Separation and Dismissal

Allowances Under the 

Railroad Retirement and 

Railroad Unemployment

Insurance Acts 

Visit our Web site at www.rrb.gov 

UNITED STATES OF AMERICA 

RAILROAD RETIREMENT BOARD 

Form IB-6 

(06-09) 
CONTENTS
 

PAGE 

INTRODUCTION 1 

1. What is the difference between a separation

allowance and a dismissal allowance? 1 

2. Are separation and dismissal allowances

subject to railroad retirement payroll taxes? 2 

3. Does an employee receive service months

for a separation or dismissal allowance? 2 

4. Would an employee be able to receive

unemployment or sickness benefits under the

RUIA after receiving a separation or dismissal

allowance? 2 

5. Can an employee receive RUIA benefits after

a dismissal allowance or a disqualification

period ends? 3 

6. How would a separation or dismissal allowance

affect entitlement to an employee or spouse

retirement annuity under the RRA? 4 

7. How would the type of allowance selected

affect the date that an employee annuity

can begin? 5 

8. How would the separation allowance or

dismissal allowance affect entitlement to a 

survivor annuity under the RRA? 5 

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CONTENTS
 

PAGE 

What is a deemed current connection and 

ould it help an employee? 5 

Would the acceptance of a separation or

issal allowance have any effect on determining

her an employee has a deemed current

ction? 6 

What is a Separation Allowance Lump-Sum

nt (SALSA) Payment? 7 

How does an employee know which type of

ance is being offered? 8 

Where can I get more information on how

aration or dismissal allowance affects

ad retirement benefits? 9 

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1 

INTRODUCTION 

Railroad employees frequently ask the Railroad

Retirement Board (RRB) how accepting a separation

allowance or dismissal allowance from an employer

affects their future eligibility for benefits under the

Railroad Retirement Act (RRA) and Railroad

Unemployment Insurance Act (RUIA). The following

questions and answers provide information on this

subject. 

1. What is the difference between a separation

allowance and a dismissal allowance? 

A separation allowance is a payment made by an

employer, to an employee, in exchange for the

employee's agreement to sever the employment

relationship that exists between them. 

● The employee relinquishes all job rights as of the

date stated in the separation allowance agreement. 

● The separation allowance payment may be made in

one lump-sum amount or in installments. The effective 

date of the separation does not change if an installment

plan is used. 

A dismissal allowance is a series of monthly payments

made by an employer to an employee who will retain

employment rights for an agreed-upon period of time.

The following may apply to the payments and agreement. 

● The employee will be terminated from employment

with the employer at the end of the agreed-upon period. 

● The employee may be recalled to work during the

agreed-upon period. 

● The employee may receive employee benefits during

the agreed-upon period. 
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2. Are separation and dismissal allowances 

subject to railroad retirement payroll taxes? 

Both separation and dismissal allowances are subject t

railroad retirement Tier I and Tier II withholdings

based on the tax rates and earnings bases in effect

during the year paid (this is true of separation

allowances whether they are paid in a lump sum or

installments). Both allowances are also subject to

Medicare and Federal income taxes. 

3. Does an employee receive service months for

separation or dismissal allowance? 

No service months are credited for a separation

allowance beyond the point of separation. An employe

will be credited with a service month for each monthly

dismissal allowance payment. Such service months wi

be used as any other reported month in RRA and RUI

benefit processes. 

If an employee has fewer than 12 reported service

months for a given year, additional months may be

credited or deemed if the total reported Tier II

compensation amount for the year exceeds 1/12 of the

annual Tier II earnings base times the number of

reported months. Deemed service months will also be 

used like any other reported month. (No months may 

deemed for periods after the annuity beginning date or

the date of separation.) 

4. Would an employee be able to receive 

nemployment or sickness benefits under the 

UIA after receiving a separation or dismissal 

llowance? 

 separation allowance causes an employee to be

isqualified for RUIA benefits for a period of time. Thi

disqualification period" is approximately equal to the

mount of time it would have taken the employee to 

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earn the total amount of the separation allowance at th

mployee's straight time rate of pay. 

or example, an employee who earns $5,000 a month

ithout overtime pay and receives a separation allowanc

f $20,000 would be disqualified from receiving sickness

r unemployment benefits for approximately four month

ismissal allowance payments are considered to be

emuneration under the RUIA. This means that no 

ickness or unemployment benefits may be received for

he period for which dismissal allowance payments are

eceived. 

. Can an employee receive RUIA benefits after

 dismissal allowance or a disqualification 

eriod ends? 

n employee may be eligible for unemployment benefit

t the end of a dismissal allowance or disqualification

eriod if the employee is seeking work. If the employee

s unable to work due to sickness or injury, sickness

enefits may be payable. The employee would also nee

o have qualifying base year earnings. Separation

llowance installment payments are not included in

ase year earnings. 

nformation about RUIA eligibility is available in the

RB Booklets UB-10 Unemployment Benefits for 

ailroad Employees and UB-11 Sickness Benefits for 

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6. How would a separation or dismissal 

allowance affect entitlement to an employee, 

spouse, or divorced spouse retirement annuity 

under the RRA? 

A separation or dismissal allowance would not affect

the entitlement to an employee, spouse, or divorced

spouse retirement annuity under the RRA. Refer to 

Form G-177 for the conditions of entitlement to an 

employee annuity, Form G-177A for the conditions of

entitlement to a spouse annuity, and Form G-177C for

the conditions of entitlement to a divorced spouse annuity. 

However, an employee who leaves the rail industry

before reaching retirement age may not be eligible for

an annuity based on an occupational disability or a 

supplemental annuity because the employee may not

have a current connection with the rail industry. 

The term current connection means that, at the time 

of retirement or death, a person is considered to be a

career rail industry employee. More information is 

available on maintaining a current connection in the

RRB Booklet IB-2 Railroad Retirement and Survivor 

Benefits. 

An employee with at least 25 years of service may not

receive a supplemental annuity unless a current

connection with the rail industry is maintained. An 

employee with 25 years of service may qualify for a 

deemed current connection as explained in Item 9.

A deemed current connection would preserve an

employee's right to a supplemental annuity. It would 

not preserve the right to an annuity based on occupational disability. 
5 

7. How would the type of allowance selected 

ffect the date that an employee annuity can 

egin? 

electing a separation allowance, instead of a dismis

llowance, would allow an employee annuity to begi

n earlier date, provided all other eligibility requirem

re met. 

An annuity cannot begin until the period for whic

he dismissal allowance is paid ends. 

A separation allowance does not affect the annuit

eginning date, even if it is paid in installments. An

nnuity can begin as early as the day after the empl

ast worked for the railroad. 

. How would the separation allowance or 

ismissal allowance affect entitlement to a 

urvivor annuity under the RRA? 

n employee's survivors may not be entitled to receiv

nnuity from the RRB if the employee did not meet

urrent connection requirements at the time of death.

owever, if the employee had at least 25 years of railr

ervice, survivors may qualify based on a deemed curr

onnection (as explained in Item 9) provided all othe

equirements are met. 

. What is a deemed current connection and 

ould it help an employee? 

egislation in 1981 established a deemed current

onnection for employees who leave railroad servic

nvoluntarily before attaining retirement age. The

eemed current connection would preserve an

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employee's rights to a supplemental annuity and

survivor benefits regardless of any non-railroad

earnings the employee may have after leaving

railroad service. 
6 

To qualify for a deemed current connection, an employee 

must: 

● have at least 25 years of railroad service; and, 

● have either stopped working in the railroad industry

involuntarily and without fault for a non-medical reason; 

or have been on furlough, leave of absence, or absent

because of injury and have not been called back to

work; and, 

● have not declined a bona fide offer to remain in, or 

return to, railroad employment in the same class or craft

as the employee's most recent railroad service (regardless of

the number of miles the employee would have to move to

accept such a job). 

Proof of employment status can be personnel records,

pay records, or pay stubs that indicate that an employee

was on furlough, leave of absence, or absent because of

injury. Health insurance records and affidavits from 

union officials, railroad officials, or co-workers can also 

be used. The social security number of each co-worker

should be given so the RRB can verify that each was a

railroad employee. 

10. Would the acceptance of a separation or 

dismissal allowance have any effect on determining 

whether an employee has a deemed current 

connection? 

An employee must involuntarily leave railroad service

to qualify for a deemed current connection. If the 

employee has no option to remain in railroad service, the

acceptance of a separation or dismissal allowance will

not have an effect on the deemed current connection. 

For example, if the employee's job will be abolished 
7 

whether or not a separation allowance is accepted, the

employee is considered to have left the railroad industry

involuntarily. 

However, an employee who chooses either a separation

or dismissal allowance, instead of retaining a railroad

job or accepting a job offer in the same class or craft, is

considered to have left the railroad industry voluntarily

and would not qualify for a deemed current connection. 

11. What is a Separation Allowance Lump-Sum 

Amount (SALSA) Payment? 

Special SALSA payments are payable to retired

employees when railroad retirement Tier II taxes were 

withheld from a separation allowance payment, and the

separation allowance did not yield additional Tier II

railroad service and compensation credits in their

retirement annuity. To be eligible for a SALSA payment,

an employee must have at least 120 creditable service

months or at least 60 months of creditable service 

months after 1995. If the employee died prior to 

retirement, the SALSA payments are payable to

eligible survivors of the employee. 

The following example illustrates the implications of a

separation allowance. An employee with 120 months of

railroad service agrees, in January 2008, to relinquish

seniority rights to receive a separation allowance of

$20,000, thereby severing the employment relation. The 

$20,000 separation allowance was the only creditable

railroad service the employee earned in 2008. The 

employee paid railroad retirement taxes on the $20,000.

Under the RRA the full $20,000 was used for Tier I 

benefit purposes. 
8 

However, only one month's compensation of $6,325 (1/1

of the 2008 annual Tier II earnings base of $75,900) wa

used for Tier II benefit purposes. This is because the 

RRA does not permit the use of Tier II compensation

after the employment relation ends. 

Upon awarding the employee a railroad retirement

annuity, the RRB paid the employee a SALSA payment

of $533.33. This amount represents the Tier II taxes

the employee paid on the portion of the separation

allowance that could not be used for Tier II benefit 

purposes ($6,325 times 3.9%). 

Employees who receive dismissal allowances earn

railroad service months and compensation credits from

the payments received under the agreement. All 

reported service months and compensation is used for

benefit purposes. Therefore, no SALSA amount is 

payable to employees based on dismissal allowances. 

12. How does an employee know which type of 

allowance is being offered? 

It is not always obvious whether an agreement is a

separation or dismissal allowance because the word "

separation" is often used in both agreements. However, 

one key factor is whether an employment relationship is

maintained throughout the period of payments. Service 

months are not creditable after the employee relinquishe

employment rights. If service months are to be reported

to the RRB, the agreement is most likely a dismissal

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allowance. Information about your specific agreement can

be obtained by providing your local RRB office with

a copy of the complete agreement. 
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13. Where can I get more information on how a 

eparation or dismissal allowance affects benefits? 

our local RRB office can assist you in determining how

 separation or dismissal allowance will affect benefits.

RB personnel can also provide an estimate of your

ailroad retirement annuity. If you write or send

ocuments to the RRB, always include your: 

● RRB claim number, 

● name, and 

● daytime telephone number. 

ost RRB offices are open to the public from 9:00 a.m.

ntil 3:30 p.m., Monday through Friday. To locate the 

earest RRB office, visit our Web site at www.rrb.gov or

all 877-772-5772. 

ou may also call to obtain a statement showing your

onths of railroad service and the amount of 

ompensation credited to you under the Railroad

etirement Act. 

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NONDISCRIMINATION ON THE 

BASIS OF DISABILITY 

Under Section 504 of the Rehabilitation Act of 1973 and 

Railroad Retirement Board (RRB) regulations , no qualified

person may be discriminated against on the basis of disability.

RRB programs and activities must be accessible to all qualified

applicants and beneficiaries, including those who are vision or

hearing-impaired. Disabled persons needing assistance

(including auxiliary aids or program information in accessible

formats) should contact the nearest RRB office. Complaints of

alleged discrimination by the RRB on the basis of disability

must be filed within 90 days in writing with the Director of

Administration, Railroad Retirement Board, 844 North Rush 

Street, Chicago Illinois 60611-2092. Questions about 

individual right under this regulation may be directed to the

RRB’s Director of Equal Opportunity at the same address

shown above. 

FRAUD AND ABUSE HOT LINE 

Call the toll-free Fraud and Abuse Hot Line if you have

reason to believe that someone is receiving railroad

retirement or unemployment-sickness benefits to which (s)he

is not entitled; that persons responsible for the financial

affairs of minors or incompetent beneficiaries are

misappropriating benefits; or that a doctor, hospital, or other

provider of health care services is performing unnecessary or

inappropriate services or is billing Medicare for services not

received. You may also use the Hot Line to report any

suspected misconduct by a Railroad Retirement Board (RRB)

employee. The Hot Line has been installed by the RRB’s

Inspector general to receive any evidence of fraud or abuse of

the RRB’s benefit programs. 

Call (toll-free) 1-800-772-4258. Or you may send your

complaints in writing to the RRB, OIG, Hot Line Officer,

844 North Rush Street, Chicago, Illinois 60611-2092. 

Please do not call the Inspector General’s Hot Line with

questions about eligibility requirements, delayed claims, or

similar problems Such matters should be directed to the 

nearest RRB field office.