Railroad Unemployment 

Insurance System 

Annual Report Required by Section 7105 

of the Technical and Miscellaneous 

Revenue Act of 1988 

U.S. Railroad Retirement Board 

Bureau of the Actuary and Research 

June 2018 
ANNUAL REPORT REQUIRED BY THE TECHNICAL 

AND MISCELLANEOUS REVENUE ACT OF 1988 

I. Introduction 

Section 7105 of the Technical and Miscellaneous Revenue Act of 1988 (Public Law 100-

64 7) requires the Railroad Retirement Board to submit an annual report to the Congress 

on the financial status of the railroad unemployment insurance system. The report must 

contain recommendations for financing changes that might be advisable, specifically with 

regard to rates of employer contributions. This report meets the requirements of Section 

7105 for 2018. 

II. Recent Developments 

The maximum daily benefit of $72 for the benefit year beginning July 1, 2017 will 

increase to $77 for the benefit year beginning July 1, 2018. Beginning July 1, 2019, the 

maximum daily benefit rate will increase to $78. The monthly tax base was $1,455 for 

2016, and $1,545 in 2017 and increased to $1,560 in 2018, based on changes in the 

railroad retirement tier I creditable base. 

Average employment in calendar year 2017 was 223,000 (subject to later revision), 

which is between the intermediate and optimistic employment assumptions in last year's 

report. There is currently a 1.5 percent surcharge in calendar year 2018. This year's 

report predicts that there will be a surcharge of 1.5 percent in calendar years 2019 and 

2020, under each assumption. Under the intermediate and pessimistic assumptions, the 

surcharge is expected to continue through 2021. 

Benefits payable under the Railroad Unemployment Insurance Act are subject to 

sequestration under Public Law 99-177, the Balanced Budget and Emergency Deficit 

Control Act of 1985, as amended by Public Law 112-25, the Budget Control Act of 

2011. Benefit estimates for fiscal years 2018 and 2019 reflect amounts after 

sequestration. However, since the actual sequestration percentages applicable to future 

years are unknown, benefit estimates for fiscal years 2020 and later are not reduced for 

possible sequestration. 

III. Economic and Employment Assumptions 

The economic and employment assumptions used in this report correspond to those used 

in the report required by Section 502 of the Railroad Retirement Solvency Act of 1983. 

Unemployment levels are the single most significant factor affecting the financial status 

of the railroad unemployment insurance system. Rapidly declining employment coupled 

with high unemployment levels, as occurred in the early 1980s and more recently in the 

late 2000s, can put the system into debt. Conversely, cash balances can accumulate if 
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employment declines are moderate and unemployment levels remain low. The 

experience-rating system is designed to tie individual employer contribution rates to their 

level of benefit claims, thereby adjusting the overall account balance to an appropriate 

level. 

The three railroad employment assumptions used, denoted A, B, and C, are shown in 

Table 1 at the end of the report. The projected tier I creditable limits, which determine 

both the railroad unemployment monthly wage base and the maximum daily benefit rate, 

are from the Office of Management and Budget December 2017 economic assumptions. 

Table 2 shows the tier I creditable limit, unemployment monthly earnings base and daily 

benefit rate assumptions. 

IV. Results 

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

assumptions for the 11 fiscal years 2018-2028. The results are summarized in Table 3. 

Average employer contribution rates under the experience-rated contribution system are 

. weighted averages based on the relative size of each railroad's payroll. 

Table 3 consists of three tables A, B, and C, one for each employment projection. The 

tables show (1) contributions, excluding the portion allocated to the Railroad 

Unemployment Insurance Administration Fund (Fund), (2) net benefit payments, (3) 

other income and outgo, (4) the cash balance in the Railroad Unemployment Insurance 

Account (Account) at the end of each fiscal year, (5) the loan balance, if any, including 

accrued interest, (6) the Account balance at the end of each fiscal year, less loans due and 

(7) the average employer contribution rate for each calendar year. 

The experience-rating formula is designed to keep the accrual balance of the Account, as 

of June 30, between $100 million and $250 million, indexed for changes in the system 

compensation base. If the balance exceeds an indexed $250 million, contributions are 

reduced by a pooled credit. If the balance falls below an indexed $100 million but is at 

least an indexed $50 million, contributions are increased by a surcharge of 1.5 percent. If 

the Account balance is less than an indexed $50 million, but greater than zero, the 

·surcharge will be 2.5 percent. A maximum surcharge of 3.5 percent applies ifthe 

Account balance is less than zero. 

The June 30, 2016 balance 1 of $93.8 million was above the indexed $50 million 

1 The balance referred to here and in the following paragraph is the accrual balance of the Account as of 

June 30, on which calculations of pooled credits and surcharges are based. Cash balances shown on 

Tables 3A-C are not used in these calculations. June 30 accrual balances are shown in Table 4. 
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surcharge threshold of $76.4 million but below the indexed $100 million surcharge 

threshold of $152.9 million. As a result, a 1.5 percent surcharge was in effect for 

calendar year 2017. By June 30, 2017, the balance had risen to $97.7 million, which was 

. below the indexed $100 million surcharge threshold of $146.3 million but above the 

indexed $50 million surcharge threshold of $73.1 million. Consequently, a 1.5 percent 

surcharge is in effect for calendar year 2018. 

Under each assumption, the Account balance is expected to be below the indexed $100 

million threshold in June 2018, resulting in a 1.5 percent surcharge in calendar year 2019. 

For June 2018, the balance is expected to be below the indexed $100 million threshold 

under all three assumptions, resulting in a 1.5 percent surcharge in 2019. A 1.5 percent 

surcharge is probable for 2020 under the intermediate and pessimistic assumptions. 

Surcharges of 1.5 percent will occur intermittently thereafter. There are no loans 

expected even under the pessimistic assumption. The highest average contribution rate in 

the 11-year projection period is under employment assumption C, where it rises to 4.03 

percent for calendar year 2023. This is well below the 12 percent maximum rate 

allowable. 

Administrative expenses are assumed to be above current levels in every fiscal year. 

Nevertheless, the 0.65 percent of taxable payroll allocated to the Fund is sufficient to 

finance administrative expenses during the projection period. When the accrual balance 

in the Administration Fund exceeds $6 million at the end of a fiscal year, excess funds 

are transferred to the Account early in the next fiscal year. Under all employment 

assumptions, the accrual balance in the Administration Fund exceeds $6 million at the 

end of each year in the 11-year projection period. 

V. Recommendation 

As stated in the introduction, the Congress directed the Railroad Retirement Board to 

make recommendations for financing changes that might be advisable, specifically with 

regard to rates of employer contributions. 

No financing changes are recommended at this time. Projections under three different 

employment assumptions indicate that experience-based contribution rates will respond 

to fluctuating employment and unemployment levels and thereby maintain fund solvency. 
Table 1: Employment Assumptions Used in 2018 Report 

Calendar Average Employment (thousands) 

Year A B c 

2017 223 223 223 

2018 222 220 216 

2019 221 216 210 

2020 220 213 204 

2021 220 209 198 

2022 219 206 192 

2023 218 203 186 

2024 217 200 181 

2025 216 197 176 

2026 215 194 171 

2027 215 191 166 

2028 214 188 161 

Assumptions A and B reflect the stability of employment in passenger service (Amtrak 

and commuter service) as distinguished from freight service. Assumption A has the 

most optimistic employment of the three assumptions. Assumption B is intended to 

provide a "moderate" assumption. Assumption C, the most pessimistic, has declines in 

both passenger and freight employment. 

Passenger employment is assumed to remain level at 48,000 under assumptions A and 

B, and to decline by 500 each year under assumption C. Non-passenger employment is 

assumed to decline at a constant annual rate of 0.5 percent, 2.0 percent and 3.5 percent 
Calendar 

Year 

2017 

2018 

2019 

2020 

2021 

2022 

2023 

2024 

2025 

2026 

2027 

2028 

Table 2: Annual Tier I Creditable Limit, Monthly RUI 

Taxable Limit, and Maximum Daily Benefit Rate 

Annual 

Tier I 

Limit 

$127,200 

128,400 

132,300 

135,900 

140,700 

146,700 

153,600 

161 ,400 

169,500 

177,900 

186,900 

196,500 

Monthly 

RUI 

Limit 

$1 ,545 

1,560 

1,600 

1,640 

1,690 

1,750 

1,825 

1,910 

1,995 

2,085 

2,180 

2,280 

Maximum 

Daily 

Benefit 

Rate [1] 

$72 

77 

78 

80 

82 

84 

87 

91 

95 

99 

104 

109 

[1] Effective for registration periods beginning after June 30 in the calendar 

year. 
Account 

ContriFiscal butions 

Year (1] 

2018 $108.0 

2019 113.6 

2020 116.0 

2021 86.5 

2022 64.4 

2023 93.4 

2024 113.4 

.2025 100.1 

2026 87.1 

2027 102.1 

2028 121 .7 

Table 3A. Progress of the Railroad Unemployment Insurance Account Under Assumption A 

(Dollar Amounts in Millions) 

Net Account Loan Account Cash 

Benefit Other Income Cash Balance Balance Less 

Payments and Outgo Balance Year End Loans Due 

[2] [3] Year End [4] Year End 

$104.4 $11 .7 $88.9 $0.0 $88.9 

100.9 10.5 112.1 0.0 112.1 

103.8 14.2 138.5 0.0 138.5 

101.4 15.8 139.5 0.0 139.5 

102.7 15.9 117.1 0.0 117.1 

105.0 16.7 122.3 0.0 122.3 

108.6 18.5 145.6 0.0 145.6 

113.1 20.6 153.3 0.0 153.3 

117.6 21 .8 144.6 0.0 144.6 

122.3 23.0 147.4 0.0 147.4 

127.9 24.8 166.1 0.0 166.1 

[1] Excludes 0.65 percent of taxable payroll allocated to the Administration Fund. 

Average 

Employer 

Contribution 

Calendar Rate 

Year (Percent) 

2018 3.34 

2019 3.38 

2020 3.34 

2021 1.93 

2022 2.22 

2023 3.06 

2024 2.91 

2025 2.36 

2026 2.25 

2027 2.76 

2028 2.80 

(2] In accordance with the Balanced Budget and Emergency Deficit Control Act of 1985, as amended by the Budget Control Act of 2011 , the fiscal year 2018 

amount reflects a reduction of 6.6% under sequestration for days of unemployment and sickness after September 30, 2017. The fiscal year 2019 amount 

reflects a reduction of 6.2% under sequestration for days after September 30, 2018. 

(3] Income includes interest on investments and transfers from the Administration Fund of amounts in excess of $6 million at the end of the previous fiscal year. 

Outgo includes funding for the Office of Inspector General. 

[4] Includes accrued interest. 

NOTE: Detail may not add to totals due to rounding. 
Account 

ContriFiscal butions 

Year [1] 

2018 $107.3 

2019 111 .8 

2020 115.4 

2021 105.9 

2022 88.3 

2023 94.5 

2024 113.6 

2025 115.3 

2026 102.9 

2027 101.3 

2028 119.3 

Table 3B. Progress of the Railroad Unemployment Insurance Account Under Assumption B 

(Dollar Amounts in Millions) 

Net Account Loan Account Cash 

Benefit Other Income Cash Balance Balance Less 

Payments and Outgo Balance Year End Loans Due 

[2] [3] Year End [4] Year End 

$104.4 $11.7 $88.2 $0.0 $88.2 

105.9 10.1 104.2 0.0 104.2 

112.8 13.4 120.2 0.0 120.2 

113.0 14.3 127.5 0.0 127.5 

113.4 14.7 117.1 0.0 117.1 

114.7 14.9 111 .9 0.0 111 .9 

117.2 16.0 124.3 0.0 124.3 

120.6 17.4 136.5 0.0 136.5 

124.0 18.5 133.9 0.0 133.9 

127.6 19.1 126.7 0.0 126.7 

131 .8 20.0 134.3 0.0 134.3 

[1] Excludes 0.65 percent of taxable payroll allocated to the Administration Fund. 

Average 

Employer 

Contribution 

Calendar Rate 

Year (Percent) 

2018 3.34 

2019 3.39 

2020 3.46 

2021 2.88 

2022 2.55 

2023 3.06 

2024 3.28 

2025 3.00 

2026 2.62 

2027 2.80 

2028 3.21 

[2] In accordance with the Balanced Budget and Emergency Deficit Control Act of 1985, as amended by the Budget Control Act of 2011, the fiscal year 2018 

amount reflects a reduction of 6.6% under sequestration for days of unemployment and sickness after September 30, 2017. The fiscal year 2019 amount 

reflects a reduction of 6.2% under sequestration for days after September 30, 2018. · 

[3] Income includes interest on investments and transfers from the Administration Fund of amounts in excess of $6 million at the end of the previous fiscal year. 

Outgo includes funding for the Office of Inspector General. 

[4] Includes accrued interest. 

NOTE: Detail may not add to totals due to rounding. 
Account 

ContriFiscal butions 

Year [1] 

2018 $106.5 

2019 109.6 

2020 114.1 

2021 120.2 

2022 125.8 

2023 133.2 

2024 136.0 

2025 129.7 

2026 127.6 

2027 136.2 

2028 142.4 

Table 3C. Progress of the Railroad Unemployment Insurance Account Under Assumption C 

(Dollar Amounts in Millions) 

Net Account Loan Account Cash 

Benefit Other Income Cash Balance Balance Less 

Payments and Outgo Balance Year End Loans Due 

[2] [3] Year End [4] Year End 

$104.4 $11 .7 $87.4 $0.0 $87.4 

112.7 9.8 94.1 0.0 94.1 

126.4 12.0 93.8 0.0 93.8 

134.4 12.2 91 .9 0.0 91 .9 

140.3 12.2 89.6 0.0 89.6 

139.9 12.5 95.5 0.0 95.5 

141.0 13.2 103.7 0.0 103.7 

143.1 13.8 104.2 0.0 104.2 

145.0 14.1 100.9 0.0 100.9 

146.9 14.5 104.7 0.0 104.7 

149.8 15.2 112.6 0.0 112.6 

[1] Excludes 0.65 percent of taxable payroll allocated to the Administration Fund. 

Average 

Employer 

Contribution 

Calendar Rate 

Year (Percent) 

2018 3.34 

2019 3.40 

2020 3.59 

2021 3.72 

2022 3.85 

2023 4.03 

2024 3.90 

2025 3.63 

2026 3.71 

2027 3.94 

2028 3.90 

[2] In accordance with the Balanced Budget and Emergency Deficit Control Act of 1985, as amended by the Budget Control Act of 2011, the fiscal year 2018 

amount reflects a reduction of 6.6% under sequestration for days of unemployment and sickness after September 30, 2017. The fiscal year 2019 amount 

reflects a reduction of 6.2% under sequestration for days after September 30, 2018. 

[3] Income includes interest on investments and transfers from the Administration Fund of amounts in excess of $6 million at the end of the previous fiscal year. 

Outgo includes funding for the Office of Inspector General. 

[4] Includes accrued interest. 

NOTE: Detail may not add to totals due to rounding. 
Year 

2018 

2019 

2020 

2021 

2022 

2023 

2024 

2025 

2026 

2027 

2028 

Table 4. June 30 Accrual Balance of the Railroad Unemployment Insurance Account 

(Dollar Amounts in Millions) 

Assumption A Assumption B Assumption C 

1.5 Percent 1.5 Percent 1.5 Percent 

Account Surcharge Account Surcharge Account Surcharge 

Balance Threshold Balance Threshold Balance Threshold 

$115.6 $149.3 $114.9 $148.8 $113.9 $148.3 

139.5 150.9 132.1 148.7 122.5 146.1 

167.0 154.2 149.4 150.1 125.0 145.3 

167.8 157.6 156.5 151 .7 124.4 144.8 

146.6 162.0 146.4 154.1 123.3 145.0 

153.3 167.4 142.2 157.4 129.6 146.0 

178.3 174.1 155.7 161.7 138.5 147.9 

187.4 181 .3 168.8 166.6 139.6 150.2 

180.5 188.7 167.5 171.4 137.1 152.3 

185.6 196.5 162.0 176.4 141 .8 154.6 

206.2 204.6 171.1 181 .7 150.2 156.9 

The June 30, 2017 accrual balance was $97,732, 177.41. The indexed 1.5 percent surcharge threshold was $146,285, 149.00 and 

the indexed 2.5 percent surcharge threshold was $73, 142,574.50. 

The experience rating system provides for a surcharge in the employer contribution rate when the Railroad Unemployment 

Insurance Account balance falls below certain thresholds. The 1.5 percent surcharge threshold is the greater of $100 million or the 

amount that bears the same ratio to $100 million as the system compensation base as of that June 30 bears to the system 

compensation base as of June 30, 1991 . The 2.5 percent surcharge threshold (not shown) is indexed from a $50 million base.