the authority to 

borrow from U.S. Treasury general funds on 

the basis of forthcoming financial interchange income if Railroad Retirement 

Account funds were insufficient to pay benefits during a month. 

Although the two-tier benefit structure 

provided by the 1974 Act was left intact, 

changes were made in the tier II formula and 

there were other changes in benefit provisions. For retirees whose annuities are 

awarded on or after October 1, 1981, a simplified formula yields awards that automatically keep pace with average wage increases 

in the last 60 months of service. The 1981 

law continued tier II employee and spouse 

cost-of-living increases, while revising survivor cost-of-living increases to correspond 

6
 
DEVELOPMENT OF THE RAILROAD RETIREMENT SYSTEM 

with those provided employees and spouses. 

It also broadened the current connection 

requirement applicable to certain career 

employee benefits. While the amended law 

eliminated future supplemental annuity closing dates, it restricted future supplemental 

annuity eligibility to employees with some 

service prior to October 1981. In addition, 

the amendments provided benefits for 

divorced spouses, surviving divorced spouses 

and remarried widow(er)s which are like 

those provided under the Social Security Act. 

This legislation also required prorated 

adjustments in individual vested dual benefit 

payments, depending upon the amounts 

appropriated to the fund created for these 

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

annual Federal budget and appropriations 

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

to vested employees with dual coverage on 

their own earnings, and precluded further 

awards of vested dual benefit payments to 

spouses or widows. 

The 1981 amendments mandated, in the 

event of certain adverse financial indicators, 

that railway management and labor, and the 

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

required the Railroad Retirement Board to 

reduce annuity levels during any fiscal year 

in which it appears there would be insufficient funds with which to make full benefit 

payments on a timely basis for every month 

of the year. 

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

that the financing arrangements would provide the railroad retirement system with adequate funding throughout the 1980’s. 

However, the continuing recession in the 

national economy depressed rail traffic levels 

to the extent that large-scale layoffs were 

underway by the first quarter of 1982. 

Average monthly employment in fiscal year 

1982 dropped to 457,000 from the 512,000 

average of the previous year, and it subsequently declined to 388,000 in the first quarter of 1983. The decline in employment limited payroll tax income accordingly. In addition, increased unemployment benefit payments resulting from the layoffs made such 

unprecedented demands on the Railroad 

Unemployment Insurance Account that it 

owed $500 million to the Railroad 

Retirement Account by the end of March 

1983. 

The condition of the Railroad Retirement 

Account consequently deteriorated to the 

point that the Board was required to prepare 

to reduce annuity levels on October 1, 1983, 

by an estimated 40 percent of tier II portions, 

in the absence of remedial financial legislation. 

RAILROAD RETIREMENT  

SOLVENCY ACT OF 1983 

The scheduled annuity reductions were 

averted by enactment of the Railroad 

Retirement Solvency Act on August 12, 1983. 

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

also incorporated recommendations of 

Congress and the Administration. The 

amendments were, in part, patterned after 

major social security amendments enacted 

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

benefits through coordinating provisions in 

the Railroad Retirement Act. 

Taxes 

Under the Railroad Retirement Solvency 

Act, tier II taxes on employers increased 

from 11.75 percent to 12.75 percent in 

January 1984, to 13.75 percent in January 

1985, and to 14.75 percent in January 1986. 

Tier II taxes on employees increased from 

7
 
Railroad Retirement Handbook, 2009
 

2 percent to 2.75 percent in 1984, to 3.50 percent in 1985, and to 4.25 percent in 1986. 

And since 1985, railroad retirement taxes are 

applied to earnings on an annual, rather 

than a monthly, basis. As a result of the 

1983 social security amendments, tier I taxes 

on employers and employees increased from 

6.70 percent to 7 percent in January 1984, to 

7.05 percent in 1985, to 7.15 percent in 1986, 

to 7.51 percent in 1988 and to 7.65 percent in 

1990. 

The 1983 social security amendments 

subjected railroad retirement tier I annuity 

portions to Federal income taxes on the same 

basis as social security benefits and the 

Solvency Act made tier II benefits and vested 

dual benefit payments subject to Federal 

income tax on the same basis as private pensions, beginning with tax year 1984. The 

revenues raised from income taxes on tier I 

and vested dual benefits are used for benefit 

payments. Revenues raised by the tax on 

tier II benefits were to be used for benefit 

payments through fiscal year 1988, after 

which the revenues would remain in general 

Treasury funds. Subsequent legislation 

extended these transfers permanently. 

Other Financing Provisions 

The Railroad Retirement Account was 

reimbursed in three installments from the 

general fund of the Treasury for shortfalls in 

vested dual benefit appropriations between 

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

Treasury funds until the Board receives 

financial interchange funds from the social 

security system was broadened to place 

financial interchange monies in the Railroad 

Retirement Account effectively on a current 

basis. 

Benefit Provisions 

The 1983 social security amendments 

deferred July 1983 cost-of-living increases to 

January 1984 and required that future 

increases be made in January of subsequent 

years. This deferral applied to railroad 

retirement tier I annuity amounts as well as 

social security benefits. The Railroad 

Retirement Solvency Act correspondingly 

changed the future payment dates of tier II 

cost-of-living increases from July 1 to 

January 1, with the first increase payable on 

January 1, 1985. It also required an offset of 

the dollar amount of the next five percent of 

tier I cost-of-living increases from tier II benefits. 

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

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

if they retired before age 62. The reductions 

did not affect tier II benefits, and employees 

who acquired 30 years of service and 

attained age 60 before July 1, 1984, could 

still retire at any time with full benefits, as 

under prior law. (The Railroad Retirement 

and Survivors’ Improvement Act of 2001 as 

described on pages 10-11 eliminated these 

reductions for 60/30 employees retiring after 

2001.) The 1983 law established a fivemonth waiting period for railroad retirement 

disability annuities, just as for social security 

disability benefits, and altered the tier I computation of annuities subject to reduction for 

certain non-covered service pensions. It 

required the Board to honor court orders that 

treat non-tier I railroad retirement benefits 

as property subject to division in proceedings 

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

of applications for benefits to a maximum of 

six months to conform to the Social Security 

Act, except for disability benefit applications, 

which can retroact 12 months. 

The Solvency Act eliminated annuity 

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

and was also the basis for benefits under 

8
 
DEVELOPMENT OF THE RAILROAD RETIREMENT SYSTEM 

another Federal law. It conformed railroad 

retirement student benefit provisions to 

social security student benefit provisions and 

eliminated age reductions applied to disabled 

widow(er)s’ annuities for months they were 

under age 60 when their annuities began. 

LEGISLATION ENACTED 

1985-2000 

The Balanced Budget and Emergency 

Deficit Control Act of 1985, known as the 

Gramm/Rudman/Hollings Act, enacted in 

December 1985, required decreases in vested 

dual benefit payments during the 1986 fiscal 

year and suspension of the January 1986 

cost-of-living increase in the tier II portions 

of railroad retirement annuities. Gramm/ 

Rudman and/or related budget legislation 

reduced vested dual benefits and supplemental annuities periodically in subsequent 

years. 

Budget reconciliation legislation 

enacted in April 1986 included changes in 

Internal Revenue Code provisions increasing 

income taxes on some railroad retirement 

annuities. Effective with tax year 1986, the 

tier I portion of a railroad retirement annuity, which is treated as a social security benefit for Federal income tax purposes, was limited for tax purposes to amounts actually 

equivalent to social security benefits. This 

primarily affected tier I early retirement benefits payable between ages 60 and 62 and 

some occupational disability benefits that are 

now treated like private pensions. The Tax 

Reform Act of October 1986 eliminated, for 

annuities beginning after July 1, 1986, the 

three-year recovery rule for contributory pensions, making railroad retirement benefits 

exceeding social security equivalent levels 

taxable immediately upon retirement. For 

tax reporting purposes, benefit payments are 

prorated on the basis of estimated life 

expectancies to exempt an employee’s 

previously-taxed pension contributions. 

In 1987, the continuing decline in railroad employment led to concern over the system’s financing in the next century. A 

Federal budget deficit reduction bill consequently increased tier II tax rates in January 

1988 to 16.10 percent on employers and 4.90 

percent on employees, and extended for one 

year, until October 1, 1989, the time during 

which revenues from Federal income taxes 

on tier II railroad retirement benefits could 

be transferred to the Railroad Retirement 

Account for use in paying benefits. 

Amendments enacted in 1988 eliminated the provision suspending annuities of 

retired employees and spouses who work for 

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

increased the amount disabled railroad 

retirement annuitants could earn without 

reducing their benefits from $200 per month 

to $400 per month, exclusive of work-related 

expenses. 

In addition, these amendments provided 

a lump sum, equal to railroad retirement 

tier II payroll taxes deducted from separation 

or severance payments made after 1984, to 

be paid upon retirement to employees meeting minimum service requirements if the separation or severance payments did not yield 

additional railroad retirement service or 

earnings credits. 

The 1989 budget laws effective in 1990 

increased the amount of earnings subject to 

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

premiums are subject to railroad retirement 

payroll taxes, conforming railroad retirement 

with social security. 

Omnibus budget legislation in 1990 

permanently exempted supplemental annuities from reductions under the Gramm/ 

Rudman Act. It also increased the maximum compensation subject to Medicare 

9
 
Railroad Retirement Handbook, 2009
 

hospital insurance payroll tax and mandated 

an expedited payroll tax deposit schedule for 

large employers covered by social security or 

railroad retirement. Budget legislation 

enacted in 1993 made all earnings subject to 

the Medicare payroll tax and, for those in 

high tax brackets, made a larger amount of 

social security and railroad retirement tier I 

benefits subject to Federal income tax. 

The time during which revenues from 

Federal income taxes on tier II railroad 

retirement benefits could be transferred to 

the Railroad Retirement Account for use in 

paying benefits was extended one year in 

1989, and 1990 budget legislation further 

extended the date until October 1, 1992. In 

1994, legislation extended the transfers, 

retroactive to October 1992, on a permanent 

basis which improved the financing of the 

railroad retirement system. 

Legislation enacted in April 2000 

eased the earnings restrictions affecting 

social security beneficiaries working after full 

retirement age. The legislation also applied 

to railroad retirement annuitants but it did 

not change the railroad retirement work 

restrictions applying to last pre-retirement 

employment which are not included in the 

Social Security Act. 

THE RAILROAD RETIREMENT AND  

SURVIVORS’ IMPROVEMENT  

ACT OF 2001 

The Railroad Retirement and Survivors’ 

Improvement Act of 2001, signed into law 

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

their spouses, eliminated a cap on monthly 

retirement and disability benefits, lowered 

the minimum service requirement from 10 

years to 5 years of service if performed after 

1995, and provided increased benefits for 

some widow(er)s. Financing sections in the 

law provided for the investment of railroad 

retirement funds in nongovernmental assets, 

adjustments in the payroll tax rates paid by 

employers and employees, and the repeal of a 

supplemental annuity work-hour tax. The 

law was based on joint recommendations to 

Congress negotiated by a coalition of rail 

labor organizations and rail freight carriers. 

60/30 Retirement 

The law amended the Railroad 

Retirement Act by eliminating the early 

retirement reduction applied to the annuities 

of 30-year employees retiring between the 

ages of 60 and 62 if their annuities begin 

January 1, 2002, or later. The spouses of 

such employees are also eligible for full 

annuities at age 60. Full 60/30 benefits had 

not been payable since 1983 legislation 

reduced such early retirement benefits. 

Maximum Provision 

The law eliminated, effective January 1, 

2002, a maximum on the amount of combined monthly employee and spouse benefit 

payments which had been intended to prevent benefits from exceeding an amount 

based on an employee’s earnings immediately 

prior to retirement. This maximum provision 

had the unintended effect of reducing benefits for former employees with no earnings, or 

low earnings, in the 10-year period prior to 

retirement, and for long-service employees 

with moderate earnings. 

Basic Service Requirement 

The legislation lowered the minimum eligibility requirement for regular railroad 

retirement annuities from 10 years (120 

months) of creditable railroad service to 

5 years (60 months) of creditable railroad 

service for those with 5 years of service rendered after 1995. This provision was effective 

January 1, 2002, and was not retroactive. 

10
 
DEVELOPMENT OF THE RAILROAD RETIREMENT SYSTEM 

Widow(er)s’ Benefits 

The legislation established an “initial 

minimum amount” based on the two-tier 

annuity amount that would have been 

payable to the railroad employee at the time 

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

any applicable reductions. Widow(er)s’ annuities computed on the basis of the initial minimum amount will not increase until the 

amount payable under previous law plus 

cost-of-living increases is higher than the initial minimum amount. 

This provision was effective February 1, 

2002, and was not retroactive. It applied to 

widow(er)s on the rolls before the effective 

date only if the annuity the widow(er) was 

receiving on the effective date was less than 

she or he would have received had the legislation been in effect on the date the 

widow(er)’s annuity began. 

Investment Changes 

The legislation provided for the transfer 

of railroad retirement funds from the 

Railroad Retirement Accounts to the 

National Railroad Retirement Investment 

Trust, whose Board of seven trustees is 

empowered to invest Trust assets in 

non-governmental assets, such as equities 

and debt, as well as in governmental securities. 

The Trust is a tax-exempt entity independent from the Federal Government and 

its trustees are subject to fiduciary standards 

similar to those required by the Employee 

Retirement Income Security Act. The Trust 

must submit an annual report to Congress on 

its operations. 

Effect on Payroll Tax Rates 

The legislation reduced tier II tax rates 

on rail employers, including rail labor 

unions, in calendar years 2002 and 2003, and 

beginning with 2004 provides automatic 

adjustments in the tier II tax rates for both 

employers and employees. It also repealed 

the supplemental annuity work-hour tax rate 

paid by employers, beginning with calendar 

year 2002. 

While there was no change in the tier II 

tax rate of 4.90 percent on employees in the 

years 2002 and 2003, starting with calendar 

year 2004 tier II taxes on both employers and 

employees have been based on the ratio of 

certain asset balances to the sum of benefits 

and administrative expenses (the average 

accounts benefits ratio). Depending on the 

average account benefits ratio, tier II taxes 

for employers range between 8.20 percent 

and 22.10 percent, while the tier II tax rate 

for employees ranges between 0 percent and 

4.90 percent. In 2005, as a result of this provision, the tier II tax rate on employees 

decreased to 4.40 percent from 4.90 percent. 

The rate on employers and rail employee representatives decreased to 12.60 percent from 

13.10 percent. The 2006 rates were the same 

as in 2005. In 2007, the tier II tax rate on 

employees decreased from 4.40 percent to 

3.90 percent and on employers it decreased 

from 12.60 percent to 12.10 percent. Those 

rates remained in effect in 2008 and 2009. 

Supplemental Annuity Funding 

In addition to repealing the supplemental 

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

Account. Supplemental annuities are now 

funded through the National Railroad 

Retirement Investment Trust. 

LEGISLATION ENACTED 

2006-2008 

The Pension Protection Act of 2006 was 

signed into law August 17, 2006. The Act, 

effective August 17, 2007, provided divorced 

spouses a railroad retirement annuity 

11
 
Railroad Retirement Handbook, 2009
 

independent of the employee’s actual entitlement and extended court-ordered partition 

payments to surviving former spouses. 

Legislation enacted January 12, 2007, 

increased the amount employees receiving 

railroad retirement disability annuities can 

earn without losing any benefits. Legislation 

modifying partition payments was signed 

into law on December 23, 2008. 

12
 
2
 

PROVISIONS OF THE 

RAILROAD RETIREMENT ACT 

CREDITABLE SERVICE  

AND EARNINGS 

Service performed for a covered 

employer or as an employee representative is creditable toward all 

types of benefits under the Railroad 

Retirement Act. Covered employers include 

interstate railroads and their affiliates 

engaged in railroad-connected operations, as 

well as employer associations and national 

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

may be counted as railroad service. 

Service to an employer is creditable if it is 

compensated and the employee is subject to 

the continuing supervision of the employer. 

Benefits are based on earnings credits and 

months of service. Earnings are creditable 

up to certain annual maximums on the 

amount of compensation subject to railroad 

retirement taxes. Credit for a month of railroad service is given for every month in 

which an employee had some compensated 

service for an employer covered by the 

Railroad Retirement Act, even if only one 

day’s service is performed in the month. 

(However, local lodge compensation earned 

after 1974 is disregarded for any calendar 

month in which it is less than $25.) 

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

creditable railroad service or 60 months (5 

years) of creditable railroad service if such 

service was performed after 1995. Service 

months need not be consecutive. 

Additional service months may be 

deemed in some cases where an employee 

does not actually work in every month of the 

year. For additional service months to be 

deemed, the employee’s compensation for the 

year, up to the tier II maximum, must exceed 

an amount equal to 1/12 of the tier II maximum multiplied by the number of service 

months actually worked. 

Except for on-the-job injuries, the first six 

months of sickness benefits payable by the 

Board are subject to tier I taxes and credited 

as compensation for tier I benefits, but are 

not credited as service months. 

Military service may be credited towards 

retirement benefits under certain conditions. 

To be creditable as compensation under the 

Railroad Retirement Act, service in the U.S. 

Armed Forces must be preceded by railroad 

service in the same or preceding calendar 

year. With the exceptions noted, the employee must also have entered active military 

service when the United States was at war or 

in a state of national emergency or have 

served in the Armed Forces involuntarily. 

13
 
Railroad Retirement Handbook, 2009
 

The war and national emergency periods 

that affect current retirements are: 

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

� December 16, 1950, to September 14, 

1978. 

� August 2, 1990, to date as yet  

undetermined. 

If military service began during a war or 

national emergency period, any active duty 

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

emergency is creditable, except that voluntary service extending beyond September 14, 

1978, is not creditable. Railroad workers 

who voluntarily served in the Armed Forces 

between June 15, 1948, and December 15, 

1950, when there was no declared national 

state of emergency, can be given railroad 

retirement credit for their military service if 

they performed railroad service in the year 

they entered or the year before they entered 

military service and if they returned to rail 

service in the year their military service 

ended or in the following year, and had no 

intervening nonrailroad employment. 

Service and Earnings Records 

The Railroad Retirement Board maintains a record of all covered railroad service 

and creditable earnings after 1936. The 

information is recorded under the employee’s 

social security account number used by the 

employer to report service and compensation 

to the Board. 

Each year, employees in the industry 

receive a Certificate of Service Months and 

Compensation (Form BA-6) from the Board. 

This statement is important because it provides both a current and cumulative record of 

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

as well as miscellaneous compensation, such 

as taxable sickness payments. It also 

includes the cumulative amounts of railroad 

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

payroll taxes, and reflects creditable military 

service if the service has previously been 

reported to the Board. The BA-6 form should 

be carefully reviewed to make sure that it is 

correct. Employees can view their individual 

railroad retirement records of service months 

and compensation via the Board’s Web site. 

This service, called “Service and Compensation History,” can be accessed by visiting 

www.rrb.gov and clicking on “Benefit Online 

Services.” This electronic alternative does 

not replace Form BA-6, but makes the same 

information available online. 

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

should write the Board as early as possible. 

The law limits to 4 years the period during 

which corrections can be made. All letters 

concerning BA-6 forms must show the 

employee’s social security number and should 

be addressed to: 

Protest Unit - CES 

U.S. Railroad Retirement Board 

844 North Rush Street 

Chicago, Illinois 60611-2092 

EMPLOYEE AND SPOUSE  

ANNUITIES 

Age and Service, Disability and 

Supplemental Annuities 

The basic requirement for a regular 

employee annuity is 120 months (10 years) of 

creditable railroad service or 60 months (5 

years) of creditable railroad service if such 

service was performed after 1995. Benefits 

14
 
PROVISIONS OF THE RAILROAD RETIREMENT ACT 

then become payable after the employee 

meets certain other requirements, which 

depend, in turn, on the type of annuity 

payable. 

An AGE AND SERVICE ANNUITY can 

be paid to: 

� Employees with 30 or more years of 

creditable railroad service. They are eligible

for regular annuities based on age and service the first full month they are age 60.

Early retirement reductions are applied if

the employee first became eligible for a 60/30

annuity July 1, 1984, or later and retired at

ages 60 or 61 before 2002. 

� Employees with 10 to 29 years of creditable railroad service, or 5-9 years, if at least 

5 years were after 1995. They are eligible for

regular annuities based on age and service

the first full month they are age 62. Early

retirement annuity reductions are applied to

annuities awarded before the employee’s full

retirement age, which ranges from age 65 for

those born before 1938 to age 67 for those

born in 1960 or later, the same as under 

social security. Reduced annuities are still 

payable at age 62 to those with less than 30

years of service, but the maximum reduction

is gradually rising to 30 percent from 20

percent by the year 2022. The tier II portion

of an annuity (as defined on page 18) is not

reduced beyond 20 percent if the employee

had any creditable railroad service before

August 12, 1983. (See pages 33-37 for a

detailed explanation of age reductions.) 

An annuity based on age cannot be paid 

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

rights to return to work for a railroad 

employer. 

A DISABILITY ANNUITY can be 

paid for: 

� Total disability, at any age, if an

employee is permanently disabled for all regular work and has at least 10 years (120

months) of creditable railroad service.

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

1995, may qualify for tier I only (as defined

on page 18) before retirement age on the

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

An age reduced tier II amount would be

payable at age 62. 

� Occupational disability, at age 60, if an

employee has at least 10 years of creditable

railroad service or at any age if the employee

has at least 20 years (240 months) of service,

when the employee is permanently disabled

for his or her regular railroad occupation. A 

“current connection” with the railroad industry is also required for an annuity based on 

occupational, rather than total, disability. 

A five-month waiting period beginning 

with the month after the month of the onset 

of disability is required before any disability 

annuity payments can begin. 

An employee can be in compensated service while filing a disability annuity application as long as the compensated service terminates within 90 days from the date of filing. However, in order for a supplemental 

annuity to be paid by the Board, or for an eligible spouse to begin receiving annuity payments, a disabled annuitant under full retirement age must relinquish employment 

rights. 

A SUPPLEMENTAL ANNUITY can be 

paid at: 

� Age 60, if the employee has at least 30

years of creditable railroad service. 

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

of creditable railroad service. 

In addition to the service requirements, a 

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

15
 
Railroad Retirement Handbook, 2009
 

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

to employees who had some rail service 

before October 1981. 

Current Connection Requirement 

An employee who worked for a railroad in 

at least 12 months in the 30 months immediately preceding the month his or her railroad 

retirement annuity begins will meet the current connection requirement for a supplemental annuity, occupational disability annuity or the survivor benefits described later in 

this publication. (If the employee died before 

retirement, railroad service in at least 12 

months in the 30 months before the month of 

death will meet the current connection 

requirement for the purpose of paying survivor benefits.) 

If an employee does not qualify on this 

basis, but has 12 months of service in an earlier 30-month period, he or she may still 

meet the current connection requirement. 

This alternative generally applies if the 

employee did not have any regular employment outside the railroad industry after the 

end of the last 30-month period which included 12 months of railroad service and before 

the month the annuity begins or the date of 

death. Full or part-time work for a nonrailroad employer in the interval between the 

end of the last 30-month period including 12 

months of railroad service and the beginning 

date of an employee’s annuity, or the month 

of death if earlier, can break a current connection. 

Self-employment in an unincorporated 

business will not break a current connection; 

however, self-employment can break a current connection if the business is incorporated. 

Working for certain U.S. Government 

agencies -- Department of Transportation, 

National Transportation Safety Board, 

Surface Transportation Board, National 

Mediation Board, Railroad Retirement 

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

State employment with the Alaska Railroad, 

as long as that railroad remains an entity of 

the State of Alaska, will not break a current 

connection. Also, railroad service in Canada 

for a Canadian railroad will neither break 

nor preserve a current connection. 

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

years of railroad service, was involuntarily 

terminated without fault from his or her last 

job in the railroad industry, and did not 

thereafter decline an offer of employment in 

the same class or craft in the railroad industry regardless of the distance to the new position. A termination of railroad service is considered voluntary unless there was no choice 

available to the individual to remain in service. Generally, where an employee has no 

option to remain in the service of his or her 

railroad employer, the termination of the 

employment is considered involuntary, 

regardless of whether the employee does or 

does not receive a separation allowance. 

However, each case is decided by the Board 

on an individual basis. This exception to the 

normal current connection requirements 

became effective October 1, 1981, but only for 

employees still living on that date who left 

the rail industry on or after October 1, 1975, 

or who were on leave of absence, on furlough, 

or absent due to injury on October 1, 1975. 

Once a current connection is established 

at the time the railroad retirement annuity 

begins, an employee never loses it, no matter 

what kind of work is performed thereafter. 

16
 
PROVISIONS OF THE RAILROAD RETIREMENT ACT 

Spouse Annuities 

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

retirement and the employee’s years of railroad service. 

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

eligible for an annuity the first full month 

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

first became eligible for a 60/30 annuity 

July 1, 1984, or later and retired at ages 60 

or 61 before 2002. If the employee was 

awarded a disability annuity, has attained 

age 60 and has 30 years of service, the 

spouse can receive an unreduced annuity the 

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

before or after 2002 as long as the spouse’s 

annuity beginning date is after 2001. 

If a retired employee with less than 30 

years of service is age 62, the employee’s 

spouse is also eligible for an annuity the first 

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

annuity if the spouse retires prior to full 

retirement age. Full retirement age for a 

spouse is gradually rising to age 67, just as 

for an employee, depending on the year of 

birth. Reduced benefits are still payable at 

age 62, but the maximum reduction will be 

35 percent rather than 25 percent by the 

year 2022. The tier II portion of a spouse 

annuity is not reduced beyond 25 percent if 

the employee had any creditable railroad 

service before August 12, 1983. 

A spouse of an employee receiving an age 

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

age and service annuity) is eligible for a 

spouse annuity at any age if caring for the 

employee’s unmarried child, and the child is 

under age 18 or a disabled child of any age 

who became disabled before age 22. 

The employee must have been married to 

the spouse for at least 1 year, unless the 

spouse is the natural parent of their child, 

the spouse was eligible or potentially eligible 

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

before marrying the employee or the spouse 

was previously married to the employee and 

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

1-year marriage requirement. 

An annuity may also be payable to the 

divorced wife or husband of a retired employee if their marriage lasted for at least 10 consecutive years, both have attained age 62 for 

a full month and the divorced spouse is not 

currently married. The amount of a divorced 

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

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

the spouse annuity otherwise payable (tier I 

only). 

A divorced spouse can receive an annuity 

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

less than 2 years, the employee and spouse 

are at least age 62, and the employee is fully 

insured under the Social Security Act using 

combined railroad and social security earnings. A court-ordered partition payment may 

be paid even if the employee is not entitled to 

an annuity provided that the employee has 

10 years of railroad service or 5 years after 

1995 and both the employee and former 

spouse are 62. 

Employee and Spouse  

Annuity Estimates 

Railroad employees can get estimates of 

future annuities for themselves and their 

spouses through the Board’s Web site at 

www.rrb.gov. The estimates are based on 

17
 
Railroad Retirement Handbook, 2009
 

the service and earnings records maintained 

by the Board and show the earliest date the 

employee can receive a full annuity and, if 

applicable, the earliest date he or she can 

receive a reduced annuity. Employees who 

want estimates can also contact a field office 

of the Board for approximate figures. Each 

Board field office can furnish estimates for 

employees with at least 10 years of railroad 

service, or 5 years after 1995. It is not possible to provide a precise amount if the 

employee is not currently eligible. 

The tables on the next page illustrate 

average amounts awarded to employees and 

spouses in fiscal year 2008. 

Two-tier Annuities and Dual Benefits 

Regular railroad retirement annuities are 

calculated under a two-tier formula. The 

annuity formula components for employees 

and spouses are described later in this 

chapter. 

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

an employee has acquired. The amount of 

the first tier is calculated using social security formulas, but with railroad retirement age 

and service requirements. 

The second tier is based on railroad 

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

and above social security benefits to workers 

in other industries. 

An additional amount may also be 

payable as part of the regular annuity if an 

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

and met certain vesting requirements. 

Employees with Railroad Retirement 

and Social Security Benefits 

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

18
 

social security benefits, the Social Security 

Administration determines the amount due, 

but a combined monthly benefit payment is 

issued by the Railroad Retirement Board. 

Since the tier I portion of an employee 

annuity is based on combined railroad retirement and social security credits, it is reduced 

by the amount of any actual social security 

benefit paid on the basis of the employee’s 

nonrailroad employment in order to prevent 

a duplication of benefits based on those earnings. The tier I amount is also reduced in 

the event a social security benefit is payable 

to the employee on the basis of another person’s earnings. This reduction follows principles of social security law which, in effect, 

limit payment to the higher of any two or 

more benefits payable to an individual at one 

time. An annuitant is required to advise the 

Railroad Retirement Board if any benefits 

are received directly from the Social Security 

Administration or if those benefits increase 

(other than for an annual cost-of-living 

increase). 

If an employee qualified for dual benefits 

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

annuity amount, which offsets, in part, the 

dual benefit reduction. This additional 

amount, which reflects the dual benefits 

payable prior to 1975, is called the vested 

dual benefit payment. The vested dual benefit cannot be paid prior to the date the 

employee could begin to receive a social security benefit if he or she were to file for such a 

benefit. 

Employees who do not qualify for a vested 

dual benefit may be eligible for a refund of 

any excess social security taxes they paid 

(see page 31). 

(Text continued on page 20.) 
PROVISIONS OF THE RAILROAD RETIREMENT ACT 

Average Average years 

award of service 

Employee $3,182 35.8 

Employee and spouse $4,458 35.8 

Table 1.--Fiscal Year 2008 Annuity Awards 

to 30-year Employees Retiring Before Full Retirement Age 

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

be payable. The supplemental annuity amount, for awards after 1974, is $23 plus $4 for each year of service 

over 25 years, up to a maximum of $43 for employees with 30 or more years of service. Figures in the tables on 

this page include supplemental annuity amounts. 

Table 2.--Fiscal Year 2008 Annuity Awards Based on  

Service Averaging Less than 30 Years 

Average Average years 

award of service 

Employee full retirement age or over $2,053 22.6 

Employee full retirement age or over 

and spouse $3,049 25.7 

Employee under full retirement age with 

less than 30 years of service $1,433 17.1 

Employee under full retirement age with 

less than 30 years of service and spouse $1,862 17.2 

Employee retiring because of disability $2,442 24.7 

19
 
Railroad Retirement Handbook, 2009
 

Employees with Public, Non-profit or 

Foreign Pensions 

For employees first eligible for a railroad 

retirement annuity and a Federal, State or 

local government pension after 1985, there 

may be a reduction in the tier I amount for 

receipt of a public pension based, in part or 

in whole, on employment not covered by 

social security or railroad retirement after 

1956. This may also apply to certain other 

payments not covered by railroad retirement 

or social security, such as from a non-profit 

organization or from a foreign government or 

a foreign employer, but it does not include 

military service pensions, payments by the 

Department of Veterans Affairs, or certain 

benefits payable by a foreign government as 

a result of a totalization agreement between 

that government and the United States. 

Workers’ Compensation 

If an employee is receiving a disability 

annuity, the tier I portion may, under certain 

circumstances, be reduced for receipt of 

workers’ compensation or public disability 

benefits. 

If an annuitant becomes entitled to any 

pensions or benefits as described above, the 

Board must be notified immediately. 

Spouses with Dual Benefits 

Social Security Benefits 

The tier I portion of a spouse annuity is 

reduced for any social security entitlement, 

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

the employee’s earnings or the earnings of 

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

limit payment to the higher of any two or 

more benefits payable to an individual at one 

time. 

Public Pensions 

The tier I portion of a spouse annuity 

may also be reduced for receipt of any 

Federal, State or local government pension 

separately payable to the spouse based on 

the spouse’s own earnings. The reduction 

generally does not apply if the employment 

on which the pension is based was covered 

under the Social Security Act throughout the 

last 60 months of public employment. Most 

military service pensions and payments from 

the Department of Veterans Affairs will not 

cause a reduction. Pensions paid by a foreign government or interstate instrumentality will also not cause a reduction. For spouses subject to the public pension reduction, 

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

amount of the public pension. 

Employee Annuity 

If both the husband and wife are qualified railroad employees and either had some 

railroad service before 1975, both can receive 

their own railroad retirement employee and 

spouse annuities, without a full dual benefit 

reduction. 

If both the husband and wife started railroad employment after 1974, the amount of 

any spouse or divorced spouse annuity is 

reduced by the amount of the employee 

annuity to which the spouse is also entitled. 

Minimum Guaranty for Employee 

and Spouse Annuities 

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

in monthly benefits than they would have if 

railroad earnings were covered by social 

security rather than railroad retirement 

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

family would otherwise be eligible for a type 

20
 
PROVISIONS OF THE RAILROAD RETIREMENT ACT 

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

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

disabled, retired, or deceased. The Railroad 

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

a retired rail employee has children who 

would otherwise be eligible for a benefit 

under social security, the employee’s annuity 

would be increased to reflect what social 

security would pay the family, unless the 

annuity is already more than that amount. 

Cost-of-living Increases in Employee 

and Spouse Retirement Benefits 

After retirement, the tier I portions of 

both employee and spouse annuities are generally increased for higher living costs at the 

same time, and by the same percentage, as 

social security benefits. These increases, 

effective December 1 and included in the 

January payment, are triggered under both 

programs when the Consumer Price Index 

rises during the 12 months ending the previous September 30. Generally, if the Index 

increases by 5 percent, for example, the tier I 

portion increases by 5 percent. 

If an annuitant is receiving both railroad 

retirement and social security benefits, the 

increased tier I portion is reduced by the 

increased social security benefit. 

The tier II portions of retired employee 

and spouse annuities are normally increased 

annually by 32.5 percent of the increase in 

the Consumer Price Index. 

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

increased by these cost-of-living adjustments. 

Working After Retirement 

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

for any month in which a retired employee 

regardless of age, works for an employer covered under the Railroad Retirement Act, 

including labor organizations. However, 

service for less than $25 a month to a local 

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

Retired employees and spouses who work 

for their last pre-retirement nonrailroad 

employer are subject to an earnings deduction. Such employment will reduce tier II 

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

earnings deductions, by $1 for each $2 of 

earnings received, subject to a maximum 

reduction of 50 percent. These reductions 

continue after full retirement age. Work that 

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

Retired employees and spouses who have 

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

born before 1938 to age 67 for those born in 

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

in or outside the rail industry, that exceed 

certain exempt amounts. The tier I and vested dual benefits of these employee and 

spouse annuities are subject to deductions if 

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

the calendar year in which full social security 

retirement age is attained, the deduction is 

$1 in benefits for every $2 of annual earnings 

exceeding an exempt amount ($14,160 in 

2009). 

21
 
Railroad Retirement Handbook, 2009
 

If the employee or spouse has a 

tier I reduction for social security benefits, 

the tier I benefit is not reduced for excess 

earnings. 

In the first year in which an employee 

subject to these earnings deductions is both 

entitled to an annuity and has a non-work 

month, a full annuity can be paid for those 

months in which the employee had low earnings or did not have substantial selfemployment, no matter what total earnings 

for the year were. A non-work month is one 

in which the employee neither earns over 

1/12th of the annual exempt amount nor has 

substantial self-employment. Non-work 

months can be claimed in only one calendar 

year, which need not necessarily be the first 

year of entitlement. 

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

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

vested dual benefits for every $3 earned in 

excess of an exempt amount ($37,680 in 

2009), but only counting those earnings in 

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

dual benefit deductions stop effective with 

the month full retirement age is attained. 

Earnings received for services rendered, 

plus any net earnings from self-employment, 

are considered when assessing deductions for 

earnings. Interest, dividends, certain rental 

income or income from stocks, bonds, or other 

investments are not generally considered 

earnings for this purpose. 

Annuitants under full retirement age who 

work after retirement and expect that their 

earnings for a year will be more than the 

annual exempt amount must promptly notify 

the Board and furnish an estimate of their 

expected earnings in order to prevent an 

overpayment and penalties. They should 

also notify the Board if their original estimate changes significantly. 

Retired employees and spouses who 

return to work for a railroad or for their last 

pre-retirement nonrailroad employer must 

notify the Board, regardless of earnings or 

age. 

A spouse benefit is subject to reductions 

not only for the spouse’s earnings, but also 

for the earnings of the employee, regardless 

of whether the earnings are from service for 

the last pre-retirement nonrailroad employer 

or other post-retirement employment. 

A spouse annuity is not payable for any 

month in which the employee’s annuity is not 

payable, or for any month in which the 

spouse, regardless of age, works for an 

employer covered under the Railroad 

Retirement Act. (A divorced spouse can 

receive an annuity even if the employee has 

not retired, provided they have been divorced 

for a period of not less than 2 years, the 

employee and spouse are at least age 62, and 

the employee is fully insured under the 

Social Security Act using combined railroad 

and social security earnings. A court-ordered 

partition payment may be paid even if the 

employee is not entitled to an annuity provided that the employee has 10 years of railroad service or 5 years after 1995 and both 

the employee and former spouse are age 62.) 

Disability work restrictions.—If an annuity 

is based on disability, there are certain work 

restrictions that can affect payment, depending on the amount of earnings. The annuity 

is not payable for any month in which the 

annuitant works for an employer covered 

under the Railroad Retirement Act. The 

annuity is not payable for any month in 2009 

in which the annuitant earns more than $770 

in any employment or net self-employment, 

exclusive of disability-related work expenses. 

Withheld payments will be restored if earnings for the year are less than $9,625 after 

deduction of disability-related work expenses. 

22
 
PROVISIONS OF THE RAILROAD RETIREMENT ACT 

Failure to report such earnings could involve 

a significant penalty charge. 

These disability work restrictions cease 

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

transition is effective no earlier than full 

retirement age even if the annuitant had 30 

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

pre-retirement nonrailroad employer. 

If a disabled annuitant works before his 

or her full retirement age, this may also raise 

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

of the amount of earnings. Consequently, 

any earnings must be reported promptly to 

avoid overpayments, which are recoverable 

by the Board and may also include penalties. 

When Annuities Stop 

Payment of any annuity stops upon the 

annuitant’s death, and the annuity is not 

payable for any day in the month of death. 

A disability annuity stops after the employee 

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

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

based on caring for a child and the child is no 

longer under age 18 or disabled or the child 

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

the spouse annuity may continue if she or he 

is qualified without the child or it can 

resume when the spouse attains a qualifying 

age. While a divorce ends eligibility for a 

spouse annuity, a divorced spouse may, 

under conditions described previously, 

qualify for a divorced spouse’s annuity. A 

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

benefit, based on her or his own earnings, if 

the unreduced social security benefit is equal 

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

unreduced tier I amount. A divorced 

spouse’s annuity may be reduced or stopped 

if the divorced spouse is also entitled to a 

railroad retirement annuity. 

It is important to notify the Railroad 

Retirement Board promptly if one of 

the above changes occurs. Failure to report 

can result in an overpayment, which the 

Board will take action to recover, sometimes 

with interest or penalties. Failure to report 

changes promptly or making a false 

statement can also result in a fine or 

imprisonment. 

SURVIVOR BENEFITS 

Annuities are payable to surviving widows and widowers, children and certain other 

dependents. Lump-sum benefits are payable 

after the death of a railroad employee only if 

there are no qualified survivors of the 

employee immediately eligible for monthly 

annuities. With the exception of a residual 

lump-sum death benefit, eligibility for survivor benefits depends on whether or not the 

employee was “insured” under the Railroad 

Retirement Act at the time of death. 

An employee is insured if he or she has at 

least 10 years of railroad service, or 5 years 

performed after 1995, and a “current connection” with the railroad industry as of the earlier of the month the annuity begins or the 

month of death. The current connection 

requirement is described earlier in this chapter. 

If a deceased employee was not so 

insured, jurisdiction of any survivor benefits 

payable is transferred to the Social Security 

Administration and any survivor benefits are 

paid by that agency instead of the Board. 

Regardless of which agency has jurisdiction, 

the deceased employee’s railroad retirement 

and social security credits will be combined 

for the purpose of benefit computations. 

23
 
Railroad Retirement Handbook, 2009
 

Types of Survivor Benefits 

Annuities are payable to widows, widowers and unmarried children; in certain cases, 

benefits are also payable to parents, remarried widow(er)s, grandchildren and surviving 

divorced spouses. 

WIDOWS’ and WIDOWERS’ ANNUITIES 

are payable at: 

� Age 60; age reductions are applied to

annuities awarded before full retirement age.

The eligibility age for unreduced annuities is

gradually rising from 65 to 67, depending on

the year of birth. 

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

and permanently disabled and unable to 

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

the employee’s death or within 7 years after

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

A 5-month waiting period is required after

the onset of disability before a disability

annuity can begin. 

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

an unmarried child of the deceased employee

under age 18 or a disabled child of any age

who became disabled before age 22. 

Generally, the widow(er) must have been 

married to the employee for at least 9 

months prior to death, unless she or he was 

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

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

was potentially entitled to certain railroad 

retirement or social security benefits in the 

month before the month of death, or the marriage was postponed due to State restrictions 

on divorce due to mental incompetence or 

similar incapacity. 

Survivor annuities may also be payable to 

a surviving divorced spouse, or remarried 

widow(er). Benefits are limited to the 

amount social security would pay and therefore are less than the amount of the survivor 

annuity otherwise payable. However, a former spouse may be paid a court-ordered 

partition amount. 

A surviving divorced spouse may qualify 

if she or he was married to the employee for 

at least 10 consecutive years, is unmarried or 

remarried under the conditions described in 

the next paragraph, and is age 60 or older 

(50 if disabled). A surviving divorced spouse 

who is unmarried can qualify at any age if 

caring for the employee’s child and the child 

is under age 16 or disabled, in which case the 

10-year marriage requirement does not 

apply. 

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

paid to a widow(er) or surviving divorced 

spouse who remarries after age 60, or to a 

disabled widow(er) or disabled surviving 

divorced spouse who remarries after age 50; 

however, remarriage prior to age 60 (or age 

50 if disabled) would not prevent eligibility if 

such remarriage ends. Such social security 

level benefits may also be paid to a younger 

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

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

security benefits or the remarriage ends. 

OTHER SURVIVOR ANNUITIES are 

payable to: 

� An unmarried child under age 18. 

� An unmarried child age 18 in full-time 

attendance at an elementary or secondary 

school or in approved homeschooling until 

the student attains age 19 or the end of the

school term in progress when the student

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

benefits are limited to the two months following the month age 19 is attained. These benefits will be terminated earlier if the student 

marries, graduates, or ceases full-time attendance. 

24
 
PROVISIONS OF THE RAILROAD RETIREMENT ACT 

� An unmarried disabled child over age

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

� An unmarried dependent grandchild

meeting any of the requirements described

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

� A parent at age 60 who was dependent

on the employee for at least half of the parent’s support. If the employee was also survived by a widow(er), surviving divorced

spouse or child who could ever qualify for an

annuity, the parent’s annuity is limited to

the amount that social security would pay

(tier I). 

Survivor Annuity Estimates 

The best way for survivors to obtain an 

annuity estimate is to contact a Board field 

office. Active or retired employees who are 

concerned about the amount of benefits 

which would be payable to their survivors 

may also receive estimates from a Board field 

office. 

The average annuity awarded to 

widow(er)s in fiscal year 2008, excluding 

remarried widow(er)s and surviving divorced 

spouses, was $1,625 a month. Children 

received $1,153 a month, on the average. 

Total family benefits for widow(er)s with 

children averaged $3,390 a month. The average annuity awarded to remarried 

widow(er)s or surviving divorced spouses in 

fiscal year 2008 was $914 a month. 

Survivor Annuity Tiers 

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

Tier I is based on the deceased employee’s 

combined railroad retirement and social 

security credits, and is generally equivalent 

to the amount that would have been payable 

under social security. 

Tier II amounts are percentages of the 

deceased employee’s tier II amount, as 

described later in this chapter. 

Survivor annuity amounts may also be 

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

annuity will be at least equal to the two-tier 

benefit the deceased employee would have 

received at the time of the award of the 

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

social security benefits, and no less than the 

spouse annuity she or he was receiving just 

prior to the employee’s death. 

Survivors with Dual Benefits 

Social Security Benefits 

The tier I portion is reduced by the 

amount of any social security benefits 

received by a survivor annuitant, whether 

the social security benefits are based on the 

survivor’s own earnings or those of another 

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

limit payment to the higher of any two or 

more benefits payable to an individual at one 

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

they are generally combined into a single 

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

benefits are received directly from the Social 

Security Administration or if those benefits 

increase (other than for an annual 

cost-of-living increase). 

Public Pensions 

The tier I portion of a widow(er)’s annuity 

may be reduced for receipt of any Federal, 

State or local government pension based on 

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

generally does not apply if the employment 

on which the pension is based was covered 

25
 
Railroad Retirement Handbook, 2009
 

under the Social Security Act throughout the 

last 60 months of public employment. 

Most military service pensions and payments from the Department of Veterans 

Affairs will not cause a reduction. Pensions 

paid by a foreign government or interstate 

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

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

of the amount of the public pension. 

Employee Annuity 

If a widow(er) is qualified for a railroad 

retirement employee annuity as well as a 

survivor annuity, a special guaranty applies 

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

months of railroad service before 1975, the 

widow or dependent widower may receive 

both an employee annuity and a survivor 

annuity, without a full dual benefit reduction. 

If either the deceased employee or the 

survivor annuitant had some service before 

1975 but had not completed 120 months of 

railroad service before 1975, the employee 

annuity and the tier II portion of the survivor annuity would be payable to the 

widow(er). The tier I portion of the survivor 

annuity would be payable only to the extent 

that it exceeds the tier I portion of the 

employee annuity. 

If both the widow(er) and the deceased 

employee started railroad employment after 

1974, the survivor annuity payable to the 

widow(er) is reduced by the amount of the 

employee annuity. 

Cost-of-living Increases in  

Survivor Annuities 

Cost-of-living increases, effective 

December 1 and included in the January 

payment, are made on the basis of increases 

in national prices or, in some circumstances, 

average national wages, and calculated the 

same way as cost-of-living increases in 

employee and spouse annuities. 

However, in the case of widow(er)s’ annuities computed on the basis of the initial minimum amount provided under 2001 legislation, the monthly payment will not increase 

until the amount payable under previous law 

plus subsequent cost-of-living increases is 

higher than the initial minimum amount. 

Work and Earnings Limitations 

A survivor annuity is not payable for any 

month the survivor works for an employer 

covered under the Railroad Retirement Act, 

regardless of the survivor’s age. 

Survivors who are receiving social security benefits have their railroad retirement 

annuity and social security benefit combined 

for earnings limitations purposes. Prior to 

the calendar year in which full retirement 

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

benefits for every $2 earned over an exempt 

amount ($14,160 in 2009). The deduction is 

$1 for every $3 earned over an exempt 

amount ($37,680 in 2009) for the months in 

the calendar year in which the individual 

attains full retirement age, up to the month 

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

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

non-work month, a full annuity can be paid 

for those months in which the survivor had 

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

for the year were. 

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

promptly to the Board in order to prevent 

potential overpayments. 

These earnings restrictions do not apply 

to disabled widow(er)s under age 60 or to disabled children. However, any work or 

26
 
PROVISIONS OF THE RAILROAD RETIREMENT ACT 

earnings by a disability annuitant must be 

reported and are reviewed to determine 

whether they indicate recovery from the disability. 

When Survivor Payments Stop 

All survivor payments stop upon death; 

no annuity is payable for the month of death. 

A widow(er)’s annuity will be reduced 

upon remarriage and in some cases payment 

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

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

annuity could also end upon entitlement to 

another survivor or spouse annuity under the 

Railroad Retirement Act which is greater 

than the widow(er)’s annuity. 

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

entitled to a social security benefit which 

equals or exceeds the deceased employee’s 

basic tier I amount and reduces the annuity 

amount to zero. 

A widow(er)’s or surviving divorced 

spouse’s annuity which is based on a child in 

care will end if the child is no longer in the 

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

remarriage occurs. 

A child’s or grandchild’s annuity will stop 

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

annuity was based. If the child is 18 and a 

full-time elementary or high school student, 

the annuity stops when full-time attendance 

ceases, at graduation, or upon attainment of 

age 19. In most cases, when a student 

attains age 19 during the school term, benefits are extended to the 2 months following 

the month age 19 is attained. 

An annuity will stop if it was based on 

disability and the beneficiary recovers from 

the disability before age 60. A disability 

annuity can be reinstated if the disability 

recurs within 7 years and the widow(er) is 

still under age 60. 

A parent’s survivor annuity may stop 

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

Any of the above occurrences must be 

reported promptly to the Board in order to 

prevent an overpayment. 

Lump-sum Death Benefits 

A lump-sum death benefit is payable to 

certain survivors of an employee with 10 or 

more years of railroad service, or less than 10 

years if at least 5 years were after 1995, and 

a current connection with the railroad industry if there is no survivor immediately eligible for a monthly annuity upon the employee’s death. 

If the employee did not have 10 years of 

service before 1975, the lump-sum is limited 

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

living in the same household as the employee 

at the time of the employee’s death. 

If the employee had less than 10 years of 

service but had 5 years after 1995, he or she 

must have met social security’s insured status requirement for the lump sum to be 

payable. 

If the employee had 10 years of service 

before 1975, the lump sum is payable to the 

living-with widow or widower. If there is no 

such widow or widower, the lump sum may 

be paid to the funeral home or the payer of 

the funeral expenses. These lump sums 

averaged $989 in fiscal year 2008. 

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

the widow(er) had excess earnings deductions 

which prevented annuity payments or for 

any other reason did not receive monthly 

benefits in the 12-month period beginning 

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

difference between the lump-sum benefit and 

monthly benefits actually paid, if any, is 

27
 
Railroad Retirement Handbook, 2009
 

payable in the form of a deferred lump-sum 

benefit. 

The average for all types of lump sums 

was $905 in fiscal year 2008. 

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

certain conditions, a residual lump-sum 

death benefit which ensures that a railroad 

family receives at least as much in benefits 

as the employee paid in railroad retirement 

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

refund of an employee’s pre-1975 railroad 

retirement taxes, after subtraction of any 

benefits previously paid on the basis of the 

employee’s service. This benefit is seldom 

payable. 

RETIREMENT-SURVIVOR  

INFORMATION 

Applying for an Annuity 

Applications for railroad retirement or 

survivor benefits are generally filed at one of 

the Board’s field offices, or with a traveling 

Board representative at a customer outreach 

program service location or by telephone and 

mail. The Board accepts applications up to 3 

months in advance of an annuity beginning 

date which allows the agency to complete the 

processing of most new claims by a person’s 

retirement date. An employee can be in compensated service while filing a disability 

application provided that the compensated 

service terminates either before the annuity 

beginning date or before the end of the 3­

month period. When an employee files a disability application while still in compensated 

service, it will be necessary for the employee 

to provide a specific ending date of the compensation. Compensated service includes not 

only compensation with respect to active 

service performed by an employee for an 

employer, but also includes pay for time lost, 

wage continuation payments, certain employee protection payments and any other payment for which the employee will receive 

additional creditable service. 

Railroad employees can also get estimates 

of their future annuities over the Internet. 

Employees can access this service by visiting 

www.rrb.gov and clicking on “Benefit Online 

Services” for directions on establishing an 

RRB Internet Services account. 

Persons applying for railroad retirement 

benefits will be automatically enrolled in the 

U.S. Treasury’s Direct Deposit Program, 

which electronically transfers Federal payments into individuals’ checking or savings 

accounts. However, Direct Deposit waivers 

are available to individuals who state that 

Direct Deposit would cause a hardship, and 

to individuals without bank accounts. 

Applicants for railroad retirement or 

survivor benefits can check with a Board 

field office as to when they can expect their 

first payment. Customer service standards 

and progress reports are available in field 

offices and online at www.rrb.gov. 

To expedite filing, applicants should contact a Board office for a pre-retirement consultation. Certain proofs are required when 

filing a railroad retirement annuity application, such as: 

For employees and spouses: 

√ Proof of an employee’s age. 

√ Proof of any military service. 

√ Proof of marriage if the spouse 

is eligible or will shortly become eligible 

for a spouse annuity. A divorced spouse 

must furnish proof of divorce from the 

employee. 

√ Proof of the spouse’s or divorced 

spouse’s age. 

28
 
PROVISIONS OF THE RAILROAD RETIREMENT ACT 

√ Proof of a child’s relationship and age, 

if the spouse is applying for an annuity based 

on caring for the employee’s child. 

√ Notice of any social security benefit 

award or other social security claim determination. 

√ Information about any public service 

pension for which the applicant qualifies. 

√ Banking information for Direct Deposit 

of benefit payments. 

The best proof of age is a certified copy of 

a civil or church document recorded at or 

close to the time of birth. The best proof of 

marriage is a certified copy of the public or 

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

furnish a certified copy of the final divorce 

decree. Proof of military service may be a 

certificate of discharge, or any official military record that shows the dates of service. 

Employees are encouraged to file proofs of 

age, and especially of any military service, 

well in advance of retirement in order to 

expedite the annuity application process and 

avoid delays resulting from inadequate 

proofs. Information will be recorded and 

stored electronically and all proofs will be 

promptly returned. 

Applicants for disability annuities are 

required to submit supporting medical information. They are sometimes asked to take a 

special medical examination given by a doctor designated by the Board. 

An annuity is effective as of the first full 

month throughout which the employee and/or 

spouse is age 60 with 30 years’ service, or age 

62 in the case of reduced annuities with less 

than 30 years’ service. An annuity is effective the first day of the month full retirement 

age is attained in the case of unreduced 

annuities with less than 30 years of service. 

The retroactivity of a retirement annuity 

application is limited to 1 year for disability 

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

reduced age annuities. 

Any social security benefits due the 

retired employee or family member which 

begin after 1974 are paid through the 

Railroad Retirement Board. Even though 

the Board processes payment, the Social 

Security Administration is responsible for all 

adjudication. 

For survivors: 

A widow(er) must furnish proof of age, 

proof of marriage and proof of the employee’s 

death. A surviving divorced spouse must furnish proof of divorce from the employee. If 

applying for a disability annuity, the 

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

relationship to the employee and proof of 

support from the employee. 

If children are eligible for benefits, proof 

of the relationship and age of each child is 

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

required. Eighteen-year-old students must 

provide proof of full-time elementary or high 

school attendance. A stepchild of the employee must provide proof of dependency on the 

employee. 

Retroactivity of a survivor annuity application is 1 year for disabled widow(er)s and 6 

months for full retirement age widow(er)s, 

mothers (fathers), children and parents. 

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

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

divorced spouses or remarried widow(er)s). 

Otherwise, there is generally no retroactivity 

for reduced age widow(er)s’ annuities. 

29
 
Railroad Retirement Handbook, 2009
 

Lump-sum death benefit applications must 

be filed within 2 years after the death of the 

employee. There is no time limit on filing for 

a residual payment. 

Garnishment/Property Settlements 

Garnishment.—Certain percentages of an 

employee, spouse or survivor annuity may be 

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

enforce an obligation for child support and/or 

alimony payments. 

Property settlements.—Employee tier II 

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

property settlements in proceedings related 

to divorce, annulment or legal separation. 

Tier I benefits are not subject to property settlements. 

Representative Payees 

Railroad retirement or health insurance 

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

serve the interests of the beneficiary. 

Payments made in this way are generally for 

a child, or an adult incapable of using the 

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

the beneficiary’s best interest. The benefits 

are generally used to provide for basic needs. 

The representative payee must report events 

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

If Requirements for Benefits Are not Met 

Retirement annuities are not payable by 

the Board unless the employee has 5 years 

(60 months) of creditable service after 1995 

or 10 years (120 months) of service at any 

time. Service includes any creditable military service. 

Survivor annuities are not payable unless 

the employee had a current connection with 

the railroad industry and either 5 years (60 

months) of creditable service after 1995 or 10 

years (120 months) of service at any time. 

In either of the above circumstances, if 

the requirements are not met, the employee’s 

railroad retirement credits are transferred to 

the Social Security Administration and treated as social security credits. Benefits paid by 

that agency would accordingly take into 

account both railroad and social security covered earnings. 

The Railroad Retirement Act does not 

allow a former railroad employee to withdraw his or her retirement taxes. Like social 

security taxes, railroad retirement taxes are 

not refundable unless retirement tax withholding has exceeded annual maximums. 

Railroad Retirement Taxes 

By law, railroad retirement tier I payroll 

taxes are coordinated with social security 

taxes and increase automatically when social 

security taxes rise. Employees and employers pay tier I taxes which are the same as 

social security taxes. In addition, both 

employees and employers pay tier II taxes to 

finance railroad retirement benefit payments 

over and above social security levels. 

The tier I tax on employees and employers is 7.65 percent in 2009. The tier II tax on 

employees is 3.90 percent. The tier II tax 

rate on rail employers, rail labor organizations and rail employee representatives is 

12.10 percent in 2009. An employee representative is a labor official of a noncovered 

labor organization who represents employees 

covered under the Acts administered by the 

Railroad Retirement Board. 

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

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

levels. 

30
 
PROVISIONS OF THE RAILROAD RETIREMENT ACT 

Table 3.--2009 Regular Railroad Retirement Taxes 

Tax rate 

Maximum 

annual taxable 

earnings 

Tier I 

Employees and employers 7.65%* $106,800 

Tier II 

Employees 

Employers 

3.90% 

12.10% 

$ 79,200 

$ 79,200 

Annual regular taxes 

on employees earning $106,800 

Tier I Tier II Total 

Employees $8,170.20 $3,088.80 $11,259.00 

Employers $8,170.20 $9,583.20 $17,753.40 

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

insurance. The 2009 maximum earnings base for railroad retirement is $106,800 and the Medicare 

hospital insurance tax is applied to all earnings. Consequently, employee and employer contributions continue to be made at the 1.45% rate, even after the employee has earned $106,800. 

Dual Tax Payments Employees who worked for two or more

Since 1975, railroad employees who also railroads, or had both railroad retirement 

worked for a social security covered employer 

and social security taxes withheld from their 

earnings, should see Internal Revenue in the same year may, under certain circum­

stances, receive a tax credit equivalent to any Service publication 505, Tax Withholding 

excess social security taxes withheld. 

and Estimated Tax, for information on how 

to figure any excess railroad retirement or

Employees who worked for two or more social security tax withheld.

railroads in a year, or who had tier I taxes 

withheld from their Railroad Retirement Dual Railroad Retirement-Social 

Board sickness benefits in addition to their Security Taxes Paid, 1951-74 

railroad earnings, may be eligible for a tax 

credit of any excess tier I or tier II railroad An employee with 10 or more years of 

retirement taxes withheld. Employees who railroad service who is not entitled to a vesthad tier I taxes withheld from their supple­ ed dual benefit payment may be entitled to a 

mental sickness benefits may also be eligible refund of excess social security taxes if his or 

for a tax credit of any excess tier I tax. Such 

her combined taxable earnings from the railtax credits may be claimed on an employee’s road retirement and social security systems 

Federal income tax return. in any year in the period 1951-74 exceeded a 

31
 
Railroad Retirement Handbook, 2009
 

maximum annual amount creditable under 

the Railroad Retirement Act. Eligible 

employees will receive their refunds from the 

Board at retirement without applying for 

them. In the event an employee should die 

before receiving the refund, payment will be 

made to the employee’s survivors. 

Separation or Severance Payments 

A lump sum, approximating railroad 

retirement tier II payroll taxes deducted 

from separation or severance payments, may 

be paid upon retirement to employees meeting minimum service requirements, or their 

survivors, to the extent that the separation 

or severance payments did not yield additional railroad retirement service or earnings 

credits. The lump-sum provision applies to 

separation and severance payments made 

after 1984. 

Federal Income Tax on Railroad 

Retirement Benefits 

The tier I portion of a railroad retirement 

annuity that is actually equivalent to a social 

security benefit is treated as a social security 

benefit for Federal income tax purposes. 

Depending on the amount of other income 

received in the taxable year, a portion of 

these benefit payments may be subject to 

Federal income tax. 

Tier I benefits exceeding social security 

benefits, such as retirement benefits payable 

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

portions of railroad retirement annuities, 

vested dual benefits, and supplemental annuities paid by the Board are treated like private pensions for Federal income tax purposes. The Railroad Retirement Act specifically 

exempts benefits paid by the Board from 

State and local income tax. 

The Railroad Retirement Board issues 

tax information statements to annuitants 

each January. In the absence of a request 

not to withhold, taxes are withheld from U.S. 

citizens or residents whose railroad retirement benefits in excess of the social security 

equivalent level total more than certain 

annual threshold amounts. Any amounts 

withheld during the taxable year are reflected on the annual statements. 

Monitoring Retirement and Survivor 

Benefit Payments 

Under several monitoring programs now 

in effect, the Board maintains contact with 

retirement and survivor beneficiaries in 

order to ensure the reporting of events which 

would require suspension or termination of 

monthly benefits. The records of beneficiaries are also checked with the Social Security 

Administration because annuities may be 

affected by nonrailroad earnings and because 

entitlement to social security benefits affects 

the amount of all annuities. 

Representative payees.—Each person who 

is paid on behalf of another periodically 

receives a questionnaire. The purpose of the 

questionnaire is to determine whether the 

beneficiary is still living, how much of the 

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

Disability annuitants.—Disability annuitants receive a notice annually reminding 

them of their obligation to report all events 

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

notify the Board if they perform any work 

(including self-employment). They must also 

notify the Board if their doctor tells them 

their condition has improved and they are 

able to work. 

If a disability annuitant had substantial 

earnings, his or her physical condition is 

reviewed in order to determine whether or 

not there was a recovery from the disability. 

Notices are sent annually until the annuitant 

reaches full retirement age. 

32
 
PROVISIONS OF THE RAILROAD RETIREMENT ACT 

EMPLOYEE AND SPOUSE 

ANNUITY FORMULA COMPONENTS 

The following describes railroad retirement annuity formula components as applied 

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

previous pages of this chapter. 

Employee Retirement Annuity 

The amount of a regular annuity is the 

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

tiers, plus any vested dual benefit payment 

also due. 

Tier I 

The first tier is calculated in generally 

the same way as a social security benefit. 

Any social security credits of an employee are 

combined with his or her railroad retirement 

credits for tier I computational purposes. 

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

account the changes in wage levels over a 

worker’s lifetime. This procedure, called 

indexing, increases creditable earnings from 

past years to reflect average national wage 

levels just prior to the employee’s first year 

of eligibility. The adjusted earnings are used 

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

the gross tier I amount. 

For employees with less than 10 years of

railroad service, tier I benefits are calculated 

only if the employee has at least 5 years of

service after 1995 and an “insured status” 

under social security rules (usually 40 quarters of coverage), counting both railroad

retirement and social security covered

earnings. 

Delayed retirement credits 

Tier I benefits are increased for each 

month an employee delays retirement past 

full retirement age, up until age 70. For 

those who attain their full retirement age on 

January 1, 2007, or later with a date of birth 

January 2, 1941, through January 1, 1943, 

the delayed retirement credit is 5/8 of 

1 percent per month. For those born 

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

(8 percent per year). Delayed retirement 

credits are not given to an employee with 

less than 10 years of railroad service, even if 

the employee is over full retirement age 

when retiring from his or her railroad job, if 

the employee is also entitled to an agereduced social security retirement benefit 

and the beginning date of that social security 

benefit precedes the beginning date of his or 

her railroad retirement annuity. 

Age reductions.—For employees retiring 

between age 62 and full retirement age with 

less than 30 years of service, age reductions 

are applied separately to the components of 

an annuity. As mentioned earlier, the full 

retirement age is gradually rising from 65 to 

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

age 62 is gradually increasing from 20 

percent to 30 percent. This does not affect 

those who retire at ages 60 or 61 with 30 

years of service. 

The full retirement age for employee and 

spouse benefits increases from 65 to 66 and 

from 66 to 67 at the rate of two months per 

year over two separate six-year periods. 

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

increase in full retirement age from age 65 to 

age 66 affects those who were born in the 

years 1938 through 1942. The full retirement age will remain at age 66 for those born 

in the years 1943 through 1954. The increase in full retirement age from age 66 to 

age 67 affects those who were born in the 

years 1955 through 1959. For individuals 

33
 
Railroad Retirement Handbook, 2009
 

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

Year of birth Full retirement age Annuity reduction at age 62 

1937 or earlier 

1938 

1939 

1940 

1941 

1942 

1943 through 1954 

1955 

1956 

1957 

1958 

1959 

1960 or later 

65 

65 and 2 months 

65 and 4 months 

65 and 6 months 

65 and 8 months 

65 and 10 months 

66 

66 and 2 months 

66 and 4 months 

66 and 6 months 

66 and 8 months 

66 and 10 months 

67 

20.00% 

20.833% 

21.667% 

22.50% 

23.333% 

24.167% 

25.00% 

25.833% 

26.667% 

27.50% 

28.333% 

29.167% 

30.00% 

who were born in 1960 or later, the full 

retirement age will be 67. 

Reduced benefits continue to be available 

but at greater reductions. The early retirement reduction factor for an employee is 

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

reduction period regardless of the age of initial entitlement and will decrease to 1/240 for 

each month (if any) over 36. This will result 

in a gradual increase in the reduction at age 

62 to 30 percent for an employee once the age 

67 retirement age is in effect. 

If an employee has less than 10 years of 

railroad service and is already entitled to an 

age-reduced social security benefit, the age 

reduction in his or her tier I will be based on 

the age reduction applicable on the beginning 

date of the employee’s social security benefit, 

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

railroad retirement annuity. 

Age reductions are required in the tier I 

annuity amounts of 30-year employees who 

retired at ages 60-61 before 2002 and 

attained age 60 or completed 30 years of 

service after June 1984. The age reductions 

are applied only to the tier I annuity portion. 

If an employee affected by this provision was 

born before 1938 and attained 60/30 eligibility after December 1985, tier I is permanently 

reduced by approximately 20 percent. For 

those born after 1937 who retired before 

2002, the reduction gradually increased as 

described earlier. In both cases, the tier I 

amount is frozen until the first month 

throughout which the employee is age 62. It 

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

subject to future cost-of-living increases. No 

reduction will apply if the employee retired 

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

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

Workers’ compensation or public disability 

benefit reductions.—For employees who are 

under age 65 and receiving a disability annuity, the tier I amount is, under certain circumstances, reduced for receipt of workers’ 

compensation or public disability benefits. 

34
 
PROVISIONS OF THE RAILROAD RETIREMENT ACT 

Social security reductions.—After any 

required age reduction, the tier I amount is 

reduced by the amount of any social security 

benefits also payable but not to an amount 

below zero. 

Reductions for public, non-profit or 

foreign pensions.—For employees who attain 

eligibility for both tier I benefits and certain 

government pension or other payments after 

1985, a reduction may be required for receipt 

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

on employment not covered by railroad 

retirement or social security after 1956. This 

also applies to payments from a non-profit 

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

tier I benefit will not be reduced by more 

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

is under age 65 and is receiving a disability 

annuity, the tier I benefit may be reduced by 

an additional amount if the pension from 

noncovered employment is a public disability 

benefit. 

Tier II 

The second tier of a regular annuity is 

computed under a separate formula, and is 

based on railroad service alone. Tier II benefits are equal to seven-tenths of 1 percent of 

the employee’s average monthly earnings 

using the tier II tax base in the 60 months of 

highest earnings, times his or her years of 

service in the rail industry. The tier II component is reduced by 25 percent of any gross 

employee vested dual benefit amount due. 

Age reductions.—Age reductions required 

for those employees retiring between age 62 

and their full retirement age with less than 

30 years of service are also applied to the 

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

the employee is under full retirement age 

when his or her annuity begins and 1/240 for 

each additional month. 

Full retirement age is gradually rising as 

mentioned earlier. However, if an employee 

had any creditable railroad service before 

August 12, 1983, full retirement age for 

tier II purposes will remain 65. 

Employees with 5-9 years of creditable 

railroad service, if at least 5 years were after 

1995, are eligible for tier II benefits the first 

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

that apply to employees with 10 to 29 years 

of service. If they are eligible on the basis of 

total disability, a tier II benefit is not 

payable until age 62 and that amount is 

reduced for early retirement. 

Amount of Vested Dual Benefit Payment 

To determine this additional annuity 

amount for a retired employee meeting the 

vesting requirements, the Railroad Retirement Board computes a social security benefit based solely on the individual’s railroad 

service before 1975, and a social security benefit based solely on social security covered 

earnings before 1975. The vested dual benefit is the amount by which the total of these 

two computations exceeds a social security 

benefit based on combined railroad and social 

security covered earnings before 1975. 

The vested dual benefit is increased by 

the cumulative cost-of-living percentage 

increases applicable to tier I benefits that 

occurred between January 1, 1975, and the 

date of retirement or January 1, 1982, 

whichever was earlier. The computed 

amount is then frozen; that is, no further 

cost-of-living increases are applied thereafter. The amount of any vested dual benefit 

due is added to the tier portions and paid as 

part of the regular annuity. 

35
 
Railroad Retirement Handbook, 2009
 

The same age reduction applied to the 

tier I component is applied to the vested dual 

benefit component of an annuity for those 

employees retiring before full retirement age 

with less than 30 years of service. 

Supplemental Annuity Formula 

The amount of a supplemental annuity 

awarded after 1974 is equal to $23 plus $4 

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

each fractional year of service. 

If a retired employee also receives a private pension paid for entirely or in part by a 

railroad, the supplemental annuity is subject 

to reduction. The reduction is equal to the 

amount of the pension paid for by the 

employer. If the employer reduces the private pension because of the supplemental 

annuity, the amount of the reduction is 

restored to the supplemental annuity but 

does not raise it over the $43 maximum. 

There is no reduction in the supplemental 

annuity for any part of a private pension 

paid for by the employee alone nor is there a 

reduction for a pension paid by a railroad 

labor organization. 

Spouse Annuity 

The spouse annuity formula is based on 

certain percentages of the employee’s tier I 

and tier II amounts. 

Tier I 

The tier I portion of a spouse annuity, 

before any applicable reductions, is 

50 percent of the railroad employee’s unreduced tier I amount. 

Spouse age reductions.—Age reductions 

required for those spouses (between age 62 

and full retirement age) of employees retiring 

with less than 30 years of service are applied 

separately to each annuity component. Full 

retirement age for a spouse is gradually rising, just as for an employee. Actuarially 

reduced benefits continue to be available but 

at greater reductions. The tier I reduction is 

1/144 for each of the first 36 months the 

spouse is under full retirement age when her 

or his annuity begins and will decrease to 

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

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

for a spouse once the age 67 retirement age 

is in effect. 

If an employee has less than 10 years of 

railroad service and the spouse is already 

entitled to an age-reduced social security 

benefit, the age reduction in her or his tier I 

will be based on the age reduction applicable 

on the beginning date of the spouse’s social 

security benefit, even if the spouse is already 

of full retirement age on the beginning date 

of her or his railroad retirement annuity. 

December 2001 legislation eliminated the 

tier I age reduction for employees ages 60 or 

61 with 30 or more years of service whose 

railroad retirement annuities begin 

January 1, 2002, or later. The spouses of 

these employees are also eligible for full 

annuities at age 60. 

Age reductions required for spouses of 

employees with 30 years of service who 

attained 60/30 eligibility after June 1984 but 

whose annuities began before January 2002 

are applied only to the tier I portion of the 

spouse annuity. If the employee attained 

60/30 eligibility before July 1984, retired at 

age 62 with 30 years of service, or begins 

receiving an annuity at ages 60 or 61 after 

2001 with 30 years of service, the spouse 

tier I portion is not subject to these reductions. 

If the employee’s annuity is subject to 

60/30 age reductions, the spouse of such an 

employee may receive a reduced tier I benefit, unless the spouse is already of full retirement age. 

36
 
PROVISIONS OF THE RAILROAD RETIREMENT ACT 

In reduced 60/30 spouse cases, the tier I 

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

reduced tier I on the employee’s annuity 

beginning date and is also frozen until the 

first full month throughout which both the 

employee and spouse are age 62. Then it is 

recomputed based on 1/2 of the employee’s 

age 62 gross tier I amount and reduced for 

each month the spouse is under full retirement age at that time. If at the time of 

recomputation the spouse is already at full 

retirement age, or the spouse has a minor or 

disabled child in care, no age reduction would 

apply. 

The spouse of a disability annuitant who 

is otherwise eligible for a 60/30 age annuity 

receives an age reduction if the spouse’s 

annuity beginning date was before 2002. If 

the spouse’s annuity beginning date is 

January 1, 2002, or later, the spouse can 

receive an unreduced annuity as early as age 

60. If the spouse is entitled based on having 

a minor or disabled child in care, there is no 

age reduction. 

Reductions for other benefits.—After any 

applicable age reduction required for the 

spouse’s early retirement, the spouse tier I 

amount is reduced by the amount of any 

social security benefit to which the spouse is 

entitled. 

The tier I amount may also be reduced for 

certain Federal, State or local government 

pension payments based on the spouse’s own 

earnings. For spouses subject to the public 

pension reduction, the tier I reduction is 

equal to 2/3 of the public pension. 

The spouse tier I amount may also be 

reduced if the employee under age 65 is 

receiving a disability annuity and a workers’ 

compensation or public disability benefit. 

While these offsets can reduce or even 

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

the tier II benefit potentially payable to that 

spouse. 

Divorced spouse.—The annuity of a 

divorced spouse is limited to the tier I 

amount and thus equal to what social security would pay. 

Tier II 

The spouse tier II amount, before any 

applicable reductions, is 45 percent of the 

employee’s unreduced tier II amount. If the 

employee is awarded a vested dual benefit, 

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

the 25 percent reduction for the employee’s 

vested dual benefit entitlement. 

Age reductions.—As mentioned earlier, 

age reductions are gradually increasing. The 

tier II age reduction for spouses of employees 

retiring with less than 30 years of service is 

1/144 for each of the first 36 months the 

spouse is under full retirement age when her 

or his annuity begins and decreases to 1/240 

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

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

employee and spouse retirement age for 

tier II purposes will remain age 65. Age 

reductions are not applied to spouse annuities based on the spouse’s caring for a child. 

Dual Annuities 

If both the employee and spouse are railroad employees and either one had some railroad service before 1975, the spouse tier I 

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

entitled and that initial reduction is restored 

in the spouse tier II amount. The spouse 

tier I amount cannot be reduced to an 

amount below zero. 

If a spouse is also a railroad employee 

annuitant and both the employee and spouse 

started railroad employment after 1974, the 

37
 
Railroad Retirement Handbook, 2009
 

amount of any spouse or divorced spouse 

annuity is reduced by the amount of the 

employee annuity to which the spouse is also 

entitled. 

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

will receive only the higher benefit. 

SURVIVOR ANNUITY 

FORMULA COMPONENTS 

Tier I 

The survivor tier I amount is based on 

the deceased employee’s combined railroad 

retirement and social security credits, and is 

computed using social security formulas. In 

general, the survivor tier I amount is equal 

to the amount of survivor benefits that would 

have been payable under social security. 

The gross survivor tier I amount (before 

reductions for early retirement, or other benefits) is generally equivalent to the unreduced tier I retirement benefit the deceased 

employee had, or would have, received. 

For surviving aged or disabled 

widow(er)s, remarried widow(er)s and surviving divorced spouses whose annuities begin a 

year or more after the employee’s death, the 

“average indexed monthly earnings,” upon 

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

a higher benefit provided the employee died 

before age 62. The reindexing takes into 

account changes in national earnings levels 

which occur after the employee’s death but 

before the survivor becomes eligible for benefits. This provides a benefit consistent with 

earnings levels at the time of the survivor’s 

eligibility, rather than the time of the 

employee’s death. 

A widow(er), surviving divorced spouse or 

remarried widow(er) whose annuity begins at 

full retirement age or later receives the full 

tier I amount unless the deceased employee 

received an annuity that was reduced for 

early retirement. The eligibility age for a full 

widow(er)’s annuity is gradually rising from 

65 to 67. The maximum age reductions will 

range from 17.1 percent to 20.36 percent, 

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

For a surviving divorced spouse or remarried 

widow(er), the maximum age reduction is 

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

remarried widow(er), the maximum reduction is 28.5 percent, even if the annuity 

begins at age 50. 

A widow(er) or surviving divorced spouse 

whose eligibility is based on caring for a 

child of the employee receives 75 percent of 

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

An eligible child also receives 75 percent of 

the full tier I amount. The total amount the 

family can receive is subject to a maximum 

(usually applicable if there are three or more 

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

survivor annuities). 

A dependent parent can receive 

82.5 percent of the full tier I amount, but if 

both parents are eligible, the total amount 

cannot be more than 150 percent of the full 

tier I amount. 

Dual benefit reduction.—The tier I 

amount described above is reduced by the 

amount of any social security benefit or by 

the tier I amount of any railroad retirement 

employee annuity the survivor also receives. 

In the case of a widow or dependent widower 

who is also a railroad employee annuitant, 

and either the widow(er) or the deceased 

employee had 120 months of railroad service 

before 1975, the tier I reduction may be partially restored in the survivor tier II amount. 

If either the deceased employee or the 

widow(er) had some railroad service before 

1975 but less than 120 months, the survivor 

38
 
PROVISIONS OF THE RAILROAD RETIREMENT ACT 

tier I portion is payable only to the extent 

that it exceeds the tier I portion of the 

widow(er)’s own employee annuity. If the 

widow(er) qualifies for a railroad retirement 

employee annuity and neither the widow(er) 

nor the deceased employee had any railroad 

service before 1975, the survivor annuity 

payable to the widow(er) is reduced by the 

total amount of the widow(er)’s own employee annuity. 

The tier I amount may also be reduced by 

certain Federal, State or local government 

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

own earnings. For widow(er)s subject to the 

government pension reduction, the tier I 

reduction is equal to 2/3 of the public pension. 

Tier II 

Widow(er)s.—December 2001 legislation 

established an “initial minimum amount” 

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

benefit equal to the tier II benefit the 

employee would have received at the time of 

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

any applicable age reduction. It does this by 

providing an additional amount initially set 

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

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

This additional amount is offset each year 

by the dollar amount of the cost-of-living 

increases payable in both the tier I and 

tier II benefits provided under prior law. 

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

payment will not increase until such time as 

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

prior law with all interim cost-of-living 

increases otherwise payable, exceeds the 

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

The initial minimum amount provision 

applies to all widow(er)s whose annuities 

begin February 1, 2002, or later, and to 

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

before that date. If, because of previous costof-living adjustments, annuities awarded 

before February 2002 were already higher 

than the annuity that would be payable 

under the December 2001 legislation, the 

guaranty did not apply. 

The same age reductions that apply to 

tier I amounts also apply to tier II amounts. 

If a widow(er) is also a railroad employee 

annuitant and both the widow(er) and the 

deceased employee started railroad employment after 1974, the amount of any survivor 

annuity is reduced by the amount of the 

employee annuity to which the survivor is 

also entitled. 

Other survivors.—Each child receives 15 

percent of the deceased employee’s tier II 

amount, and each surviving parent receives 

35 percent. The minimum total tier II 

amount payable to a family is 35 percent of 

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

A tier II benefit is not provided for a surviving divorced spouse or a remarried 

widow(er). However, partition payments 

may be extended to surviving former spouses 

pursuant to divorce agreements. A tier II 

benefit is not payable to surviving parents if 

other family members may receive benefits 

or if the parent has remarried. 

Survivor-Spouse Guaranty 

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

amount of any widow(er)’s benefit payable 

will not be less than the annuity she or he 

was receiving as a spouse in the month 

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

payable until the regular survivor formula 

produces more in benefits than the spouse 

guaranty. At that point, benefit components 

are based on the regular survivor formula 

and both tier I and tier II amounts are 

increased for the cost of living. 

39
 
Railroad Retirement Handbook, 2009
 

APPEALS file an appeal with the Board’s Bureau of

 

A railroad worker, spouse, or survivor 

whose application for a benefit under the 

Railroad Retirement Act is denied, or one 

who is dissatisfied with the decision, has the 

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

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

of the original award or denial of the claim 

informs him or her of the right to appeal. 

An individual has 60 days, from the date 

of the initial notice of a decision on his or her 

claim, to file a written statement requesting 

reconsideration from the Board unit that 

denied the claim. This step is mandatory 

before a decision may be appealed to the 

Board’s Bureau of Hearings and Appeals. In 

cases involving overpayments, requests for 

waiver of recovery of the overpayment must 

be filed within 60 days of the date of the 

overpayment notice. In such cases, recovery 

of the overpayment will be deferred and a 

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

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

of the overpayment recovered prior to the 

date on which the waiver request is filed will 

not be subject to waiver. 

An individual has 60 days from the date 

of the reconsideration or waiver decision to 

Hearings and Appeals, a bureau independent 

of the units responsible for reconsideration 

decisions. The Bureau of Hearings and 

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

Board’s field representatives, designated 

medical examiners, and others who may be 

in a position to furnish information pertinent 

to the appellant’s claim. The appellant has 

the right to request an oral hearing. If one is 

held, it may be conducted in the Board office 

closest to the appellant’s home. In some 

cases, video conferencing or phone hearings 

are held. 

If an appellant is not satisfied with the 

Bureau of Hearings and Appeals’ decision, he 

or she may appeal to the three-member 

Board within 60 days from the date on which 

notice of the Bureau of Hearings and 

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

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

conduct a hearing. An appellant who is not 

satisfied with the Board’s final decision may 

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

Circuit Court of Appeals. The petition for 

review must be filed within one year after 

notice of the three-member Board’s decision 

has been mailed to the appellant. 

40
 
3
 

FINANCING OF THE 

RAILROAD RETIREMENT SYSTEM 

Railroad retirement and survivor 

 

benefits are financed by the  

following sources of income: 

1.	 Payroll taxes on railroad earnings  

paid by covered employees and  

employers. 

2.	 Income from a financial interchange 

with the social security trust funds. 

3.	 Earnings on investments. Funds not 

needed immediately for benefit payments 

or administrative expenses are transferred 

to the National Railroad Retirement 

Investment Trust for investment as 

explained on page 43. 

4.	 Borrowing from general revenues 

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

5.	 Appropriations from general revenues. 

6.	 Revenues from Federal income taxes 

on retirement benefits. 

Each of these income sources is described 

briefly below and on the following pages. 

PAYROLL TAXES 

Payroll taxes levied on covered employers 

and their employees are the primary source 

of income to the Railroad Retirement 

Account. 

The tax rate equivalent to that which 

would be paid under social security is commonly called the tier I tax. The tier I tax 

rate of 7.65 percent is divided into 6.20 percent for railroad retirement and 1.45 percent 

for Medicare hospital insurance. Payroll 

taxes in excess of the tier I rate are called 

tier II taxes. In 2009, tier II taxes are 

12.10 percent on employers and employee 

representatives and 3.90 percent on employees. 

The Railroad Retirement and Survivors’ 

Improvement Act of 2001 significantly 

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

investment of railroad retirement funds in 

nongovernmental assets, adjustments in the 

payroll tax rates paid by employers and 

employees, and the repeal of a supplemental 

annuity work-hour tax. Supplemental annuities continue to be payable and are funded 

by the National Railroad Retirement 

Investment Trust. 

Tier II taxes on both employers and 

employees are based on an “average account 

benefits ratio.” Depending on the average 

account benefits ratio, the tier II tax rate for 

41
 
Railroad Retirement Handbook, 2009
 

employers ranges between 8.20 percent and 

22.10 percent, while the tier II tax rate for 

employees is between 0 percent and 

4.90 percent. 

The “account benefits ratio” is, with 

respect to any fiscal year, the amount determined by the Railroad Retirement Board by 

dividing the fair market value of the assets 

in the Railroad Retirement Account and the 

National Railroad Retirement Investment 

Trust (and for years before 2002, the Social 

Security Equivalent Benefit Account) as of 

the close of such fiscal year by the total benefits and administrative expenses paid from 

the Railroad Retirement Account and the 

National Railroad Retirement Investment 

Trust during such fiscal year. If the ratio is 

not an exact multiple of 0.1, it is raised to 

the next highest multiple of 0.1. 

Likewise, the term “average account benefits ratio” means, with respect to any calendar year, the average determined by the 

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

ending before such calendar year. 

Tier I taxes are ultimately transferred to 

the social security and hospital insurance 

trust funds through the financial interchange. The tier II tax is used to finance 

tier II benefits, supplemental annuity benefits, and also the portion of tier I benefits not 

reimbursed through the financial interchange. 

Earnings Base 

The taxable amounts of an employee’s 

earnings are subject to tier I and tier II maximums, which are both indexed to annual 

increases in national wage levels. The tier I 

maximum is the same as the social security 

wage base and is higher than the tier II base 

as a result of 1977 social security amendments, which provided for a series of yearly 

increases in the social security tax base that 

effected corresponding increases in the railroad retirement tier I tax base. 

FINANCIAL INTERCHANGE 

Purpose and History of Financial 

Interchange 

The financial interchange between the 

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

Old-Age, Survivors, and Disability Insurance 

(OASDI) and Hospital Insurance (HI) trust 

funds in the same position they would have 

been had railroad employment been covered 

under the Social Security and Federal 

Insurance Contributions Acts. It follows that 

all computations under the financial interchange are performed according to social 

security law. The amount of benefits payable 

under the Railroad Retirement Act has no 

effect on the results. 

The financial interchange provision was 

introduced by the 1951 amendments to the 

Railroad Retirement Act and was made 

retroactive to January 1, 1937. The initial 

determination covered the period from 

January 1937 through June 1952 and indicated a balance of $488.2 million in favor of 

the social security system. Only interest was 

paid on that amount until the debt was liquidated by subsequent offsets in favor of the 

railroad retirement system. Since the liquidation of the original balance, annual transfers reflecting the experience of the preceding 

fiscal year have always favored railroad 

retirement. 

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

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

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

Act which raised benefits immediately while 

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

which reduced the taxes payable to social 

security but had little immediate effect on 

the benefit reimbursements. 

42
 
FINANCING OF THE RAILROAD RETIREMENT SYSTEM 

Financial Interchange Determinations 

Placing the social security trust funds in 

the same position they would have been had 

railroad employment been covered under 

social security since its inception involves 

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

employment and computing the amount of 

additional benefits which social security 

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

computation of the latter amount, credit is 

given for any social security benefits actually 

paid to railroad retirement beneficiaries. 

When benefit reimbursements exceed payroll 

and income taxes, the difference, with an 

allowance for interest and administrative 

expenses, is transferred from the social security trust funds to the railroad retirement 

trust funds. If taxes exceed benefit reimbursements (this has not happened since 

1951), a transfer would be made in favor of 

the social security trust funds. 

INVESTMENTS 

The National Railroad Retirement 

Investment Trust was established by the 

Railroad Retirement and Survivors’ 

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

Government, became effective February 1, 

2002. 

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

The Railroad Retirement and Survivors’ 

Improvement Act authorizes the Trust to 

invest the assets of the Railroad Retirement 

Account in a diversified investment portfolio 

in the same manner as those of private sector 

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

was limited to U.S. Government securities. 

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

railroad labor unions and three by railroad 

companies. The seventh is an independent 

Trustee selected by the other six Trustees. 

The terms are for 3 years and are staggered. 

The Trustees are required to discharge 

their duties solely in the interest of the 

Railroad Retirement Board, and through it, 

the participants and beneficiaries of the programs funded under the Railroad Retirement 

Act. The Trustees are subject to fiduciary 

rules similar to those required by the 

Employee Retirement Income Security Act 

(ERISA). 

The financial statements of the Trust are 

required to be audited annually by an independent public accountant. In addition, the 

Trust must submit an annual report to 

Congress on its operations, including a statement of financial position, a statement of 

cash flows, a statement on internal accounting and administrative control systems, the 

independent auditor’s report, and any other 

information necessary to inform Congress 

about the operations and financial condition 

of the Trust. All National Railroad 

Retirement Investment Trust annual management reports and quarterly updates are 

available on the Railroad Retirement Board's 

Web site at www.rrb.gov. 

BORROWING FROM GENERAL 

REVENUES RELATED TO THE  

FINANCIAL INTERCHANGE 

Financial interchange transfers are made 

in a lump sum for a whole fiscal year in the 

June following the close of a fiscal year. 

At any time, therefore, there are between 9 

and 21 months’ worth of financial interchange transfers which, in a sense, are owed 

the Board. The Board receives interest on 

this money, so this practice does no long43 
Railroad Retirement Handbook, 2009
 

term harm to the financial condition of the 

Railroad Retirement Account. The lag in the 

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

In order to avoid any further cash-flow 

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

Treasury general funds. Each loan is equal 

to an estimate of the transfer the Board 

would have received in the preceding month 

if the financial interchange with social security were on an up-to-date basis, with interest adjustments. The Board must repay 

these loans when it receives the transfer 

from social security against which the money 

was advanced. 

APPROPRIATIONS FROM  

GENERAL REVENUES 

Prior to the Railroad Retirement Act of 

1974, concurrent social security benefits 

(dual benefits) payable to railroad retirement 

annuitants had a significant effect on the 

amount of the financial interchange. 

Consider the example of two hypothetical 

employees shown on the next page. 

The size of the benefits is appropriate to 

the early 1970’s. The employees are 

assumed to have identical dates of birth, 

dates of retirement, and histories of railroad 

earnings. One employee, however, is 

assumed to have had just enough covered 

employment under social security to qualify 

for a social security benefit. (The difference 

in railroad retirement benefits arises from 

minor reductions in the 1937 Act formula for 

receipt of a social security benefit.) 

Two conclusions are apparent. First, the 

employee with benefits under both systems 

received an advantage over the career railroad worker, which many considered unfair. 

In the example, the employee who is eligible 

for social security collects $80 more than the 

employee who is not eligible (the difference 

in line C); while, under a completely integrated system, the social security earnings would 

have added only $20 (the difference in line 

D). Second, because social security subtracted the social security benefit in calculating 

the financial interchange transfer, railroad 

retirement paid most of the cost of these benefits. In the example on the next page, this 

is represented by the $60 difference in line F. 

This situation was a major cause of the 

poor financial condition of the railroad retirement system in the early 1970’s. In order to 

improve the system’s financial condition, the 

Railroad Retirement Act of 1974 provided 

that the tier I component of the railroad 

retirement annuity be reduced by any social 

security benefit. This essentially integrated 

the two systems and eliminated the advantage of qualifying for benefits under both systems. 

However, it was generally considered 

unfair to eliminate this advantage entirely 

for those already retired or close to retirement when the 1974 Act became effective. 

The 1974 Act, therefore, provided for a 

restoration of social security benefits which 

were considered vested at the end of 1974. 

The restored amount is known as the “vested 

dual benefit.” This benefit was initially 

available to qualifying spouses and survivors 

as well as to qualifying employees. The vested dual benefit was explained in the previous 

chapter on benefit provisions. Eventually, 

after a period of several decades, the vested 

dual benefit will be entirely phased out. 

Under the 1974 Act, appropriations had 

been authorized from general revenues for 

the phase-out costs of vested dual benefits. 

The amounts were to be sufficient to fund (on 

a level payment basis over the years 1976­

2000) the vested dual benefit for new accruals and for beneficiaries on the rolls. The 

yearly amount was to be reviewed every 

three years at the time of each actuarial valuation. 

44
 
FINANCING OF THE RAILROAD RETIREMENT SYSTEM 

Table 5.--Example of Effects of Dual Benefits on Financial Interchange 

Employee Employee not 

Item eligible for eligible for 

social security social security 

(A) Railroad retirement benefit $380 $400 

(B) Social security benefit 100 ­

(C)  Total benefit, A + B 480 400 

(D)  Social security benefit on 

combined earnings (gross tier I) 240 220 

(E) Financial interchange transfer 

from social security to railroad 

retirement, D - B 140 220 

(F)  Amount to be financed by excess 

of railroad retirement taxes over 

social security taxes, A - E 240 180 

The costs of these vested dual benefit 

payments, which were intended to be funded 

solely from general revenues, were substantially more than the amount estimated at the 

time the 1974 Act was passed, and substantially more than the funds that were appropriated between 1974 and 1981. To stop the 

resulting drain on the Railroad Retirement 

Account, the 1981 amendments established a 

Dual Benefits Payments Account. This 

account is credited with the general revenue 

appropriations, and it is charged with vested 

dual benefit payments. The Board is 

required to adjust vested dual benefit payments from this account so that the amounts 

paid to annuitants do not exceed the 

amounts appropriated. 

TAXATION OF RAILROAD 

RETIREMENT BENEFITS 

Social security amendments in 1983 subjected railroad retirement tier I benefits to 

Federal income taxes on the same basis as 

social security benefits, and subsequent railroad retirement legislation subjected benefits 

over and above social security levels to 

Federal income tax on the same basis as private and public service pensions, beginning 

with taxable year 1984. Revenues from 

income taxes on tier I, tier II and vested dual 

benefits are used for benefit payments. 

FINANCIAL POSITION OF THE  

RAILROAD RETIREMENT SYSTEM 

The financial condition of the railroad 

retirement system is closely related to the 

size of the railroad work force. This is 

because, as mentioned previously, the payroll 

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

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

small labor force. Railroad employment has 

declined steeply over the years and the drop 

in employment necessitated the strong corrective action taken in the 1981 and 1983 

45
 
Railroad Retirement Handbook, 2009
 

amendments. In the absence of these 

amendments, substantial reductions in payments would have been required. 

The omnibus budget legislation enacted 

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

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

railroad retirement benefits to be transferred 

to the railroad retirement system for an additional year, fiscal year 1989. Subsequent legislation extended these income tax transfers 

on a permanent basis. 

Legislation in 2001 provided for the 

investment of railroad retirement funds in 

non-governmental assets, adjustments in the 

payroll tax rates paid by employers and 

employees, and the repeal of a supplemental 

annuity work-hour tax. 

The Board’s 24th triennial actuarial 

valuation, submitted to Congress in June 

2009, contained generally favorable information concerning railroad retirement financing. It concluded that, barring a sudden, 

unanticipated, large decrease in railroad 

employment or substantial investment losses, the railroad retirement system will experience no cash-flow problems during the next 

22 years. However, the report also indicated 

that the long-term stability of the system is 

not assured. Under its current financing 

structure, actual levels of railroad employment and investment return over the coming 

years will largely determine whether corrective action is necessary. No railroad retirement financing changes were recommended 

by the Board. 

As of September 30, 2008, total railroad 

retirement system assets, comprising assets 

managed by the National Railroad Retirement Investment Trust and the railroad 

retirement system accounts at the Treasury, 

equaled $26.7 billion. 

46
 
4
 

HEALTH INSURANCE FOR THE 

AGED AND DISABLED 

Amendments to the Social Security 

Act enacted in 1965 established a 

broad program of health insurance, 

known popularly as “Medicare,” for people 

age 65 or older, including railroad workers 

and members of their families. Part A provides hospital insurance and related benefits 

financed through payroll taxes. Part B provides medical insurance benefits on a voluntary basis, with the cost shared by the participants and the Federal Government. Both 

parts of the program have been modified and 

liberalized several times since 1967, principally in the 1973 extension of coverage to 

persons under age 65 who are totally disabled or have permanent kidney failure. In 

2003, legislation was enacted which provided 

prescription drug coverage for Medicare beneficiaries beginning in 2006, among other 

changes. 

Persons covered by the railroad retirement system participate in the health insurance program on the same basis as those 

under the social security system. Amendments to the railroad retirement laws in 

1965 and to the social security laws in 1972 

gave the Railroad Retirement Board an 

important role in the administration of the 

health insurance program and made possible 

the collection of hospital insurance taxes on 

the same basis as retirement taxes under the 

Railroad Retirement Tax Act. The 1965 

amendments also empowered the Board to 

make payments from the Railroad Retirement Account for hospital insurance services 

provided anywhere in Canada to persons 

receiving or qualified to receive railroad 

retirement benefits. Such payments apply 

only to the charges in excess of the amounts 

payable for hospital and related services 

under Canadian public health insurance 

laws. 

Social security legislation in 1972 gave 

the Board direct legislative authority to collect Medicare premiums from railroad retirement beneficiaries and to select a carrier to 

process medical insurance claims for all railroad retirement beneficiaries. Previously, 

authority in these areas had been delegated 

to the Board by the Social Security 

Administration. 

ELIGIBILITY 

All railroad retirement beneficiaries age 

65 or over and other persons who are directly 

or potentially eligible for railroad retirement 

benefits are covered by the program. Although the age requirements for some unreduced railroad retirement benefits have risen 

just like the social security requirements, 

47
 
Railroad Retirement Handbook, 2009
 

beneficiaries are still eligible for Medicare at 

age 65. Coverage before age 65 is available 

for disabled employee annuitants who have 

been entitled to monthly benefits based on 

total disability for at least 24 months. There 

is no 24-month waiting period for those who 

have ALS (Amyotrophic Lateral Sclerosis), 

also known as Lou Gehrig’s disease. If entitled to monthly benefits based on an occupational disability, and the individual has been 

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

date. If receiving benefits due to occupational disability and the person has not been 

granted a disability freeze, he or she is generally eligible for Medicare at age 65. The 

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

total disability. Disabled widow(er)s under 

65, disabled surviving divorced spouses 

under 65, and disabled children may also be 

eligible. 

Medicare coverage before age 65 on the 

basis of permanent kidney failure is also 

available to employee annuitants, employees 

who have not retired but meet certain minimum service requirements, spouses, and 

dependent children who suffer from permanent kidney failure requiring hemodialysis or 

a kidney transplant. The Social Security 

Administration has jurisdiction of Medicare 

for those eligible on the basis of permanent 

kidney failure. 

PART A AND PART B  

ENROLLMENT 

If a retired employee or a family member 

is receiving a railroad retirement annuity, 

enrollment for both hospital and medical 

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

For beneficiaries who are totally and permanently disabled, Medicare hospital and medical insurance starts automatically with the 

30th month after the beneficiary became disabled or, if later, the 25th month after the 

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

an individual may decline medical insurance, 

if so desired; this does not preclude him or 

her from applying for medical insurance at a 

later date. Premiums may be higher if 

enrollment is delayed. 

If an individual is eligible for but not 

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

and apply for both hospital and medical 

insurance. (This does not mean that the 

individual must retire if presently working.) 

The best time to apply is during the 3 

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

have both hospital and medical protection 

beginning with the month age 65 is reached. 

If the individual does not enroll for medical 

insurance in the 3 months before attaining 

age 65, he or she can enroll in the month age 

65 is reached or during the next 3 months, 

but there will be a delay of 1 to 3 months 

before medical insurance is effective. 

Individuals who do not enroll during this 

Initial Enrollment Period may sign up in any 

General Enrollment Period (January 1 ­

March 31 each year). Coverage for such individuals begins July 1 of the year of enrollment. 

Premiums for medical insurance are 

increased 10 percent for each 12-month period the individual could have been, but was 

not, enrolled. However, individuals age 65 or 

older who wait to enroll in Part B because 

they have group health plan coverage based 

on their own or their spouse’s current 

employment may not have to pay higher premiums because they may be eligible for 

48
 
HEALTH INSURANCE FOR THE AGED AND DISABLED 

special enrollment periods. The same special 

enrollment period rules apply to disabled 

individuals, except that the group health 

insurance may be based on the current 

employment of the individual, his or her 

spouse, or a family member. 

Individuals deciding when to enroll in 

Medicare Part B must consider how this will 

affect eligibility for health insurance policies 

which supplement Medicare coverage. These 

include “Medigap” insurance and prescription 

drug coverage and are explained later in this 

chapter. 

For information on coverage for kidney 

disease, a social security office should be 

contacted. 

EXPLANATION OF HOSPITAL 

INSURANCE BENEFITS 

(Part A of Medicare) 

The hospital insurance program is 

designed to help pay the bills when an 

insured person is hospitalized. The program 

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

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

care. 

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

nursing facilities, home health visits and hospice care. Coverage also includes blood, after 

the first three pints, when the person is an 

inpatient at a hospital or skilled nursing 

facility during a covered stay. 

There is a limit on how many days of hospital or skilled nursing care Medicare helps 

pay for in each “benefit period.” A benefit 

period begins the day a patient goes to a hospital or skilled nursing facility. It ends after 

a person has not received any hospital or 

skilled nursing care for 60 days in a row. 

There is no limit to the number of benefit 

periods a person can have. 

Benefits are ordinarily paid only for services received in the United States or Canada. 

Hospital insurance also covers hospital stays 

in Mexico under very limited conditions. 

What Medicare Part A Covers 

1. If a patient is hospitalized, Medicare 

will pay for all covered hospital services during the first 60 days of a benefit period 

except for a deductible. From the 61st 

through the 90th day, Medicare hospital 

insurance pays for all covered services except 

for a coinsurance charge. A lifetime reserve 

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

hospital for more than 90 days in a benefit 

period; the patient pays a coinsurance charge 

for these additional days. Covered hospital 

services include almost all those ordinarily 

furnished by a hospital to its patients. 

(More information on specific services is 

available by calling 1-800-MEDICARE 

(1-800-633-4227) or by looking at 

www.medicare.gov and selecting “Find Out 

What Medicare Covers.”) However, payments 

will not be made for private-duty nursing or 

personal comfort items. Inpatient psychiatric 

hospital services are covered, but there is a 

lifetime limitation of 190 days. 

2. Under certain conditions, the cost of 

skilled nursing care in a facility approved by 

Medicare for services of a professional level 

(not custodial care) is covered for the first 20 

days in each benefit period plus up to 80 

additional days with the patient paying a 

coinsurance charge for the 21st through the 

100th day. These benefits are payable only if 

the patient was in a hospital for at least 3 

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

49
 
Railroad Retirement Handbook, 2009
 

3. Under certain conditions, Medicare 

pays the cost of medically necessary home 

health care. This is limited to reasonable 

and necessary part-time or intermittent 

skilled nursing care and home health aide 

services as well as physical therapy, occupational therapy, and speech-language therapy 

which are ordered by a doctor. It also 

includes medical social services, durable 

medical equipment (such as wheelchairs, hospital beds, oxygen, and walkers), medical 

supplies, and other services. 

4. Hospice care is a service provided to 

terminally-ill persons. It includes drugs for 

symptom control and pain relief, medical and 

support services from a Medicare-approved 

hospice, and other services not otherwise covered by Medicare. 

Financing 

Railroad employers and employees each 

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

EXPLANATION OF 

MEDICAL INSURANCE BENEFITS 

(Part B of Medicare) 

The medical insurance program is 

designed to help pay the bills for doctors’ 

services and for a number of other medical 

costs not covered by the hospital insurance 

program. 

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

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

security benefits), the monthly premium is 

deducted from their railroad retirement 

checks; others make payments or, in some 

cases, have their premiums paid under a 

State assistance program. 

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

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

services. 

There is an annual deductible for Part B 

services. After the deductible is paid, 

Medicare will generally pay 80 percent of the 

approved charges for covered services during 

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

the cost. 

Medicare provides basic protection 

against the high cost of illness, but it will not 

pay all health care expenses. Some of the 

services and supplies Medicare cannot pay 

for are custodial care, such as help with 

bathing, eating, and taking medicine; dentures and routine dental care; most eyeglasses, hearing aids and routine examinations to 

prescribe or fit them, and long-term care 

(nursing homes). 

What Medicare Part B Covers 

Medical and Other Services 

Doctors’ services (not routine physical 

exams), outpatient medical and surgical 

services and supplies, diagnostic tests, 

ambulatory surgery center facility fees for 

approved procedures, and durable medical 

equipment are usually covered. 

Clinical Laboratory Services 

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

Home Health Care 

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

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

a doctor, and some other services. 

50
 
HEALTH INSURANCE FOR THE AGED AND DISABLED 

Outpatient Hospital Services 

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

doctor’s care. 

Blood 

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

Preventive Services 

These include bone mass measurements, 

cardiovascular screening, colorectal cancer 

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

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

Hepatitis B) and a one-time “Welcome to 

Medicare” physical examination. 

Many other services are covered. More 

information on specific services is available 

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

or by looking at www.medicare.gov and 

selecting “Find Out What Medicare Covers.” 

Medical insurance generally does not pay 

for services outside the United States. There 

are rare emergency cases where medical 

insurance can pay for care in Canada or 

Mexico. 

Financing 

Part B medical insurance is paid for in 

part by premiums from persons who enroll in 

the program. Monthly premiums for some 

beneficiaries are greater, depending on a 

beneficiary’s or married couple’s modified 

adjusted gross income. Some individuals 

also pay premium surcharges because they 

enrolled late for Part B. 

MEDICARE PLAN CHOICES 

Medicare beneficiaries have choices for 

receiving health care services. The Original 

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

nationwide. A beneficiary can see any doctor 

or provider who accepts Medicare and is 

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

Plan (Part C). Medicare Advantage Plans 

combine Part A and Part B and, in many 

cases, Part D prescription drug coverage. In 

limited instances, other Medicare Health 

Plans may be available. To find out which 

plans are available in an area, look at 

www.medicare.gov and select “Search Tools” 

at the top of the page and then “Compare 

Health Plans and Medigap Policies in Your 

Area.” Or, call 1-800-MEDICARE 

(1-800-633-4227). 

A beneficiary must have both Medicare 

Part A and Part B to join a Medicare 

Advantage Plan, and the individual must live 

in the plan’s service area. Under a Medicare 

Advantage Plan, a beneficiary may pay lower 

copayments and receive extra benefits. 

Original Medicare Plan 

Under the Original Medicare Plan, 

patients visit the hospital, doctor, or health 

care provider of their choice who accepts 

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

responsible for certain deductible and coinsurance payments. 

Persons enrolled in the Original Medicare 

Plan who want prescription drug coverage 

must join a Medicare Prescription Drug Plan 

as described on the next page, unless they 

already have drug coverage from a current or 

former employer or union that is at least as 

good as the standard Medicare prescription 

drug coverage. 

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

services. The remainder of the bill from the 

51
 
Railroad Retirement Handbook, 2009
 

hospital, as well as bills for services in 

skilled nursing facilities or home health visits, is sent to Medicare to pay its share. 

Claims for medical insurance benefits 

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

generally handled by the Board’s carrier on a 

nationwide basis: 

Palmetto GBA 

Railroad Medicare Part B Office 

P.O. Box 10066 

Augusta, GA 30999-0001 

1-800-833-4455 

Medigap 

Many private insurance companies sell 

insurance to help pay for services not covered 

by the original Medicare plan. This kind of 

insurance is called “Medigap” for short. 

Policies may cover deductibles, coinsurance, 

copayments, health care outside the United 

States and more. Generally, individuals 

need Medicare Part A and Part B to enroll. 

A monthly premium is charged. 

When someone first enrolls in Medicare 

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

6-month “Medigap open enrollment period.” 

During that time, the individual has a right 

to buy the Medigap policy of his or her choice 

regardless of any health problems. The company cannot refuse a policy or charge the 

individual more than all other open enrollment applicants. If an individual does not 

buy a policy when first eligible, the cost may 

go up or the desired policy may not be available. 

More detailed information about Medigap 

policies is presented in the publication 

Choosing a Medigap Policy: A Guide to 

Health Insurance for People with Medicare, 

available by calling the Medicare toll-free 

number 1-800-633-4227 or going to 

www.medicare.gov and clicking on “Find a 

Medicare Publication.” 

Medicare Advantage Plans 

Medicare Advantage Plans are available 

in most areas of the country. A beneficiary 

must have both Medicare Part A and Part B 

to join a Medicare Advantage Plan, and the 

individual must live in the plan’s service 

area. Medicare Advantage Plan choices 

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

and others. A PPO is a plan under which a 

beneficiary uses doctors, hospitals, and 

providers belonging to a network; beneficiaries can use doctors, hospitals, and providers 

outside the network for an additional cost. 

Under a Medicare Advantage Plan, a beneficiary may pay lower copayments and receive 

extra benefits. Most plans include prescription drug coverage (Part D). 

For those in a Medicare Advantage Plan,

information on out-of-pocket costs is available by calling 1-800-633-4227 or by going to

www.medicare.gov, selecting “Search Tools”

and then “Compare Health Plans and

Medigap Policies in Your Area.” 

PRESCRIPTION DRUG COVERAGE 

Medicare contracts with private companies to offer beneficiaries prescription drug 

coverage. These companies offer a variety of 

options, with different covered prescriptions, 

and different costs. Beneficiaries pay a 

monthly premium, a yearly deductible and 

part of the cost of prescriptions. Those with 

limited income and resources may qualify for 

help in paying some prescription drug costs. 

Medicare prescription drug plans are voluntary. To enroll, individuals must have 

Medicare Part A and/or Part B. Beneficiaries 

can join during the period that starts 3 

months before Medicare coverage starts and 

ends 3 months after the first month of 

Medicare coverage. There may be a higher 

premium if an individual doesn’t join a 

Medicare drug plan when first eligible, and 

52 
HEALTH INSURANCE FOR THE AGED AND DISABLED 

he or she does not have other prescription 

drug coverage that, on average, covers at 

least as much as standard Medicare prescription drug coverage. In most cases, there is 

no automatic enrollment to get a Medicare 

prescription drug plan. Individuals enrolled 

in Medicare Advantage Plans will generally 

get their prescription drug coverage through 

their Plan. 

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

Drug Coverage. The Medicare and You handbook lists the Medicare prescription drug 

plans available in a beneficiary’s area. Free 

personalized information is available on the 

Web or by calling the Medicare toll-free 

number. Free personalized counseling is also 

available from the local State Health 

Insurance Assistance Program (SHIP) and 

other local and community-based organizations. 

APPEALS 

If a patient disagrees with a decision on 

the amount Medicare will pay on a claim or 

whether services received are covered by 

Medicare, he or she has the right to appeal 

the decision. Under the Original Medicare 

Plan, the notice received from Medicare 

stating the decision made on a claim tells a 

patient what appeal steps can be taken. This 

information is also available in Medicare 

Advantage Plan materials. 

ADVANCE DIRECTIVES 

Individuals have the right to make a 

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

person’s choices for health care or names 

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

make his or her own health care decisions. 

Laws governing advance directives vary from 

State to State. 

OTHER MEDICARE PUBLICATIONS 

A handbook, Medicare & You, is mailed to 

Medicare beneficiary households each fall by 

the Centers for Medicare & Medicaid 

Services. It describes the Medicare benefits, 

costs and health service options available. 

Medicare for Railroad Workers and Their 

Families (Form RB-20) provides general 

information on Medicare and is available at 

any Board field office. It is also available at 

www.rrb.gov. 

Help Lines/Web Sites 

Medicare Toll-Free Number and Web Site 

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

TTY/1-877-486-2048 

www.medicare.gov 

Palmetto GBA Toll-Free Number and Web Site 

1-800-833-4455 

TTY/TDD 1-877-566-3572 

www.palmettogba.com 

53
 
5
 

DEVELOPMENT OF THE RAILROAD  

UNEMPLOYMENT INSURANCE SYSTEM 

The railroad unemployment insurance system, like the railroad 

retirement system, was established 

in the 1930’s. The Great Depression demonstrated the need for unemployment compensation programs, and State unemployment 

programs had been established under the 

Social Security Act in 1935. While the State 

unemployment programs generally covered 

railroad workers, railroad operations which 

crossed State lines caused special problems. 

Unemployed railroad workers were denied 

compensation by one State because they 

became unemployed while working in another State or because their employers had paid 

unemployment taxes in another State. 

Although there were cases where employees 

appeared to be covered in more than one 

State, they often did not qualify in any. 

RAILROAD UNEMPLOYMENT  

INSURANCE ACT OF 1938 

A Federal study commission, which 

reported on the nationwide State plans for 

unemployment insurance, recommended that 

railroad workers be covered by a separate 

plan because of the complications their coverage had caused the State plans. Congress 

subsequently enacted the Railroad 

Unemployment Insurance Act in June 1938. 

The Act established a system of benefits for 

unemployed railroaders, financed entirely by 

railroad employers and administered by the 

Board. Sickness benefits were added in 

1946. 

The Act of 1938 established a system of 

benefits for unemployed railroad workers, 

plus a free placement service, to be financed 

by a payroll tax of 3 percent, payable entirely 

by employers. After some minor changes in 

the following year, the law went into operation on July 1, 1939. 

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

rates geared to base-year earnings. Initially, 

the daily rates ranged from $1.75 to $3 and 

were payable for a maximum of 80 days in 

each benefit year, after an initial waiting 

period. In 1940, the maximum daily rate 

was raised to $4 and the maximum duration 

to 100 days in 20 weeks; the waiting period 

was reduced from 15 days to 7 days and a 

uniform benefit year was established. 

MAJOR AMENDMENTS TO THE  

RAILROAD UNEMPLOYMENT  

INSURANCE ACT 

The first set of major amendments was 

enacted in 1946. The maximum duration 

was increased to 26 weeks and the maximum 

55
 
Railroad Retirement Handbook, 2009
 

daily benefit rate to $5. The most important 

feature of these amendments was the program of cash sickness benefits (including 

maternity benefits) for railroad workers, paralleling unemployment benefits and financed 

from the same taxes. At that time, only two 

States, Rhode Island and California, had 

sickness plans. Three additional States (New 

Jersey, New York and Hawaii) and Puerto 

Rico later adopted similar plans. 

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

the war years, the balance in the Railroad 

Unemployment Insurance Account mounted 

rapidly. Consequently, in 1948 the principle 

of a fixed contribution rate was abandoned 

and a sliding scale of contribution rates substituted. The rates were to range from 0.5 

percent to 3 percent of taxable payroll, 

depending on the current balance in the 

Railroad Unemployment Insurance Account. 

1950’s.—Amendments enacted in 1952 

and 1954 raised the maximum daily benefit 

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

earnings needed by an employee to qualify 

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

the taxable limit on monthly earnings from 

$300 to $350. The amendments also provided that the benefit rate, subject to the maximum amount, should not be less than half 

the claimant’s daily wage rate. In addition, 

normal benefits for unemployment or sickness in a benefit year were each limited in 

total to the employee’s creditable base year 

earnings. 

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

benefit rate guaranty to 60 percent of the 

daily wage rate, and provided extended 

unemployment benefits for 13 weeks to 

employees with at least 10 years of service 

and 26 weeks of extended benefits to 15-year 

employees. These amendments also raised 

the base year qualifying amounts from $400 

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

They removed the waiting period for unemployment benefits and the Sunday and holiday disqualification provision, and increased 

the maximum contribution rate to 3.75 percent. In addition, the Board received authority to borrow money from the Railroad 

Retirement Account when necessary in order 

to pay benefits when due. Such loans were 

to bear the same interest rate as was being 

earned by other investments of the Railroad 

Retirement Account and were to be repaid as 

funds became available. 

1960’s.—Amendments enacted in 1963 

were designed to improve the financing of the 

system. The maximum contribution rate was 

increased to 4 percent, and the amount of 

base-year earnings needed by an employee to 

qualify for benefits was raised from $500 to 

$750. Also, a minimum base-year service 

requirement of 7 months was added for 

employees having no previous railroad service, and the disqualification for quitting work 

voluntarily without good cause was made 

more stringent. Following these amendments, indebtedness to the Railroad 

Retirement Account gradually declined from 

a then peak level of nearly $330 million and 

was liquidated in September 1973. 

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

except that these extended sickness benefits 

could not be paid to employees age 65 or 

older. These amendments also raised the 

base-year qualifying amount to $1,000, eliminated the special maternity benefit provisions (benefits were still payable for pregnancy and childbirth under the sickness benefit 

provisions), and added a disqualification for 

employees who receive separation allowances. 

56
 
DEVELOPMENT OF THE RAILROAD UNEMPLOYMENT INSURANCE SYSTEM 

1970’s.—Amendments in 1975 increased 

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

July 1, 1976. The 60 percent daily benefit 

rate guaranty was retained in the amended 

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

$12.70 was established. The amendments 

liberalized the basic eligibility requirements 

for new employees by lowering the 7-month 

base-year service requirement to 5 months. 

In addition, the 1975 amendments mandated 

a 7-day waiting period for benefit payments 

resulting from strikes. The tax rate schedule 

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

depending on the balance in the account, in 

order to finance the increased benefits. This 

legislation also lowered the waiting period 

for sickness benefits. 

The 1975 legislation also provided 

extended unemployment benefit periods of up 

to 13 weeks for employees with less than 10 

years of service during “periods of high 

unemployment.” Under the pre-existing law, 

extended benefits were payable only to 

employees with 10 or more years of service. 

However, subsequent 1981 legislation repealing the “high unemployment” extended benefit provisions in the State unemployment programs nullified the related railroad unemployment insurance provisions, and the 

Board was required to cease awarding 

extended benefits to employees with less 

than 10 years of service. 

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

lieu of unemployment benefits subject to 

Federal income tax. 

1980’s.—Amendments enacted in 1981 

subjected the first six months of sickness 

benefits to tier I railroad retirement taxes, 

provided the benefits did not result from onthe-job injury. Legislation enacted in March 

1983 provided unemployed railroad workers 

with less than 10 years of service, who 

exhausted normal railroad unemployment 

benefits, up to 10 weeks of temporary supplemental extended unemployment benefits, but 

these temporary benefits were financed from 

Federal general revenue funds. 

The national economic recession of the 

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

benefit payments to record levels which far 

exceeded unemployment tax income and 

necessitated high levels of loans from the 

Railroad Retirement Account. The Railroad 

Unemployment Insurance Account owed the 

Railroad Retirement Account a peak amount 

of over $850 million at the end of fiscal year 

1986. Financial measures to assist the 

Railroad Unemployment Insurance Account 

were included in the Railroad Retirement 

Solvency Act enacted August 12, 1983. 

The Railroad Retirement Solvency Act 

raised the taxable limit on monthly earnings 

from $400 to $600 and the base-year qualifying amount from $1,000 to $1,500. The waiting period for benefits during strikes was 

increased from 7 to 14 days. A temporary 

repayment tax on railroad employers was 

scheduled to begin July 1, 1986, to initiate 

repayment of the loans made by the Railroad 

Retirement Account. Sickness benefits, other 

than those resulting from on-the-job injuries, 

were made subject to Federal income tax. 

The 1983 legislation also mandated the 

establishment of a Railroad Unemployment 

Compensation Committee to review the 

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

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

particular, repayment of the system’s debt to 

the Railroad Retirement Account, and the 

viability of transferring railroad unemployment benefit payments to State programs. 

57
 
Railroad Retirement Handbook, 2009
 

The Consolidated Omnibus Budget 

Reconciliation Act of April 1986 revised the 

1983 law which had set a temporary unemployment insurance loan repayment tax 

beginning July 1, 1986, at a 2 percent rate 

with increases of 0.3 percent a year until 

1990. The amended schedule required rates 

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

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

1988. This budget legislation also continued 

authority for borrowing by the Railroad 

Unemployment Insurance Account from the 

Railroad Retirement Account, but provided 

for an automatic unemployment insurance 

surtax on rail employers of 3.5 percent on 

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

As a result of the Gramm/Rudman Act, 

unemployment and sickness benefits were 

reduced in fiscal year 1986 and were reduced 

periodically in subsequent years. 

The 1986 Tax Reform Act made all unemployment benefits subject to Federal income 

tax, beginning with taxable year 1987. 

1988 LEGISLATION  

AND LATER AMENDMENTS 

The Railroad Unemployment Insurance 

and Retirement Improvement Act, based on 

the recommendations of the Railroad 

Unemployment Compensation Committee, 

was included in the Technical and Miscellaneous Revenue Act of 1988, enacted 

November 10, 1988. The legislation raised 

the unemployment and sickness daily benefit 

rate from $25 to $30 retroactively to July 

1988 and indexed benefit rates and earnings 

requirements to national wage levels. The 

daily benefit rate subsequently rose to $31 in 

July 1989, $33 in July 1992, and $36 in July 

1994. A 2-week waiting period was established and employers were provided the right 

to appeal claims of their employees after 

1989. Also, the amount of subsidiary remuneration from part-time work which unemployment benefit claimants can earn without 

affecting their benefits was increased from 

$10 to $15 a day. 

Under the indexing provisions of the 1988 

amendments, the taxable earnings base in 

calendar year 1989 increased from $600 to 

the first $710 of each employee’s monthly 

earnings, and by 2009 to $1,330. For 1989 

and 1990, the contribution rate for most 

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

with rates ranging from 5.55 percent to 12 

percent. 

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

the retirement system by fixing the loan 

repayment tax at 4 percent in January 1989, 

with that rate remaining in force until the 

debt was fully repaid with interest. And the 

previous $7,000 annual base for this tax was 

changed to conform to the indexed monthly 

taxable compensation base. In June 1993 

the $180 million loan balance was repaid in 

its entirety from cash reserves in the 

Railroad Unemployment Insurance Account 

and the loan repayment tax was terminated. 

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

Railroad Unemployment Insurance Account, 

was eliminated in 1991. Instead, a surcharge 

can be added to employers’ unemployment 

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

on the previous June 30 goes below 

$100 million (as indexed). The surcharge 

rate would be 1.5, 2.5 or 3.5 percent depending on the balance in the Account. 

Credits would be provided to employers if 

a large balance accumulates in the account. 

If the account balance on the preceding 

June 30 were above $250 million (as 

indexed), the excess would be refunded to the 

58
 
DEVELOPMENT OF THE RAILROAD UNEMPLOYMENT INSURANCE SYSTEM 

employers in the form of a rate reduction for 

the year through a pooled credit. The 1988 

amendments also require the Board to make 

annual financial reports to Congress on the 

status of the unemployment insurance system. The reports have been favorable. 

The Omnibus Budget Reconciliation Act 

of 1989 revised Federal indexing procedures, 

which raised the maximum on monthly compensation subject to railroad unemployment 

insurance taxes and the qualifying earnings 

requirement. This legislation also revised 

fiscal year 1990 unemployment and sickness 

benefit sequestrations under the Gramm/ 

Rudman Act. 

1990’s.—Under 1991, 1992 and 1993 

emergency unemployment compensation legislation providing temporary extended State 

unemployment benefits, unemployed railroad 

workers were made eligible for extended benefits, on a temporary basis, regardless of 

years of service. These temporary extended 

benefits were made available for specified 

periods in 1991, 1992, 1993 and 1994 if previous benefit rights were exhausted by certain dates. 

RAILROAD UNEMPLOYMENT  

INSURANCE AMENDMENTS  

ACT OF 1996 

The Railroad Unemployment Insurance 

Amendments Act of 1996, signed into law on 

October 9, 1996, increased the railroad 

unemployment and sickness insurance daily 

benefit rate and revised the formula for 

indexing future benefit rates. It also reduced 

the waiting period for initial benefit payments and eliminated duplicate waiting periods in continuing periods of unemployment 

and sickness. In addition, the Act applied an 

earnings test to claims for unemployment 

and reduced the duration of extended benefit 

periods for long-service employees. The Act’s 

provisions were based on joint recommendations to Congress negotiated by rail labor and 

management in order to update the railroad 

unemployment insurance system along the 

lines of State unemployment insurance systems. The following provisions were effective 

upon the October 9, 1996, enactment date. 

The maximum railroad unemployment 

and sickness insurance daily benefit rate 

increased to $42 from $36. The formula for 

indexing future benefit rates was modified so 

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

July. By July 2004, the rate had risen to 

$56; it remained $56 in July 2005 and 

increased to $57 in July 2006, $59 in July 

2007, $61 in July 2008, $64 in July 2009, 

and will increase to $66 in July 2010. 

The Act eliminated the full 2-week waiting period and made benefits payable for 

each day of unemployment or sickness in 

excess of 7 during an employee’s first 

14-day registration period in a benefit year. 

It also eliminated a second waiting period 

previously required when a new benefit year 

began during a continuing period of unemployment or sickness. 

An earnings test was made applicable to 

claims for intermittent unemployment. If an 

employee’s earnings for days worked in a 14­

day registration period are more than a certain indexed amount, no benefits are payable 

for any days of unemployment in that period. 

The Act eliminated the second 13-week 

period of extended benefits for those with 15 

or more years of service. 

59
 
6
 

PROVISIONS OF THE RAILROAD 

UNEMPLOYMENT INSURANCE ACT 

BENEFIT PROVISIONS 

The Railroad Unemployment 

Insurance Act provides benefits for 

qualified railroad employees. The 

Act is designed to restore part of their wage 

loss arising from unemployment or sickness 

(including maternity). Payments are made 

for days of unemployment or sickness in a 

benefit year, which begins on July 1, to 

employees who had sufficient earnings in the 

preceding calendar year (called the base 

year) to meet the qualifying conditions. 

Qualifications 

Qualified employee.—A “qualified employee” is one who earns qualifying creditable 

compensation in a base year counting no 

more than a certain amount in any month. 

In addition, a new employee must have some 

employment in at least 5 months of the first 

year worked in the railroad industry in order 

to draw benefits in the following benefit year. 

General eligibility requirements.—To be 

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

available for work. A “day of unemployment” 

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

disqualified, and has properly registered for 

unemployment benefits. Any calendar day 

on which the employee does not work solely 

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

or she is between regularly assigned trips or 

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

unemployment. 

To be eligible for sickness benefits, a 

qualified employee must be unable to work 

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

these conditions and for which he or she does 

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

sickness” providing evidence of the employee’s medical condition and its expected duration signed by the employee’s doctor (or other 

authorized individual). 

Benefits 

The maximum daily benefit payable in 

benefit year 2009-2010 (July 2009 - June 

2010) is $64; and, for biweekly claims, maximum benefits can total $640. The maximum 

daily benefit rate increases to $66 in July 

2010 and may increase at the beginning of 

each future benefit year depending on the 

growth in average national wages. 

61
 
Railroad Retirement Handbook, 2009
 

Sickness benefits payable for the first 6 

months after the employee last worked are 

subject to tier I railroad retirement payroll 

taxes, unless benefits are being paid for an 

on-the-job injury. 

Registration and waiting periods.— 

Benefits are normally paid for the number of 

days of unemployment or sickness over 4 in 

14-day registration periods. Initial sickness 

claims must also begin with 4 consecutive 

days of sickness. However, during the first 

14-day claim period in a benefit year, benefits are only payable for each day of unemployment or sickness in excess of 7 which, in 

effect, provides a 1-week waiting period. 

Separate waiting periods are required for 

unemployment and sickness benefits. 

However, only one 7-day waiting period is 

required during any period of continuing 

unemployment or sickness, even if that period continues into a subsequent benefit year. 

Strike benefits.—If someone is unemployed because of a strike conducted in accordance with the Railway Labor Act, benefits 

are not payable for days of unemployment 

during the first 14 days of the strike, but 

benefits are payable during subsequent 14­

day periods. If a strike is in violation of the 

Railway Labor Act, no unemployment benefits are payable to employees participating in 

the strike; however, employees not among 

those participating in such an illegal strike, 

but who are unemployed on account of the 

strike, may receive benefits after the first 

two weeks of the strike. 

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

14-day strike waiting period may count as 

the benefit year waiting period if the employee subsequently becomes unemployed for reasons other than a strike later in the benefit 

year. 

Normal benefits.—Normal benefits are 

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

benefit year ends (normally June 30) or earlier if benefit payments equal base year creditable earnings. 

Maximum normal benefits payable in the 

benefit year beginning July 2009 cannot 

exceed an employee’s railroad earnings in 

base year 2008, counting monthly earnings 

up to $1,653. In the benefit year beginning 

July 2010, monthly earnings up to $1,718 for 

base year 2009 will be counted. This allows 

employees who qualify with relatively low 

earnings to be eligible for more days of benefits. 

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

voluntarily quit work without good cause and 

not have voluntarily retired. 

Extended benefits.—If an employee has at 

least 10 years of service (120 or more cumulative service months) and exhausts normal 

unemployment or sickness benefits, he or she 

may be eligible to receive extended benefits 

for up to 65 days (during 7 consecutive 14­

day registration periods). Also, if the 

employee is not qualified for normal benefits 

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

may still be eligible for extended benefits. 

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

voluntarily quit work without good cause and 

not have voluntarily retired. To qualify for 

extended sickness benefits, a beneficiary 

must not have voluntarily retired and must 

be under age 65. 

Accelerated benefits.—Employees with 10 

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

qualify them for unemployment or sickness 

benefits in the current benefit year, but will 

qualify them in the next benefit year, may be 

able to receive normal unemployment or sickness benefits before the regular beginning 

62
 
PROVISIONS OF THE RAILROAD UNEMPLOYMENT INSURANCE ACT 

date of the next benefit year. To be eligible, 

they must have 14 or more consecutive days 

of unemployment or sickness and not have 

voluntarily retired, or quit work without good 

cause if claiming unemployment benefits, 

and be under age 65 when claiming sickness 

benefits. 

Maternity benefits.—Maternity benefits 

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

she is unable to work or if working would be 

injurious to her health because of pregnancy, 

miscarriage, or childbirth. Such benefits are 

paid in the same amounts as any other sickness benefits. 

Effects of Work and Earnings 

A claimant may not receive benefits for 

any day for which pay is received. This 

includes railroad and nonrailroad wages, 

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

payments, vacation pay, holiday pay, 

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

subsidiary remuneration. However, payments received under a Railroad Retirement 

Board-approved nongovernmental supplemental unemployment or sickness insurance 

plan, an employee’s own health or accident 

insurance policy or a group insurance policy 

will not affect entitlement to benefits and 

should not be reported on claims. 

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

days worked, and/or days of vacation, paid 

leave, or other pay, in a 14-day registration 

period are more than a certain indexed 

amount, no benefits are payable for any days 

of unemployment in that period. That registration period, however, can be used to satisfy the waiting period requirement described 

earlier. Earnings include pay from selfemployment and railroad, nonrailroad, and 

part-time work. Earnings also include pay 

that would have been earned except for failure to mark up or report for duty on time, or 

because the employee missed a turn in pool 

service or was otherwise not ready or willing 

to work. For the benefit year that began 

July 2009, the amount is $1,280, and for the 

benefit year that begins July 2010, the 

amount will be $1,330. These amounts correspond to the base year monthly compensation 

amounts used in determining eligibility for 

benefits in each year. Also, even if an earnings test applies on the first claim in a benefit year, this will not prevent the first claim 

from satisfying the waiting period in a benefit year. 

On the other hand, earnings of no more 

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

with the holding of normal full-time employment may be considered subsidiary remuneration and may not prevent payment of any 

days in a claim. However, a claimant must 

be sure to report all full and part-time work 

on each claim, regardless of the amount of 

earnings, so the Board can determine 

whether the work affects benefits. 

Disqualifications 

A claimant for unemployment benefits 

may be disqualified for 30 days if he or she 

refuses to accept suitable work or fails to follow instructions to apply for work or to 

report to a Board office or State unemployment office for an interview. 

A claimant who leaves either railroad or 

nonrailroad work voluntarily without good 

cause is disqualified, starting with the day he 

or she leaves work, until he or she has 

returned to railroad employment and earned 

wages sufficient to qualify for benefits again. 

This disqualification also applies to a 

claimant who leaves work voluntarily with 

good cause, but only with respect to periods 

63
 
Railroad Retirement Handbook, 2009
 

in which he or she could receive unemployment benefits under another law. 

A claimant is also disqualified for any day 

on which he or she takes part in a strike 

begun in violation of the Railway Labor Act 

or in violation of the established rules and 

practices of a labor organization of which he 

or she is a member. This disqualification 

only applies to claimants who work on the 

premises where the strike occurs and who do 

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

An employee who is paid a separation 

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

period of time it would have taken to earn 

the amount of the allowance. 

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

Board. 

If a claimant makes a false or fraudulent 

statement or claim to obtain unemployment 

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

to a fine or imprisonment. The Board checks 

with Federal agencies and all 50 States, the 

District of Columbia, and Puerto Rico as well 

as railroads in order to detect fraudulent 

benefit claims. The Board also checks with 

physicians to verify the accuracy of medical 

statements supporting sickness benefit 

claims. 

Payments Under Other Laws or Systems 

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

Retirement Act, Social Security Act, or any 

other social insurance law for days for which 

he or she is also entitled to benefits under 

the Railroad Unemployment Insurance Act, 

unemployment or sickness benefits are 

payable only to the extent to which they 

exceed the other payments for those days. 

Examples of other such social insurance payments are military pensions other than VA 

benefits, firefighters’ and police pensions, or 

certain workers’ compensation payments. 

Claimants should report all such other payments promptly to avoid having to refund 

benefits later. 

There is no reduction in unemployment or 

sickness benefits for benefits paid under a 

Board-approved nongovernmental sickness 

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

employee receives supplemental unemployment benefits under a Board-approved nongovernmental unemployment benefit plan. 

But unemployment and sickness benefits 

provided under the Railroad Unemployment 

Insurance Act are not payable if Federal/ 

State unemployment or sickness benefits 

under other laws, including Canadian law, 

are paid for the same period of time. 

If an employee is awarded damages or 

receives a settlement because of an injury, 

any sickness benefits already paid for the 

same injury will have to be deducted from 

the settlement and refunded to the Board. 

Any benefits due for the same injury for later 

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

or settlement after medical (even if covered 

by insurance) and legal expenses have been 

deducted. 

Unemployment benefits are normally not 

paid if an employee is fully protected by a 

wage guaranty plan. If an employee receives 

unemployment or sickness benefits, however, 

and is later paid a guaranty or other pay for 

time lost for the same period, the employer 

will be asked to withhold an amount equal to 

the unemployment or sickness benefits. The 

64
 
PROVISIONS OF THE RAILROAD UNEMPLOYMENT INSURANCE ACT 

employer must then pay this amount to the 

Board. 

PAYMENT PROCESS 

Claiming Unemployment Benefits 

Claimants can apply for unemployment 

benefits by mail or online. 

To apply by mail, claimants must obtain 

an application from their labor organization, 

employer, local Railroad Retirement Board 

office or the Board’s Web site at www.rrb.gov. 

The completed application should be mailed 

to the local Board office as soon as possible 

and, in any case, must be filed within 30 

days of the date on which the claimant 

became unemployed or the first day for 

which he or she wishes to claim benefits. 

Benefits may be lost if the application is filed 

late. 

To apply online, claimants should go to 

the Board’s Web site and click on “Benefit 

Online Services” for directions on establishing an RRB Internet Services account. 

Employees are encouraged to establish online 

accounts while still employed so the account 

is ready if they ever need to apply for these 

benefits or use other select Internet services. 

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

by mail or online, and notifies the claimant’s 

current railroad employer, and base-year 

employer if different. The employer has the 

opportunity to provide information about the 

benefit application. 

After the Board processes the application, 

biweekly claim forms are mailed to the 

claimant, and are also available online, as 

long as he or she remains unemployed and 

eligible for benefits. Claim forms should be 

signed and sent on or after the last day of the 

claim. This can be done by mail or electronically. The completed claim must be received 

by a Board office within 15 days of the end of 

the claim or the date the claim was mailed to 

the claimant or made available online, 

whichever is later. Claimants must not file 

both a paper and online claim form for the 

same claim period(s). 

Only one application need be filed during 

a benefit year, even if a claimant becomes 

unemployed more than once. However, a 

claimant must, in such a case, request a new 

claim form from a Board office or online 

within 30 days of the first day for which he 

or she wants to resume claiming benefits. 

Claiming Sickness Benefits 

An application for sickness benefits can 

be obtained from railroad employers, railroad 

labor organizations, any Board office or the 

Board’s Web site. An application and a doctor’s statement of sickness are required at 

the beginning of each period of continuing 

sickness for which benefits are claimed. The 

Board suggests that employees keep an 

application form on hand for use in claiming 

sickness benefits. If the employee is too sick 

to complete the application, someone else 

may do so. In that case, a family member 

should also complete form SI-10, Statement 

of Authority to Act for Employee, and include 

it with the application. Attached to each 

application is a statement of sickness which 

must be completed by the employee’s doctor. 

The forms should be completed and 

mailed to the Board’s headquarters in 

Chicago by the 7th day of illness or injury for 

which benefits are claimed. After the Board 

receives the application and statement of 

sickness and determines eligibility, biweekly 

claim forms are mailed to the claimant for 

completion and return to a Board field office 

for processing. 

The claim forms must be received at the 

Board within 30 days of the last day of the 

claim period, or within 30 days of the date 

the claim form was mailed to the claimant, 

65
 
Railroad Retirement Handbook, 2009
 

whichever is later. Benefits may be lost if an 

application or claim is filed late. 

Payments 

Applicants for unemployment and sickness benefits can check with their local 

Board office as to when they can expect their 

first payment. Customer service standards 

and progress reports are available in field 

offices and online at www.rrb.gov. 

Some claims for benefits may take longer 

to handle than others if they are more complex, or if a Board office has to get information from other people or organizations. If 

this happens, the claimant may expect an 

explanation and an estimate of the additional 

time required to make a decision. 

Railroad unemployment and sickness 

insurance benefits are paid by Direct 

Deposit. With Direct Deposit, benefit payments are made electronically to an employee’s bank, savings and loan, credit union, or 

other financial institution. New applicants 

for unemployment and sickness benefits will 

be asked to provide information needed for 

Direct Deposit enrollment. Waivers are 

available to individuals who determine that 

Direct Deposit would cause a hardship, and 

to individuals without bank accounts. 

Unemployment and sickness claimants 

can conveniently check on the status of their 

claims or payments at any time by calling 

the Board toll-free at 1-877-772-5772. 

Information is also available online. 

Free Placement Service 

The Railroad Unemployment Insurance 

Act authorizes the Board to operate a free 

placement service. The primary purpose of 

the placement service is to secure new 

employment for experienced railroad workers 

who have lost their jobs. 

When a claimant applies for unemployment benefits, he or she also applies for 

employment service. The claimant will probably be interviewed by a Board representative who will try to help secure employment 

if he or she does not have good prospects of 

returning to his or her former job. The 

claimant may be referred by the representative to a suitable railroad job; otherwise, an 

effort will be made towards placement in a 

nonrailroad job for which the claimant 

appears qualified. 

As part of its placement service, the 

Board maintains a list of job openings reported by railroads. The list is available for 

review at all offices of the Board and online 

at www.rrb.gov. The booklet, Guide to 

Finding the Right Job (Form UB-12), is also 

available from any Board field office and 

online. 

APPEALS 

Employees 

If a claimant disagrees with a decision 

made on a claim, he or she has 60 days from 

the date of the initial notice of the decision in 

which to file a written statement requesting 

reconsideration from the Board office that 

made the decision. This step is mandatory 

before a decision may be appealed to the 

Board’s Bureau of Hearings and Appeals. 

Failure to request reconsideration within 

60 days will result in forfeiture of further 

appeal rights. 

If the case involves a benefit overpayment 

of more than 10 times the maximum daily 

benefit rate, the claimant may request a 

waiver of repayment. A request for waiver 

filed within 60 days will, in certain cases, 

defer recovery of the overpayment from subsequent benefit payments. If waiver is 

requested, the claimant may be asked to 

complete a financial statement on a form provided by the Board. 

66
 
PROVISIONS OF THE RAILROAD UNEMPLOYMENT INSURANCE ACT 

If dissatisfied with the reconsideration or INCOME TAXES

 

waiver decision, a claimant may, within 60 

days, appeal to the Board’s Bureau of 

Hearings and Appeals. 

If not satisfied with the Bureau of 

Hearings and Appeals’ decision, a claimant 

may further appeal, within 60 days, to the 

three-member Board. 

If not satisfied with the three-member 

Board’s decision, a claimant may file a petition for a review of the decision by a U.S. 

Court of Appeals. A petition for review must 

be filed within 90 days of the notice of the 

Board’s decision. 

Employers 

When an employer is a party to a claim 

for benefits, that employer may protest the 

payment of benefits, but such protests do not 

prevent the timely payment of benefits. 

However, employees may be required to 

repay benefits if their employers’ protests are 

ultimately successful. The employer also has 

the right to appeal an unfavorable decision to 

the Board’s Bureau of Hearings and Appeals. 

Unemployment benefits paid by the 

Board are subject to Federal income taxes, 

just like unemployment benefits paid under 

State government programs. 

Sickness benefits paid by the Board, 

except for sickness benefits resulting from 

on-the-job injuries, are subject to Federal 

income tax under the same limitations and 

conditions that apply to the taxation of sick 

pay received by workers in other industries. 

The Railroad Unemployment Insurance 

Act specifically provides that railroad unemployment and sickness benefits are not subject to State income taxes. In January of 

each year, the Board sends railroad employees Form 1099-G showing the total amount 

of unemployment benefits paid during the 

previous year and/or a Form W-2 showing 

the net amount of sickness benefits paid. 

67
 
7
 

FINANCING UNEMPLOYMENT AND 

SICKNESS INSURANCE 

Under the Railroad Unemployment 

Insurance Act, an employee’s eligibility for benefits is based on 

taxable earnings in a calendar year and normally applies only to benefits in the benefit 

year starting the following July 1. Given this 

limited period of potential benefits, the 

financing of railroad unemployment and sickness benefits is essentially a short-term 

proposition in comparison to the financing of 

retirement benefits. An employee’s eligibility 

for unemployment or sickness benefits ceases 

within 2 years after he or she leaves railroad 

work, while eligibility for railroad retirement 

annuities continues for decades after an 

employee leaves the industry. Consequently, 

in a given series of benefit years, gradually 

declining rail employment is less of a factor 

than major recessions or work stoppages 

causing industry-wide unemployment on a 

temporary basis. 

CONTRIBUTIONS 

The railroad unemployment and sickness 

benefit programs are financed exclusively by 

contributions of railroad employers, based on 

the taxable earnings of their employees. The 

employees themselves do not contribute. 

Experience-based tax rates were phased 

in during 1991. Each employer pays contributions at a rate which takes into consideration the employer’s actual incidence of benefit usage. Under experience rating, employers whose employees have low incidences of 

unemployment and sickness pay contributions at a lower rate than employers with 

higher levels of benefit usage. Each employer’s rate also has a component for administrative expenses and a component to cover 

costs shared by all employers. 

In 2009, the basic tax rates on railroad 

employers, including covered commuter railroads, range from a minimum of 0.65 percent 

to a maximum of 12 percent. Also, a surcharge of 1.5 percent is added to the basic 

tax rates, as the Railroad Unemployment 

Insurance Account accrual balance of $122.5 

million was less than the indexed threshold 

of $130.1 million but greater than a threshold of $65.1 million on June 30, 2008. Over 

80 percent of employers are being assessed 

2.15 percent in 2009 (the 0.65 percent minimum rate plus the 1.5 percent surcharge). 

New employers initially pay a tax of 2.61 percent in 2009, which represents the average 

rate paid by all employers in the period 2005­

2007. 

A surcharge is added to each employer’s 

tax rate during any calendar year in which 

the balance in the Railroad Unemployment 

Insurance Account on the preceding June 30 

69
 
Railroad Retirement Handbook, 2009
 

is less than an indexed threshold amount. If 

the account balance is less than $100 million 

(as indexed), but at least $50 million (as 

indexed), the surcharge will be 1.5 percent. 

If the account balance is less than $50 million (as indexed), but greater than zero, the 

surcharge will be 2.5 percent. A maximum 

surcharge of 3.5 percent applies if the 

account balance is less than zero. If the 

account balance on the preceding June 30 is 

above $250 million (as indexed), the excess 

will be refunded to the employers in the form 

of a rate reduction for the year through a 

pooled credit. Each employer’s tax rate 

(prior to application of individual maximum 

and minimum limitations) will be reduced by 

the ratio of the excess amount to the taxable 

payroll of all employers. 

The experience-based tax rates have a 12 

percent maximum, or a 12.5 percent maximum if a 3.5 percent surcharge is in effect. 

Included in the rate is the basic rate, an 

administration tax rate of 0.65 percent, and, 

if either is applicable, the surcharge rate or 

the rate of the pooled credit. Since the basic 

employer tax rate plus any pooled credit cannot be less than zero, 0.65 percent is the minimum rate which any employer can pay. 

RAILROAD UNEMPLOYMENT  

INSURANCE ACCOUNT 

Railroad unemployment insurance funds 

not needed immediately for the payment of 

benefits are deposited in the Railroad 

Unemployment Insurance Account maintained by the Treasury. This account, 

together with similar accounts for each State, 

forms a national unemployment trust fund. 

Deposits in the unemployment trust fund are 

invested by the Treasury in securities of the 

U.S. Government. Every quarter, the 

Railroad Unemployment Insurance Account 

and the Railroad Unemployment Insurance 

Administration Fund each receive a proportionate share of the interest earnings of the 

trust fund, based on average daily balances. 

The Railroad Unemployment Insurance 

Administration Fund, separate from the 

Railroad Unemployment Insurance Account, 

pays the costs of administering the railroad 

unemployment insurance system. An 

amount equal to 0.65 percent of taxable payroll is set aside from railroad contributions 

for the Railroad Unemployment Insurance 

Administration Fund. Any amount in the 

Railroad Unemployment Insurance 

Administration Fund in excess of $6 million 

(on an accrual basis) on September 30 of any 

year is transferred to the Railroad 

Unemployment Insurance Account. 

Borrowing Authority 

To ensure adequate funds in periods of 

high unemployment, Congress gave the 

Board authority in 1959 to borrow money 

from the Railroad Retirement Account for the 

payment of benefits from the Railroad 

Unemployment Insurance Account. 

FINANCIAL REPORT 

The Railroad Retirement Board is 

required to report annually to the Congress 

on the financial status of the railroad unemployment insurance system. The reports 

must include any recommendations for 

financing changes which might be advisable, 

including any adjustment the Board recommends regarding the rates of employer contributions. 

The Board’s 2009 railroad unemployment 

insurance financial report was generally 

favorable. Even as projected maximum benefit rates increase 43 percent from $61 to $87 

from 2008 to 2019, experience-based contribution rates are expected to maintain 

solvency. While small, short-term cash-flow 

problems may occur in 2010 and 2011, projections show quick repayment of loans 

70
 
FINANCING UNEMPLOYMENT AND SICKNESS INSURANCE 

resulting from any shortfall, even under the 

most pessimistic employment assumption. 

The report also predicted average employer 

contribution rates well below the maximum 

throughout the projection period. A 1.5 percent surcharge, in effect in calendar year 

2009 in order to maintain a minimum 

account balance, will likely remain in effect 

in 2010 and rise to 2.5 percent in 2011, 

according to the report. No financing 

changes were recommended by the Board. 

71
 
8
 

ADMINISTRATION OF THE 

RAILROAD RETIREMENT SYSTEM 

ADMINISTRATION 

The railroad retirement system is 

based on three Federal laws: the 

Railroad Retirement Act, the 

Railroad Unemployment Insurance Act, and 

the Railroad Retirement Tax Act. The first 

two of these Acts are administered by the 

Railroad Retirement Board, and the third, by 

the Internal Revenue Service of the U.S. 

Treasury. The Board also participates in the 

administration of the Federal Medicare 

health insurance program. In past years, the 

Board assisted in the administration of certain employee protection provisions of the 

Regional Rail Reorganization Act, the 

Northeast Rail Service Act, the Milwaukee 

Railroad Restructuring Act, and the 

Bankrupt Railroad Service Preservation and 

Employee Protection Act. 

An independent agency in the executive 

branch of the Federal Government, the 

Board is administered by three members 

appointed by the President, with the advice 

and consent of the Senate. By law, one member is appointed upon recommendation of 

railroad labor organizations, one upon recommendation of railroad employers, and the 

third member, the Chairman, is, in effect, 

independent of employees and employers and 

represents the public interest. The terms of 

office are 5 years and are arranged so as to 

expire in different calendar years. The 

President also appoints an Inspector General 

for the Board. 

The primary function of the Board is the 

determination and payment of benefits under 

the retirement-survivor and unemploymentsickness programs. To this end, the Board 

employs field representatives to assist railroad personnel and their families in filing 

claims for benefits, examiners to adjudicate 

the claims, and information technology staff 

to operate the data processing equipment 

and administer the automated programs 

needed to maintain earnings records, calculate benefits and process payments. 

The Board also employs actuaries to predict the future income and outlays of the railroad retirement trust funds, statisticians and 

economists to provide vital data, and attorneys to interpret legislation and represent 

the Board in litigation. The Inspector 

General employs auditors and investigators 

to detect any waste, fraud or abuse in the 

benefit programs. 

The headquarters of the Board is located 

at 844 North Rush Street, Chicago, Illinois 

60611-2092 and the Board maintains field 

offices across the United States in localities 

73
 
Railroad Retirement Handbook, 2009
 

easily accessible to large numbers of railroad 

workers. 

Relations Between the Board and Other 

Government Agencies 

As an independent agency in the executive branch of the Federal Government, the 

Board has many dealings with a number of 

other Federal agencies and with some State 

agencies. Its dealings with some of these 

agencies, such as the President’s Office of 

Management and Budget, the Office of 

Personnel Management, the Government 

Accountability Office, and the Department 

of the Treasury, are similar to the dealings 

of other executive branch agencies with these 

units. The Board’s relations with certain 

others—principally, the Social Security 

Administration, the Centers for Medicare & 

Medicaid Services, State employment security departments and, on a smaller scale, the 

Department of Labor—are related directly or 

indirectly to the various benefit programs. 

The Board’s relationship with the Social 

Security Administration is particularly 

extensive because of the coordination 

between the two systems. Railroad retirement annuities may be based in part on 

social security credits, and social security 

benefit amounts awarded after 1974 to railroad retirement annuitants are made 

through the Board as part of combined railroad retirement-social security monthly benefit payments. 

The Board and the Social Security 

Administration have an interagency agreement providing for system-to-system access 

between the two agencies. This allows Board 

computer systems to access information as it 

is needed, thus improving customer service 

and reducing errors. 

Relations Between the Board and 

Congress 

The Board has numerous contacts with 

the Congress as a whole and with its individual members and committees. It sends the 

President and Congress an annual report on 

its operations and, on request, supplies additional information on the Board’s programs. 

Officials of the Board testify at congressional 

hearings on proposed legislation to amend 

the Railroad Retirement and Railroad 

Unemployment Insurance Acts, and the 

Board prepares reports on such legislation. 

Congress has jurisdiction over the amounts 

available to the railroad retirement system 

for benefit payments and for administration. 

Relations Between the Board and 

Railroads 

The administrative organization of the 

Board fosters close relations with railroad 

employers, employees and their representatives. As mentioned earlier, two of the 

Board’s three members are appointed on the 

recommendations of railway labor and management associations, and labor and management officials have been active in the development of the railroad retirement and unemployment insurance programs since their 

inception. 

In addition, the Board relies on labor 

groups and railroad employers for assistance 

in keeping railroad personnel informed about 

the Board’s benefit programs. The Board 

conducts informational programs for railroad 

labor and management officials to acquaint 

them with the details of the benefit programs 

and their reporting responsibilities. These 

officials, in turn, educate railroad workers as 

to their benefit rights and responsibilities. 

74
 
ADMINISTRATION OF THE RAILROAD RETIREMENT SYSTEM 

Railroad employers and railway labor 

groups also cooperate with the Board in a 

joint placement program to find jobs for 

unemployed personnel. These joint placement efforts help to reduce the costs of the 

unemployment insurance program. 

The Board has direct contact with railroad employees through its field offices 

where its personnel explain benefit rights 

and responsibilities on an individual basis, 

assist employees in applying for benefits, 

provide related services for annuitants and 

answer any questions related to the benefit 

programs. 

Through various publications and press 

releases, the Board disseminates, as widely 

as possible, information on its operations and 

the provisions of the laws it administers. Its 

publications include annual reports, triennial 

actuarial valuations, and benefit booklets 

and leaflets. This material is also available 

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

Relations Between the Board and the 

National Railroad Retirement Investment 

Trust 

The National Railroad Retirement 

Investment Trust was established by the 

Railroad Retirement and Survivors’ Improvement Act of 2001. The sole purpose of the 

Trust is to manage and invest railroad retirement assets. The Trust is a tax-exempt 

entity independent from the Federal Government. 

The Act authorizes the Trust to invest the 

assets of the Railroad Retirement Account in 

a diversified investment portfolio in the same 

manner as those of private sector retirement 

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

to U.S. Government securities. 

The Trust has no powers or authority 

over the administration of benefits under the 

Railroad Retirement Act. While the Act does 

not delegate any authority to the Railroad 

Retirement Board with respect to day-to-day 

activities of the Trust, the Act does provide 

that the Board may bring a civil action to 

enjoin any act or practice of the Trust that 

violates the provisions of the Act or to 

enforce any provision of the Act. 

Budget Estimates 

Each year, Congress specifies in an 

appropriation act how much of the money 

derived from employer and employee taxes 

the Board may spend to administer the benefit programs. The appropriation is based on 

budget estimates prepared by the Board. 

The requested appropriation is sent to the 

Congress at the same time it is sent to the 

President’s Office of Management and 

Budget. In addition, as explained in the 

retirement financing chapter, the level of certain dual benefit payments for a fiscal year is 

determined by the Federal budget and appropriations process. 

Relation of Administrative Costs to 

Benefit Payments 

The Board has always had an exceptionally good record of administrative economy. 

Total administrative expenses currently 

average about one percent of benefit payments, despite the complexity of the Railroad 

Retirement Board’s programs. 

KEEPING BENEFICIARIES 

INFORMED 

The Board conducts informational programs to keep railroad employees informed of 

their benefit rights and responsibilities under 

the Railroad Retirement and Railroad 

Unemployment Insurance Acts, with emphasis on the necessity of prompt application for 

benefits. Yet cases still occur in which qualified railroad employees or their family mem75
 
Railroad Retirement Handbook, 2009
 

bers forfeit benefits either because they do 

not know that these benefits are available or 

because they are unaware of the steps they 

themselves must take to claim them. 

The Railroad Retirement Act limits the 

retroactivity of retirement and survivor 

annuity applications. Depending on the type 

of annuity application, the retroactivity can 

be as long as one year or there can be no 

retroactivity at all. The Board’s regulations 

do allow the granting of an earlier annuity 

beginning date if an annuitant can establish 

that he or she was deterred from filing an 

application at an earlier date by some action 

or statement of a Board employee. However, 

while the Board attempts to keep potential 

annuitants informed of their rights under the 

Railroad Retirement Act through press 

releases, informational bulletins and booklets, that information might not reach everyone. This is especially true when an individual left the railroad industry well in advance 

of retirement. Ultimately, the burden falls 

on the individual to secure benefit information. 

Likewise under the Railroad Unemployment Insurance Act, while the Board may 

permit retroactive registration beyond the 

normal period when it can be shown that the 

employee was not at fault and that failure to 

apply for benefits was due to circumstances 

beyond the employee’s control, it cannot 

approve delayed claims if the only reason for 

a delay in filing was lack of knowledge of the 

law. 

PROGRAM INTEGRITY 

Railroad employees, by and large, are 

honest and law-abiding, but any large group 

may include a few persons who either deliberately or through lack of knowledge seek 

benefits to which they are not entitled. 

Various procedures for detecting and discouraging such actions include reviews of employer 

records for work on days claimed as days of 

unemployment or sickness and checks with 

State agencies to detect duplication of benefit 

payments. The Board has wage matching 

agreements with all 50 States, the District of 

Columbia and Puerto Rico, covering the entire 

rail population. Electronic data exchange programs with railroads as well as Federal and 

State agencies have significantly enhanced the 

Board’s capability to detect fraud and abuse of 

the railroad unemployment and sickness insurance system. A 75-day disqualification is 

applied in all cases in which fraud is discovered. In some cases, prosecution is also recommended. 

Other program activities designed to protect the railroad retirement trust funds include 

the investigation of uncashed annuity checks, 

matches with the Social Security 

Administration and the Centers for Medicare & 

Medicaid Services, and development of an 

online system to monitor railroad 

retirement/social security trust fund transfers. 

In addition to conducting audits of the Board’s 

operations, the Inspector General’s Office identifies and refers cases for prosecution of individuals who commit fraud against the Board’s 

benefit programs. 

76
 
ADMINISTRATION OF THE RAILROAD RETIREMENT SYSTEM

OFFICE OF INSPECTOR GENERAL 

The Railroad Retirement Board’s Office of 

Inspector General is responsible for promoting economy, efficiency and effectiveness, and 

for identifying and preventing fraud, waste 

and abuse in agency programs. The Office of 

Inspector General conducts audits, investigations and management reviews of agency 

operations. 

The Office of Inspector General identifies 

current and potential program weaknesses, 

and provides findings and recommendations 

for corrective action to management. It 

works with the agency staff to ensure delivery of the highest quality service to the railroad community. It also aggressively pursues individuals who engage in activities to 

fraudulently receive monies from the 

Railroad Retirement Board. The Office of 

Inspector General endeavors to ensure the 

integrity of the trust funds through nationwide investigations of fraud and abuse. 

Information about the Office of Inspector 

General and reports issued by that office 

are available by accessing the Office of 

Inspector General web pages at 

www.rrb.gov. The Office of Inspector 

General also maintains a fraud and abuse 

Hotline: 1-800-772-4258 or via e-mail at 

hotline@oig.rrb.gov. Information on using 

the Hotline can be found on the inside back 

cover of this Handbook. 

77
Index
 

Account, 

dual benefits payments, pp. 44-45

railroad retirement, pp. 41-46

railroad unemployment

insurance, pp. 70-71

social security equivalent

benefit, pp. 41-46 

Administration, pp. 73-77 

Annuities, see Benefits, RRA 

Appeals,

Medicare, p. 53

RRA, p. 40

RUIA, pp. 66-67 

BA-6, p. 14 

Base year, RUIA, p. 61 

Benefit year, RUIA, p. 61 

Benefits, RRA, 

child’s annuity, pp. 24-25, 38, 39

computation of, pp. 33-39

disability annuity, pp. 15, 22-23

employee annuity, pp. 10, 13-16,

17-23, 33-36 

lump-sum, pp. 27-28

parent’s annuity, pp. 25, 38, 39

residual payment, p. 28

spouse annuity, pp. 17, 20-22, 36-38

supplemental annuity,

pp. 15-16, 36

survivor, pp. 11, 23-30, 38-39

widow(er)’s annuity,

pp. 11, 23-27, 38-39 

Benefits, RUIA, 

accelerated, pp. 62-63

claims for, pp. 65-66

disqualifications for, pp. 63-64

eligibility for, p. 61

extended, p. 62

normal, p. 62

registration period, p. 62

sickness, pp. 61-66

unemployment, pp. 61-66 

Board, Railroad Retirement, 

pp. 73-75 

Certificate of Service Months 

and Compensation, p. 14 

Child’s annuity, pp. 24-25, 38, 39 

Compensation,

creditable under RRA, pp. 13-14

creditable under RUIA, pp. 61,

69-70 

military service, pp. 13-14 

Contributions, under RUIA, 

pp. 69-70 

Current connection, p. 16 

Disability annuity, pp. 15, 22-23 

Divorced spouses, pp. 17, 23, 24 

Dual Benefits Payments 

Account, pp. 44-45 

Earnings,

effect on benefits, pp. 21-22,

26-27, 63 

Employee annuity, pp. 10, 13-16,

17-23, 33-36 

Employee annuity, supplemental,

pp. 15-16, 36 

Employment,

effect on RRA benefits, pp. 21-22,

26-27 

effect on RUIA benefits, p. 63 

Financial interchange, pp. 43-44 

Financing, RRA, pp. 41-46 

Financing, RUIA, pp. 69-71 

Health insurance, pp. 47-53 

Help lines, pp. 49, 51, 52, 53, 66, 77 

Income taxes, 

retirement-survivor benefits, 

pp. 32, 45

unemployment-sickness benefits,

p. 67 

Lump-sum death benefits,

pp. 27-28 

78
 
INDEX 

Medicare, pp. 47-53 

National Railroad Retirement 

Investment Trust, pp. 11, 41, 42, 43, 75 

Parent’s annuity, pp. 25, 38, 39 

Placement service, p. 66 

Railroad Retirement Account, 

pp. 41-46 

Railroad Retirement Act, 

appeals, p. 40

benefits, types of, pp. 14-28

history, pp. 1-12

provisions, pp. 13-40 

Railroad Retirement and 

Survivors’ Improvement Act,

pp. 10-11, 36, 39,

41-43, 75 

Railroad Unemployment 

Insurance Account, 

p. 70 

Railroad Unemployment 

Insurance Act, 

appeals, pp. 66-67

history, pp. 55-59

provisions, pp. 61-67 

Registration period, RUIA, p. 62 

Residual payment, p. 28 

Retirement benefits, pp. 14-23,

33-38 

Service, pp. 13-14 

Sickness benefits, pp. 61-67 

Social Security Equivalent 

Benefit Account, pp. 41-46 

Spouse annuity, pp. 17, 20-22,

36-38 

Strike benefits, p. 62 

Supplemental annuity, pp. 11, 15-16, 36 

Survivor benefits, pp. 11, 23-30,

38-39 

Taxes, income, 

retirement-survivor benefits, 

pp. 32, 45

unemployment-sickness benefits,

p. 67 

Taxes, railroad payroll,

regular railroad retirement, pp. 11,

30-32, 41-42 

RUIA, pp. 69-70

supplemental annuity, p. 11 

Tier I, see Benefits, RRA, computation of 

Tier II, see Benefits, RRA, computation of 

Unemployment benefits, pp. 61-67 

Vested dual benefits, pp. 18, 35-36, 44-45 

Waiting period, RUIA, p. 62 

Web sites, pp. 14, 28, 43, 49, 51, 52, 53,

65 

Widow(er)’s annuity, pp. 11, 23-27, 38-39 

Widow(er)’s Initial Minimum Amount,

pp. 11, 26, 39 

79
 
Railroad Retirement Handbook, 2009
 

NONDISCRIMINATION ON THE BASIS  

OF DISABILITY 

Under Section 504 of the Rehabilitation Act of 1973 and Railroad 

Retirement Board regulations, no qualified person may be discriminated against on the basis of disability. The Board’s programs and

activities must be accessible to all qualified applicants and beneficiaries, including those with impaired vision and/or hearing.

Individuals with disabilities needing assistance (including auxiliary

aids or program information in accessible formats) should contact the

nearest Board office. Complaints of alleged discrimination by the

Board on the basis of disability must be filed within 90 days in writing with the Director of Administration, Railroad Retirement Board,

844 North Rush Street, Chicago, Illinois 60611-2092. Questions 

about individual rights under this regulation may be directed to the

Board’s Director of Equal Opportunity at the above address. 

Comments? If you have any comments or suggestions regarding the presentation of information in this publication, please let us 

know. You can fax us at 312-751-7154, e-mail us at opa@rrb.gov or 

write us at the following address: Public Affairs, U.S. Railroad 

Retirement Board, 844 North Rush Street, Chicago, IL 60611-2092. 

80
 
FRAUD, WASTE AND ABUSE HOTLINE 

1-800-772-4258 

The Railroad Retirement Board’s Office of Inspector General established its 

Hotline as a public service. The Hotline provides individuals with a means to 

report or discuss any suspected misconduct relating to the Railroad Retirement 

Board, its programs or employees. 

If you believe a doctor, hospital or other health care provider is billing Medicare 

for services not provided or for unnecessary medical procedures or supplies; someone is illegally receiving Railroad Retirement Board benefits; or you wish to report 

or discuss any other suspected misconduct relating to the Railroad Retirement 

Board, its programs or employees, please contact the Office of Inspector General 

at: 

Toll-Free Hotline: 1-800-772-4258 

U.S. Mail: 

RRB-OIG Hotline Officer 

844 North Rush Street, 4th Floor 

Chicago, IL 60611-2092 

Fax: (312) 751-4342 

E-mail: hotline@oig.rrb.gov 

Please review the Railroad Retirement Board’s e-mail notice and Internet 

privacy policy at www.rrb.gov before submitting information online. 

Note: Please do not contact the Office of Inspector General’s Hotline with 

questions regarding benefit eligibility requirements, delayed payments or similar 

issues. These types of matters should be directed to a Railroad Retirement Board 

office. 
U.S. Railroad Retirement Board 

844 North Rush Street 

Chicago, IL 60611-2092 

www.rrb.gov