UNITED STATES RAILROAD RETIREMENT BOARD - 1

Program

Letter

 United States

 Railroad Retirement Board

 Office of Programs

 

Quality Reporting Service Center

Email: QRSC@rrb.gov 

Phone: (312) 751-4992

 Fax: (312) 751-7123

Letter No. 2019-02 Date: January 15, 2019

 [Revised: April 10, 2019]

TO: Certification Contact Officials

SUBJECT: Changes in Creditable Compensation for Nonstatutory Stock Options

Effective for Compensation Reports for Calendar Year 2018

The purpose of this program letter is to notify employers of a recent decision by the Supreme Court 

of the United States (SCOTUS) which affects the status of nonstatutory stock options as taxable 

compensation under the Railroad Retirement Tax Act (RRTA). The decision did not specifically 

address the status of such options under the Railroad Retirement Act (RRA) and Railroad 

Unemployment Insurance Act (RUIA). The Board has previously held that it will interpret 

creditable compensation under the RRA and RUIA similarly to interpretations of taxability under 

the RRTA. However, in January of 2019, three new Board members took office and they have not 

yet made a decision on this issue. Consequently, these interim instructions are issued with the 

proviso that they are subject to change should the Board in the future decide not to follow prior 

procedure.

Please share this information with the appropriate members of your staff who file service 

and compensation reporting forms for employees of your organization.

General

In the case Wisconsin Central Ltd. v. United States, 138 S. Ct. 2067 (2018), the court ruled in a 5

to 4 decision that nonstatutory stock options granted to employees are not taxable “money

remuneration” under Section 3231(e)(1) of the RRTA.

The Supreme Court held in Wisconsin Central that amounts are taxable compensation under the 

RRTA only if they are in the form of “currency issued by a recognized authority as a medium of 

exchange.” Both prior to and after this decision, statutory stock options—that is, those options 

granted under an employee stock purchase plan or an incentive stock option (ISO) plan—were 

and are not considered taxable compensation under the RRTA or creditable compensation under 

the RRA and RUIA. However, in light of the Wisconsin Central decision, nonstatutory stock 
UNITED STATES RAILROAD RETIREMENT BOARD - 2

options—that is, stock options that are granted neither under an employee stock purchase plan 

nor an ISO plan—are not considered taxable compensation under the RRTA or creditable 

compensation under the RRA and RUIA, either. Whether other forms of equity-based 

compensation are subject to the RRTA in light of Wisconsin Central depends on whether the 

particular payment that an employee receives is “currency issued by a recognized authority as a 

medium of exchange.” 

Effect of Ruling

Since nonstatutory stock options are no longer considered taxable compensation under the RRTA, 

interim instructions for reporting purposes are that they are also no longer considered creditable 

compensation under the RRA and RUIA. Therefore, effective for compensation reports for 

calendar year 2018, employers are no longer required to report nonstatutory stock options

exercised by employees as creditable compensation. However, employers should retain this 

information in their records as such information is still needed by the Railroad Retirement 

Board. Procedures are being developed for employers on how to report nonstatutory stock 

options to the RRB separate from regular compensation reports. Those details will be

provided in a separate transmittal.

Questions

If you have questions concerning creditable compensation under the RRA or RUIA, please contact 

the Quality Reporting Service Center at the email or telephone number shown above. If you have 

questions about taxable compensation, please contact the Internal Revenue Service, as they 

administer the RRTA.

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