Coverage under the Railroad 

Retirement System

By Robert M. Perbohner

Counsel to the Management Member

11th National Employer 

Railroad Employer 

Training Seminar

August 2021
WARNING

Any views expressed herein are solely those of the 

presenter, and as such, may not represent the 

views of the three-Member Board, the 

Management Member of the Board, or agency 

officials. Nothing herein may be construed as 

legal advice or as binding authority upon the U S. 

R.R.B. and its agents. The Internal Revenue 

Service has sole authority to issue legal advice 

and opinions on matters pertaining to the 

Railroad Retirement Tax Act.
RRB Coverage Determination 

Process

Coverage determinations are made by the 

three member Board appointed by President 

and confirmed by the Senate:

Management Member – Thomas Jayne

Labor Member – John Bragg

Chairman – Erhard Chorlé

There must be at least two affirmative votes 

by individual Board members to render a 

coverage determination.
Payroll Taxes RRTA

2021

employee employer

Tier 1 7.65 % 7.65 %

Tier 2 4.9 % 13.1 %

Tier 1 Base same as SSA ($142,800)

Tier 2 Base ($106,200)

Tier 1 includes Medicare tax of 1.45% with no max.

Additional .9% Medicare tax for individuals earning in excess 

of $200,000 and married couple filing jointing above 

$250,000.
RUIA Contributions

Contributions for Unemployment/Sickness 

program are experienced rated. Rates for 

2021 as follows: 

2.5% surcharge = 3.15% to 12% on the first 

$1,710 per month per employee.
Employers under RRA, RUIA & 

RRTA

1) Any carrier by railroad subject to the jurisdiction 

of the Surface Transportation Board under Part 

A of subtitle IV of title 49;

2) Any company which is directly or indirectly 

owned or controlled by, or under common 

control with, one or more employers...and 

which operates any equipment or facility or 

performs any service (except trucking...) in 

connection transportation of passengers or 

property by rail.
Coverage Rail Carriers

• Covered if: carrier subject to jurisdiction of 

STB. 

• Not covered if: not subject to jurisdiction 

such as a private carrier or tourist line.
Coverage of Non-Carriers

• Directly or indirectly owned or controlled by, or 

under common control with a covered carrier; 

and 

• Operates any equipment or facility or performs 

any service in connection with transportation of 

passengers or property by railroad......
Control by Carrier

Direct or Indirect

• Common stockholders

• Common directors or officers

• Sole provider contracts
Direct Control by

Covered Carrier

Railroad

Hotel Car Repair 

Shop

Rail 

Construction

Shareholder control?

Common Officers?

Common Shareholders?
Under Common Control

Holding 

Company

Real 

Estate Co. Railroad Rail Car Repair
Under Common Control or 

indirectly controlled?

John Doe

President 

Rail Repair Shop

John Doe 

President

ABC Railroad

John Doe

Individual
Exception to under common 

control

Union Pacific Decision – U.S. Appellate Court 

interpreting identical language under the RRTA said 

a holding company is not considered to be under 

common control with a carrier subsidiary. 26 Cl. Ct. 

739 (1992), aff'd, 5 F.3d 523 (Fed. Cir. 1993). 

See also, privately held holding companies, 

Indiana Boxcar Corporation, 712 F. 3rd 590 (2013) 

and American Railroad Group Transportation 

Services, LLC B.C.D. 15-02. 
Lower Tier Holding company

Holding 

Company 1

Holding 

Company 2

Railroad
Examples of Operating Equipment 

or Facilities or Performing Service in 

Connection with Transportation

• Car repair

• Maintenance

• Train Operations

• Management Services

• Warehousing

• Lobbying

• And a bunch more........
Exceptions to Coverage

• Casual Service

• Segregation

• Trucking

• Value –added service
Casual Service

• Measure railroad related service

• Do not include railroad service to unrelated 

entities

• See, VMV Enterprises B.C.D. 93-79
Segregation

• Can apply to both carriers and non-carrier 

employers

• Entity must be principally engaged in nonrailroad business

• Distinct enterprise

• Must ask Board for an opinion
Trucking Exception 

Examples

• CSX Intermodal – Trucking and freight 

services over multiple carriers.

• Triple Crown – Trucking services 

independent of NS carrier services.
Value Added Services

Examples

Related entity provides a service beyond what 

railroads generally provide. 

• Pabtex – B.C.D. 95-12 – blending fuel 

products.

• CSX TDSI – B.C.D. 96-82 – auto storage & 

detailing.
Employee Coverage under the

RRA, RUIA & RRTA

Any individual who is in the 

service of one or more 

employers or in an employment 

relation to one or more 

employers.
SERVICE TO AN 

EMPLOYER

A) Subject to the continuing legal authority of the employer to supervise and 

direct the manner rendition of his or service; or 

B) Rendering professional or technical services and is integrated into the staff of 

the employer; or

C) Rendering on the property used in the employer’s operations, personal 

services the rendition of which is integrated

into the employer’s operations: and 

He or she renders such service for compensation.

An officer by definition is an employee.
Kelm Decision

• Is work being done under direction of independent 

contractor, if so then:

• Kelm v. Chicago, St. Paul, Minneapolis and 

Omaha Railway Co. 206 F. 2d 831 (8th Cir. 1953) 

holds that part B and C to do not apply to 

employees of independent contractors performing 

service for the RR where such contractors are 

engaged in an independent trade or business.
Types of Independent 

Contractors

• Sole Proprietors – self employed individuals

(Section A B or C can apply in these situations.)

• Multi-person or corporate entities engaging 

in independent business (mostly concerned 

with Section A)
Types of Independent 

Contractors (cont.)

• Temporary Workers

• Limited services on specific jobs 

• Contractors working on or for railroad on 

regular basis. 
Types of Services

• Technology Training

• Lobbying Environmental

• Claims Engineering

• Health care Marketing

• Maintenance HR- Labor

• Administrative Rail car repair

• Management Terminal Operations
Determining Independent 

Contractors

• Courts and RRB have relied on various factors:

a) contractor investment in facilities or 

equipment,

b) contractor opportunity for profit or loss, and/or

c) contractor engages in recognized trade

or business.

d) See RRB regulations 20 CFR §216.23

Aparacor, Inc. v. US, 556 F. 2d 1004 (Ct. Cl. 1977)

Lanigan Storage & Van Co. v. US, 389 F.2d 337 (6th Cir. 1968)

Also consider IRS Common Law Rules twenty factors
What to Avoid

• Train Operations

• Officers or Top Management

• Dispatchers – Rail Term B.C.D. 11-14 

Also see, Herzog Transit Services, 624 F. 

3d 467 (7th Cir. 2010) 
Temporary Workers

(non-operating positions)

Factors to Consider

• Is company established in business of 

providing temporary workers ?

• Does Co. have more clients than just your 

RR?

• How much supervision required for the 

temporary workers? 

• Sliding scale based on length of service 

See, Adecco Employment Services B.C.D 01-25 and

ETC Office Systems Services B.C.D. 00-13
Former Employees

• Former railroad employees can work as 

independent contractors, but:

• Work must truly be independent – helps 

for them to offer services to others

• Do not simply place in old position and 

certainly does not provide daily 

supervision. 
Risks

• Contractor or contractor’s employees will be 

found to be your employee for RRB reporting.

• Four year statute of limitations for RRB except in 

cases of fraud.

• IRS may pursue for RRTA Withholdings

• Special risk for RRB annuitants working as 

contractors. Seek prior approval by RRB (selfemployment determination from General 

Counsel’s Office).
How does an employer get 

reviewed by the RRB? 

• Audit & Compliance/Bureau of Law

• Employee coverage request

• Outside referral

• STB Determination
Resources

• Railroad Retirement Board website lists Board Coverage 

Decisions at https://www.govinfo.gov/collection/railroadretirement-board-publications

Contacts at RRB for questions:

Management Member’s Office 

• Rob Perbohner, Counsel to the Management Member

312-751-7166 -------- Robert.Perbohner@rrb.gov

• RRB General Counsel’s Office 

Marguerite Dadabo, Assistant General Counsel 

312-751-4945 ---- Marguerite.Dadabo@rrb.gov