Labor Employer Reporting Instructions

Part IV – Particular Types of Compensation Payments

Chapter 10: Miscellaneous Compensation and Sick Pay

1

Definition of Miscellaneous Compensation 

Miscellaneous compensation is any payment which is subject to Tier I taxes and is creditable as 

Tier I compensation, but cannot be credited as regular compensation. Miscellaneous 

compensation, as referred to in these instructions, must meet the following conditions: 

• The payment is subject to railroad retirement tax; 

 

• The payment is remuneration for services rendered in an earlier year; 

 

• The payment cannot be credited to the earlier year because the employee already has 

maximum Tier I compensation credit in that year; and 

 

• The payment cannot be credited to the year when the payment is made because no service 

was performed in the year of payment and the employer reports compensation generally 

on an earned basis. See Chapter 1 of this Part, for an explanation of earned basis. 

Example of Miscellaneous Compensation 

An employee resigns on 12/31/03 and retires on 01/01/04. He earned and received payments 

totaling $83,000 in 2003, and received a payment of $6,000 in March 2004 for his last pay period 

in 2003, for vacation pay and other benefits earned but not paid in 2003. Because the employer 

generally reports on an earned basis, the employer filed an adjustment increasing 2003 

compensation by an additional $4,000 bringing the total compensation for 2003 to the maximum 

of $87,000. The remaining $2,000 paid in 2004 is reported as miscellaneous compensation for 

2004. 

Taxable and Creditable Miscellaneous Compensation 

In the example, you will note that the entire $6,000 paid in 2004 is subject to Tier I, Tier II, and 

Medicare taxes at the 2004 tax rate. While the taxable and creditable compensation are not always 

equal for each year, particularly for employers who report compensation on an earned basis, the 

amounts will usually be equal in the aggregate for all years. In the previous example, the creditable 

Tier I compensation (after the adjustment) for 2003 is $87,000 and $2,000 for 2004. The total 

creditable compensation for the two years is $89,000. The taxable compensation for 2003 is 

$83,000; and $6,000 for 2004 for a total of $89,000. 

Definition of Sick Pay Paid by the Labor Organization 

Sick pay is compensation paid under a plan or agreement available on the same basis to employees 

in a like class and payable for days not worked on account of injury, illness, sickness, disease, 

pregnancy, or childbirth. If an employee receives his or her regular earnings, wages, or salary while 

off sick, this is not sick pay but regular earnings. 
Labor Employer Reporting Instructions

Part IV – Particular Types of Compensation Payments

Chapter 10: Miscellaneous Compensation and Sick Pay

2

If your organization pays sick pay to your employees, request a copy of The Reporting Instructions 

for Creditable Sickness Payments from the RRB's Quality reporting Service Center. 

Report Miscellaneous Compensation and Sick Pay on Form BA-3

Because sick pay and miscellaneous pay are both creditable only as Tier I compensation, they are 

reported separately from regular earnings to help ensure the integrity of our records. 

Employers should use Form BA-3, Annual Report of Creditable Compensation, to report this type 

of compensation. See Part V, Chapter 3 for information on how to complete Form BA-3.