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 2020
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-

647) 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 2020.

II. Recent Developments

The maximum daily benefit of $78 for the benefit year beginning July 1, 2019 will 

increase to $80 for the benefit year beginning July 1, 2020. Beginning July 1, 2021, the 

maximum daily benefit rate will increase to $82. The monthly tax base was $1,560 in

2018, $1,605 in 2019, and increased to $1,655 in 2020, based on changes in the railroad 

retirement tier I creditable base.

Average employment in calendar year 2019 was 214,000 (subject to later revision), 

which is lower than the pessimistic employment assumption in last year's report. There is 

currently no surcharge in calendar year 2020. In addition to a trend of declining industry 

employment, unemployment levels are currently much higher than previously anticipated 

due to the current global pandemic, which has affected demand for both freight and 

passenger rail services.

This year’s report predicts that there will be a 2.5 percent surcharge in calendar year 

2021, a 3.5 percent surcharge is expected in 2022, and a 1.5 percent surcharge is likely in 

2023. 

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, which was further amended by Public Law 112-40, the American Taxpayer Relief 

Act of 2012; Public Law 113-67, the Bipartisan Budget Act of 2013, Public Law 113-82, 

the Military Retired Pay Restoration Act of 2014; Public Law 114-74, the Bipartisan 

Budget Act of 2015; Public Law 115-123, the Bipartisan Budget Act of 2018; Public Law 

116-37, the Bipartisan Budget Act of 2019; and Public Law 116-136, CARES Act. 

Benefit estimates for fiscal years 2020 through 2030 reflect amounts after sequestration. 
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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 

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 Social Security Administration's April 2020 Trustees Report, intermediate 

set of 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 2020-2030. 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 assumption projection: (A) 

optimistic, (B) intermediate, (C) pessimistic. 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 
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surcharge will be 2.5 percent. A maximum surcharge of 3.5 percent applies if the 

Account balance is less than zero.

The June 30, 2018 balance1 of $118.1 million was above the indexed $50 million 

surcharge threshold of $75.1 million but below the indexed $100 million surcharge 

threshold of $150.1 million. As a result, a 1.5 percent surcharge was in effect for 

calendar year 2019. By June 30, 2019, the balance had risen to $157.5 million, which 

was above the indexed $100 million surcharge threshold of $152.3 million. 

Consequently, no surcharge is in effect for calendar year 2020. 

Under each assumption, the Account balance is expected to be below the indexed $50 

million threshold in June 2020, showing a 2.5 percent surcharge in calendar year 2021.

For June 2021, due to the current unemployment levels caused by the global health crisis 

that will likely carry into next year, the balance is expected to be below zero under all 

three assumptions, resulting in a 3.5 percent surcharge in 2022, and increasing the 

maximum rate to 12.5 percent for the year. A 1.5 percent surcharge is likely for 2023

under the optimistic and intermediate assumptions, and a 2.5 percent surcharge is 

expected under the pessimistic assumption. Surcharges of 1.5 percent may occur

thereafter. As a result of the current global pandemic, short-term cash flow problems are 

expected through fiscal year 2021, with full repayment of the loans by the end of fiscal 

year 2022 under assumptions A and B, and during fiscal year 2023 under assumption C.

The highest average contribution rate in the 11-year projection period is under 

employment assumption C, where it rises to 10.68 percent for calendar year 2022. This is 

below the 12.5 percent maximum rate allowable while a 3.5 percent surcharge is in 

effect.

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. 

 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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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 

assumptions indicate that experience-based contribution rates will respond to fluctuating 

employment and unemployment levels and with short-term borrowing, will maintain fund 

solvency. 
Table 1: Employment Assumptions Used in 2020 Report

Calendar Average Employment (thousands)

Year A B C 

2019 214 214 214

2020 205 201 196

2021 204 198 190

2022 203 195 185

2023 202 192 179

2024 202 189 174

2025 201 186 169

2026 200 183 164

2027 199 181 160

2028 199 178 155

2029 198 175 151

2030 197 173 147

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 

under assumptions A, B, and C, respectively. 
Table 2: Annual Tier I Creditable Limit, Monthly RUI

 Taxable Limit, and Maximum Daily Benefit Rate

Maximum 

Annual Monthly Daily 

Calendar Tier I RUI Benefit 

Year Limit Limit Rate [1]

2019 $132,900 $1,605 $78 

2020 137,700 1,655 80 

2021 141,900 1,700 82 

2022 147,000 1,755 85 

2023 153,600 1,825 87 

2024 159,900 1,890 91 

2025 165,900 1,955 94 

2026 172,200 2,020 97 

2027 178,800 2,090 101 

2028 185,700 2,165 104 

2029 192,900 2,240 108 

2030 200,400 2,320 112 

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

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

(Dollar Amounts in Millions)

Account Net Account Loan Account Cash 

Contri- Benefit Other Income Cash Balance Balance Less 

Fiscal butions Payments and Outgo Balance Year End Loans Due 

Year [1] [2] [3] Year End [4] Year End 

2020

$53.2

$206.8

$39.6

$14.6

$29.4 (

$14.8) 

2021 96.6 163.8 75.6 23.0 98.5 (75.5) 2022 267.2 101.1 (88.2) 100.9 0.0 100.9 2023 280.8 92.8 16.7 305.6 0.0 305.6 2024 121.8 95.1 20.7 353.0 0.0 353.0 2025 24.0 98.8 21.5 299.7 0.0 299.7 2026 17.5 101.6 21.3 236.9 0.0 236.9 2027 32.6 104.7 21.0 185.7 0.0 185.7 2028 55.8 108.4 20.7 153.8 0.0 153.8 2029 91.2 111.4 21.6 155.2 0.0 155.2 2030 111.2 115.1 23.1 174.4 0.0 174.4 [1] Excludes 0.65 percent of taxable payroll allocated to the Administration Fund.[2] In accordance with the Balanced Budget and Emergency Deficit Control Act of 1985, as amended, the fiscal year 2020 amoun under sequestration for days of unemployment and sickness after September 30, 2019. Fiscal years 2021 thru 2030 amounts r

 under sequestration for days after September 30, 2020.[3] Income includes interest on investments, transfers from the Administration Fund of amounts in excess of 

$6 million at the end 

 and loans from the Railroad Retirement Account. Outgo includes funding for the Office of Inspector General and repayment o[4] Includes accrued interest.NOTE: Detail may not add to totals due to rounding.
Table 3B. Progress of the Railroad Unemployment Insurance Account Under Assumption B

(Dollar Amounts in Millions)

Account Net Account Loan Account Cash 

Contri- Benefit Other Income Cash Balance Balance Less 

Fiscal butions Payments and Outgo Balance Year End Loans Due 

Year [1] [2] [3] Year End [4] Year End 

2020

$53.0

$206.8

$39.6

$14.4

$29.5 (

$15.1) 

2021 93.6 204.6 120.4 23.8 144.5 (120.7) 2022 277.7 112.8 (136.4) 52.3 0.0 52.3 2023 311.1 103.1 14.7 275.0 0.0 275.0 2024 151.2 104.5 18.9 340.6 0.0 340.6 2025 40.4 107.3 19.5 293.2 0.0 293.2 2026 24.0 109.2 18.9 226.9 0.0 226.9 2027 37.3 111.2 17.9 170.8 0.0 170.8 2028 62.8 113.8 17.4 137.2 0.0 137.2 2029 95.3 115.7 17.6 134.4 0.0 134.4 2030 113.2 118.3 18.5 147.8 0.0 147.8 [1] Excludes 0.65 percent of taxable payroll allocated to the Administration Fund.[2] In accordance with the Balanced Budget and Emergency Deficit Control Act of 1985, as amended, the fiscal year 2020 amoun under sequestration for days of unemployment and sickness after September 30, 2019. Fiscal years 2021 thru 2030 amounts r

 under sequestration for days after September 30, 2020.[3] Income includes interest on investments, transfers from the Administration Fund of amounts in excess of 

$6 million at the end 

 and loans from the Railroad Retirement Account. Outgo includes funding for the Office of Inspector General and repayment o[4] Includes accrued interest.NOTE: Detail may not add to totals due to rounding.
Table 3C. Progress of the Railroad Unemployment Insurance Account Under Assumption C

(Dollar Amounts in Millions)

Account Net Account Loan Account Cash 

Contri- Benefit Other Income Cash Balance Balance Less 

Fiscal butions Payments and Outgo Balance Year End Loans Due 

Year [1] [2] [3] Year End [4] Year End 

2020

$52.9

$206.8

$39.7

$14.4

$29.6 (

$15.2) 

2021 90.4 230.8 144.2 18.2 169.2 (151.0) 2022 279.7 140.8 (132.6) 24.5 30.7 (6.2) 2023 355.2 128.8 (18.6) 232.3 0.0 232.3 2024 208.7 128.6 16.8 329.2 0.0 329.2 2025 68.6 130.3 17.3 284.8 0.0 284.8 2026 40.6 130.6 16.1 210.9 0.0 210.9 2027 52.2 131.3 14.5 146.2 0.0 146.2 2028 83.4 132.4 13.3 110.5 0.0 110.5 2029 116.8 132.7 13.2 107.8 0.0 107.8 2030 130.0 133.8 13.4 117.4 0.0 117.4 [1] Excludes 0.65 percent of taxable payroll allocated to the Administration Fund.[2] In accordance with the Balanced Budget and Emergency Deficit Control Act of 1985, as amended, the fiscal year 2020 amoun under sequestration for days of unemployment and sickness after September 30, 2019. Fiscal years 2021 thru 2030 amounts r

 under sequestration for days after September 30, 2020.[3] Income includes interest on investments, transfers from the Administration Fund of amounts in excess of 

$6 million at the end 

 and loans from the Railroad Retirement Account. Outgo includes funding for the Office of Inspector General and repayment o[4] Includes accrued interest.NOTE: Detail may not add to totals due to rounding.
Table 4. June 30 Accrual Balance of the Railroad Unemployment Insurance Account

 (Dollar Amounts in Millions)

1.5 Percent 2.5 Percent 1.5 Percent 2.5 Percent 1.5 Percent 2.5 Percent

Account Surcharge Surcharge Account Surcharge Surcharge Account Surcharge Surcharge

 Year Balance Threshold Threshold Balance Threshold Threshold Balance Threshold Threshold

2020 $61.7 $147.2 $73.6 $61.4 $146.4 $73.2 $61.0 $145.6 $72.8

2021 (32.5) 148.0 74.0 (71.7) 144.6 72.3 (98.8) 140.7 70.4

2022 134.3 151.6 75.8 87.4 146.4 73.2 32.3 140.5 70.3

2023 337.0 156.2 78.1 307.5 149.2 74.6 267.2 141.1 70.6

2024 385.5 161.7 80.8 373.5 152.6 76.3 363.8 142.4 71.2

2025 333.3 166.7 83.4 326.7 155.6 77.8 319.6 143.1 71.6

2026 271.7 171.8 85.9 261.3 158.5 79.3 246.2 143.8 71.9

2027 222.1 176.9 88.4 206.5 161.4 80.7 182.5 144.4 72.2

2028 191.6 182.3 91.2 173.7 164.6 82.3 146.9 145.1 72.6

2029 194.3 188.1 94.1 171.8 168.0 84.0 144.5 146.0 73.0

2030 214.7 193.9 97.0 185.8 171.3 85.7 154.3 146.8 73.4

Assumption A Assumption B Assumption C

The June 30, 2019 accrual balance was $157,488,983.12. The indexed 1.5 percent surcharge threshold was $152,277,818.00 and the 

indexed 2.5 percent surcharge threshold was $76,138,909.00.

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 is indexed from a $50 million base. The maximum surcharge of 3.5 percent applies if the Railroad

Unemployment Insurance Account balance is less than zero.