Twenty-Third

Actuarial Valuation

of the Assets and Liabilities

Under the Railroad Retirement Acts

as of December 31, 2004

with

Technical Supplement

U.S. Railroad Retirement Board

Bureau of the Actuary

Chicago, Illinois
Twenty-Third Actuarial Valuation

of the Assets and Liabilities

Under the Railroad Retirement Acts

as of December 31, 2004

with

Technical Supplement

by

Frank J. Buzzi, Chief Actuary

with Statements of the

Railroad Retirement Board

and the

Actuarial Advisory Committee

U.S. Railroad Retirement Board

Bureau of the Actuary

October 2006
i

CONTENTS

Statement of the Railroad Retirement Board v

Statement of the Actuarial Advisory Committee vii

Report of the Actuary

I. Introduction 1

II. Summary of Recent Developments and Results 1

III. Regular and Supplemental Benefits and Their Financing 3

IV. Dual Benefits, Their Financing, and the Financial Interchange 6

V. Assumptions, Methodology, and Valuation Results 9

VI. Statement of Actuarial Opinion 14

Appendix

Outline of the benefit and financing provisions of the railroad retirement system as

 amended through December 31, 2005 29

Technical Supplement

General Methodology and Assumptions 38

Mortality and Remarriage Experience 57

Retirement Studies 71

Withdrawal Studies 78

Employee and Beneficiary Censuses, Family Composition, and Miscellaneous Statistics 81
ii

TABLES

1. Employment, inflation and interest assumptions 15

2. Progress of the National Railroad Retirement Investment Trust, Railroad Retirement

 Account and Social Security Equivalent Benefit Account 17

3. Present value of benefits in millions of dollars 20

4. Present value of benefits as a percentage of the present value of tier 2 payroll 21

5. Balance of the Combined National Railroad Retirement Investment Trust and Railroad

 Retirement Account, and the Social Security Equivalent Benefit Account as of

 December 31, 2004 22

6. Actuarial surplus or (deficiency) for National Railroad Retirement Investment Trust and

 Railroad Retirement Account 23

7. Minimum contribution required under ERISA 24

8. Vested dual benefit amounts and average number of beneficiaries 25

9. Supplemental annuity benefit amounts and average number of beneficiaries 26

10. Average number of railroad retirement annuitants and number of annuitants per full

 time employee 27

11. Transfers to railroad retirement system under financial interchange with social security

 system, 1937-2006 28

S-1. 2004 RRB Annuitants Mortality Table 43

S-2. 2004 RRB Disabled Mortality Table for Annuitants with Disability Freeze 44

S-3. 2004 RRB Disabled Mortality Table for Annuitants without Disability Freeze 45

S-4. 1994 RRB Active Service Mortality Table 46

S-5. 2004 RRB Spouse Total Termination Table 47

S-6. Probability of a retired employee having a spouse eligible for railroad retirement benefits 48

S-7. 1995 RRB Mortality Table for Widows 49

S-8. 1997 RRB Remarriage Table 50

S-9. 2004 RRB Total Termination Table for Disabled Children 51

S-10. Calendar year rates of immediate age retirement 52

S-11. Rates of immediate disability retirement and of eligibility for disability freeze 53

S-12. Calendar year rates of final withdrawal 54

S-13. Service months and salary scales 55

S-14. Family characteristics of railroad employees assumed for the valuation of survivor

 benefits 56

S-15. Mortality experience of railroad age annuitants between anniversaries of retirement

 in 2000 and 2003, by sex and type of retirement 58
iii

S-16. Mortality experience of railroad age annuitants between anniversaries of retirement

 in 2000 and 2003, by year 59

S-17. Mortality ratios for railroad age annuitants on a select and ultimate basis between

 anniversaries of retirement in 2000 and 2003 60

S-18. Age specific death rates of railroad disability annuitants between anniversaries of

 retirement in 2000 and 2003, by age and duration 61

S-19. Mortality experience of railroad disability annuitants between anniversaries of

 retirement in 2000 and 2003, by disability freeze status 62

S-20. Percentages of railroad disability annuitants included in the 23rd valuation mortality studies 

 who would have qualified for a benefit under the social security disability standards 63

S-21. Mortality experience of active railroad employees during calendar years 1998-2002 64

S-22. Total termination experience of spouse annuitants between anniversaries of retirement

 in 2000 and 2003 65

S-23. Mortality experience of spouse annuitants between anniversaries of retirement

 in 2000 and 2003 66

S-24. Number of retired employees and number with a spouse eligible for railroad retirement

 benefits, by attained age of employee on December 31, 2003 67

S-25. Mortality experience of widow annuitants between anniversaries of retirement

 in 2000 and 2003 68

S-26. Remarriage experience of widows between 1991 and 2003 anniversaries of widowhood 69

S-27. Total termination experience of disabled children annuitants between anniversaries of

 retirement in 2000 and 2003 70

S-28. Rates of immediate age retirement 72

S-29. Immediate age retirement experience of railroad employees with 5-29 years of

 service during calendar years 2001-2003 73

S-30. Immediate age retirement experience of railroad employees with 30 or more years of

 service during calendar years 2001-2003 74

S-31. Rates of immediate disability retirement 75

S-32. Immediate disability retirement experience of railroad employees during calendar

 years 2001-2003 76

S-33. Percentages of immediate disability retirements in 2001-2003 meeting the disability freeze

 standards of the Social Security Act 77

S-34. Withdrawal experience of railroad employees during calendar years 1999-2002, 

 by attained age and years of service 79

S-35. Distribution of 2004 active employees by age and completed years of service 82
iv

S-36. Census of vested inactive employees in 2004 by age and completed years of service 83

S-37. Comparison between 2004 and 2001 of selected characteristics of active railroad

 employees 84

S-38. Census of employee and spouse annuitants on December 31, 2004 85

S-39. Census of survivor annuitants on December 31, 2004 86

S-40. Comparison of service months of railroad employees during calendar years 2000-2002

 with assumptions used in the 23rd valuation 87

S-41. Average creditable compensation per service month during 2004 88

S-42. Age distribution of new entrants during calendar years 2000-2003 and comparison with

 assumptions of the 22nd valuation 89

S-43. Family characteristics of railroad employees who died in 2000-2003 with a current

 connection 90

S-44. Selected employment and benefit statistics for 2001 and 2004 91



1

REPORT OF THE ACTUARY 

I. INTRODUCTION

Section 15 of the Railroad Retirement Act of 1974 requires that the Railroad Retirement Board, at 

intervals of not more than three years, prepare actuarial valuations of the railroad retirement system. 

Section 22 of the Railroad Retirement Act of 1974 requires the Railroad Retirement Board to 

prepare an annual report containing a five-year projection of revenues to and payments from the 

Railroad Retirement Account and to submit the report to the President and the Congress by July 1. 

This report must also contain a five-year projection of the account benefits ratio and average 

account benefits ratio. If the five-year projection indicates that funds in the Railroad Retirement 

Account will be insufficient to pay full benefits, (1) representatives of railroad employees, railroad 

carriers and the President must submit proposals to the Congress to preserve the financial solvency 

of the Railroad Retirement Account, and (2) the Railroad Retirement Board must issue regulations 

to reduce annuity levels during any fiscal year in which there would be insufficient funds to make 

full payments. 

Section 502 of the Railroad Retirement Solvency Act of 1983 requires the Railroad Retirement 

Board to prepare an annual report on the actuarial status of the railroad retirement system and to 

submit the report to the Congress by July 1. The report must contain recommendations for any 

financing changes which might be advisable, including (1) changes in the tax rates, and (2) whether 

any part of the taxes on employers should be diverted to the Railroad Unemployment Insurance 

Account to aid in the repayment of any debt to the Railroad Retirement Account. 

This report, the 23rd actuarial valuation, is intended to meet these three requirements for 2006. 

II. SUMMARY OF RECENT DEVELOPMENTS AND RESULTS

Recent actuarial reports have discussed in detail the importance of the level of railroad employment 

to the railroad retirement system's financial stability. The payroll tax on railroad employment has 

been the major source of income to the system since its establishment in the 1930's. It is clear that 

the fewer railroad workers there are, the less money the retirement account collects in payroll taxes, 

and the more likely the system is to require additional funds. Declines in railroad employment over 

a long period, coupled with inflation and subsequent benefit increases, required legislation to 

strengthen the system's financial condition in 1974, 1981, 1983, and 1987. 

The 22nd valuation (2003 actuarial report) projected a surplus of 0.24 percent of tier 2 payroll and an 

average tier 2 tax rate of 20.07 percent under the intermediate employment assumption. Favorable 

employment and investment experience have combined to produce higher trust fund balances, 

which in turn have produced lower projected taxes due to the tier 2 tax rate schedule. The surplus 

has increased to 0.33 percent of tier 2 payroll, and the average tier 2 tax rate has decreased to 16.52 

percent. The combined effect of a 3.55 percent of payroll reduction in projected future tier 2 tax 

rates and a 0.09 percent of payroll increase in projected surplus results in an overall improvement

equal to 3.64 percent of tier 2 payroll. 
2

The 23rd valuation has been prepared under three assumptions as to the future behavior of railroad 

employment. These employment assumptions are similar to the employment assumptions used in 

the 22nd valuation. Employment assumptions I and II are based on the stability of employment in 

passenger service (Amtrak and commuter service) as distinguished from freight service. 

Employment assumption III follows the structure of assumptions I and II, except that it has declines 

in passenger employment and steeper declines in freight employment than employment assumptions 

I and II. Employment assumptions I, II and III are intended to provide an optimistic, moderate and 

pessimistic outlook, respectively. The specific results of the projections made in this report of the 

railroad retirement system's financial condition are as follows: 

1. Under employment assumption I, the average tier 2 tax rate is 14.52 percent, and an 

actuarial surplus of 0.33 percent of tier 2 payroll exists as of December 31, 2004. There are 

no cash flow problems during the 75-year projection period, and the tier 2 payroll tax rate 

ranges from 8.2% to 18.0%. 

2. Under employment assumption II, the average tier 2 tax rate is 16.52 percent, and an 

actuarial surplus of 0.33 percent of tier 2 payroll exists as of December 31, 2004. There are 

no cash flow problems during the 75-year projection period, and the tier 2 payroll tax rate 

ranges from 8.2% to 18.0%. 

3. Under employment assumption III, the average tier 2 tax rate is 18.91 percent, and an 

actuarial surplus of 0.28 percent of tier 2 payroll exists as of December 31, 2004. Cash flow 

problems arise in 2042 and remain into 2052. There are no cash flow problems from the 

close of 2052 to the end of the projection period, and the tier 2 payroll tax rate ranges from

8.2% to 27.0%. 

The average tier 2 tax rate is calculated by dividing the present value of tier 2 payroll taxes by the 

present value of tier 2 payroll as of January 1, 2005. The surplus or deficiency figures given above 

represent the change in the average tier 2 tax rate which would produce a balance of zero in the 

combined National Railroad Retirement Investment Trust, Railroad Retirement Account and Social 

Security Equivalent Benefit Account at the end of the 75-year projection period. 

The conclusion is that, barring a sudden, unanticipated, large drop in railroad employment or 

substantial investment losses, the railroad retirement system will experience no cash flow problems 

during the next 36 years. The long-term stability of the system, however, is not assured. Under the 

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

coming years will determine whether additional corrective action is necessary. 

As mentioned earlier, this report is intended to meet the requirements of Section 502 of the 1983 

Solvency Act. Section 502 requires recommendations with regard to (1) the tax rates and (2) 

whether any part of the taxes on employers should be diverted to the Railroad Unemployment 

Insurance Account to aid in the repayment of its debt to the Railroad Retirement Account. 

1. This report recommends no change in the rate of tax imposed on employers and employees. 
3

The tier 2 tax rate schedule maintains a close balance between the present value of future 

income and expenditures. Although future financing problems are projected to occur under 

employment assumption III, as discussed above, the absence of projected cash flow 

problems for at least 36 years under each employment assumption indicates that an 

immediate change in the tax rate schedule is not required. 

2. No diversion of taxes from the Railroad Retirement Account to the Railroad Unemployment 

Insurance Account is recommended. As of May 24, 2006, there are no loans outstanding 

from the Railroad Retirement Account to the Railroad Unemployment Insurance Account. 

Section V of this report presents details of the valuations under the three employment assumptions. 

III. REGULAR AND SUPPLEMENTAL BENEFITS AND THEIR FINANCING

The Appendix contains a detailed description of the provisions of the current law. Sections III and

IV provide a more general summary of the law. 

Amounts available for payment of railroad retirement benefits are held in four Accounts: the 

National Railroad Retirement Investment Trust (NRRIT), the Railroad Retirement (RR) Account, 

the Social Security Equivalent Benefit (SSEB) Account, and the Dual Benefits Payments Account. 

Because of their intertwined nature, the NRRIT, RR Account and SSEB Account are discussed 

together in this section. Dual benefits and the Dual Benefits Payments Account are discussed in a 

separate section, Section IV. 

Amounts held in the NRRIT, RR Account and SSEB Account are mainly used to pay monthly 

benefits to retired or disabled employees, their spouses, and survivors. The various types of 

benefits and their eligibility requirements are described in the Appendix. The Accounts also pay 

out relatively small amounts in lump sums to employees and their survivors in certain cases. The 

monthly benefits consist of three components, known as tier 1, tier 2 and supplemental annuity. 

For all categories of recipients, the gross tier 1 benefit is generally equivalent to the benefit that the 

social security system would pay if all the employee's earnings (railroad and non-railroad) had been 

covered under the Social Security Act. Any benefit actually received from social security is 

subtracted to determine the net tier 1 benefit payable. Section IV explains the logic behind this 

determination. The cost-of-living increase paid to social security beneficiaries automatically carries 

over to the tier 1 component of railroad retirement annuities. 

There are some differences between social security benefits and tier 1 benefits. The most 

significant are as follows: 

1. An employee may not retire before age 62 under the social security system. Under the 

railroad retirement system, an employee may retire at age 60 with 30 years of service. A 

spouse of a 30-year employee may also retire at age 60. If the employee retired after 2001, 

there is no age reduction in either case. 
4

2. Railroad retirement pays an occupational disability benefit under tier 1 and tier 2. Social 

security requires total and permanent disability. The same five-month waiting period 

applies under both systems. 

3. Widow(er)s who retire at age 60 or 61 under railroad retirement are deemed age 62 in the 

computation of the tier 1 benefit, resulting in a smaller age reduction than under social 

security. 

4. From the start of the railroad retirement system through 1984, earnings up to a monthly 

maximum amount were taxed and credited for benefit computation purposes. Social 

security has always used an annual earnings limit. The 1983 Solvency Act changed railroad 

retirement to an annual earnings limit for 1985 and later years, but benefit computations for 

new beneficiaries will reflect the pre-1985 use of a monthly limit for many years into the 

future. All benefits awarded before 1985 reflect a monthly limit exclusively. 

The formula used to compute the tier 2 component of railroad retirement is comparable to a private 

pension formula. Under the formula adopted in 1981, the employee tier 2 benefit is equal to 0.7 

percent of the employee's average monthly railroad earnings for the 60 months of highest earnings, 

multiplied by the number of years of railroad service, less 25 percent of any vested dual benefit. 

Unlike private pensions, tier 2 benefits (1) provide automatic cost-of-living increases, and (2) are 

paid to spouses and survivors without any reduction in employee benefit for the payment of these 

auxiliary benefits. 

The tier 2 benefit for spouses is equal to 45 percent of the employee's tier 2 benefit. The survivor's 

tier 2 benefit is a specified percentage of the employee's tier 2 benefit. The Appendix lists the 

percentages and describes an initial minimum widow(er)’s amount which became payable 

beginning in calendar year 2002. 

The tier 2 cost-of-living increases for employees, spouses and survivors are equal to 32.5 percent of 

the percentage increase which is used in computing social security increases (and tier 1 increases). 

The increase is paid at the same time as the tier 1 cost-of-living increase. 

The portion of tier 1 benefits which is considered equivalent to social security benefits is subject to 

Federal income tax under the rules that apply to social security benefits. Tier 2 benefits, the portion 

of tier 1 benefits in excess of social security benefits, supplemental annuity benefits, and vested dual 

benefits are subject to Federal income tax under the rules that apply to private pensions. 

A railroad retiree may receive a supplemental annuity in addition to his regular annuity if (1) the 

retiree has a "current connection" with the railroad industry at the time of retirement, and (2) the 

retiree has attained age 65 with 25 years of railroad service, or attained age 60 with 30 years of 

railroad service. A current connection is generally defined as at least 12 months of railroad service 

in the 30 months preceding retirement. 

The 1981 amendments added the requirement that an employee must have worked in the railroad 

industry before October 1, 1981, to receive a supplemental annuity. This provision will result in 
5

phasing out the supplemental annuity over a long period. The first effect will not occur until 

October 2006. The last supplemental annuity check will probably not be paid until after 2060. 

The monthly supplemental annuity benefit is $23, plus $4 for each year of service in excess of 25, 

with a maximum benefit of $43. No cost-of-living increases are applied. Spouses and survivors do 

not receive a supplemental annuity. 

If the recipient of a supplemental annuity receives a private pension from his railroad employer, the 

supplemental annuity is reduced by the portion of the private pension that is attributable to the 

employer's contributions. This reduction is not made if the private pension is reduced for receipt of

the supplemental annuity. 

Benefits paid from the NRRIT, RR Account and SSEB Account are financed by the following 

sources of income: 

1. Payroll tax. Employees and employers pay a tax at the social security rate on earnings in a 

year up to the social security, or tier 1, earnings limit. (The Medicare hospital insurance 

portion of this rate is not subject to an earnings limit.) This tax is called the tier 1 tax. In 

addition, employers and employees pay a tier 2 tax equal to a percentage of the employee's 

earnings up to the tier 2 earnings limit. The tier 2 earnings limit is what the social security 

limit would be if the 1977 social security amendments had not been enacted. The 2006 

earnings limits are $94,200 and $69,900 for tier 1 and tier 2, respectively. 

Tier 2 taxes on both employers and employees are based on a 10-year average of the ratio of 

certain asset balances to the sum of benefits and administrative expenses (the average 

account benefits ratio). Depending on the average account benefits ratio, the tier 2 tax rate 

for employers will range between 8.2 percent and 22.1 percent, while the tier 2 tax rate for 

employees will be between 0 percent and 4.9 percent. This calculation is described in the 

Appendix. 

2. Income tax. The tax on tier 1 benefits up to the social security level is credited to the SSEB 

Account and then to social security through the financial interchange. Revenue derived 

from taxing RR Account benefits (tier 2 and the excess of tier 1 over the social security 

level) is transferred to the RR Account. 

3. Investment income. 

4. The financial interchange with the social security system. This extremely important 

arrangement, which will be discussed in detail in Section IV, has resulted in the large annual 

lump sum transfers of money from social security to railroad retirement shown in Table 11. 

5. Advances from general revenues related to certain features of the financial interchange. 

Financial interchange transfers are made in a lump sum for a whole fiscal year in the June 

following the end of that fiscal year. For example, the transfer reflecting transactions which 

occurred from October 2003 through September 2004 (fiscal year 2004) took place in June 

2005. At any time, therefore, there are between 9 and 21 months' worth of financial 
6

interchange transfers that are, in a sense, owed to the railroad retirement system. Railroad 

retirement receives interest on this money, so this practice does no long-term harm to the 

financial condition of the railroad retirement system. The lag in the transfers, however, 

could cause short-term cash flow problems. 

In order to avoid the cash flow problems caused by this lag, the 1983 Solvency Act provided 

for monthly loans to railroad retirement from U.S. Treasury general funds. Each loan is 

equal to the transfer the Railroad Retirement Board estimates railroad retirement would have 

received in the preceding month, with interest, if the financial interchange with social 

security were on an up-to-date basis. Railroad retirement must repay these loans when it 

receives the transfer from social security against which the money was advanced. 

The 1983 Solvency Act created the SSEB Account, effective October 1, 1984. Before that date, all 

tier 1 benefits, tier 2 benefits, lump sums and administrative expenses had been paid from the RR 

Account, and all the income described above had been credited to the RR Account. Since then, the 

SSEB Account has paid the social security level of benefits and the administrative expenses 

allocable to that level of benefits. The tier 1 portion of the payroll tax, the income taxes on the 

social security level of benefits, the income from the financial interchange, and the advances from

general revenues are credited to the SSEB Account. Repayment of the advances is made from the 

SSEB Account. 

The Railroad Retirement and Survivors’ Improvement Act of 2001 created the National Railroad 

Retirement Investment Trust to manage and invest amounts collected in the RR Account and SSEB 

Account. The portion of the RR Account that is not needed to pay current administrative expenses 

and the balance of the SSEB Account not needed to pay current benefits and administrative 

expenses must be transferred from time to time to the NRRIT in such manner as will maximize 

investment returns to the Railroad Retirement system. 

IV. DUAL BENEFITS, THEIR FINANCING, AND THE FINANCIAL INTERCHANGE

In the early 1950's, an arrangement known as the financial interchange was established between the 

railroad retirement and social security systems. The purpose of the financial interchange is to place 

the social security trust funds in the same financial position they would have been if railroad 

employment had always been covered under social security. If railroad employment had been 

covered under social security, social security would have collected taxes on railroad employment, 

and it would have paid benefits based on railroad employment. Under the financial interchange, the 

railroad retirement system gives the social security system the taxes social security would have 

collected, and the social security system gives the railroad retirement system the additional benefits 

social security would have paid to railroad workers and their families over what it actually pays 

them. 

The word "additional" in the preceding sentence is important, because it is possible for a railroad 

employee to be covered under both railroad retirement and social security. The social security 

coverage may be based on earnings from moonlighting while in a railroad job or from coverage 

under the two systems at different times. Fulfilling the purpose of the financial interchange requires 
7

deducting from social security's fund only the difference between what social security would have 

paid had it covered railroad employment, and what it actually pays the person based on his nonrailroad employment. Under the financial interchange, therefore, social security subtracts an 

employee's social security benefit from the amount it would otherwise give to the railroad

retirement system. 

This arrangement gave rise to problems that became acute in the early 1970's. The problems arose 

from the weighting in the social security formula in favor of low-earning, short-service workers. A 

railroad employee's non-railroad earnings usually added little to the benefit social security would 

have paid on combined railroad and non-railroad earnings (called gross tier 1 today). However, the 

employee might qualify for the minimum social security benefit, receiving much more from social

security than his non-railroad earnings added to his gross tier 1 benefit. 

The following example of two hypothetical employees may clarify the problem. The size of the 

benefits is appropriate to the early 1970's. The employees are assumed to have identical dates of 

birth, dates of retirement, and histories of railroad earnings. One employee, however, is assumed to 

have had just enough covered employment under social security to qualify for a social security 

benefit. (The difference in railroad retirement benefits arises from minor reductions in the 1937 Act 

formula for receipt of a social security benefit.) 

Eligible for Not eligible for 

social security social security

A. Railroad retirement benefit $380 $400 

B. Social security benefit 100 - 

C. Total benefit, A + B 480 400 

D. Social security benefit on 

combined earnings (gross tier 1) 240 220 

E. Financial interchange transfer 

from social security to railroad 

retirement, D – B 140 220 

F. Amount to be financed by excess 

of railroad retirement taxes 

over social security taxes, A – E 240 180 

Two conclusions are apparent. First, the employee with benefits under both systems received an 

advantage over the career railroad worker, which many considered unfair. In the example, the 

employee who is eligible for social security collects $80 more than the employee who is not eligible 

(the difference in line C), while, under a completely integrated system, the social security earnings

would have added only $20 (the difference in line D). Second, because social security subtracted 

the social security benefit in calculating the financial interchange transfer, railroad retirement paid 

most of the cost of these benefits. In the example, this is represented by the $60 difference in line F. 

This situation was a major cause of the poor financial condition of the railroad retirement system in 

the early 1970's. In order to improve the system's financial condition, the Railroad Retirement Act 

of 1974 provided that the tier 1 component of the railroad retirement annuity be reduced by any 
8

social security benefit. This essentially integrated the two systems and eliminated the advantage of 

qualifying for benefits under both systems. 

However, it was generally considered unfair to eliminate this advantage entirely for those already 

retired or close to retirement when the 1974 Act became effective. The 1974 Act, therefore, 

provided for a restoration of social security benefits that were considered vested at the end of 1974. 

The restored amount is known as the "vested dual benefit." This benefit was available to qualifying 

spouses and survivors as well as to qualifying employees. 

For employees retiring in 1975 or later, the vested dual benefit was to be equal to 

(1) a social security benefit based on social security earnings, plus 

(2) a social security benefit based on railroad earnings, minus 

(3) a social security benefit based on combined railroad and social security earnings. 

Social security or railroad earnings after 1974 were not to be included in this calculation. The 

"social security benefit" referred to in (1), (2) and (3) is the one which would have been calculated 

at the end of 1974. The resulting amount was to be increased by all the automatic social security 

cost-of-living adjustments between 1974 and the date the employee retired. 

For spouses and survivors, the formulas were different and more complicated than those for 

employees. 

The 1981 amendments made significant changes regarding vested dual benefits. Spouses and 

survivors were not to be awarded vested dual benefits after August 13, 1981, though they would 

continue to receive these benefits if they were awarded before that date. Also, vested dual benefits 

awarded to employees would take into account cost-of-living increases only through 1981, rather 

than through the date of retirement. 

Since October 1981, vested dual benefits have been paid from a segregated Dual Benefits Payments 

Account, and appropriations have been made to that account. This means that, starting in fiscal year 

1982, each annual appropriation is to be sufficient to pay the benefits for that year. If the 

appropriation for a fiscal year is less than required for full funding, the Railroad Retirement Board 

must reduce benefits to a level that the amount appropriated will cover. 

The appropriation for vested dual benefits in fiscal year 1982 was less than required for full 

funding, resulting in a cutback in benefits during that year. Full funding was restored for the last

two months of fiscal year 1982. The appropriation was less than required in fiscal year 1986, 

resulting in a cutback during April-September of that year. The appropriation was again less than 

required in fiscal year 1988, which resulted in a cutback during April-September. Benefits were cut 

back in January 1996 due to a lapse in government funding and then restored later that same month. 

For years other than those mentioned, full benefits have been paid. 
9

V. ASSUMPTIONS, METHODOLOGY, AND VALUATION RESULTS

A. Assumptions and Methodology

Average railroad employment is assumed to be 233,000 in 2005 under each of the three 

employment assumptions. This is the estimated average for the year (subject to later adjustment) 

and exceeded the range projected for 2005 under the employment assumptions contained in the 

2005 actuarial report. 

Employment assumptions I and II, based on a model developed by the Association of American 

Railroads, assume that (1) passenger employment will remain at the level of 43,000, and (2) the 

employment base, excluding passenger employment, will decline at a constant annual rate (1.0 

percent for assumption I and 2.5 percent for assumption II) for 25 years, at a reducing rate over the 

next 25 years, and remain level thereafter. 

Employment assumption III differs from employment assumptions I and II by assuming that (1) 

passenger employment will decline by 500 per year until a level of 35,000 is reached and then 

remain level, and (2) the employment base, excluding passenger employment, will decline at a 

constant annual rate of 4.0 percent for 25 years, at a reducing rate over the next 25 years, and 

remain level thereafter. 

The assumed rates of decline in freight employment are 0.5% lower during the first 25 years under 

each employment assumption than assumed in the 22nd valuation. 

Because inflation has been fairly stable at relatively low levels in recent years, only one set of 

earnings and price inflation assumptions was used in this valuation. The ultimate earnings increase 

and cost-of-living increase assumptions are the same as those used in the previous valuation. The 

ultimate interest rate assumption has decreased from 8.0% in the 22nd valuation to 7.5% in the 23rd

valuation. Table 1 shows the employment, inflation and interest rate assumptions used in the 23rd

valuation. A comparison of historical and projected employment is illustrated in Figure 1. 

Only one combination of non-economic assumptions (for example, rates of mortality, disability, 

retirement, and withdrawal) was used in this valuation. These assumptions, some of which were 

changed from the previous valuation to reflect recent experience, are discussed in the Technical 

Supplement to this report. 

Projections were made for the various components of income and outgo under each employment 

assumption for the 75 calendar years 2005-2079. The projections of these components were 

combined and the investment income calculated to produce the projected balances in the combined 

NRRIT and RR Account and in the SSEB Account separately for each year. The results are 

summarized in Table 2. Present values of the various components of NRRIT and RR Account 

income and outgo were calculated by discounting amounts in each projection year to December 31, 

2004, using the interest rate series shown in Table 1. The present values were combined to 

calculate the NRRIT and RR Account actuarial surplus or deficiency. The derivation of the surplus 

or deficiency appears in Table 6. 
10

B. Valuation Results

This section sets forth the results of the valuation in the form of a discussion of the tables in which 

the results appear. Because it is desirable for the discussion of a table to be reasonably selfcontained, there is some repetition between tables and between this section and preceding sections 

of this report. 

Table 2. Progress of the National Railroad Retirement Investment Trust (NRRIT), Railroad 

Retirement (RR) and Social Security Equivalent Benefit (SSEB) Accounts. Projections were made 

for the various components of income and outgo under each employment assumption for the 75 

calendar years 2005-2079. The projections of these components were combined and the investment 

income calculated to produce the projected balances in the combined NRRIT and RR Account, and 

the SSEB Account at the end of each projection year. The results are summarized in Table 2. 

Table 2 consists of three tables, one for each of employment assumptions I, II, and III. The tables

show, for the SSEB Account and the combined NRRIT and RR Account for each projection year, 

(1) the various elements of income and outgo, (2) the account balance on December 31, and (3) the 

account benefits ratio, average account benefits ratio and combined employer and employee tier 2 

tax rate. 

The balances of the RR Account and NRRIT are combined because amounts not needed to pay 

current administrative costs are transferred from the RR Account to the NRRIT for investment. The 

SSEB Account is assumed to maintain a target balance of approximately 1.5 months of benefit 

payments in order to meet benefit obligations and contingencies, and transfer any excess to the 

NRRIT. 

Table 2 indicates that no cash-flow problems arise under employment assumptions I and II (Tables 

2-I and 2-II). 

Under employment assumption I, the combined account balance grows through 2015, declines 

slightly in 2016 and then continues to grow through the end of the projection period. The combined 

employer and employee tier 2 tax rate decreases to 15% in 2011, increases to 18% in 2020-2028, 

decreases to 8.2% in 2040-2078 and then increases to 10.0% in 2079. 

Under employment assumption II, the combined account balance grows to $31,730 million in 2010,

decreases to $29,592 million in 2023, and grows thereafter through the end of the projection period. 

The combined employer and employee tier 2 tax rate decreases to 15% in 2011, increases to 18% in 

2018-2051, and then decreases until reaching the minimum rate of 8.2% in 2064-2079. 

Under employment assumption III, the combined account balance grows to $31,260 million in 

2010, and then it begins to decline (Table 2-III). The balance becomes negative in 2042. Negative 

after-transfer balances indicate the amount that would be owed, including interest, if unreduced 

benefits were paid by borrowing from some unknown source. The combined account deficit grows 

until 2047, when the balance reaches -$2,232 million. The balance then begins to improve, and it 

becomes positive in 2052. The combined employer and employee tier 2 tax rate decreases to 16% 

in 2007-2015, increases to the maximum rate of 27% in 2031-2064 and then decreases until 
11

reaching the minimum rates of 8.2% in 2075-2079. Under this assumption, the tax rate mechanism 

does not respond quickly enough to avoid cash flow problems. 

Table 3. Present value of benefits in millions of dollars. This table shows, for each employment 

assumption, the present value of tier 2 benefits, supplemental annuity benefits and the portion of 

tier 1 benefits which exceeds the social security level of benefits. The portion of tier 1 benefits in 

excess of the social security level is referred to as "tier 1 liability." The most important components 

of this liability were described in Section III. Supplemental annuity benefits are included with tier 2 

benefits in this table. The present values are shown separately by type of beneficiary (employee, 

spouse, survivor) and by employee status on the valuation date (retired, retired and deceased, active, 

inactive, future entrants). 

Table 4. Present value of benefits as a percentage of the present value of tier 2 payroll. The format 

for this table is the same as for Table 3. Each number in Table 4 was obtained by dividing the 

corresponding number in Table 3 by the appropriate present value of one percent of tier 2 payroll. 

The payroll figures are shown in Table 6. 

Table 5. Balance of the Railroad Retirement and Social Security Equivalent Benefit Accounts as of 

December 31, 2004. This table derives the balance in the accounts as of December 31, 2004. No 

accrual adjustments are made either for financial interchange amounts due and unpaid on that date 

or for benefits due on January 3, 2005, because these amounts are included in the projected future 

cash flows. 

Table 6. Actuarial surplus or (deficiency) for National Railroad Retirement Investment Trust and 

Railroad Retirement Account. The top half of Table 6 expresses the asset and liability components 

of the actuarial balance as present values in dollars. The bottom half expresses these components as 

a percentage of tier 2 payroll. The actuarial surplus or deficiency was calculated for the NRRIT and 

RR Account, but not for the SSEB Account, for the following reason. 

The SSEB Account pays the social security level of benefits and administrative expenses allocable 

to those benefits, and it receives as income the social security level of taxes. If there were no other 

source of income or outgo during the course of a year, a surplus or deficiency would build up, 

depending on whether taxes exceeded or were less than benefits. However, the SSEB Account also 

receives or pays any financial interchange transfers. The financial interchange transfer, subject to 

qualifications described in the next paragraph, should be enough to offset any surplus or deficit for 

the year. Furthermore, this would be the case even if the social security level of benefits or taxes 

are raised or lowered. The SSEB Account can thus be regarded as automatically funded, the 

financial interchange being the mechanism for correcting any surplus or deficiency. Therefore, the 

concept of actuarial balance is not meaningful when applied to the SSEB Account. 

The qualification mentioned above arises because, in a relatively small number of cases, the railroad 

retirement system does not pay benefits when social security would pay benefits. In these cases, 

mainly dependent children of retired railroad employees, the SSEB Account collects an amount 

through the financial interchange but does not pay a corresponding benefit. This imbalance 

between outgo and income is transferred from time to time to the NRRIT. The value of these 
12

transfers, or amounts available for transfer, is included as an asset in Table 6 as “Available from

SSEB Account.” 

Revenue derived from taxing NRRIT and RR Account benefits (tier 2 and the excess of tier 1 over 

the social security level) is transferred to the RR Account. The present value of these transfers is 

shown as an asset in Table 6 as “Income taxes on benefits.” 

The cost of the system to the railroad industry may be considered as the excess of “Retirement 

taxes” over “Actuarial surplus or (deficiency).” Table 6 shows that the cost of the system is much 

more stable when expressed in dollars than when expressed as a percentage of payroll. For 

example, the cost of the system under employment assumption III is $40,841 million, or 18.63 

percent of payroll; whereas the cost under employment assumption I is $45,615 million, or 14.19 

percent of payroll. Using employment assumption III as the base, the percentage cost variation in 

dollars between the two valuations is 11.69 percent. As a percentage of payroll, the percentage cost 

variation is 23.83 percent. 

Table 7. Minimum contribution required under ERISA. The railroad retirement system is 

specifically exempt from the minimum funding provisions of the Employee Retirement Income

Security Act (ERISA). In the past, there has been some interest in what the contribution 

requirement of the system would be if this were not the case. The following discussion is limited to 

the regular minimum funding standard for multiemployer plans. 

The funding goal of the railroad retirement system is to receive enough funds each year to cover 

benefits and expenses for the year and to maintain a reasonable account balance. In terms of the 

participants in the system, payroll taxes collected each year from rail employers and employees are 

used to pay benefits to rail retirees, their spouses and survivors. In contrast, ERISA essentially 

requires that pension plans be "advance-funded." Under this arrangement, the goal is to receive 

enough funds each year over the employees' working lifetimes to fully fund their retirement 

benefits. 

ERISA recognizes that when a private pension plan is initiated, it will usually have an "accrued 

liability." This liability represents the value placed on future benefits and expenses of the plan that 

is attributable to employee service preceding the date of the plan (often referred to as "past 

service"). As such, the liability might be measured by the amount that would have been 

accumulated if contributions to fund each employee's benefits had been made from the time 

employment began. Since a new plan would have no funds at the time it is initiated, the accrued 

liability is also the unfunded accrued liability. The unfunded accrued liability is specifically 

identified by ERISA, because ERISA has separate funding rules for benefits based on past and 

future service. 

In the case of an existing pension plan which becomes subject to ERISA funding standards, as for a 

new plan, the accrued liability must be determined. This determination is made based on employee 

service preceding the date the plan becomes subject to ERISA standards, but taking into account 

projected future levels of employee pay. The unfunded accrued liability for an existing plan is the 

excess of the accrued liability over the funds on hand. 
13

Table 7 illustrates what the minimum funding requirements would be for the railroad retirement 

system as of December 31, 2004, using the entry age normal actuarial funding method, if it became 

subject to ERISA on that date. The unfunded accrued liability of $35,941 million shown in Table 7 

may be considered to be the amount needed, in excess of funds on hand and tier 2 payroll taxes at a 

6.00 percent rate, to fund combined NRRIT and RR Account benefits and expenses for former and 

present employees. The 6.00 percent rate (normal cost rate) is the average cost expressed as a 

percentage of tier 2 payroll that would fund each employee's benefits and expenses over the 

employee's working lifetime. 

Under ERISA requirements, the minimum annual contribution to be made would be equivalent to 

tier 2 payroll taxes at the rate of 6.00 percent, plus the level annual amount of $2,921 million which 

would amortize the unfunded accrued liability of $35,941 million over 30 years. 

Since the amortization payment is a level dollar amount, and since the taxable payroll would change 

from year to year, the required contribution expressed as a percentage of payroll would vary during 

the amortization period. Line 10 of the table shows the level percentage of tier 2 payroll that would 

be required to fund the unfunded accrued liability and meet a 6.00 percent payroll tax over the 30 

year amortization period. Under the ERISA requirements, the minimum annual contribution after 

30 years, if all assumptions were realized, would be the 6.00 percent of payroll normal cost. 

In summary, the effect of ERISA would be to accelerate funding for the railroad retirement system. 

Contributions equivalent to an average of 21.50 to 26.18 percent of tier 2 payroll would be required 

for 30 years with 6.00 percent contributions thereafter. 

Table 8. Vested dual benefit amounts and average number of beneficiaries. This table shows a 

projection of vested dual benefit payments for every fiscal year from 2007 through 2030. After 

2030, the amounts become insignificant. The amounts shown assume that the benefits are fully 

funded. Fiscal years are shown because vested dual benefit appropriations are made on a fiscal year 

basis. The table also indicates the average number of vested dual beneficiaries in each fiscal year. 

The table applies to all the employment assumptions discussed in this report. 

The revenue derived from taxing pre-October 1988 vested dual benefits was transferred to the RR 

Account. The revenue derived from taxing vested dual benefits in fiscal years 1989 and later is 

transferred to the Dual Benefits Payments Account, and it reduces the amount of the appropriation 

by the same amount. Therefore, the amount available for the payment of vested dual benefits is 

unaffected by income tax revenues derived from these benefits. 

The 1981 amendments removed much of the uncertainty from projections of future vested dual 

benefit payments. The volatility caused by inflation is gone, since future awards take into account 

cost-of-living increases from 1975 through 1981, rather than through the date of retirement. Also, 

awards of these benefits to spouses and widow(er)s ceased after August 13, 1981. Uncertainties 

which remain in projecting future vested dual benefit payments are when employees will retire, 

what their benefits will be, and when beneficiaries will die. 

The projections of vested dual benefit payments by the Railroad Retirement Board are the basis for 

the agency's requests for appropriated amounts. Generally, a margin of about 2 percent is added to 
14

projected amounts to determine the appropriated amounts requested. This margin is needed because 

of the uncertainties in making projections and to ensure that adequate funds are available for the full 

payment of vested dual benefits. Appropriated amounts remaining in a fiscal year after all benefit 

payments have been made are returned to the Treasury. 

Table 9. Supplemental annuity benefit amounts and average number of beneficiaries. This table 

shows a projection of supplemental annuity benefits for every calendar year from 2006 through 

2045. Since service before October 1, 1981 is required for a supplemental annuity, benefit amounts 

after 2045 will continue to decline. 

Table 10. Average number of railroad retirement annuitants and number of annuitants per full time

employee. The left half of Table 10 shows the average number of annuitants under each 

employment assumption, and the right half shows the average number per full time employee. 

Under employment assumption I, the average number of annuitants per full time employee remains 

relatively level through 2019 and then declines. Under employment assumption II, the average 

number of annuitants per full time employee increases until reaching a maximum of 2.95 in 2021-

2022 and then declines. Under employment assumption III, the average number of annuitants per 

full time employee increases steadily to 3.91 in 2031-2032 and declines thereafter. 

VI. STATEMENT OF ACTUARIAL OPINION

It is my opinion that (1) the techniques and methodology used herein to evaluate the financial and 

actuarial status of the Railroad Retirement System are generally accepted within the actuarial

profession; and (2) the assumptions used and the resulting actuarial estimates are, in the aggregate,

reasonable for the purpose of evaluating the financial and actuarial status of the trust funds, taking 

into consideration the experience and expectations of the program.

Frank J. Buzzi

Chief Actuary, Railroad Retirement Board

Fellow of the Society of Actuaries 

Member of the American Academy of Actuaries 

 Enrolled Actuary #05-4940
 15 

Table 1. Employment, inflation and interest assumptions 

Calendar Average employment (thousands) Percentage increase over prior year Interest 

year I II III Earnings Cost of living rate 

2005 233 233 233 3.7% 2.7% 7.3% 

2006 231 228 225 4.0 4.1 7.5 

2007 229 224 217 4.0 2.6 7.5 

2008 227 219 210 4.0 3.0 7.5 

2009 226 215 202 4.0 3.0 7.5 

2010 224 210 195 4.0 3.0 7.5 

2011 222 206 189 4.0 3.0 7.5 

2012 220 202 182 4.0 3.0 7.5 

2013 218 198 176 4.0 3.0 7.5 

2014 217 194 170 4.0 3.0 7.5 

2015 215 191 164 4.0 3.0 7.5 

2016 213 187 159 4.0 3.0 7.5 

2017 211 183 153 4.0 3.0 7.5 

2018 210 180 148 4.0 3.0 7.5 

2019 208 176 143 4.0 3.0 7.5 

2020 206 173 139 4.0 3.0 7.5 

2021 205 170 134 4.0 3.0 7.5 

2022 203 167 130 4.0 3.0 7.5 

2023 202 164 126 4.0 3.0 7.5 

2024 200 161 123 4.0 3.0 7.5 

2025 198 158 119 4.0 3.0 7.5 

2026 197 155 116 4.0 3.0 7.5 

2027 195 152 112 4.0 3.0 7.5 

2028 194 149 109 4.0 3.0 7.5 

2029 192 147 106 4.0 3.0 7.5 

2030 191 144 104 4.0 3.0 7.5 

2031 189 142 101 4.0 3.0 7.5 

2032 188 139 98 4.0 3.0 7.5 

2033 187 137 96 4.0 3.0 7.5 

2034 186 135 94 4.0 3.0 7.5 

2035 184 133 92 4.0 3.0 7.5 

2036 183 132 91 4.0 3.0 7.5 

2037 182 130 89 4.0 3.0 7.5 

2038 181 129 87 4.0 3.0 7.5 

2039 181 127 86 4.0 3.0 7.5 

2040 180 126 85 4.0 3.0 7.5 

2041 179 125 84 4.0 3.0 7.5 

2042 178 124 83 4.0 3.0 7.5 

2043 178 123 82 4.0 3.0 7.5 

2044 177 122 81 4.0 3.0 7.5 

2045 176 121 80 4.0 3.0 7.5 

2046 176 120 80 4.0 3.0 7.5 

2047 176 120 79 4.0 3.0 7.5 

2048 175 119 79 4.0 3.0 7.5 

2049 175 119 78 4.0 3.0 7.5 

2050 175 118 78 4.0 3.0 7.5 

2051 174 118 78 4.0 3.0 7.5 

2052 174 118 77 4.0 3.0 7.5 

2053 174 118 77 4.0 3.0 7.5 

2054 174 118 77 4.0 3.0 7.5 

2055-2079 174 118 77 4.0 3.0 7.5 
Figure 1. Average Railroad Employment 1937-2079, Historical and Projected 

1,800,000 1,400,000 1,000,000 

800,000 

600,000 

400,000 200,000 100,000 

50,000 

1937 1947 1957 1967 1977 1987 1997 2007 2017 2027 2037 2047 

Calendar Year 

EmploEmploEmplo
 17 

Table 2-I. Progress of the Combined National Railroad Retirement Investment Trust (NRRIT) and Railroad Retirement (RR) Account, and

the Social Security Equivalent Benefit (SSEB) Account under Employment Assumption I

(Dollar amounts in millions)

Average Combined NRRIT and RR Account SSEB Account 

Account account Tier 2 Benefits Benefits Other Combined 

Calendar benefits benefits tax and admin- Tax Other Balance, and admin- Tax income and Balance, balance, 

year ratioa ratiob rate istration incomec incomed end year istration incomec expense e end year end year 

2006 7.37 6.40 17.0% $4,005 $2,639 $2,197 $29,221 $5,699 $2,426 $3,211 $709 $29,930 

2007 7.20 6.60 16.0% 4,193 2,606 2,215 29,849 5,838 2,525 3,330 727 30,576 

2008 6.99 6.80 16.0% 4,401 2,703 2,256 30,407 6,013 2,617 3,418 748 31,155 

2009 6.80 6.90 16.0% 4,596 2,799 2,293 30,904 6,219 2,709 3,535 774 31,678 

2010 6.62 6.90 16.0% 4,786 2,895 2,328 31,340 6,449 2,802 3,676 803 32,143 

2011 6.40 7.00 15.0% 4,985 2,830 2,315 31,500 6,682 2,898 3,814 832 32,332 

2012 6.21 6.90 16.0% 5,186 3,093 2,372 31,778 6,923 2,996 3,957 862 32,640 

2013 6.03 6.90 16.0% 5,375 3,196 2,392 31,991 7,181 3,100 4,113 894 32,885 

2014 5.86 6.90 16.0% 5,556 3,301 2,408 32,145 7,447 3,208 4,271 927 33,072 

2015 5.70 6.70 16.0% 5,730 3,410 2,422 32,246 7,716 3,322 4,428 960 33,206 

2016 5.54 6.60 16.0% 5,881 3,521 2,324 32,209 7,995 3,441 4,555 960 33,169 

2017 5.45 6.40 17.0% 6,004 3,832 2,404 32,442 8,275 3,556 4,789 1,030 33,472 

2018 5.41 6.20 17.0% 6,105 3,955 2,466 32,758 8,544 3,676 4,902 1,063 33,821 

2019 5.40 6.10 17.0% 6,184 4,081 2,498 33,153 8,800 3,801 5,030 1,095 34,248 

2020 5.45 5.90 18.0% 6,247 4,429 2,546 33,881 9,040 3,931 5,139 1,125 35,006 

2021 5.52 5.80 18.0% 6,295 4,569 2,486 34,643 9,264 4,065 5,227 1,152 35,795 

2022 5.65 5.70 18.0% 6,324 4,714 2,678 35,710 9,471 4,204 5,292 1,178 36,888 

2023 5.82 5.70 18.0% 6,351 4,861 2,768 36,988 9,662 4,346 5,339 1,202 38,190 

2024 6.02 5.60 18.0% 6,383 5,012 2,874 38,490 9,842 4,490 5,374 1,224 39,714 

2025 6.25 5.60 18.0% 6,420 5,166 2,994 40,230 10,021 4,636 5,408 1,246 41,476 

2026 6.50 5.70 18.0% 6,461 5,322 3,040 42,131 10,208 4,785 5,446 1,269 43,400 

2027 6.79 5.80 18.0% 6,507 5,485 3,282 44,392 10,398 4,938 5,484 1,293 45,685 

2028 7.11 5.90 18.0% 6,569 5,651 3,459 46,933 10,596 5,094 5,526 1,317 48,250 

2029 7.41 6.10 17.0% 6,650 5,528 3,643 49,454 10,804 5,253 5,577 1,343 50,797 

2030 7.72 6.30 17.0% 6,742 5,695 3,837 52,244 11,030 5,416 5,641 1,371 53,615 

2031 8.01 6.50 16.0% 6,834 5,554 3,981 54,945 11,277 5,586 5,721 1,401 56,346 

2032 8.35 6.80 16.0% 6,915 5,725 4,247 58,003 11,543 5,766 5,810 1,434 59,437 

2033 8.69 7.00 15.0% 6,994 5,569 4,470 61,048 11,829 5,954 5,911 1,470 62,518 

2034 9.04 7.30 15.0% 7,085 5,743 4,706 64,411 12,126 6,149 6,014 1,507 65,918 

2035 9.37 7.60 14.0% 7,204 5,568 4,950 67,724 12,436 6,350 6,124 1,545 69,269 

2036 9.69 7.90 14.0% 7,330 5,744 5,175 71,314 12,775 6,558 6,259 1,587 72,901 

2037 9.97 8.30 12.0% 7,448 5,166 5,448 74,480 13,135 6,780 6,400 1,632 76,112 

2038 10.12 8.60 10.0% 7,617 4,547 5,660 77,070 13,496 7,007 6,534 1,676 78,746 

2039 10.18 8.90 10.0% 7,852 4,697 5,858 79,773 13,856 7,236 6,665 1,721 81,494 

2040 10.17 9.20 8.2% 8,074 4,094 6,029 81,822 14,264 7,479 6,836 1,771 83,593 

2041 10.19 9.40 8.2% 8,257 4,230 6,172 83,966 14,727 7,737 7,048 1,829 85,795 

2042 10.24 9.60 8.2% 8,437 4,372 6,348 86,249 15,201 8,012 7,248 1,887 88,136 

2043 10.25 9.80 8.2% 8,678 4,525 6,525 88,622 15,671 8,296 7,433 1,946 90,568 

2044 10.17 10.00 8.2% 9,000 4,687 6,705 91,014 16,137 8,585 7,611 2,004 93,018 

2045 10.08 10.10 8.2% 9,319 4,856 6,881 93,431 16,655 8,889 7,830 2,068 95,499 

2050 9.78 10.10 8.2% 10,945 5,817 7,845 106,464 19,766 10,665 9,185 2,454 108,918 

2055 9.48 9.90 8.2% 12,836 7,021 8,942 121,185 23,525 12,915 10,710 2,920 124,105 

2060 9.31 9.60 8.2% 14,957 8,496 10,243 138,692 27,891 15,702 12,304 3,462 142,154 

2065 9.19 9.40 8.2% 17,488 10,286 11,824 160,064 32,974 19,084 14,024 4,093 164,157 

2070 9.05 9.30 8.2% 20,653 12,466 13,736 185,946 39,083 23,185 16,062 4,851 190,797 

2075 8.82 9.10 8.2% 24,679 15,129 15,993 216,398 46,627 28,169 18,663 5,788 222,186 

2079 8.65 8.90 10.0% 28,666 21,064 18,166 247,233 53,987 32,925 21,306 6,701 253,934 

a

 The fair market value of the assets in the RR Account and NRRIT as of the close of the fiscal year (September 30) divided by the total benefits and administrative

 expenses paid from the RR Account and NRRIT during the fiscal year. b The average of the account benefits ratios for the 10 most recent fiscal years ending before the calendar year.

Includes payroll taxes and income taxes on benefits. d Includes investment income and transfers from SSEB Account. 

e Other income includes financial interchange income, advances from general revenues, and interest income. Other expense includes repayment of advances 

from general revenues and transfers to the NRRIT.

c
 18 

Table 2-II. Progress of the Combined National Railroad Retirement Investment Trust (NRRIT) and Railroad Retirement (RR) Account, and
 

the Social Security Equivalent Benefit (SSEB) Account under Employment Assumption II

(Dollar amounts in millions)
 

Average Combined NRRIT and RR Account SSEB Account 

Account account Tier 2 Benefits Benefits Other Combined 

Calendar benefits benefits tax and admin- Tax Other Balance, and admin- Tax income and Balance, balance, 

year ratioa ratiob rate istration incomec incomed end year istration incomec expense e end year end year 

2006 7.37 6.40 17.0% $4,005 $2,622 $2,196 $29,204 $5,699 $2,411 $3,226 $709 $29,913 

2007 7.18 6.60 16.0% 4,193 2,563 2,212 29,786 5,838 2,484 3,372 727 30,513 

2008 6.97 6.80 16.0% 4,401 2,633 2,248 30,266 6,013 2,547 3,487 748 31,014 

2009 6.75 6.90 16.0% 4,596 2,698 2,279 30,648 6,219 2,609 3,635 774 31,422 

2010 6.54 6.90 16.0% 4,786 2,762 2,303 30,927 6,449 2,671 3,807 803 31,730 

2011 6.29 7.00 15.0% 4,984 2,674 2,278 30,895 6,682 2,732 3,979 832 31,727 

2012 6.05 6.90 16.0% 5,185 2,891 2,318 30,920 6,923 2,795 4,158 861 31,781 

2013 5.82 6.90 16.0% 5,373 2,958 2,318 30,823 7,180 2,862 4,350 893 31,716 

2014 5.60 6.80 16.0% 5,553 3,025 2,310 30,604 7,445 2,931 4,546 926 31,530 

2015 5.37 6.70 16.0% 5,727 3,093 2,294 30,264 7,713 3,004 4,743 960 31,224 

2016 5.16 6.40 17.0% 5,877 3,331 2,168 29,887 7,990 3,080 4,910 960 30,847 

2017 4.99 6.20 17.0% 5,998 3,404 2,213 29,506 8,266 3,150 5,185 1,029 30,535 

2018 4.87 6.00 18.0% 6,097 3,655 2,234 29,299 8,531 3,223 5,341 1,061 30,360 

2019 4.77 5.80 18.0% 6,174 3,735 2,225 29,085 8,781 3,300 5,513 1,093 30,178 

2020 4.69 5.60 18.0% 6,234 3,816 2,217 28,884 9,014 3,378 5,665 1,121 30,005 

2021 4.60 5.40 18.0% 6,278 3,897 2,086 28,589 9,228 3,458 5,797 1,148 29,737 

2022 4.56 5.20 18.0% 6,303 3,981 2,196 28,463 9,423 3,541 5,906 1,172 29,635 

2023 4.53 5.10 18.0% 6,324 4,065 2,194 28,398 9,600 3,625 5,998 1,194 29,592 

2024 4.51 5.00 18.0% 6,349 4,149 2,197 28,395 9,764 3,708 6,077 1,214 29,609 

2025 4.50 4.90 18.0% 6,377 4,234 2,202 28,454 9,924 3,790 6,154 1,234 29,688 

2026 4.48 4.80 18.0% 6,408 4,319 2,119 28,485 10,088 3,873 6,235 1,254 29,739 

2027 4.49 4.70 18.0% 6,442 4,407 2,219 28,669 10,251 3,957 6,314 1,274 29,943 

2028 4.49 4.70 18.0% 6,489 4,496 2,237 28,913 10,418 4,041 6,397 1,295 30,208 

2029 4.50 4.60 18.0% 6,552 4,586 2,259 29,206 10,590 4,126 6,485 1,316 30,522 

2030 4.50 4.60 18.0% 6,624 4,680 2,283 29,544 10,774 4,212 6,585 1,339 30,883 

2031 4.50 4.60 18.0% 6,692 4,776 2,254 29,882 10,974 4,303 6,696 1,364 31,246 

2032 4.53 4.60 18.0% 6,746 4,880 2,341 30,356 11,186 4,400 6,812 1,390 31,746 

2033 4.58 4.60 18.0% 6,793 4,988 2,381 30,932 11,412 4,504 6,936 1,418 32,350 

2034 4.64 4.60 18.0% 6,850 5,102 2,430 31,614 11,641 4,612 7,057 1,446 33,060 

2035 4.70 4.60 18.0% 6,931 5,222 2,486 32,392 11,876 4,724 7,181 1,475 33,867 

2036 4.76 4.60 18.0% 7,013 5,347 2,521 33,247 12,130 4,840 7,321 1,506 34,753 

2037 4.86 4.60 18.0% 7,082 5,482 2,618 34,265 12,395 4,968 7,460 1,539 35,804 

2038 4.94 4.70 18.0% 7,196 5,625 2,702 35,395 12,651 5,098 7,584 1,571 36,966 

2039 5.00 4.70 18.0% 7,361 5,773 2,791 36,598 12,897 5,229 7,699 1,601 38,199 

2040 5.08 4.80 18.0% 7,495 5,929 2,882 37,914 13,182 5,371 7,847 1,636 39,550 

2041 5.20 4.80 18.0% 7,590 6,094 2,976 39,394 13,506 5,525 8,021 1,676 41,070 

2042 5.35 4.90 18.0% 7,683 6,272 3,106 41,090 13,820 5,692 8,167 1,715 42,805 

2043 5.50 5.00 18.0% 7,830 6,462 3,242 42,964 14,120 5,864 8,294 1,753 44,717 

2044 5.61 5.10 18.0% 8,041 6,660 3,389 44,971 14,408 6,038 8,406 1,788 46,759 

2045 5.74 5.20 18.0% 8,229 6,868 3,541 47,151 14,737 6,224 8,554 1,829 48,980 

2050 6.75 5.80 18.0% 9,151 8,100 4,584 61,904 16,640 7,347 9,343 2,066 63,970 

2055 8.08 6.70 16.0% 10,193 8,725 6,073 82,639 18,845 8,826 10,077 2,339 84,978 

2060 9.45 8.00 12.0% 11,328 8,125 7,878 107,197 21,338 10,692 10,711 2,649 109,846 

2065 10.12 9.30 8.2% 12,711 7,018 9,471 128,336 24,227 12,960 11,344 3,007 131,343 

2070 10.38 10.10 8.2% 14,556 8,466 11,094 150,833 27,797 15,711 12,183 3,450 154,283 

2075 10.58 10.40 8.2% 17,058 10,246 13,196 179,923 32,403 19,060 13,470 4,022 183,945 

2079 10.65 10.60 8.2% 19,635 11,958 15,262 208,428 37,062 22,262 14,957 4,601 213,029 

a

 The fair market value of the assets in the RR Account and NRRIT as of the close of the fiscal year (September 30) divided by the total benefits and administrative

 expenses paid from the RR Account and NRRIT during the fiscal year. b The average of the account benefits ratios for the 10 most recent fiscal years ending before the calendar year.
 

Includes payroll taxes and income taxes on benefits.
 d Includes investment income and transfers from SSEB Account. 

e Other income includes financial interchange income, advances from general revenues, and interest income. Other expense includes repayment of advances 
 

from general revenues and transfers to the NRRIT.
 

c 
 19 

Table 2-III. Progress of the Combined National Railroad Retirement Investment Trust (NRRIT) and Railroad Retirement (RR) Account, and

the Social Security Equivalent Benefit (SSEB) Account under Employment Assumption III

(Dollar amounts in millions)

Average Combined NRRIT and RR Account SSEB Account 

Account account Tier 2 Benefits Benefits Other Combined 

Calendar benefits benefits tax and admin- Tax Other Balance, and admin- Tax income and Balance, balance, 

year ratioa ratiob rate istration incomec incomed end year istration incomec expense e end year end year 

2006 7.36 6.40 17.0% $4,005 $2,603 $2,196 $29,184 $5,699 $2,394 $3,243 $709 $29,893 

2007 7.17 6.60 16.0% 4,193 2,514 2,208 29,713 5,838 2,435 3,420 727 30,440 

2008 6.93 6.80 16.0% 4,401 2,552 2,240 30,104 6,013 2,468 3,567 748 30,852 

2009 6.69 6.90 16.0% 4,595 2,584 2,262 30,354 6,219 2,496 3,748 774 31,128 

2010 6.45 6.90 16.0% 4,785 2,613 2,275 30,457 6,449 2,522 3,956 803 31,260 

2011 6.19 6.90 16.0% 4,983 2,640 2,241 30,355 6,682 2,547 4,164 832 31,187 

2012 5.91 6.90 16.0% 5,184 2,668 2,269 30,109 6,922 2,572 4,380 861 30,970 

2013 5.62 6.80 16.0% 5,371 2,696 2,246 29,680 7,179 2,600 4,611 893 30,573 

2014 5.34 6.70 16.0% 5,551 2,724 2,212 29,066 7,443 2,629 4,846 926 29,992 

2015 5.04 6.60 16.0% 5,723 2,752 2,165 28,259 7,709 2,660 5,083 959 29,218 

2016 4.75 6.30 17.0% 5,872 2,923 2,001 27,312 7,984 2,693 5,290 959 28,271 

2017 4.48 6.10 17.0% 5,991 2,951 2,002 26,274 8,256 2,719 5,606 1,027 27,301 

2018 4.24 5.80 18.0% 6,088 3,125 1,971 25,282 8,516 2,746 5,802 1,060 26,342 

2019 4.01 5.50 18.0% 6,162 3,153 1,901 24,174 8,760 2,775 6,015 1,090 25,264 

2020 3.78 5.30 18.0% 6,219 3,180 1,824 22,959 8,984 2,805 6,207 1,118 24,077 

2021 3.53 5.00 18.0% 6,258 3,210 1,615 21,525 9,189 2,837 6,377 1,143 22,668 

2022 3.30 4.70 18.0% 6,277 3,243 1,638 20,129 9,371 2,873 6,520 1,166 21,295 

2023 3.06 4.50 18.0% 6,292 3,277 1,540 18,653 9,532 2,910 6,643 1,186 19,839 

2024 2.80 4.20 18.0% 6,310 3,311 1,434 17,089 9,678 2,946 6,750 1,204 18,293 

2025 2.56 3.90 19.0% 6,329 3,504 1,327 15,591 9,818 2,981 6,854 1,221 16,812 

2026 2.29 3.70 19.0% 6,350 3,539 1,126 13,906 9,957 3,016 6,958 1,238 15,144 

2027 2.02 3.50 19.0% 6,371 3,577 1,095 12,208 10,091 3,051 7,056 1,254 13,462 

2028 1.75 3.20 20.0% 6,403 3,778 977 10,560 10,225 3,085 7,156 1,271 11,831 

2029 1.47 3.00 20.0% 6,448 3,818 856 8,785 10,359 3,119 7,257 1,287 10,072 

2030 1.23 2.70 23.0% 6,499 4,361 744 7,391 10,500 3,153 7,364 1,305 8,696 

2031 1.07 2.40 27.0% 6,543 5,088 611 6,547 10,651 3,191 7,478 1,323 7,870 

2032 0.95 2.20 27.0% 6,570 5,156 609 5,741 10,806 3,235 7,590 1,342 7,083 

2033 0.82 2.00 27.0% 6,587 5,229 552 4,935 10,971 3,284 7,707 1,362 6,297 

2034 0.70 1.70 27.0% 6,611 5,311 497 4,132 11,132 3,337 7,815 1,382 5,514 

2035 0.57 1.50 27.0% 6,653 5,397 442 3,318 11,291 3,391 7,920 1,402 4,720 

2036 0.44 1.30 27.0% 6,693 5,488 357 2,470 11,461 3,449 8,033 1,423 3,893 

2037 0.32 1.20 27.0% 6,714 5,593 327 1,676 11,630 3,517 8,134 1,444 3,120 

2038 0.21 1.00 27.0% 6,773 5,704 275 883 11,781 3,585 8,214 1,462 2,345 

2039 0.08 0.80 27.0% 6,865 5,820 221 59 11,916 3,654 8,279 1,479 1,538 

2040 0.07 0.70 27.0% 6,906 5,948 899 - 12,086 3,734 7,635 762 762 

2041 0.07 0.60 27.0% 6,910 6,086 824 - 12,277 3,823 7,751 60 60 

2042 -0.01 0.50 27.0% 6,914 6,240 145 (528) 12,441 3,922 8,459 - (528) 

2043 -0.09 0.40 27.0% 6,967 6,402 47 (1,045) 12,583 4,022 8,561 - (1,045) 

2044 -0.15 0.30 27.0% 7,066 6,572 12 (1,528) 12,707 4,123 8,585 - (1,528) 

2045 -0.21 0.20 27.0% 7,122 6,754 (17) (1,914) 12,867 4,235 8,632 - (1,914) 

2050 -0.15 -0.20 27.0% 7,369 7,868 - (1,362) 13,706 4,928 8,778 - (1,362) 

2055 0.67 -0.10 27.0% 7,671 9,384 308 5,212 14,639 5,871 8,926 561 5,773 

2060 2.77 0.80 27.0% 8,076 11,322 1,499 23,001 15,731 7,077 8,893 1,581 24,582 

2065 6.45 2.80 23.0% 8,750 11,763 4,156 57,393 17,115 8,544 8,609 2,124 59,517 

2070 9.30 5.90 18.0% 9,819 11,310 6,648 92,153 19,033 10,330 8,758 2,363 94,516 

2075 11.15 9.00 8.2% 11,389 6,733 9,286 126,756 21,748 12,513 9,311 2,700 129,456 

2079 11.37 10.50 8.2% 13,023 7,852 10,793 147,713 24,637 14,608 10,127 3,058 150,771 

a

 The fair market value of the assets in the RR Account and NRRIT as of the close of the fiscal year (September 30) divided by the total benefits and administrative

 expenses paid from the RR Account and NRRIT during the fiscal year. b The average of the account benefits ratios for the 10 most recent fiscal years ending before the calendar year.

Includes payroll taxes and income taxes on benefits. d Includes investment income and transfers from SSEB Account. 

e Other income includes financial interchange income, advances from general revenues, and interest income. Other expense includes repayment of advances 

from general revenues and transfers to the NRRIT.

c
 20

Table 3. Present value of benefits in millions of dollars

Employment assumption I 

Tier 1 

Tier 2a liability Total 

Employment assumption II 

Tier 1 

Tier 2a liability Total 

Employment assumption III 

Tier 1 

Tier 2a liability Total 

Employee annuities 

Retired 

Active 

Inactive 

Future entrants 

Total 

$14,372 

17,281 

1,379 

5,557

38,589 

$ 5,417 

8,589 

525 

2,041

16,572 

$19,789 

25,869 

1,904 

7,598

55,160 

$14,372 

17,281 

1,379 

4,174

37,206 

$ 5,417 

8,589 

525 

1,537

16,068 

$19,789 

25,869 

1,904 

5,711

53,274 

$14,372 

17,281 

1,379 

2,934

35,965 

$ 5,417 

8,589 

525 

1,082

15,612 

$19,789 

25,869 

1,904 

4,015 

51,578 

Spouse annuities 

Retired 4,041 1,402 5,443 4,041 1,402 5,443 4,041 1,402 5,443 

Active 4,324 2,430 6,754 4,324 2,430 6,754 4,324 2,430 6,754 

Inactive 297 95 392 297 95 392 297 95 392 

Future entrants 1,121 358 1,479 845 271 1,117 595 192 787 

Total 9,784 4,284 14,068 9,508 4,198 13,706 9,258 4,118 13,376 

Survivor annuities 

Retired & deceased 5,094 849 5,943 5,094 849 5,943 5,094 849 5,943 

Active 2,124 263 2,388 2,124 263 2,388 2,124 263 2,388 

Inactive 67 24 91 67 24 91 67 24 91 

Future entrants 761 156 917 577 117 694 408 83 491 

Total 8,046 1,292 9,338 7,862 1,253 9,116 7,693 1,219 8,912 

All annuities combined 

Retired & deceased 23,507 7,668 31,175 23,507 7,668 31,175 23,507 7,668 31,175 

Active 23,729 11,281 35,011 23,729 11,281 35,011 23,729 11,281 35,011 

Inactive 1,743 644 2,387 1,743 644 2,387 1,743 644 2,387 

Future entrants 7,439 2,554 9,994 5,597 1,926 7,522 3,937 1,356 5,293 

Total annuities $56,419 $22,147 $78,567 $54,576 $21,519 $76,095 $52,916 $20,949 $73,865 

Lump sum payments 73 73 73 

Total benefits $78,640 $76,168 $73,939 

Note: Detail may not add to totals due to rounding. 

a Includes supplemental annuity benefits. 
 21

Table 4. Present value of benefits as a percentage of the present value of tier 2 payroll

Employment assumption I 

Tier 1 

Tier 2a liability Total 

Employment assumption II 

Tier 1 

Tier 2a liability Total 

Employment assumption III 

Tier 1 

Tier 2a liability Total 

Employee annuities 

Retired 

Active 

Inactive 

Future entrants 

Total 

4.47% 

5.37 

0.43 

1.73 

12.00 

1.68% 

2.67 

0.16 

0.63 

5.15 

6.16% 

8.05 

0.59 

2.36 

17.16 

5.39% 

6.48 

0.52 

1.57 

13.96 

2.03% 

3.22 

0.20 

0.58 

6.03 

7.43% 

9.71 

0.71 

2.14 

19.99 

6.56% 

7.88 

0.63 

1.34 

16.41 

2.47% 

3.92 

0.24 

0.49 

7.12 

9.03% 

11.80 

0.87 

1.83 

23.53 

Spouse annuities 

Retired 1.26 0.44 1.69 1.52 0.53 2.04 1.84 0.64 2.48 

Active 1.34 0.76 2.10 1.62 0.91 2.53 1.97 1.11 3.08 

Inactive 0.09 0.03 0.12 0.11 0.04 0.15 0.14 0.04 0.18 

Future entrants 0.35 0.11 0.46 0.32 0.10 0.42 0.27 0.09 0.36 

Total 3.04 1.33 4.38 3.57 1.58 5.14 4.22 1.88 6.10 

Survivor annuities 

Retired & deceased 1.58 0.26 1.85 1.91 0.32 2.23 2.32 0.39 2.71 

Active 0.66 0.08 0.74 0.80 0.10 0.90 0.97 0.12 1.09 

Inactive 0.02 0.01 0.03 0.03 0.01 0.03 0.03 0.01 0.04 

Future entrants 0.24 0.05 0.29 0.22 0.04 0.26 0.19 0.04 0.22 

Total 2.50 0.40 2.90 2.95 0.47 3.42 3.51 0.56 4.07 

All annuities combined 

Retired & deceased 7.31 2.38 9.70 8.82 2.88 11.70 10.73 3.50 14.22 

Active 7.38 3.51 10.89 8.90 4.23 13.14 10.83 5.15 15.97 

Inactive 0.54 0.20 0.74 0.65 0.24 0.90 0.80 0.29 1.09 

Future entrants 2.31 0.79 3.11 2.10 0.72 2.82 1.80 0.62 2.41 

Total annuities 17.55% 6.89% 24.44% 20.48% 8.07% 28.55% 24.14% 9.56% 33.70% 

Lump sum payments 0.02 0.03 0.03 

Total benefits 24.46% 28.58% 33.73% 

Note: Detail may not add to totals due to rounding. 

a Includes supplemental annuity benefits. 
 22 

Table 5. Balance of the Combined National Railroad Retirement Investment Trust (NRRIT)

and Railroad Retirement (RR) Account, and the Social Security

Equivalent Benefit (SSEB) Account as of December 31, 2004

(Dollar amounts in millions)

Combined NRRIT 

and RR Account 

SSEB 

Account 

Securities: 

Market value of NRRIT investments 

Par value specialsa

 (including accrued interest) 

Cash accounts 

$ 27,008 

334 

8 

$ -

738 

12 

Balance $ 27,350 $ 750 

a Par value specials are securities issued by the Treasury directly to the Railroad

 Retirement and Social Security Equivalent Benefit Accounts, maturing on the first

 business day of the month following the month of issue. Their yield rate each month

 is the average yield rate, computed as of the last day of the previous month, of

 marketable Treasury notes with maturity dates not less than three years away. 
 23 

Table 6. Actuarial surplus or (deficiency) for National Railroad Retirement

Investment Trust and Railroad Retirement Account

Employment assumption

I II III

Present values in millions of dollars 

Funds on hand, 12/31/2004 $ 27,350 $ 27,350 $ 27,350 

Retirement taxes 46,687 44,021 41,456 

Income taxes on benefits 6,432 6,228 6,044 

Available from SSEB Account 1,742 1,788 1,700 

Total, present and prospective assets 82,257 79,341 76,550 

Benefit payments 78,640 76,168 73,939 

Administrative expenses 2,281 2,545 1,996 

Total liabilities 78,449 81,185 75,935 

Actuarial surplus or (deficiency) 892 1,072 615 

One percent of tier 2 payroll $ 3,215 $ 2,665 $ 2,192 

Present values as a 

percentage of tier 2 payroll 

Funds on hand, 12/31/2004 8.51% 10.26% 12.48% 

Retirement taxes 14.52 16.52 18.91 

Income taxes on benefits 2.00 2.34 2.76 

Available from SSEB Account 0.56 0.65 0.78 

Total, present and prospective assets 25.58 29.77 34.93 

Benefit payments 24.46 28.58 33.73 

Administrative expenses 0.79 0.86 0.91 

Total liabilities 25.25 29.44 34.65 

Actuarial surplus or (deficiency) 0.33 0.33 0.28 
 24 

Table 7. Minimum contribution required under ERISA 

(Dollar amounts in millions) 

Amount or rate 

1. Present value of benefits for former and present employees $ 68,646 

2. Present value of administrative expenses for former and present 

employees 2,056 

3. Present value of tier 2 payroll for present employees 111,016 

4. Normal cost as a percentage of tier 2 payroll 6.00% 

5. Present value of future service costs for present employees = 6,661 

(3) x (4) 

6. Accrued liability = (1) + (2) - (5) 64,041 

7. Funds on hand, 12/31/2004a 28,100 

8. Unfunded accrued liability = (6) - (7) 35,941 

9. Level amount to fund unfunded accrued liability in 30 years 2,921 

Employment Assumption 

I II III 

10. Level tax rate to fund unfunded accrued liability and meet 

normal costs for next 30 years 21.50% 23.55% 26.18% 

11. Tax rate after 30 years (normal cost rate) 6.00% 6.00% 6.00% 

a The amount shown is the sum of the NRRIT, RR Account and SSEB Account balances shown

 in Table 5. 
 25

Table 8. Vested dual benefit amounts and average number of beneficiaries

Vested dual Average 

Fiscal benefit amountsa number of 

year (Millions) beneficiaries 

2007 $88 47,000 

2008 79 41,000 

2009 70 37,000 

2010 62 32,000 

2011 55 28,000 

2012 48 25,000 

2013 42 21,000 

2014 36 18,000 

2015 31 16,000 

2016 26 13,000 

2017 22 11,000 

2018 19 10,000 

2019 16 8,000 

2020 13 7,000 

2021 11 5,000 

2022 9 4,000 

2023 7 4,000 

2024 6 3,000 

2025 4 2,000 

2026 3 2,000 

2027 3 1,000 

2028 2 1,000 

2029 2 1,000 

2030 1 1,000 

a When projected amounts are used to determine the appropriation

 needed for benefit payments, a margin must be added to ensure

 payment of full benefits. 
 26

Table 9. Supplemental annuity benefit amounts and average number of beneficiaries

Supplemental Average 

Calendar benefit amounts number of 

year (Millions) beneficiariesa 

2006 $61 122,000 

2007 61 121,000 

2008 60 121,000 

2009 60 120,000 

2010 60 120,000 

2011 60 120,000 

2012 60 120,000 

2013 60 119,000 

2014 59 119,000 

2015 59 118,000 

2016 58 117,000 

2017 58 115,000 

2018 56 113,000 

2019 55 110,000 

2020 53 106,000 

2021 51 102,000 

2022 49 98,000 

2023 46 93,000 

2024 44 88,000 

2025 42 83,000 

2026 39 78,000 

2027 37 73,000 

2028 34 68,000 

2029 32 64,000 

2030 29 59,000 

2031 27 54,000 

2032 25 50,000 

2033 23 45,000 

2034 21 41,000 

2035 19 37,000 

2036 17 33,000 

2037 15 30,000 

2038 13 26,000 

2039 12 23,000 

2040 10 20,000 

2041 9 17,000 

2042 7 15,000 

2043 6 13,000 

2044 5 10,000 

2045 4 9,000 

a Average number in a year. Excludes cases where the supplemental annuity is totally 

eliminated because of a private pension. On January 1, 2005, there were about 32,000

 of these cases. 
 27

Table 10. Average number of railroad retirement annuitants and number of annuitants per full time employee

Average number of annuitants Average number of annuitants 

Calendar under each employment assumption per full time employee 

year I II III I II III 

2006 588,600 588,600 588,600 2.55 2.58 2.62 

2007 579,300 579,300 579,300 2.53 2.59 2.67 

2008 571,500 571,500 571,500 2.51 2.61 2.73 

2009 564,600 564,600 564,600 2.50 2.63 2.79 

2010 559,100 559,100 559,100 2.50 2.66 2.86 

2011 554,100 554,000 554,000 2.50 2.69 2.93 

2012 549,700 549,700 549,700 2.50 2.72 3.01 

2013 545,700 545,700 545,600 2.50 2.75 3.10 

2014 541,900 541,800 541,600 2.50 2.79 3.18 

2015 538,100 537,900 537,700 2.50 2.82 3.27 

2016 534,100 533,800 533,400 2.51 2.86 3.36 

2017 529,400 528,900 528,400 2.50 2.89 3.44 

2018 523,800 523,100 522,400 2.50 2.91 3.52 

2019 517,300 516,400 515,400 2.49 2.93 3.60 

2020 509,900 508,700 507,400 2.47 2.94 3.66 

2021 501,800 500,300 498,500 2.45 2.95 3.72 

2022 492,800 490,900 488,700 2.42 2.95 3.76 

2023 483,400 481,000 478,300 2.40 2.94 3.79 

2024 473,700 470,700 467,500 2.37 2.93 3.82 

2025 464,100 460,500 456,700 2.34 2.92 3.84 

2026 454,700 450,500 445,800 2.31 2.91 3.85 

2027 445,400 440,400 435,000 2.28 2.90 3.87 

2028 436,600 430,700 424,300 2.25 2.89 3.88 

2029 428,100 421,300 414,000 2.23 2.88 3.89 

2030 420,300 412,400 404,000 2.20 2.87 3.90 

2031 412,900 403,900 394,300 2.18 2.85 3.91 

2032 405,800 395,500 384,500 2.16 2.84 3.91 

2033 398,900 387,200 374,900 2.14 2.82 3.90 

2034 392,400 379,300 365,500 2.11 2.81 3.88 

2035 386,400 371,800 356,500 2.09 2.79 3.86 

2036 381,000 364,800 347,900 2.08 2.77 3.84 

2037 375,800 357,800 339,100 2.06 2.75 3.81 

2038 371,100 351,100 330,600 2.05 2.73 3.78 

2039 367,000 344,900 322,400 2.03 2.71 3.74 

2040 363,300 339,000 314,400 2.02 2.69 3.70 

2041 359,800 333,300 306,400 2.01 2.67 3.66 

2042 356,400 327,400 298,200 2.00 2.65 3.60 

2043 353,300 321,800 290,400 1.99 2.62 3.55 

2044 350,700 316,700 283,000 1.98 2.60 3.49 

2045 348,600 311,900 275,700 1.98 2.58 3.43 

2050 340,300 289,800 241,700 1.95 2.45 3.11 

2055 333,300 269,900 212,100 1.91 2.30 2.75 

2060 324,800 250,700 186,500 1.87 2.13 2.42 

2065 315,000 233,100 165,600 1.81 1.98 2.15 

2070 306,000 218,700 150,300 1.76 1.86 1.95 

2075 299,300 208,500 140,300 1.72 1.77 1.82 

2079 295,800 203,400 135,400 1.70 1.73 1.76 
 28 

Table 11. Transfers to railroad retirement system under financial interchange with social security system, 1937-2006a 

(Millions of dollars) 

Benefit Tax Cash transfers toc 

Fiscal credits to credits to railroad retirement 

Determination years railroad social Year of 

number covered retirementb security Amount transfer 

1-20 1937-71 d 12,981.3 6,572.3 6,636.9 d 1953-72 d

21 1972 1,217.1 470.9 802.5 1973

22 1973 1,412.8 556.4 930.9 1974

23 1974 1,575.6 653.5 1,010.3 1975

24 1975 1,853.3 718.7 1,238.7 1976

25 1976 1,872.2 f 772.0 1,207.5 1977

26 1977 e 2,556.6 f 1,060.8 1,618.5 1978

27 1978 2,230.3 902.6 1,477.4 1979

28 1979 2,389.5 1,089.9 1,429.9 1980

29 1980 2,683.4 1,204.8 1,614.4 1981

30 1981 2,973.7 1,322.5 1,819.6 1982

31 1982 3,321.9 1,296.0 2,278.6 1983

32 1983 3,471.8 1,287.9 2,425.6 1984

33 1984 3,524.1 1,472.8 2,352.9 1985

34 1985 3,658.5 1,443.1 2,652.8 1986

35 1986 3,744.8 1,398.7 2,614.2 1987

36 1987 3,864.4 1,305.0 2,851.3 1988

37 1988 4,028.8 1,427.3 2,933.5 1989

38 1989 4,149.5 1,418.9 3,049.1 1990

39 1990 4,415.3 1,451.1 3,456.7 1991

40 1991 4,434.7 1,476.5 3,206.4 1992

41 1992 4,720.1 1,523.1 3,435.4 1993

42 1993 4,796.5 1,583.3 3,525.5 1994

43 1994 5,199.6 1,515.5 4,120.1 1995

44 1995 4,836.2 f 1,545.1 3,556.3 1996

45 1996 5,008.0 1,566.8 3,747.2 1997

46 1997 5,114.1 1,615.4 3,819.1 1998

47 1998 5,173.5 1,641.9 3,816.0 1999

48 1999 5,195.6 1,767.5 3,697.6 2000

49 2000 4,767.8 f 1,750.9 3,282.8 2001

50 2001 5,180.5 1,756.9 3,646.8 2002

51 2002 5,217.5 1,748.2 3,747.3 2003

52 2003 5,350.6 1,731.1 3,843.5 2004

53 2004 5,480.8 1,820.0 3,917.3 2005

54 2005 5,527.6 1,906.1 3,946.3 2006

Total 1937-2005 143,928.1 52,773.6 99,708.7 

a

 Financial interchange transactions with the Hospital Insurance Trust Fund are not included. These involve mainly a transfer of collected

 taxes to the Centers for Medicare and Medicaid Services, with some adjustments for difference in earnings bases under the two systems. 

b

 Benefit amounts were credited to RR Account for covered years 1983 and earlier and to SSEB Account for covered years 1984 and later.

 Amounts include allowances for administrative expenses and adjustments to previous determinations. 

Cash transfers were made to RR Account in 1984 and earlier and to SSEB Account in 1985 and later. Transfers include interest,

 which is not shown in table.

d First determination covered period January 1937-June 1952. Initial balance of $488.2 million was never transferred to social security;

 only interest was paid until debt was liquidated by subsequent offsets in favor of railroad retirement. 

e

 1977 figure covered 15 months (July 1976 - September 1977) because of change in definition of fiscal year. 

f

 Includes adjustment for pre-1957 military service. 

c
29

A P P E N D I X 

Outline of the benefit and financing provisions 

of the railroad retirement system as amended through December 31, 2005

EMPLOYEE BENEFITS

1. Normal age annuity 

Requirement of 10 years of service or 5 years of service after 1995 for retirement at social security retirement age (see definition at end of 

outline). Employees with less than 10 years of service must meet Social Security Act eligibility requirements to receive a tier 1 benefit. 

2. Prenormal age annuity

A. Eligible for unreduced benefit upon later of (1) attainment of age 60 and (2) completion of 30 years of service (60/30 eligibility). 

B. Eligible for reduced benefit with less than 30 years of service upon later of (1) attainment of age 62 and (2) completion of 10 years

of service or 5 years of service after 1995. The benefit is reduced by 1/180 for each of the first 36 months and by 1/240 for each 

additional month the employee is under social security retirement age. (Reduction for age in excess of 36 months applies only to

tier 1 benefit if employee had any service before 8-12-1983.) 

3. Total and permanent disability annuity

10-year service requirement or 5 years of service after 1995. Benefit may not begin earlier than the later of (1) the first day of the sixth 

month following date disability begins and (2) the first day of the twelfth month before the month in which the application is filed. 

Employees with less than 10 years of service and at least 5 years of service after 1995 who meet Social Security eligibility requirements 

may qualify for a tier 1 benefit only (an age reduced tier 2 benefit would be payable at age 62). 

4. Occupational disability annuity

Requirement of 20 years of service or attainment of age 60 with 10 years of service; current connection (see definition at end of outline)

required. Benefit may not begin earlier than the later of (1) the first day of the sixth month following date disability begins and (2) the first

day of the twelfth month before the month in which the application is filed.

5. Supplemental annuity 

Requirement of attainment of age 60 with 30 years of service if retired on or after 7-1-1974, or age 65 with 25 years of service. Must have 

service before 10-1-1981. Current connection required. 

6. Vested dual benefit 

A. Requirement of fully insured (see definition at end of outline) status under Social Security Act effective 12-31-1974 and either 

(1) 25 years of railroad service before 1975 or (2) 10 years of railroad service before 1975, with some railroad work in 1974 or a 

current connection on 12-31-1974 or at the time the annuity begins, or 

B. Requirement of fully insured status under Social Security Act as of last year of railroad work before 1975 and 10 years of railroad 

service before 1975. 
30

7. Work restrictions

Suspension of annuity for any month annuitant is employed by a railroad. For disabilities, loss of one month's annuity for each $400 in 

excess of $4,800 earned in a year with the last $200 of such excess treated as $400 (no annuity is lost for any month with earnings below 

$400). In addition, the tier 1 portion of a regular annuity based on railroad earnings (see definition at end of outline) after 1974 and all 

social security earnings (see definition at end of outline) is subject to social security work restrictions, unless a social security benefit is 

also being paid. If annuitant is employed by last non-railroad employer preceding retirement, the tier 2 portion and the supplemental 

annuity are also affected, being reduced one dollar for each two dollars of earnings, subject to a maximum reduction of 50 percent. All 

vested dual benefits are subject to social security work restrictions. 

8. Creditable service (continuity not required) 

All service after December 31, 1936. Service before 1937 may be used if annuitant had employment relation on August 29, 1935 or 6

months of service after August 29, 1935 and before 1946. No limit on service except 30-year maximum if pre-1937 service used. 

Additional service months may be deemed, for years after 1984, where employee does not work in every month of year, but railroad 

earnings exceed monthly prorations of annual tier 2 maximum earnings creditable. 

9. Creditable and taxable railroad earnings 

From 1966 through 1978, the maximum monthly earnings were one-twelfth of the annual social security maximum. The 1977 social 

security amendments introduced a difference between the maximum monthly earnings creditable for tier 1 and tier 2 benefits starting 

in 1979. 

before July 1, 1954 $ 300 Tier 1 Tier 2 

July 1, 1954 - May 31, 1959 350 1979 $1,908.33 $1,575 

June 1, 1959 – Oct. 31, 1963 400 1980 2,158.33 1,700 

Nov. 1, 1963 – Dec. 31, 1965 450 1981 2,475 1,850 

1966-67 550 1982 2,700 2,025 

1968-71 650 1983 2,975 2,225 

1972 750 1984 3,150 2,350 

1973 900 

 1974 1,100 

 1975 1,175 

 1976 1,275 

 1977 1,375 

 1978 1,475 

Starting in 1985, earnings are credited on an annual rather than a monthly basis. The annual maximums are: 

Tier 1 Tier 2 Tier 1 Tier 2

 1985 $39,600 $29,700 1996 $62,700 $46,500 

1986 42,000 31,500 1997 65,400 48,600 

1987 43,800 32,700 1998 68,400 50,700 

1988 45,000 33,600 1999 72,600 53,700 

1989 48,000 35,700 2000 76,200 56,700 

1990 51,300 38,100 2001 80,400 59,700 

1991 53,400 39,600 2002 84,900 63,000 

1992 55,500 41,400 2003 87,000 64,500 

1993 57,600 42,900 2004 87,900 65,100 

1994 60,600 45,000 2005 90,000 66,900 

1995 61,200 45,300 2006 94,200 69,900 
31

10. Creditable military service and earnings 

Military service is creditable in war and national emergency periods, and in some cases between June 15, 1948 and December 15, 1950, if

preceded by railroad service in the year of entry into military service or the preceding year. 

Earnings: $160 before 1968 

$260 after 1967 but before 1975 

For each calendar year after 1974, earnings are the same as that credited under social security. 

11. Basic monthly annuity computation 

Tier 1: Social security benefit based on combined railroad and social security earnings, less social security benefit actually payable (based 

on social security earnings only). See item 2 for computation of tier 1 benefit for employees with 60/30 eligibility.

Tier 2: 0.7% of the average monthly compensation (AMC) multiplied by the number of years of service. This amount is then reduced by

25% of the employee's gross vested dual benefit. The AMC is the average of an individual's highest 60 months of railroad earnings 

up to the tier 2 maximum. For each month of service in a year for which the Railroad Retirement Board's records do not show 

earnings on a monthly basis, the total earnings for the year divided by the months of service in that year will be considered the 

monthly earnings for each month of service in the year. 

12. Vested dual benefit computation

A. For employees satisfying requirements in item 6.A., benefit is social security benefit based on railroad earnings through 1974, plus 

social security benefit based on social security earnings through 1974, less social security benefit based on combined railroad and

social security earnings through 1974. 

B. For employees satisfying requirements of item 6.B., benefit is the same as in A., except for the exclusion of all earnings after last 

pre-1975 year employee had railroad employment. 

In both cases, benefit might be proportionally reduced so that the total amount paid out in vested dual benefits in any fiscal year does 

not exceed the total amount appropriated for that year (see item 40). 

13. Supplemental annuity computation 

For employees who were entitled to supplemental annuities or who would have been entitled, but for last person service, prior to 1975, the 

monthly benefit is a minimum of $45 increased by $5 for each year of service over 25, with a maximum benefit of $70. These employees

have a reduction in their regular railroad retirement annuity because of the supplemental annuity. For employees first entitled or potentially

entitled after 1974, the monthly benefit is a minimum of $23 increased by $4 for each year of service over 25, with a maximum benefit of 

$43. These employees have no reduction in their regular railroad retirement annuity. Supplemental annuity will be reduced if employee 

receives a private pension from railroad employer based on employer contributions. 

14. Cost-of-living increases (annually, effective with January 1 payments) 

Tier 1: Same as social security increases. 

Tier 2: 32.5% of social security increases.

Vested dual benefits: Frozen at the 1974 level, except that social security cost-of-living increases effective between 12-31-1974 and the 

earlier of January 1, 1982 and the annuity beginning date are included in the benefit computation.

Supplemental annuity: None. 

15. Tax rebate lump sum 

Employee who has at least 10 years of railroad service and is not eligible for the vested dual benefit will receive a lump sum at retirement 

computed by summing for each year from 1951 through 1974 the product of the social security tax rate for the year times the excess of the 

employee's combined railroad and social security earnings for the year over (approximately) the maximum creditable for the year under the 

1937 Act. Survivors of employee may receive refund if employee dies before receiving it. 
32

16. Separation/severance lump sum 

Lump sum, equal to tier 2 payroll taxes deducted from separation or severance payments, will be paid at retirement to employees with at 

least 10 years of service or 5 years of service after 1995 to the extent that separation or severance payments did not yield additional tier 2

service credits. 

SPOUSE BENEFITS

17. Eligibility

 A. Unreduced annuity:

1. Spouse retiring at age 60 (or any age with a child in care), if (a) employee attained 60/30 eligibility before 7-1-1984 and retired 

at age 60 or later, (b) employee attained 60/30 eligibility after 6-30-1984 and retired at age 62 or later, (c) employee has 30 or

more years of service and retired after 12-31-2001 at age 60 or later, or (d) spouse retired after 12-31-2001, and employee 

retired from disability, has 30 or more years of service and is age 60 or over. 

2. Spouse retiring at social security normal retirement age (or any age with a child in care), if (a) employee retired before 1-1-

1975 and is age 65 or over, (b) employee retired after 12-31-1974 and is age 62 or over, or (c) employee retired after 6-30-

1974, has 30 or more years of service and is age 60 or over. 

 B. Reduced annuity: 

1. Spouse retiring at age 60 if employee attained 60/30 eligibility after 6-30-1984 and retired with an age annuity before 1-1-2002

before attaining age 62. 

2. Spouse retiring at age 62, if employee has less than 30 years of service, is retired, and has attained age 62. Age reduction is

1/144 for each of the first 36 months spouse is under social security retirement age and 1/240 for each month in excess of 36 

that spouse is under retirement age. (Reduction for age in excess of 36 months applies to tier 1, but not tier 2, if employee had

any service before 8-12-1983.) 

18. Work restrictions

Same as employee; in addition, spouse is not paid for any month employee annuity is not payable by virtue of work restrictions, and spouse 

is reduced $1 for each $2 of employee's earnings for last non-railroad employer preceding employee's retirement (see item 7). 

19. Annuity computation 

Tier 1: One-half of social security benefit based on employee's combined railroad and social security earnings. See item 17 for 

computation of spouse tier 1 in cases where employee is receiving a reduced 60/30 benefit. If spouse is entitled to a social security

benefit, tier 1 is reduced by the amount of the benefit, but not below 0. If spouse is entitled to employee annuity or a public service

pension, certain additional restrictions apply. 

Tier 2: 45% of employee's tier 2 benefit. Spouse receives additional benefit if spouse is also an employee annuitant and either the 

employee or spouse has railroad service prior to 1975. 

20. Vested dual benefit 

A spouse receiving a vested dual benefit on August 13, 1981 will continue to receive a benefit (adjusted as described in item 12). No

vested dual benefits will be awarded after that date. 
33

21. Divorced spouse 

Entitled to a tier 1 benefit only. Employee must be age 62 and retired. Divorced spouse must be social security retirement age (or age 62 

for reduced benefit), unmarried, and have been married for at least 10 consecutive years to employee.

22. Cost-of-living increases for spouses 

Each tier is subject to same percentage increase as corresponding tier of employee benefit. 

SURVIVOR AND DEATH BENEFITS

23. Residual lump sum death benefit 

Payable when it appears no further benefits will derive from deceased employee except possibly to a widow, widower or parent at a future 

date. In this case, survivor must waive the right to all future benefits based on the deceased employee's railroad service. The amount 

payable is the sum of 4% of taxable railroad earnings from 1-1-1937 to 12-31-1946, 7% from 1-1-1947 to 12-31-1958, 7-1/2% from 

1-1-1959 to 12-31-1961, 8% from 1-1-1962 to 12-31-1965, 8.1% from 1-1-1966 to 12-31-1966, 8.65% from 1-1-1967 to 12-31-1967, 8.8% 

from 1-1-1968 to 12-31-1968, 9.45% from 1-1-1969 to 12-31-1970, 9.85% from 1-1-1971 to 12-31-1972, 10.1% from 1-1-1973 to 

9-30-1973, 5.35% from 10-1-1973 to 12-31-1973, and 5.45% from 1-1-1974 to 12-31-1974. Railroad earnings after 1974 are not taken 

into account. The amount actually paid is reduced by the amount of benefits paid deriving from the deceased employee. 

24. Employee requirement for survivor benefits 

All benefits except residual lump sum require deceased employee to have 10 years of railroad service or 5 years of service after 1995 and a 

current connection. If employee does not meet above conditions, his earnings record is transferred to social security, which pays any 

survivor benefits. 

25. Aged widow's and widower's eligibility

A widow or widower must be age 60 and unremarried. Those age 60-61 are deemed age 62 in computing the benefit. For those born

before 1940, the benefit reduction is 19/40% for each month of age under 65 when benefits begin. For those born after 1939, the age 

reduction depends on the age at retirement and the social security retirement age. In this case, the monthly reduction factor is that 

percentage which would cause retirement at age 60 to result in a 28.5 percent reduction.

26. Disabled widow's and widower's eligibility

A widow or widower must be at least age 50 and under age 60, unremarried, and totally and permanently disabled if disability occurs

within 7 years of employee's death or within 7 years after widowed mother's or father's status terminated. Age reduction is 28.5%. Benefit 

may not begin earlier than the later of (1) the first day of the sixth month following the date disability begins and (2) the first day of the 

twelfth month before the month in which the application is filed.

27. Widowed mother's and father's eligibility 

Unremarried surviving spouse of a deceased employee who is under social security retirement age and who at the time of filing an 

application has in his or her care a minor or disabled child of the deceased employee. 
34

28. Divorced widow(er)'s and remarried widow(er)'s eligibility

The following are eligible for a tier 1 benefit only. 

A. Divorced widow(er) - must (1) have been married to employee at least 10 years, be unmarried or remarried after age 60 (after age

50 and disability onset if disabled), and have attained age 60 or age 50 if disabled, or (2) be unmarried at any age with a child of the 

employee in care. 

B. Remarried widow(er) - must have remarried after age 60 (after age 50 and disability onset if disabled), or the remarriage must have 

ended. Widow(er) must have attained age 60, be between 50 and 59 and disabled or be any age with a child in care. 

Benefits for divorced aged widow(er)s and remarried aged widow(er)s are reduced for the full number of months under social security

retirement age.

29. Child's eligibility 

A child of a deceased employee must be under 18 or under 19 and a full-time elementary or secondary school student. Unmarried children

continuously disabled since before age 22 are also eligible, regardless of age. 

30. Parent's eligibility

A parent of a deceased employee who has attained age 60 and received at least one-half of his or her support from the employee will be 

eligible for an annuity. If the employee died leaving a widow, widower or child who is or might become eligible in the future, the parent 

will be eligible for a tier 1 benefit only. In certain instances, a remarried parent of a deceased employee will be eligible for a tier 1 benefit. 

31. Work restrictions

Annuity not payable for any month in which survivor engages in railroad employment. Entire benefit subject to social security work 

restrictions. 

32. Annuity computation 

Tier 1: Amount payable to survivor under Social Security Act, based on the deceased employee's combined railroad and social security

earnings after 12-31-1936, less the amount of any social security benefit received. Additional restrictions exist for a widow or 

widower who also receives an annuity as a railroad employee or who receives a public service pension. 

Tier 2: Widow or widower - 50% of employee tier 2 benefit 

Parent - 35% of employee tier 2 benefit 

Children - 15% of employee tier 2 benefit for each child 

The total family tier 2 benefit has a minimum of 35% and a maximum of 80% of the employee's tier 2 benefit (a maximum 

of 130% is used for the purpose of calculating the widow(er) intitial minimum amount). 

For a widow or widower an “initial minimum amount” based on the two-tier annuity amount that would have been payable to the railroad 

employee at the time the widow(er)’s annuity is awarded is computed with a widow(er)’s tier 2 amount equal to 100 percent of the 

employee’s tier 2 amount. Widow(er)s’ annuities computed on the basis of the initial minimum amount are not adjusted for annual cost-ofliving increases until the total annuity amount is exceeded by the annuity amount the widow(er) would have been paid under prior law (tier 

2 amount equal to 50 percent of the employee’s tier 2 amount), with all interim cost-of-living increases otherwise payable. 

For an aged widow or widower, the total benefit exclusive of any vested dual benefit may not be less than amount received as spouse in

month before employee's death. 

All percentages are before deductions for work or entitlement to social security benefit or railroad retirement employee annuity.

33. Vested dual benefit for widow or widower 

A widow or widower receiving a vested dual benefit on August 13, 1981 will continue to receive a benefit (adjusted as described in item

12). No vested dual benefits will be awarded after that date. 
35

34. Insurance lump sum 

Payable if employee leaves no survivor eligible for monthly benefits in the month of his death.

A. If employee had 10 years of service before 1-1-1975, the benefit is 10 times the basic amount. The basic amount is 52.4% of the

first $75 of average monthly remuneration (AMR), plus 12.8% of the remainder, increased by 1% for each year before 1975 with 

earnings of $200 or more. The AMR is combined railroad and social security earnings before 1975 divided by the number of 

months after 1936 or age 22 and up to retirement or death. 

B. If employee had less than 10 years of service as of 12-31-1974, the amount will be the amount social security would have paid 

(currently $255). This amount will only be paid to a widow or widower living with the employee at the time of the employee's

death.

35. Cost-of-living increases for survivors 

Each tier is subject to same percentage increase as corresponding tier of employee benefit. 

FINANCING, INVESTMENTS AND TAXATION OF BENEFITS 

36. Employee and employer payroll taxes 

Employees and employers contribute at the prevailing social security rate up to the tier 1 earnings limit. In addition, employees and

employers pay a tier 2 tax up to the tier 2 earnings limit. Tier 2 taxes on both employers and employees are based on the ratio of certain

asset balances to the sum of benefits and administrative expenses (the average account benefits ratio). 

At the end of each fiscal year (September 30), an Account Benefits Ratio (ABR) is calculated by dividing the fair market value of the assets

in the RR Account and the NRRIT (and for years before 2002, the SSEB Account) as of the close of such fiscal year by the total benefits 

and administrative expenses paid from the RR Account and the NRRIT during such fiscal year. The Average Account Benefits Ratio

(AABR), with respect to any calendar year, is then calculated as the average of the account benefits ratios for the 10 most recent fiscal

years ending before such calendar year. If the AABR is not a multiple of 0.1, it is increased to the next highest multiple of 0.1. The tier 2 

tax rate is determined from a tax rate table based on the AABR.

 AABR Tier 2 tax rate 

At least But less than Employer Employee

2.5 22.1 4.9 

2.5 3.0 18.1 4.9 

3.0 3.5 15.1 4.9 

3.5 4.0 14.1 4.9 

4.0 6.1 13.1 4.9 

6.1 6.5 12.6 4.4 

6.5 7.0 12.1 3.9 

7.0 7.5 11.6 3.4 

7.5 8.0 11.1 2.9 

8.0 8.5 10.1 1.9 

8.5 9.0 9.1 0.9 

9.0 8.2 0.0 

Contributions to 401(k) deferred compensation plans and the value of employer-paid premiums for group term life insurance coverage in 

excess of $50,000 are included in railroad earnings for payroll tax purposes. 

37. Supplemental annuity tax 

As of 1-1-2002, the supplemental annuity work-hour tax has been repealed. 
36

38. Financial interchange 

Railroad retirement system pays to social security system the taxes social security would have collected and receives the additional amount 

of benefits and administrative expenses social security would have paid if railroad employment had been covered under social security. 

The net difference (including interest) is transferred in the June after the fiscal year for which the transfer is made. 

The Railroad Retirement Board estimates the amount and direction of the financial interchange transfer that would be made for each month 

if transfers were on a current monthly basis. If this estimate favors the railroad retirement system, Treasury advances the amount with 

interest to the Railroad Retirement Account, as a loan from the general fund, by the middle of the succeeding month. Within 10 days after

receipt of the annual financial interchange for a fiscal year, the RRB must repay the amount, with interest, advanced during the fiscal year. 

39. Investments 

Amounts in the Railroad Retirement Account not needed to pay current administrative expenses and amounts in the Social Security

Equivalent Benefit Account not needed to pay current benefits and administrative expenses are transferred to the National Railroad 

Retirement Investment Trust whose Board of seven trustees is empowered to invest Trust assets in non-governmental assets, such as 

equities and debt, as well as in governmental securities.

40. Financing of vested dual benefits

General revenue appropriations finance all vested dual benefit payments since September 1981. Beginning October 1, 1981, each annual 

appropriation is placed in the Dual Benefits Payments Account. Total benefits paid in any fiscal year (starting with 1982) may not exceed

the total available in the account. The account may borrow at the end of a fiscal year the amount that the Railroad Retirement Board 

estimates will be necessary to pay vested dual benefits for the first month of the next fiscal year. 

41. Taxability of benefits 

The portion of tier 1 benefits equivalent to social security benefits is taxed under the same rules as are social security benefits. Tier 1 

benefits in excess of social security equivalent benefits, tier 2 benefits, vested dual benefits, and supplemental annuities are taxed under the 

rules by which private pensions are taxed.

Revenues from taxes on social security equivalent benefits are transferred to the social security system through the financial interchange. 

Revenues from taxes on tier 1 benefits in excess of social security equivalent benefits and tier 2 benefits are transferred to the Railroad 

Retirement Account. Revenues from taxes on vested dual benefits are transferred to the Dual Benefits Payments Account. 

MISCELLANEOUS PROVISIONS

42. Benefit preservation 

Each year the Railroad Retirement Board must report to the President and Congress the results of a five-year projection of anticipated

revenues to and payments from the railroad retirement account. If the results show that the funds in the account will be insufficient to pay

full benefits at any time during the five-year period, the report must indicate (1) the first fiscal year in which benefits would have to be 

reduced because of insufficient funds in the absence of any changes, and (2) the amount of adjustments necessary to preserve financial 

solvency. Within 180 days after publication of this report, representatives of railroad labor and management are obligated to submit 

proposals designed to preserve the fund's solvency. The Railroad Retirement Board will publish regulations necessary to provide a 

constant level of benefits at the maximum level possible and to insure that no individual receives less than what he would have had all his

earnings been covered under social security. The Railroad Retirement Board's regulations will take effect beginning with the first year in 

which benefit reductions will be necessary and continue until legislative action supersedes them. 

43. Minimum annuity

The overall minimum guaranty for employees and dependents is 100% of the amount, or the additional amount, the family would receive 

under the Social Security Act if the employee's railroad earnings after 1936 were credited as social security earnings. 
37

44. Automatic benefit eligibility adjustments 

Liberalizations in social security eligibility requirements will automatically be reflected in railroad retirement eligibility requirements, but 

reductions in social security requirements for categories not entitled to railroad retirement annuities under the 1937 act will not confer 

railroad retirement eligibility. If the Social Security Act is amended to provide benefits to a class not previously entitled under social 

security, the new class will also be provided railroad retirement benefits. The amount will be the social security benefit based on the 

employee's combined railroad and social security earnings. 

45. Transfer of credits

Transfer of railroad retirement credits is made to social security if an employee had less than 10 years of railroad service and less than 5 

years of service after 1995 or, in the case of a survivor, if the employee lacked a current connection. 

DEFINITIONS 

The meanings of terms used in the outline are defined below: 

Railroad earnings - earnings derived from covered railroad employment, up to the maximums specified in item 9.

Social security earnings - earnings derived from employment covered under the Social Security Act (excludes railroad earnings), up to 

the maximums allowed.

Current connection - generally defined as having at least 12 months of railroad service in the 30 months preceding death or retirement.

An employee whose last 12 months of railroad service occurred prior to the 30 months before retirement or death may maintain a

current connection if the employee did not perform any regular employment between the end of the 30 month period containing the last 

12 months of railroad service and the month of retirement or death. For purposes of the supplemental annuity or survivors' benefits, an

employee who was terminated involuntarily and without fault on or after October 1, 1975, after 25 years of service and did not 

thereafter decline an offer of employment in the same class or craft in the railroad industry is deemed to have a current connection.

Fully insured - insured for retirement at age 62 under social security; does not necessarily imply an insured status for disability benefits 

or for survivor benefits for death before age 62. 

Social security benefit - when used in describing the computation of the vested dual benefit, the term "social security benefit" means a 

primary insurance amount computed by using the social security formula in effect in 1974 and the specified earnings; it does not imply

an actual benefit.

Social security retirement age - the age at which an individual may receive an unreduced benefit at retirement under the Social Security

Act, as follows: 

Year of attainment 

of early retirement age 

 (62 for employees and spouses, Retirement age 

60 for widows and widowers) (age for unreduced benefit)

1999 or earlier 65 years, 0 months 

2000 65 years, 2 months 

2001 65 years, 4 months 

2002 65 years, 6 months 

2003 65 years, 8 months 

2004 65 years, 10 months 

2005-2016 66 years, 0 months 

2017 66 years, 2 months 

2018 66 years, 4 months 

2019 66 years, 6 months 

2020 66 years, 8 months 

2021 66 years, 10 months 

2022 or later 67 years, 0 months