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No. 19-2 For Immediate Release

March 2019

Supreme Court Finds Injury Award for Lost Wages

Is Taxable Compensation under Railroad Retirement Tax Act

A recent decision by the U.S. Supreme Court found that the portion of a damages award

attributable to lost wages for a workplace injury is considered to be taxable compensation under the 

Railroad Retirement Tax Act (RRTA). The decision in BNSF Railway Co. v. Loos (No. 17-1042) was 

released by the Court on March 4, 2019.

Mr. Loos pursued a claim against his then-employer, BNSF, for a workplace injury under the 

Federal Employers’ Liability Act (FELA), a law allowing railroad workers to file suit against their 

employers for on-the-job injuries. Mr. Loos was awarded damages of $126,212, of which $30,000 

was attributable to lost wages from BNSF. BNSF indicated that it would withhold railroad retirement 

taxes from the lost wages portion of the award. Mr. Loos disagreed with this theory of withholding,

arguing that, consistent with the RRTA’s definition of compensation, the payment must be “for 

services rendered” in order to be taxable and instead of compensation for services rendered the 

payment at issue compensated for an injury. 

The issue worked its way from the lower courts to the Supreme Court. Oral arguments took 

place on November 6, 2018, and the Court reached its decision on a 7-2 vote. In reversing the 

decision of the Circuit Court of Appeals for the Eighth Circuit, the Supreme Court held that the 

RRTA’s definition of compensation includes not simply pay for active service, but also “pay for 

periods of absence from active service provided there is an employer-employee relationship.” 

Whether the employer chooses to make the payment through a voluntary settlement or is 

involuntarily made to do so through an award of damages is immaterial so long as the payment for 

lost wages is provided based on the recipient’s status as a service-rendering employee. 

The Internal Revenue Service administers the RRTA and, therefore, is the official source for 

railroad retirement tax information. However, for purposes only of illustrating the Court’s decision, 

U.S. Railroad Retirement Board

RRB News

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877-772-5772 general information

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the following example is provided. In 2019, railroad employers and employees are subject to a 

railroad retirement tier I payroll tax of 7.65 percent (6.20 percent on earnings up to $132,900 for 

retirement, and 1.45 percent on all earnings for Medicare hospital insurance) and a tier II tax of 13.1 

percent and 4.9 percent, respectively, on earnings up to $98,700. (An additional 0.9 percent in 

hospital insurance taxes, 2.35 percent in total, applies to an individual’s income exceeding $200,000, 

or $250,000 for a married couple filing a joint tax return). If a railroad employee with no other 

earnings in 2019 is awarded $550,000 due to an on the job injury, of which $200,000 is attributable to 

lost wages (both past and future), the employer and employee would be required to pay $11,139.80 in 

tier I taxes ($8,239.80 retirement and $2,900 Medicare) and $12,929.70 and $4,836.30, respectively, 

in tier II taxes. (The additional Medicare tax would not apply as the award for lost wages did not 

exceed $200,000). 

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