Federal Register / Vol. 60, No. 27 / Thursday, February 9, 1995 / Proposed Rules 7729

2. Section 217.8 is amended by

adding paragraphs (t) and (u) to read as

follows:

§ 217.8 When one application satisfies the

filing requirement for other benefits.

* * * * *

(t) An accrued annuity due at the

death of a spouse or divorced spouse if

the claimant is entitled to an employee

annuity on the same claim number.

(u) A full-time student’s annuity if the

student was entitled to a child’s annuity

in the month before the month the child

attained age 18.

Dated: January 31, 1995.

By Authority of the Board.

Beatrice Ezerski,

Secretary to the Board.

[FR Doc. 95–3168 Filed 2–8–95; 8:45 am]

BILLING CODE 7905–01–P

20 CFR Parts 226 and 232

RIN 3220–AA58

Computing Employee, Spouse, and

Divorced Spouse Annuities

AGENCY: Railroad Retirement Board.

ACTION: Proposed rule.

SUMMARY: The Railroad Retirement

Board (Board) proposes to revise its

regulations dealing with the

computation of retirement annuities

under the Railroad Retirement Act of

1974 (Act). The Board’s current

regulations regarding the computation

of these annuities were promulgated

under the Railroad Retirement Act of

1937 and no longer reflect the

computational provisions contained in

the Act.

DATES: Comments must be received by

the Secretary to the Board on or before

March 13, 1995.

ADDRESSES: Secretary to the Board,

Railroad Retirement Board, 844 North

Rush Street, Chicago, Illinois 60611.

FOR FURTHER INFORMATION CONTACT:

Thomas W. Sadler, Assistant General

Counsel, Railroad Retirement Board,

844 North Rush Street, Chicago, Illinois

60611, telephone (312) 751–4513, TTD

(312) 751–4701.

SUPPLEMENTARY INFORMATION: The

proposed revision to Part 226 (formerly

‘‘Computation of Annuity’’) provides

the rules for computing the amount of

the employee, spouse and divorced

spouse annuity, under the Railroad

Retirement Act of 1974. In general, the

annuity consists of two components or

tiers. The first tier (tier I) is a social

security level benefit that is computed

under social security rules based on the

employee’s earnings under both the

railroad retirement and the social

security systems and is reduced by the

amount of any social security benefit

payable. The second tier (tier II) is based

solely on the employee’s railroad

earnings.

In limited circumstances the

employee annuity may be increased by

a ‘‘vested dual benefit’’. An employee

who has completed 25 years of railroad

service may also be eligible for a

supplemental annuity.

The proposed rule is divided into

seven (7) subparts:

Subpart A sets forth definitions and

lists other regulations related to this

part.

Subpart B describes the computation

of the employee annuity which includes

the social security level component (tier

I) (proposed § 226.10), the component

based solely on railroad service (tier II)

(proposed § 226.11); the vested dual

benefit (proposed § 226.12), and a

supplemental annuity (proposed

§ 226.16). Proposed § 226.13 describes

how cost-of-living increases apply to the

annuity.

Subpart C (proposed §§ 226.30–

226.35) parallels subpart B and

describes the computation of the spouse

and divorced spouse annuities.

However, the divorced spouse is not

entitled to a tier II benefit and no

supplemental annuity or vested dual

benefits are payable to spouses.

Proposed § 226.31 explains how the

spouse and divorced spouse annuity are

reduced due to receipt of a public

pension which was not based upon

employment covered by the Social

Security Act on the last day of

employment.

Subpart D (proposed §§ 226.50–

226.52) describes the Railroad

Retirement Family Maximum which is a

statutory ‘‘cap’’ placed upon the total

benefits payable under the RRA.

Proposed § 226.51 describes how the

maximum is determined (the higher of

$1,200 or an amount based upon the

employee’s final average monthly

compensation (FAMC)). Proposed

§ 226.52 describes how the ‘‘reduction

amount’’ is computed when the

maximum is exceeded and proposed

§ 226.50 describes how the spouse, then

the employee annuity is reduced until

the total employee and spouse annuity

equal the maximum. The railroad

retirement maximum is computed at the

employee’s annuity beginning date but

will be recomputed if the spouse later

divorces the employee or the employee

later becomes entitled to a vested dual

benefit or supplemental annuity. A

divorced spouse annuity is not counted

in determining whether the RRA

maximum is exceeded.

Subpart E (proposed §§ 226.60–

226.63) explains how years of service

and average monthly compensation

(AMC) are determined. The tier II of the

employee annuity is seven tenths of 1%

(.007) times the product of an

employee’s years of service times his or

her AMC. The spouse’s tier II is 45% of

the employee’s tier II. See proposed

§ 226.11 and 226.32.

Subpart F (proposed §§ 226.70–

226.74) describes the reduction required

due to receipt of workers’ compensation

benefits. The tier I of an employee,

spouse, or divorced spouse annuity is

reduced if the employee is under age 65

and is entitled to a disability annuity

and another periodic benefit based upon

disability pursuant to some other

Federal or state law or plan (proposed

§ 226.70). The reduction amount is first

applied to the tier I of any spouse or

divorced spouse annuity payable, then

to the employee tier I (§ 226.71). Certain

disability payments do not cause a

reduction. These are listed in proposed

§ 226.72.

The formula for the reduction amount

is found at proposed § 226.71. The

reduction provided for in this part

applies if the total tier I components

payable to the employee and spouse (or

divorced spouse) plus workers’

compensation or public disability

benefit exceed 80% of the employee’s

prior average current earnings. Proposed

§ 226.73 explains what events cause a

change in the reduction amount.

Proposed § 226.74 provides that

‘‘average current earnings’’ must be

recomputed periodically to take into

account inflation. The redetermined

average current earnings are used only

if it results in a lower reduction amount.

Subpart G of the proposed rule

(§§ 226.90–226.92) explains how and

when an annuity is recomputed to take

into account railroad service and social

security earnings after an annuitant

retires.

Part 232—Spouses’ Annuities is now

obsolete; it is proposed to be removed.

The Board has determined that this is

not a significant regulatory action under

Executive Order 12866; therefore, no

regulatory impact analysis is required.

There are no information collections

associated with this rule.

List of Subjects in 20 CFR Part 226 and

Part 232

Pensions, Railroad employees,

Railroad retirement.

1. For the reasons set out in the

preamble, Part 226 of Title 20 of the

Code of Federal Regulations (formerly

‘‘Computation of Annuity’’) is proposed

to be revised as follows:
7730 Federal Register / Vol. 60, No. 27 / Thursday, February 9, 1995 / Proposed Rules

PART 226—COMPUTING EMPLOYEE,

SPOUSE, AND DIVORCED SPOUSE

ANNUITIES

Subpart A—General

Sec.

226.1 Introduction.

226.2 Definitions.

226.3 Other regulations related to this part.

Subpart B—Computing an Employee

Annuity

226.10 Employee tier I.

226.11 Employee tier II.

226.12 Employee vested dual benefit.

226.13 Cost-of-living increase in employee

vested dual benefit.

226.14 Employee regular annuity rate.

226.15 Deductions from employee regular

annuity rate.

226.16 Supplemental annuity.

Subpart C—Computing a Spouse or

Divorced Spouse Annuity

226.30 Spouse or divorced spouse tier I.

226.31 Reduction for public pension.

226.32 Spouse tier II.

226.33 Spouse regular annuity rate.

226.34 Divorced spouse regular annuity

rate.

226.35 Deductions from regular annuity

rate.

Subpart D—Railroad Retirement Family

Maximum

226.50 General.

226.51 Maximum monthly amount.

226.52 Total annuity subject to maximum.

Subpart E—Years of Service and Average

Monthly Compensation

226.60 General.

226.61 Use of military service.

226.62 Computing the average monthly

compensation.

226.63 Determining monthly compensation.

Subpart F—Reduction for Workers’

Compensation and Disability Benefits

Under a Federal, State, or Local Law or Plan

226.70 General.

226.71 Initial reduction.

226.72 Benefits that do not cause a

reduction.

226.73 Changes in reduction amount.

226.74 Redetermination of reduction.

Subpart G—Recomputation To Include

Additional Railroad Service and

Compensation

226.90 When recomputation applies.

226.91 How an employee annuity rate is

recomputed.

226.92 Effect of recomputation on spouse

and divorced spouse annuity.

Authority: 45 U.S.C. 231(f)(b)(5).

PART 226—COMPUTING EMPLOYEE,

SPOUSE, AND DIVORCED SPOUSE

ANNUITIES

Subpart A—General

§ 226.1 Introduction.

This part explains how employee,

spouse, and divorced spouse annuities

are computed. It describes how to

determine the years of railroad service

and average monthly compensation

used in computing the employee

annuity rate. The railroad retirement

family maximum, cost-of-living

increases, and the recomputation of an

annuity to include additional railroad

earnings are also explained in this part.

§ 226.2 Definitions.

Except as otherwise expressly noted,

as used in this part—

Annuity means a payment due an

entitled individual for a calendar month

and payable to him or her on the first

day of the following month.

Eligible means that an individual

meets all the requirements for payment

of an annuity but has not yet applied for

one.

Employee means an individual who is

or has been in the service of an

employer as defined in part 202 of this

chapter.

Entitled means that an individual has

applied for and has established his or

her rights to benefits.

Railroad Retirement Act means the

Railroad Retirement Act of 1974, as

amended.

Retirement age means, with respect to

an employee, spouse or divorced spouse

who attains age 62 before January 1,

2000, age 65. For an employee, spouse

or divorced spouse who attains age 62,

after December 31, 1999, retirement age

means the age provided for in section

216(l) of the Social Security Act.

Social Security Act means the Social

Security Act as amended.

§ 226.3 Other regulations related to this

part.

This part is closely related to part 216

of this chapter, which describes when

an employee, spouse, or divorced

spouse is eligible for an annuity, part

225 of this chapter, which explains the

primary insurance amounts used in

computing the employee, spouse and

divorced spouse annuity rates, and part

229 of this chapter, which describes

when and how employee and spouse

annuities can be increased under the

social security overall minimum. The

creditable service and compensation

used in determining the years of service

and average monthly compensation are

explained in parts 210 and 211 of this

chapter. The beginning and ending

dates of annuities are explained in part

218 of this chapter.

Subpart B—Computing an Employee

Annuity

§ 226.10 Employee tier I.

Tier I of an employee annuity is an

amount similar to the social security

benefit the employee would receive

based on combined railroad and social

security earnings. The tier I benefit is

computed as follows:

(a) A tier I PIA is computed based on

combined railroad and social security

earnings, as shown in § 225.11 of this

chapter. This PIA is adjusted for any

delayed retirement credits or cost-ofliving increases, as shown in subparts D

and E of part 225 of this chapter, and

is reduced for receipt of a pension based

upon non-covered service in accordance

with section 215(a)(7) of the Social

Security Act. The tier I of a disability

annuity may also be adjusted for other

benefits based on disability, as shown in

§§ 226.70–226.74 of this part. Except in

the case of an employee who retires at

age 60 with 30 years of service, if the

result is not a multiple of $1, it is

rounded to the next lower multiple of

$1. In the case of an employee who

retires with an age reduced annuity

based upon 30 years of service (see

§ 216.31 of this chapter) the tier I is not

rounded until all reductions have been

made.

(b) If the employee is entitled to a

reduced age annuity (see § 216.31 of this

chapter), the rate from paragraph (a) of

this section is multiplied by a fraction

for each month the employee is under

retirement age on the annuity beginning

date. The result is subtracted from the

rate in paragraph (a) of this section. At

present the fraction is 5⁄9 of 1% (or 1⁄180).

If the employee retires before age 62

with at least 30 years of service, the

employee is deemed age 62 for age

reduction purposes and a 20%

reduction is applied. This reduction

remains in effect until the first full

month throughout which the employee

is 62, at which time the tier I is

recomputed to reflect interim increases

in the national wage levels and the age

reduction factor is recomputed, if

necessary, in accordance with this

paragraph.

(c) The amount from paragraph (a) or

(b) of this section is reduced by the

amount of any monthly benefit payable

to the employee under title II of the

Social Security Act, including any

social security benefit payable under a

totalization agreement between the

Social Security Administration and

another country. The social security

benefit used to reduce the tier I may be

an age or disability benefit on the

employee’s own earnings record, a

benefit based on the earnings record of

another person, or the total of two types

of benefits. The amount of the social

security benefit used to reduce tier I is

before any deduction for excess

earnings. It is after any reduction for
Federal Register / Vol. 60, No. 27 / Thursday, February 9, 1995 / Proposed Rules 7731

other benefits based on disability. The

result cannot be less than zero.

(d) The tier I is subject to automatic

annual increases as provided for in

subpart E of part 225 of this chapter.

Example: An employee born on

November 3, 1919, becomes entitled to

an age annuity effective October 1, 1982.

Retirement age for individuals born in

1919 is age 65. He has less than 30 years

of service. His tier I PIA is $712.60,

which is rounded down to $712. Since

the employee is 25 months under age 65

when his annuity begins, $712 is

multiplied by 25⁄180 (1⁄180 for each month

under age 65), to produce an age

reduction of $98.89, and a tier I rate

after age reduction of $613.11. The

employee is also entitled to a social

security benefit of $190 a month. The

employee’s final tier I rate is $423.11.

§ 226.11 Employee tier II.

The tier II of an employee annuity is

based only on railroad service. For

annuities awarded after September

1981, the tier II benefit is computed as

follows:

(a) The product obtained by

multiplying the employee’s creditable

years of service by the average monthly

compensation, determined as shown in

subpart E of this part, is multiplied by

seven-tenths of 1 percent (.007).

(b) If the employee is entitled to a

vested dual benefit (see § 226.12 of this

part), the result from paragraph (a) of

this section is reduced by 25 percent of

the vested dual benefit amount. This

reduction is made before reduction of

the tier II benefit for age. The result

cannot be less than zero.

(c) If the railroad retirement family

maximum applies, as shown in

§§ 226.50–226.52 of this part, the

amount from paragraph (a) or (b) of this

section is reduced by the smaller of—

(1) The difference between the total

railroad retirement maximum reduction

amount and the reductions in the

spouse and supplemental annuities; or

(2) The total tier II amount from

paragraph (a) or (b) of this section.

(d) If the employee is entitled to a

reduced age annuity (see § 216.31 of this

chapter), the rate from paragraphs (a)

through (c) of this section is reduced in

the same manner as the tier I as

provided for in § 226.10 of this part. In

the case of an employee with 30 years

of service who is entitled to a reduced

age annuity (see § 216.31 of this

chapter), the age reduction only applies

to the tier I component; no age

reduction applies to the tier II

component.

(e) The total tier II amount

(paragraphs (a) through (d)), is increased

by 32.5 percent of the percentage

increase in the cost of living increase to

the tier I annuity component. Each costof-living increase is paid only to an

employee whose annuity begins on or

before the effective date of the increase.

The increases are effective on the same

date as any cost-of-living increase to the

tier I annuity component.

§ 226.12 Employee vested dual benefit.

(a) General. An employee vested dual

benefit is payable, in addition to tiers I

and II, to an employee who meets one

of the following requirements:

(1) Employee worked in the railroad

industry in 1974. An employee who

worked for a railroad in 1974 and

retired after 1974 is considered vested if

on December 31, 1974, he or she had

both 10 years of railroad service and

sufficient quarters of coverage under the

Social Security Act to qualify for a

social security benefit. An employee

qualified on this basis is eligible for

vested dual benefit amounts computed

on his or her railroad and social security

credits through December 31, 1974.

(2) Employee who did not work for a

railroad in 1974. An employee who did

not work in the railroad industry in

1974, but who had 25 or more years of

railroad service before 1975 or a current

connection with the railroad industry

on December 31, 1974, as defined in

part 216 of this chapter, or a current

connection when he or she retired, is

also considered vested under the same

conditions as an employee who had

worked in the railroad industry in 1974.

(3) An employee who completed 10

years or more years of railroad service

(but less than 25) before 1975 but left

the industry before 1975 and did not

have a current connection on December

31, 1974 or when he or she retired. Such

an employee is considered vested only

if he or she had sufficient social security

quarters of coverage to qualify for a

social security retirement benefit as of

the end of the year prior to 1975 in

which he or she left the railroad

industry. The vested dual benefit

amount is based only on credits

acquired through the last year of pre1975 railroad service instead of through

December 31, 1974.

(b) Computation. The employee

vested dual benefit is computed as

follows:

(1) The combined earnings dual

benefit PIA is subtracted from the total

of the railroad earnings dual benefit PIA

and the social security earnings dual

benefit PIA (see part 225 of this chapter

for an explanation of these PIA’s).

(2) The result from paragraph (b)(1) of

this section is adjusted for any

applicable cost-of-living increase, as

shown in § 226.13 of this part.

(3) If the employee is entitled to a

reduced age annuity (see § 216.1 of this

chapter), the rate from paragraph (b)(2)

of this section is reduced in the same

manner as the tier I as provided for in

§ 226.10 of this part. In the case of an

employee with 30 years of service who

is entitled to an annuity reduced for age,

the age reduction applies only to the tier

I component; no age reduction applies

to the vested dual benefit.

(4) The vested dual benefit payable in

a given year may also be reduced for

insufficient funding as shown in part

233 of this chapter.

Example: An employee born on

November 3, 1919 becomes entitled to

an annuity including a vested dual

benefit on October 1, 1982. His

combined earnings dual benefit PIA is

$254.90, his railroad earnings dual

benefit PIA is $93.80, and his social

security earnings dual benefit PIA is

$244.70. The vested dual benefit before

cost-of-living increase is $83.60

($93.80+244.70¥254.90=83.60). A costof-living increase of $67.72 (81 percent

of $83.60. See § 226.13 of this part)

results in a vested dual benefit of

$151.32. Retirement age for a person

born in 1919 is age 65. Since the

employee is 25 months under age 65

when the annuity begins, $151.32 is

multiplied by 25⁄180, to produce an age

reduction of $21.02 and a vested dual

benefit rate after age reduction of

$130.30.

§ 226.13 Cost-of-living increase in

employee vested dual benefit.

If the employee’s annuity begins June

1, 1975 or later, a cost-of-living increase

is added to the total vested dual benefit

amount. This increase is based on the

cost-of-living increases in social security

benefits during the period from January

1, 1975, to the earlier of the date the

employee’s annuity begins or January 1,

1982. The increases are effective on June

1 of each year through 1981. The

percentage increase for annuities that

begin June 1, 1981, or later is 81

percent.

§ 226.14 Employee regular annuity rate.

The regular annuity rate payable to

the employee is the total of the

employee tier I, tier II, and vested dual

benefit amounts, from §§ 226.10–226.12.

§ 226.15 Deductions from employee

regular annuity rate.

The employee annuity as computed

under this subpart may be reduced by

premiums required for supplemental

medicare coverage, income tax

withholding, recovery of debts due the

Federal government, garnishment

pursuant to part 350 of the chapter and
7732 Federal Register / Vol. 60, No. 27 / Thursday, February 9, 1995 / Proposed Rules

property awards as provided for in part

295 of this chapter.

§ 226.16 Supplemental annuity.

A supplemental annuity is payable in

addition to tiers I and II and the vested

dual benefit to an employee who meets

the requirements of § 216.41 of this

chapter. The supplemental annuity is

equal to $23 plus $4 for each full year

of service, over 25 years of service, up

to a maximum of $43. The supplemental

annuity may be reduced by the railroad

retirement family maximum as shown

in §§ 226.50–226.52 of this part, or for

the receipt of a private pension benefit

as explained in part 227 of this chapter.

Subpart C—Computing a Spouse or

Divorced Spouse Annuity

§ 226.30 Spouse or divorced spouse tier I.

(a) General. The tier I of a spouse or

divorced spouse annuity is an amount

similar to the social security benefit the

spouse or divorced spouse would

receive based on the employee’s

combined railroad and social security

earnings. In the case of an employee

who retires before age 62 with 30 years

of service, the spouse tier I is simply

50% of the employee tier I until the first

month throughout which both the

employee and spouse are age 62 at

which time the tier I is an amount

similar to the social security benefit on

the employee’s combined railroad and

social security earnings.

(b) Reduction for other disability

benefits. The spouse or divorced spouse

tier I may be adjusted for other

disability benefits received by a

disabled employee, as shown in

§§ 226.70–226.74 of this part.

(c) Reduction for government pension.

The amount in paragraphs (a) or (b) of

this section is reduced (but not below

zero) by the amount of any government

pension payable on the spouse’s or

divorced spouse’s earnings record, as

described in § 226.31 of this part.

(d) Rounding. The last tier I rate from

paragraph (a), (b) or (c) of this section

5 if not a multiple of $1, is rounded to

the next lower multiple of $1. However,

in cases in which the spouse is in

receipt of an age reduced 60/30 annuity

or in which the employee with 30 years

of service began a disability annuity July

1, 1984, or later, the spouse tier I is not

rounded until all reductions have been

made. See § 226.10(a).

(e) Age reduction. If the spouse or

divorced spouse is entitled to a reduced

age annuity (see §§ 216.51 and 216.52 of

this chapter), the rounded tier I rate

from paragraph (d) of this section is

multiplied by a fraction for each month

the spouse or divorced spouse is under

retirement age on the date the annuity

begins. The result is subtracted from the

rate from paragraph (d) of this section.

At present the fraction is 25⁄36 of 1% (or 1⁄144). In the case of an employee with

30 years of service who is awarded a

disability annuity on July 1, 1984, or

later, where the spouse does not have a

child of the employee under age 18 in

care, the spouse tier I is reduced for

each month the spouse is under

retirement age on the date the spouse

annuity begins. If the spouse is age 60

or 61, he or she is deemed to be age 62

for purposes of the age reduction. The

age reduction is applied before

reduction for a government pension.

(f) Reduction for social security

benefit. The previous tier I rate, from

paragraph (d) or (e) of this section, is

reduced by the amount of any monthly

benefit payable to the spouse or

divorced spouse under title II of the

Social Security Act. The social security

benefit used to reduce tier I may be an

age or disability benefit on the spouse’s

or divorced spouse’s own earnings

record, a benefit based on the earnings

record of another person, or the total of

two types of benefits. The result cannot

be less than zero.

(g) Reduction for employee annuity. If

the spouse or divorced spouse is

entitled to an employee annuity on his

or her own wage record, the spouse or

divorced spouse tier I is reduced for the

spouse’s own employee annuity as

follows:

(1) Spouse. If either the employee or

the spouse had some railroad service

before 1975, the previous tier I rate from

paragraphs (d) through (f) of this

section, whichever applies, is reduced

(but not below zero) by the spouse’s

own employee tier I rate, as computed

under § 226.10 of this part. If both the

employee and spouse began railroad

service after 1974, the spouse’s total

annuity rate, as shown in § 226.33, is

reduced (but not below zero) by the

spouse’s own employee total annuity

rate, as shown in § 226.14. These

reductions are effective from the later of

the date the employee or spouse annuity

begins.

(2) Divorced spouse. The previous tier

I rate from paragraphs (d) through (f) of

this section, whichever applies, is

reduced (but not below zero) by the

divorced spouse’s own employee total

annuity rate as shown in § 226.14.

Example: The computation of the

spouse tier I may be illustrated as

follows: A railroad employee’s wife who

was born on September 16, 1920

becomes entitled to a spouse annuity on

October 1, 1982. She is also entitled to

a social security benefit of $190 a month

effective October 1, 1982. Her husband’s

employee tier I PIA is $712.60. The

spouse tier I is $356.30 (50 percent of

$712.60). This is rounded down to $356.

Since she is 35 months under age 65,

the present retirement age when the

annuity begins, $356 is multiplied by

35⁄144, to produce an age reduction of

$86.53 and a tier I rate after age

reduction of $269.47. Her final tier I rate

effective October 1, 1982, after

reduction for social security benefits, is

$79.47 ($269.47–$190.00).

§ 226.31 Reduction for public pension.

(a) The tier I annuity component of a

spouse/divorced spouse annuity, as

described in the preceding sections of

this part, is reduced if the spouse/

divorced spouse is in receipt of a public

pension.

(b) When reduction is required.

Unless the spouse or divorced spouse

annuity meets one of the exceptions in

paragraph (d) of this section, the tier I

annuity component is reduced each

month the annuitant is receiving a

monthly pension from a Federal, state,

or local government agency (government

pension), but excluding a pension paid

by a government of a foreign country,

for which he or she was employed in

work not covered by social security on

the last day of such employment. For

purposes of this section, Federal

government employees are not

considered to be covered by social

security if they are covered for Medicare

but are not otherwise covered by social

security.

(c) Payment in a lump sum. If the

government pension is not paid

monthly or is paid in a lump-sum

payment, the Board will determine how

much the pension would be if it were

paid monthly and then reduce the

monthly railroad retirement annuity

accordingly. The number of years

covered by a lump-sum payment and

thus the period when the annuity will

be reduced, will generally be clear from

the pension plan. If one of the

alternatives to a lump-sum payment is

a life annuity, and the amount of the

monthly benefit for the life annuity can

be determined, the reduction will be

based on that monthly benefit amount.

Where the period or the equivalent

monthly pension benefit is not clear, it

may be necessary for the Board to

determine the reduction period on an

individual basis.

(d) Exceptions. The reduction does

not apply:

(1) If the annuitant is receiving a

government pension based on

employment for an interstate

instrumentality; or

(2) If the annuitant receives or is

eligible to receive a government pension
Federal Register / Vol. 60, No. 27 / Thursday, February 9, 1995 / Proposed Rules 7733

for one or more months in the period

December 1977 through November 1982

and he or she meets the requirements

for social security benefits that were

applied in January 1977 (even though he

or she did not actually claim such

benefits nor become entitled to such

benefits until a later month). The

January 1977 requirements are, for a

man, a one-half support test (see

paragraph (e) of this section), and, for a

woman claiming benefits as a divorced

spouse, marriage for at least 20 years to

the insured worker. A person is

considered eligible for a government

pension for any month in which he or

she meets all the requirements for

payment except that he or she is

working or has not applied; or

(3) If the annuitant was receiving or

eligible (as defined in paragraph (d)(2)

of this section) to receive a government

pension for one or more months before

July 1983, and he or she meets the onehalf support test (see paragraph (e) of

this section). If the annuitant meets the

exception in this paragraph but he or

she does not meet the exception in

paragraph (d)(2) of this section,

December 1982 is the earliest month for

which the reduction will not affect his

benefits; or

(4) If the annuitant has been eligible

for a government pension in a given

month except for a requirement which

delayed eligibility for such pension

until the month following the month in

which all other requirements were met,

the Board will consider the annuitant to

be eligible in that given month for the

purpose of meeting one of the

exceptions in paragraphs (d)(2) and

(d)(3) of this section. If the annuitant

meets an exception solely because of

this paragraph, his or her benefits will

be unreduced for months after

November 1984 only.

(e) The one-half support test. For a

man to meet the January 1977

requirement as provided in the

exception in paragraph (d)(2) of this

section and for a man or a woman to

meet the exception in paragraph (d)(3)

of this section, he or she must meet a

one-half support test. One-half support

is defined in part 222 of this chapter.

One-half support must be met at one of

the following times:

(1) If the employee upon whose

compensation the spouse or divorced

spouse annuity is based had a period of

disability, as defined in part 220 of this

chapter, which did not end before he or

she became entitled to an age and

service or disability annuity, the

spouse/divorced spouse annuitant must

have been receiving at least one-half

support from the employee either—

(i) At the beginning of the employee’s

period of disability; or

(ii) At the time the employee became

entitled to an age and service or

disability annuity.

(2) If the employee upon whose

compensation the spouse or divorced

spouse annuity is based did not have a

period of disability, as defined in part

220 of this chapter, at the time of his or

her entitlement, the spouse or divorced

spouse annuitant must have been

receiving at least one-half support from

the employee at the time the employee

became entitled to an age and service or

disability annuity.

(f) Amount of reduction. (1) If the

spouse/divorced spouse annuitant

becomes eligible for a government

pension after June 1983, the Board will

reduce (to zero, if necessary) the tier I

annuity component by two-thirds of the

amount of the monthly pension. If the

amount of the reduction is not a

multiple of 10 cents, it will be rounded

to the next higher multiple of 10 cents.

(2) If the spouse/divorced spouse

annuitant became eligible for a

government pension before July 1983

and he or she did not meet one of the

exceptions in paragraph (d) of this

section, the Board will reduce (to zero,

if necessary) the tier I component by the

full amount of the pension for months

before December 1984 and by two-thirds

the amount of his or her monthly

pension for months after November

1984. If the amount of the reduction is

not a multiple of 10 cents, it will be

rounded to the next higher multiple of

10 cents.

(g) Reduction not applicable. This

reduction is not applied to claimants

who both filed and were entitled to a

spouse benefit prior to December 1977.

§ 226.32 Spouse tier II.

The spouse tier II benefit is computed

as follows:

(a) The employee’s tier II amount as

computed under § 226.11 of this part,

after any reduction for entitlement to a

vested dual benefit but before reduction

for the railroad retirement family

maximum, is multiplied by 45 percent.

The spouse tier II is recomputed if the

employee’s tier II rate is reduced for

entitlement to a vested dual benefit after

the beginning date of the spouse

annuity.

(b) If tier I of a spouse annuity is

reduced for the spouse’s employee

annuity, as provided for in § 226.30(g) of

this part, the reduction is restored in tier

II. The restored amount is payable on

the effective date of the spouse or the

employee tier I benefit, whichever is

later. The previous tier II rate is

increased by the restored amount,

which is determined as follows:

(1) Initial restored amount. The

restored amount is the amount by which

the spouse tier I was reduced by reason

of receipt of an employee annuity on the

date the restored amount is first

payable. The restored amount is only

payable if either the employee or spouse

had railroad service prior to 1975.

(2) Recomputation of restored

amount. The restored amount is

recomputed if the spouse becomes

entitled to a government pension, a

social security benefit, or a different

type of social security benefit after the

date the initial restored amount is

effective. The recomputed amount is the

amount by which the spouse tier I is

reduced by reason of receipt of an

employee annuity on the effective date

of the entitlement to a government

pension or social security benefit.

(3) Cost-of-living increase in restored

amount. If an initial or recomputed

restored amount is effective before the

effective date of the cost-of-living

increase shown in paragraph (e) of this

section, the restored amount is

multiplied by the percentage increase

that applies. The result is added to the

restored amount on the effective date of

the increase for each year that the

increase is payable.

(c) If the employee’s tier II has been

reduced pursuant to section 3(g)(2) of

the Railroad Retirement Act (takeback

provision) the spouse tier II is reduced

by one half of the ‘‘takeback’’ in the

employee tier II.

(d) If the railroad retirement family

maximum applies, as shown in

§§ 226.50–226.52 of this part, the spouse

tier II rate, as determined in paragraphs

(a) through (c) of this section, is reduced

by the smaller of—

(1) The total railroad retirement

maximum reduction amount; or

(2) The previous spouse tier II rate.

(e) The tier II rate, from paragraphs (a)

through (d) of this section, is increased

by the same percentage as the employee

tier II increase described in § 226.11(e)

of this part.

(f) If the spouse is entitled to a

reduced age annuity (see § 216.51 of this

chapter), the tier II rate, as determined

in paragraphs (a) through (e) of this

section is reduced in the same manner

as the tier I as provided for in

§ 226.30(e) of this part.

Example: An employee’s tier II rate is

$329.63 effective October 17, 1981. The

spouse rate is $148.33 (45 percent ×

$329.63) effective October 17, 1981.

This is increased to $151.89 effective

June 1, 1982 by a cost-of-living increase

of 2.4 percent. The spouse is 35 months

under age 65, the present retirement age,
7734 Federal Register / Vol. 60, No. 27 / Thursday, February 9, 1995 / Proposed Rules

when the annuity begins. The $151.89

rate is multiplied by 35⁄144 to produce an

age reduction of $36.92. This is

subtracted from $151.89 to produce a

final rate of $114.97.

§ 226.33 Spouse regular annuity rate.

The final tier I and tier II rates, from

§§ 226.30 and 226.32, are added

together to obtain the total spouse

regular annuity rate.

§ 226.34 Divorced spouse regular annuity

rate.

The regular annuity rate of a divorced

spouse is equal to his or her tier I

amount. The divorced spouse is not

entitled to a tier II benefit.

§ 226.35 Deductions from regular annuity

rate.

The regular annuity rate of the spouse

and divorced spouse annuity may be

reduced by premiums required for

supplemental medicare coverage,

income tax withholding (spouse annuity

only), recovery of debts due the Federal

government, and garnishment pursuant

to part 350 of this chapter.

Subpart D—Railroad Retirement

Family Maximum

§ 226.50 General.

There is a monthly ceiling on total

family benefits which limits the amount

of certain portions of the employee and

spouse annuity. This railroad retirement

family maximum amount varies

according to the employee’s earnings in

the ten-year period that ends with the

year in which his or her annuity begins.

If the employee and spouse annuity

amounts described in § 226.52 of this

part are higher than the maximum from

§ 226.51 of this part, first the spouse tier

II, then the supplemental annuity and,

finally, the employee tier II are reduced

until the total annuity amount is equal

to the maximum or until the spouse tier

II and the employee supplemental

annuity and tier II have been reduced to

zero, whichever comes first. The

reduction for the railroad retirement

family maximum is first computed from

the date the employee’s annuity begins.

It is recomputed if the employee’s tier

II rate is reduced for entitlement to a

vested dual benefit. It is also

recomputed if a workers’ compensation

or other disability benefit begins or

ends, or the employee’s tier I benefit or

supplemental annuity begins after the

beginning date of the regular employee

annuity. Finally, it is recomputed if a

spouse who was entitled to an annuity

divorces the employee or the spouse

annuity entitlement ends.

§ 226.51 Maximum monthly amount.

The railroad retirement family

maximum is equal to an employee’s

‘‘final average monthly compensation’’

(FAMC) up to 1⁄2 of 1⁄12 of the annual

maximum tier I earnings as shown in

part 224 of this chapter in the year the

annuity begins plus 80 percent of so

much of his or her FAMC as exceeds 1⁄2

of 1⁄12 of the tier I maximum in the year

the annuity begins. For this purpose, the

FAMC is determined by dividing the

individual’s total earnings up to the tier

II earnings limit as shown in part 211 of

this chapter for the two highest-earnings

years out of the last 10 calendar years,

including the year of retirement, by 24.

The railroad retirement maximum

cannot be more than the FAMC and

cannot be less than $1,200.

Example: An employee’s annuity

begins on December 2, 1982. He has

yearly earnings that exceed the tier II

annual maximum of $24,300 in 1982

and $22,200 in 1981. The FAMC is the

sum of the tier II maximum for 1981 and

1982 divided by 24 [($24,300 + $22,200

÷ 24)] or $1,937.50. The maximum

which may be credited to a month for

tier I in 1982 is $2,700. The family

maximum is $1,350 (1⁄2 of 1⁄12 of the

annual tier I maximum) plus $470 (80%

of the difference between $1,937.50 and

$1,350) or $1,820.

§ 226.52 Total annuity subject to

maximum.

The total annuity amount which is

compared to the maximum monthly

amount to determine if a reduction for

the railroad retirement family maximum

applies is determined by adding

together the amounts in paragraphs (a)

and (b) of this section. A hypothetical

spouse annuity amount is included from

the beginning date of the employee

annuity if the spouse is not entitled to

an annuity at the time the maximum

calculation is made.

(a) Employee annuity amounts. The

following amounts are added together—

(1) The employee tier I amount,

effective on the date the employee’s tier

I benefit begins or, if later, on the date

a reduction for other disability benefits

begins or ends, as shown in § 226.71 of

this part. This amount is before any

reduction for age or social security

benefits but after including any delayed

retirement credits, after any reduction

for other disability benefits, and after

rounding; and

(2) The employee tier II rate before

reduction for the railroad retirement

family maximum, effective on the

employee’s annuity beginning date and,

if later, on the date the tier II is first

reduced for a vested dual benefit, as

shown in § 226.11 of this part; and

(3) The initial supplemental annuity

rate effective on the date the

supplemental annuity begins, before any

reduction for a private pension, as

shown in part 227 of this chapter.

(b) Spouse annuity amounts. The

following amounts are added together—

(1) The spouse tier I amount, which

is or would be effective on the date the

employee’s annuity or tier I benefit

begins, as shown in § 226.30. This

amount is before any reduction for other

disability benefits, age, or social security

benefits, but after any reduction for a

government pension or employee

annuity; and

(2) The spouse tier II rate which is or

would be effective on the employee’s

annuity beginning date, the date the

employee’s tier I benefit begins, or the

date the employee’s tier II rate is

reduced for a vested dual benefit, as

shown in § 226.11. This rate includes

the restored amount but does not

include any cost-of-living increase in

the tier II original rate or restored

amount. It is the rate before reduction

for the railroad retirement family

maximum or age minus any cost-ofliving increases.

Subpart E—Years of Service and

Average Monthly Compensation

§ 226.60 General.

The years of service and average

monthly compensation used in

computing an employee’s tier II annuity

rate are based on the employee’s

creditable railroad service and

compensation as described in parts 210

and 211 of this chapter. In computing

the average monthly compensation, the

compensation for each year cannot be

higher than twelve times the tier II

monthly maximum creditable for that

year, as described in part 211 of this

chapter.

§ 226.61 Use of military service.

(a) Claim for use of military service.

An employee is deemed to have filed a

claim for the use of military service and

earnings as service and compensation

under the Railroad Retirement Act if—

(1) The employee indicates on the

annuity application or another signed

statement that he or she has military

service;

(2) The employee does not

specifically request that the military

service be credited as wages under the

Social Security Act;

(3) The military service is creditable

under the Railroad Retirement Act, as

shown in part 212 of this chapter; and

(4) Using the military service as

railroad service and compensation

would be to the employee’s advantage
Federal Register / Vol. 60, No. 27 / Thursday, February 9, 1995 / Proposed Rules 7735

(the employee and his or her family

would receive higher total benefits than

if the military service were credited

under the Social Security Act).

(b) Effective date for use of military

service. Military service can be used as

service and compensation under the

Railroad Retirement Act starting with

the date the annuity begins but no

earlier than twelve months before the

employee files an application or

statement showing that he or she has

military service.

§ 226.62 Computing average monthly

compensation.

The employee’s average monthly

compensation is computed by first

determining the employee’s highest 60

months of railroad compensation

(disregarding compensation in excess of

the maximum creditable tier II

compensation for that year). The total of

the highest 60 months is then divided

by 60 to determine the average monthly

compensation.

§ 226.63 Determining monthly

compensation.

(a) Based on yearly compensation. If

Board records do not show monthly

compensation for a year, the monthly

compensation is determined by dividing

the total compensation reported for the

year by the number of months of service

credited to the employee for that year.

(b) For employee with government

employment and no railroad service for

60 month period before annuity

begins.—(1) General. The compensation

used in determining the average

monthly compensation (AMC) for an

employee who has not worked in the

railroad industry for the 60 month

period before the month the employee’s

annuity begins and whose major

employment during that period was for

a government agency listed in § 216.16

of this chapter is indexed. The

compensation is indexed by multiplying

it by the quotient obtained by dividing

the average annual wage for the

indexing year by the average annual

wage for the year being indexed. If the

month for which compensation is being

indexed is before 1951, the average

annual wage for 1951 is used.

(2) Indexing year defined. The

indexing year is the second year before

the year in which the annuity begins.

Subpart F—Reduction for Workers’

Compensation and Disability Benefits

Under a Federal, State or Local Law or

Plan

§ 226.70 General.

For any month an employee disability

annuitant is entitled to workers’

compensation or a public disability

benefit, the tier I benefit of the spouse

or divorced spouse is reduced due to

receipt of such benefits. (If both spouse

and divorced spouse annuities are

payable, the reduction amount is

divided and applied in equal amounts

to both the spouse and divorced spouse

tier I benefits.) The employee tier I is

reduced by the difference between the

total reduction amount, described in

§ 226.71 of this part, and the reduction

in the spouse and divorced spouse tier

I benefits.

§ 226.71 Initial reduction.

(a) When reduction is effective. A

reduction for other disability benefits

begins with the first month the

employee is receiving both a disability

annuity and workers’ compensation or a

public disability benefit. The reduction

ends with the month before the month

in which the employee becomes 65

years old or with the month in which

the workers compensation or public

disability benefit ends.

(b) Amount of reduction. The

reduction for other disability benefits

equals the difference between—

(1) The total tier I rates of the

employee, spouse, and divorced spouse,

before any reductions (age, public

pension, social security benefits, etc.)

plus the monthly amount of the

workers’ compensation of public

disability benefit; and

(2) The higher of—

(i) Eighty percent of the employee’s

average current earnings, as defined in

this section; or

(ii) The total tier I rates, as described

in paragraph (1) of this section.

Example 1: Harold is entitled to a

monthly disability annuity with a tier I

component of $507 and a monthly

public disability benefit of $410 from

the state. Eighty percent of Harold’s

average current earnings is $800.

Because this amount is higher than

Harold’s tier I component, to determine

the reduction for other disability

benefits the Board subtracts this amount

($800) from the total of Harold’s tier I

component ($507) and public disability

benefit ($410) which results in a

reduction amount of $117 ($917–$800).

This leaves Harold with a reduced tier

I amount of $390 ($507–$117).

Example 2: Tom is entitled to a

disability annuity with a tier I

component of $560. His wife and

divorced wife are both entitled to

annuities with tier I components of $280

each. Total benefits are $1,120. Tom is

receiving a monthly workers’

compensation benefit of $500 from the

state. Eighty percent of Tom’s average

current earnings is $820. Because the

total benefit ($1,120) is higher than

Tom’s average current earnings, to

determine the reduction for other

disability benefits the Board subtracts

this amount from $1,620 ($1,120 plus

$500) which results in a reduction

amount of $500. This means that the tier

I of the spouse and divorced spouse

annuity are each reduced by $250.

(c) Average current earnings, defined.

An employee’s ‘‘average current

earnings’’ is the highest of—

(1) The average monthly wage (AMW)

used to compute the tier I AMW PIA.

(The earnings are not indexed, even if

the tier I PIA which is being paid is

based on average indexed monthly

earnings. See part 225 of this chapter.);

or

(2) One-sixtieth of the employee’s

total earnings covered under either the

Social Security or Railroad Retirement

Acts (including earnings that exceed the

maximum earnings used in computing

social security benefits) for the five

consecutive years after 1950 in which

the employee had the highest earnings.

The result, if not multiple of $1, is

rounded to the next lower multiple of

$1; or

(3) One-twelfth of the employee’s total

earnings covered under either the Social

Security or Railroad Retirement Acts

(including earnings that exceed the

maximum earnings used in computing

social security benefits) for the year of

highest earnings in the period which

includes the year in which the

employee became disabled and the five

preceding years. The result, if not a

multiple of $1, is rounded to the next

lower multiple of $1.

§ 226.72 Benefits that do not cause a

reduction.

The tier I is not reduced for the

following types of benefits:

(a) A benefit paid under a law or plan

that provided, on February 18, 1981, for

reducing the benefit for entitlement to a

disability insurance benefit under the

Social Security Act.

(b) A Federal disability benefit based

on service for other than a state or local

government, if all or part of that service

is covered under the Social Security

Act.

(c) A disability benefit paid by the

Federal government or a state or local

government based on state or local

employment, if all or substantially all of

that employment is covered under the

Social Security Act. ‘‘Substantially all’’

means 85 percent or more of the

employment.

(d) A benefit paid by the Veteran’s

Administration.

(e) Private disability benefits.

(f) Amounts paid under the Federal

Employers’ Liability Act (FELA).
7736 Federal Register / Vol. 60, No. 27 / Thursday, February 9, 1995 / Proposed Rules

(g) Benefits based on need, such as

welfare benefits or supplementary

security income.

§ 226.73 Changes in reduction amount.

The reduction amount is not changed

when a tier I benefit increases because

of a recomputation or a general

adjustment in annuity rates, such as a

cost-of-living increase. However, the

reduction amount may change for the

following reasons:

(a) A spouse or divorced spouse

becomes entitled to a tier I benefit after

the effective date of the reduction. The

reduction amount is recomputed as if

the spouse or divorced spouse were

entitled to a tier I benefit on the date the

reduction first applied. The new

reduction amount applies beginning

with the date the spouse or divorced

spouse tier I benefit begins.

Example: An employee became

entitled to an annuity with a tier I

component of $500 on May 1, 1991. He

was also receiving a state disability

benefit of $300 a month based on

employment not covered under the

Social Security Act. On June 1, 1991,

the employee’s tier I increased to

$520.70. On October 1, 1991, the

employee’s wife becomes entitled to an

annuity with a tier I benefit of $260.00.

The tier I amount ($250) that would

have been payable to the wife on May

1, 1991 (assuming she had been eligible

for a benefit at that time) is used to

determine the reduction for other

disability benefit beginning October 1,

1991.

(b) The tier I benefit of a spouse or

divorced spouse annuity ends after the

effective date of the reduction. The new

reduction amount is computed using the

tier I rate to which the employee was

entitled when the reduction first

applied. The new reduction amount

applies beginning with the month after

the month in which the spouse or

divorced spouse tier I benefit ends.

(c) The average current earnings are

redetermined, as shown in § 226.74.

(d) The amount of the other disability

benefit changes. The reduction amount

is recomputed to use the new benefit

rate beginning with the date on which

the new rate is payable. Any increases

in the tier I amounts which were

effective after the reduction first applied

are not included in computing the new

reduction amount.

Example: The employee’s tier I

benefit is $500 on May 1, 1991, when

the annuity is first reduced for other

disability benefits. The tier I increases to

$520 effective June 1, 1991. When the

amount of the disability benefit changes

on October 1, 1991, $500, not $520, is

used as the employee tier I amount in

recomputing the reduction amount.

§ 226.74 Redetermination of reduction.

(a) General. The average current

earnings are redetermined in the second

year after the year the reduction for

other disability benefits was first

applied and every third year after that.

The redetermined amount is used only

if it results in a lower reduction amount.

The new reduction amount is effective

with January of the year after the

redetermination is made.

(b) Redetermined average current

earnings. The average current earnings

are redetermined by multiplying the

initial average current earnings amount

by—

(1) The average of the total wages

(including wages that exceed the

maximum used in computing social

security benefits) of all persons for

whom wages were reported to the

Secretary of the Treasury for the year

before the year of redetermination,

divided by the average of the total wages

reported to the Secretary of the Treasury

for 1977 or, if later, the year before the

year for which the reduction was first

computed. If the result is not a multiple

of $1, it is rounded to the next lower

multiple of $1; or

(2) If the reduction was first computed

before 1978, the average of all taxable

wages reported to the Secretary of

Health and Human Service for the first

quarter of 1977, divided by the average

of all taxable wages reported to the

Secretary of Health and Human Services

for the first quarter of the year before the

year for which the reduction was first

computed. If the result is not a multiple

of $1, it is rounded to the next lower

multiple of $1.

Subpart G—Recomputation To Include

Additional Railroad Service and

Compensation

§ 226.90 When recomputation applies.

An employee’s annuity may be

recomputed to include additional

railroad service and compensation and

social security wages which the

employee earns after the beginning date

of the employee annuity. The annuity is

recomputed only if the recomputation

increases the annuity rate by more than

$1 a month or results in a lump-sum

payment of more than $5. Before a

recomputed rate can be paid, the

employee must stop working in the

railroad industry. A recomputed tier I

component is payable beginning with

January 1 of the year after the year in

which the wages or compensation are

earned or (provided the employee is age

62 or disabled), in the case of railroad

compensation, in the year after the

employee stops working in the railroad

industry.

A recomputed tier II component is

payable from the date the annuity is

reinstated after the employee has ceased

railroad work.

§ 226.91 How an employee annuity rate is

recomputed.

(a) Tier I. A recomputation is made if

any social security wages or railroad

compensation for a year in which the

employee returned to work are higher

than the earnings for a year included in

the previous computation of the tier I

PIA, as shown in part 225 of this

chapter. The higher earnings are used

instead of the lower earnings for the

earlier year to determine the average

monthly wage or average indexed

monthly earnings. Part 225 of this

chapter describes how a PIA is

recomputed.

(b) Tier II. The additional service is

added to the years of service previously

used in computing the tier II rate. The

additional compensation is used to

recompute the average monthly

compensation, if the compensation for a

month in which the employee returned

to railroad service is higher than the

compensation for a month used in the

previous computation of the average

monthly compensation. The higher

monthly compensation is used instead

of the lower compensation for a

previous month to determine the new

average monthly compensation as

shown in § 226.62 of this part. The

increased years of service and average

monthly compensation are used in

computing a new tier II rate, as shown

in § 226.11 of this part.

Example: An employee receiving an

annuity which began on January 1,

1992, returns to railroad service for 10

months in 1992 and 2 months in 1993.

He stops work on February 20, 1993. He

has earnings of $34,500.00 in 1992 and

$5,200.00 in 1993. His tier II rate

effective January 1, 1992, was based on

26 years (312 months) of service and an

average monthly compensation of

$2,995 ($179,700÷60). The additional 12

months of service increases the year of

service used in computing the tier II rate

to 27 (312 months+12 months=324

months÷12=27). The 1992 earnings of

$34,500.00 are used instead of 1987

earnings of $32,700.00. The 1993

earnings are not used because they are

lower than the earnings for previous

months used in computing the average

monthly compensation. The additional

$1,800.00 in earnings increases the

average monthly compensation to

$3,025 ($179,100 +$1,800.00=

$181,500.00÷ 60). The initial tier II
Federal Register / Vol. 60, No. 27 / Thursday, February 9, 1995 / Proposed Rules 7737

amount is increased from $545.09

(26×$2,995×.007) to $571.73

(27×$3,025×.007), effective with the date

of annuity reinstatement, March 1, 1993.

§ 226.92 Effect of recomputation on

spouse and divorced spouse annuity.

The annuity of a spouse or divorced

spouse is recomputed to use the

employee’s recomputed tier I PIA and

tier II rate, if the recomputation results

in a lump-sum payment of more than $5

or an increase in the spouse or divorced

spouse annuity rate of more than $1 a

month. The spouse or divorced spouse

annuity rate is recomputed beginning

with the same date the employee’s

annuity rate is recomputed.

PART 232—SPOUSES’ ANNUITIES—

[REMOVED]

2. For the reasons set out in the

preamble, Part 232— Spouses’

Annuities, is proposed to be removed.

Dated: February 1, 1995.

By Authority of the Board.

Beatrice Ezerski,

Secretary to the Board.

[FR Doc. 95–3278 Filed 2–8–95; 8:45 am]

BILLING CODE 7905–01–P

DEPARTMENT OF STATE

Bureau of International Narcotics

Matters

22 CFR Part 140

[Public Notice 2159]

Prohibition on Assistance to Drug

Traffickers

AGENCY: Bureau of International

Narcotics Matters, Department of State.

ACTION: Proposed rule.

SUMMARY: The Bureau of International

Narcotics Matters plans to issue

regulations to implement Section 487 of

the Foreign Assistance Act of 1961, as

amended (22 U.S.C. Sec. 2291f). Section

487(a) directs the President to take all

reasonable steps to ensure that

assistance provided under the Foreign

Assistance Act or the Arms Export

Control Act is not provided to or

through any individual or entity that the

President knows or has reason to

believe: (1) has been convicted of a

violation of, or a conspiracy to violate,

any law or regulation of the United

States, a State or the District of

Columbia, or a foreign country relating

to narcotic or psychotropic drugs or

other controlled substances; or (2) is or

has been an illicit trafficker in any such

controlled substance or is or has been a

knowing assistor, abettor, conspirator,

or colluder with others in the illicit

trafficking of any such substance. The

law further directs that regulations be

issued to carry out the section and be

submitted to Congress before they take

effect. The proposed regulation will be

set forth in a new part of the Code of

Federal Regulations, 22 CFR part 140,

which will establish a single

governmentwide enforcement

mechanism for Section 487. The

proposed regulations seek to achieve

rigorous statutory enforcement in a

manner consistent with efficient foreign

assistance program administration. They

also seek to ensure protection of the

procedural rights and interests of

assistance recipients.

DATES: Comments due: April 10, 1995.

ADDRESSES: Send comments to: Bureau

of International Narcotics and Law

Enforcement Affairs, Room 7334, 2201 C

Street NW., Washington, DC 20520.

FOR FURTHER INFORMATION CONTACT:

William R. Brownfield, Office of

International Narcotics and Law

Enforcement Affairs, Department of

State, 202–647–0457, or Jo Brooks,

Office of the Legal Adviser, Department

of State, 202–647–7324.

SUPPLEMENTARY INFORMATION: This rule

will implement Section 487 of the

Foreign Assistance Act of 1961, as

amended (22 U.S.C. Sec. 2291f). The

requirements of Section 487 are

described in the Summary, above.

The procedures prescribed by these

regulations apply to assistance under

the Foreign Assistance Act of 1961 and

the Arms Export Control Act. The

regulations are set up in three Subparts:

General (Subpart A, §§ 140.1–140.3);

Applicability (Subpart B, § 104.4); and

Enforcement (Subpart C, §§ 140.5–

140.14).

The General Subpart (Subpart A)

provides a statement of the regulations’

purpose (§ 140.1), based upon the

language of Section 487 of the Foreign

Assistance Act; identifies the authorities

for issuance of the regulations (§ 140.2);

and defines key terms used in the

regulations (§ 140.3). The broad

coverage of the regulations is reflected

in the definitions of drug trafficking

(§ 140.3(b)), money laundering

(§ 140.3(c)), and narcotics offense

(§ 140.3(d)), which are intended to be

comprehensive. As noted in the

definition of drug trafficking, it

encompasses drug-related money

laundering.

Two of the key terms defined in the

regulations are ‘‘covered country’’

(§ 140.3(e)) and ‘‘covered assistance’’

(§ 140.3(f)). The term ‘‘covered country’’

corresponds to those countries listed on

the ‘‘majors list,’’ i.e., the list of major

illicit drug producing countries and

major drug-transit countries, determined

annually by the President and

transmitted to the appropriate

Congressional committees as required

by Chapter 8 of Part I of the Foreign

Assistance Act. The term ‘‘covered

assistance’’ is defined broadly, while

excluding assessed contributions to an

international organization and

assistance that by operation of law is not

subject to Section 487. The definition

further provides that assistance in

amounts less than $100,000 is excluded

unless it pertains to: recipients of

scholarships, fellowships, or participant

training; or a covered individual or

entity reasonably suspected of being or

having been involved in drug

trafficking. These definitions are

intended to ensure rigorous application

of the statutory prohibition on

assistance to drug traffickers, while

fostering efficient program

administration.

For ease of reference, the term

‘‘covered individual or entity’’ is

defined in § 140.4, where it is used,

rather than in the definition section.

Likewise, the term ‘‘key individual’’ is

described in § 140.6(a)(3), where it is

introduced.

The Applicability Subpart (Subpart B)

explains the scope of the regulations.

Their applicability is keyed primarily to

‘‘covered individuals and entities’’ that

receive or provide direct or first-tier

‘‘covered assistance’’ and are located or

providing assistance within a ‘‘covered

country.’’ However, the regulations have

been drafted carefully to ensure they are

given their full statutory scope, i.e., that

they are applied whenever an affected

agency has reasonable grounds to

suspect that a proposed recipient

individual or entity may be or may have

been involved in drug trafficking or may

have been convicted of a narcotics

offense (see § 140.4(c); see also

§§ 140.3(f)(2), 140.7(a), 140.9(a), and

140.11). They are also applicable where

a government agency providing covered

assistance has specifically designated a

recipient beyond the first tier (see

§§ 140.4(c), 140.7(b)). Additionally, the

regulations apply to individuals who

receive a scholarship, fellowship, or

participant training (unless the

assistance is provided through a

multilateral institution or international

organization and the recipient has not

been designated by the agency

providing assistance). Further assurance

that drug traffickers will not receive

assistance is provided by the

requirement that where an agency

providing covered assistance to a

multilateral institution or international