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1035.5 Overview of RRA Maximum Prior to November 01, 2005

The RRA Maximum limited the total benefits paid to an employee and a spouse when 

the ABD was after June 1, 1977. Introduced in the 1974 Railroad Retirement Act, this 

provision ensured that monthly retirement annuities did not exceed an employee’s preretirement earnings, which are the basis for these benefits. The RRA Maximum was 

repealed effective January 1, 2002. However, in certain cases, it was necessary for 

examiners to review payments made prior to January 1, 2002, to see if the RRA 

Maximum calculations were correct. 

Legal Opinion 2005-09 has now made testing and retesting of the RRA Maximum 

obsolete. Beginning November 1, 2005, examiners will no longer review payments 

made prior to January 1, 2002 for this purpose. The previously determined RRA 

Maximum reductions for the date breaks before January 1, 2002, will continue to apply; 

even if the previous reduction was erroneous or was determined that it should not have 

applied. 

IMPORTANT: FOM 1035.5 through 1035.35 remains in procedure for historical 

reference and to explain how the previous RRA Maximum reduction was computed. 

The RRA maximum was one of three amounts:

1. $1200.00, or

2. the employee’s Final Average Monthly Compensation (FAMC), or

3. the sum of:

• 80% of the FAMC, and

• 10% of a monthly taxable earnings limit for tier 1.

The RRA maximum may could be tested several times as an employee and spouse had 

changes in entitlement to annuities or other benefits. However, annuity components 

compared in each test were always treated as if they were in effect on the employee’s 

ABD.

Annuity components considered in the maximum test are tier 1, tier 2 and the 

supplemental annuity. When used in the test, these components exclude reductions for 

early retirement and most cost-of-living increases. However, the components must 

sometimes reflect reductions for other benefits.

An estimated RRA maximum was shown on MARC files. 

Reductions for the RRA maximum are applied to annuities in this order: 

• Spouse tier 2
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• Supplemental annuity

• Employee tier 2.

1035.10 When the RRA maximum was tested 

Unless a case met an exception listed in subsection FOM-1-1035.10.1, the RRA 

maximum was tested on the following annuity beginning dates:

• the employee’s ABD 

• the spouse’s ABD 

• the employee’s supplemental annuity beginning date.

When these beginning dates coincide, it was possible for an RRA maximum test to be 

made only once. However, changes in components or in entitlement required retesting 

of the RRA maximum as follows:

Tier 1 Event Effective Date for Test

WC/PDB • the employee’s initial offset date for workers compensation 

or public disability benefits

• the benefit termination date

NCSP • the effective date of the employee’s noncovered service 

pension

• the date PIA 1 is no longer reduced for the NCSP

PSP • the spouse’s initial offset date for a public service pension

• the pension termination date

Alien

Nonresidence

• the date from which the spouse’s tier 1 is not payable for 

alien nonresidence

• when tier 1 is again payable

T1 DOE • the tier 1 date of entitlement, if later than the ABD

(This was possible in 1981 Amendment cases with 

applications filed before 9/1/1983.)
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End of

Nonpayment

Period for EE

Imprisonment

• the date from which tier 1 is again payable, if the 

employee had been incarcerated on the ABD.

(Prisoner/felony nonpayment periods were possible from 

May 1983 through January 1995.)

Other events Effective Date for Test

VDB DOE • the employee’s RIB/DIB vested dual benefit date of 

entitlement

Own EE Annuity • the ABD of the spouse’s own employee annuity

Spouse

Termination • the termination date of the spouse annuity, when the 

employee’s annuity remains payable.

1035.10.1 Test exceptions

• There was no need to test the RRA maximum if: the effective date of the annuity 

calculation is after December 31, 2001 (The RRA maximum was repealed effective 

January 1, 2002.); or

• the employee’s ABD is before June 1, 1977, or

• the ABD PIA is less than $450.00, or

• the sum of annuity components in the test is $1200.00 or less, or

• the only consideration is the entitlement of a divorced spouse. A divorced spouse’s 

tier 1 is not included in the RRA maximum test.

1035.10.2 Annuity components in the RRA maximum test

Although the RRA maximum could be retested after the employee’s ABD, annuity 

components for each test were always treated as if they were in effect on the 

employee’s ABD. All components in the test were the amounts before any COL 

increase or tier 2 solvency reduction (takeback). 

These annuity components were:

Component Qualification

EE tier 1 1. gross amount on:

• the ABD,
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• the NCSP effective date, or

• the tier 1 DOE, or

• the termination date of a WC/PDB offset

2. gross amount after reduction for WC/PDB

3. zero if tier 1 was not payable (incarceration for felony 

before February 1995)

EE tier 2 • gross tier 2 on the ABD, or

• tier 2 after reduction for VDB on the vested dual benefit 

date of entitlement

Supplemental 

annuity

• gross amount before reduction for employer pension

Spouse tier 1 1. gross amount after reduction for:

• a public service pension, or

• the spouse’s own EE annuity

2. zero if tier 1 was not payable for alien nonresidence

Spouse tier 2 gross amount:

• on the EE's ABD, or

• on the EE’s vested dual benefit date of entitlement, or

• after inclusion of a restored amount, or

• after reduction for a potential RIB/DIB VDB before 

8/13/1981

Historical Note: When a legal spouse and a deemed spouse were entitled to annuities 

at the same time, both spouses’ tiers were added in the test.

1035.10.3 Component changes in RRA maximum tests

The RRA maximum was recalculated as an “initial” test when the ABD was changed, 

when lag earnings were credited from the ABD, etc. 
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When the RRA maximum was retested after the ABD, usually only one annuity 

component changed. If two or more events coincided, each corresponding component 

below may could change:

Event Component Changing in Test

Supplemental annuity entitlement • Gross supplemental annuity

Spouse entitlement • Spouse gross tier 1

• Spouse tier 2

EE entitlement to WC/PDB • Employee gross tier 1 after workers 

compensation or public disability benefits

WC/PDB termination • Employee gross tier 1

NCSP effective date • Employee gross tier 1 (PIA 1 reduced for 

NCSP)

• Spouse gross tier 1

Termination of NCSP reduction • Employee gross tier 1

• Spouse gross tier 1

PSP entitlement • Spouse tier 1 after public service pension

PSP termination • Spouse gross tier 1

Tier 1 not payable for alien 

nonresidence

• Spouse tier 1 (zero)

Tier 1 is again payable (alien 

residence)

• Spouse gross tier 1

Tier 1 date of entitlement (1981 

Amendment case filed before 

9/1/1983)

• Gross tier 1
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Tier 1 not payable for a felony 

nonpayment period (5/1983 through 

1/1995), if the A&S employee was 

incarcerated on the ABD and was not 

undergoing court approved 

rehabilitation

• Employee tier 1 (zero)

Tier 1 is again payable after a felony 

nonpayment period

• Employee gross tier 1

VDB date of entitlement • Employee tier 2 after reduction for vested 

dual benefit

• Spouse tier 2

Spouse entitled to own employee 

annuity

• Spouse tier 1 after reduction for own EE 

annuity

• Spouse tier 2, with a restored amount not 

exceeding one-half the EE’s ABD PIA

Spouse annuity terminates (and the 

employee’s annuity remains payable)

• Employee tier 1

• Employee tier 2

• Supplemental annuity

• Deemed spouse tier 1, if any

• Deemed spouse tier 2, if any

1035.10.4 Special rules for including components

In some circumstances, the RRA maximum test included an annuity component, even 

though it was reduced or not payable: 

Type of Case Amount Used in Test

Spouse WC/PDB The spouse’s gross tier 1 was the amount before 

reduction for workers compensation or public 

disability benefit offset. 

Male Spouse with Child in Care Tier 2 for a male spouse was included when the 

annuity is based on a child in care, and the 
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spouse will attain full age (60 or FRA) by the 

month the child attains age 18. This procedure 

applied even though the spouse may not have 

been entitled to the tier 2 when the RRA 

maximum was being tested.

Spouse Tier 1 not payable for a 

felony nonpayment period

From 5/1983 through 1/1995, if the spouse was in 

prison and not undergoing court approved 

rehabilitation, the spouse's gross tier I was used 

in the RRA maximum test, even though tier I was 

not payable.

Spouse with child in care age 16-

17, spouse attains full age before 

child is 18

Before 1/1986: a spouse gross tier 1 was included 

in the RRA maximum test, even though not 

payable, if:

• a female spouse’s annuity was initially based 

on a minor child age 16-17 in care, and

• the spouse attained full age (60 or 65) by the 

month the child attained age 18.

Spouse Tier 2 Reduced for Future 

VDB

Before 8/13/1981, a spouse's tier 2 in the RRA 

maximum test was reduced for future RIB/DIB 

vested dual benefit entitlement. This tier 2 

reduction was not removed in subsequent tests, 

even if the spouse's VDB was never paid. (The 

1981 amendments eliminated auxiliary vested 

dual benefits.)

Waiver Annuity components were included in the RRA 

maximum test, even if the employee or spouse 

waived all or part of an annuity.

1035.10.5 Excluding spouse T1 component

Before 1986, under the 1981 amendments, a spouse entitled on the basis of a child in 

care had no tier 1 component after the child reached age 16.

In the RRA maximum test, the spouse’s tier 1 is excluded (i.e., tier 1 is zero), if:

• the spouse was initially entitled based on a minor child who was age 16 to 17, and

• the spouse was not entitled to a full age (60 or 65) spouse annuity before the child 

attained age 18. 
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1035.10.6 “Spouse Invokes Max” estimate

Before the RRA maximum was repealed effective January 1, 2002, if a spouse had not 

yet filed an application for an annuity, the RRA maximum was tested twice on the 

employee's ABD:

• as an employee-only computation, and

• as an employee and spouse computation, using an estimated spouse annuity. 

If an RRA maximum reduction applied with the spouse's components, the employee’s 

case was coded with an indicator that the spouse invoke the RRA maximum reduction. 

1035.15 How the RRA Maximum was Calculated Prior to November 01, 

2005

The RRA maximum was one of three amounts:

1. $1200.00, or 

2. the Final Average Monthly Compensation ( FAMC), or

3. the sum of:

• 80% of the FAMC, and

• 10% of a monthly taxable earnings limit for tier 1.

The procedure for how the maximum was once determined is discussed in sections 

1035.15.1 through 1035.15.6. 

1035.15.1 Step 1- Final Average Monthly Compensation

The Final Average Monthly Compensation (FAMC) is an amount based on recent 

earnings under railroad retirement and social security, but limited to taxable limits for tier 

2. The FAMC is calculated as follows:

A. Find the employee's creditable RR and SS covered earnings in the employee's 

ABD year and the 9 preceding calendar years. Limit each year’s amount to the 

maximum taxable tier 2 compensation (see the table following “C.” below).

In cases paid before April 28, 1994, the FAMC was based on the monthly

maximum for tier 2 and the number of months the employee worked in each 

year. For example, if an employee worked only 11 months in 1982, his tier 2 

creditable compensation for the year was $22,275.00 (11 months times 

$2,025.00). 

B. Select the two highest earnings years in the 10-year period. 
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Exception for Indexed FAMC: if the employee’s annuity is initially awarded after 

9/30/1983, and the AMC is indexed for government service, as discussed in 

FOM-I-214.1, there is no ten year limit for selecting the two highest indexed 

earnings years.

C. Divide the total of the earnings in those 2 years by 24. The result is the FAMC.

Year T2 Taxable Earnings Monthly 

Maximum

T2 Taxable Earnings Annual 

Maximum

2001 4,975 59,700

2000 4,725 56,700

1999 4,475 53,700

1998 4,225 50,700

1997 4,050 48,600

1996 3,875 46,500

1995 3,775 45,300

1994 3,750 45,000

1993 3,575 42,900

1992 3,450 41,400

1991 3,300 39,600

1990 3,175 38,100

1989 2,975 35,700

1988 2,800 33,600

1987 2,725 32,700

1986 2,625 31,500

1985 2,475 29,700

1984 2,350 28,200
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1983 2,225 26,700

1982 2,025 24,300

1981 1,850 22,200

1980 1,700 20,400

1979 1,575 18,900

1978 1,475 17,700

1035.15.2 Step 2 - T1 earnings limit comparison

In the table below, find the EE’s ABD year and note the amount in column 3 (50% of 

Monthly Limit). 

A. If the FAMC is less than 50% of the monthly tier I taxable earnings limit, the RRA 

maximum is the higher of:

• the FAMC, or 

• $1,200.00.

B. If the FAMC is greater than 50% of the monthly tier I taxable earnings limit, 

proceed with step 3.

ABD Year Monthly T1 Taxable

Earnings Limit

50% of Monthly

Limit

10% of Monthly

Limit

2001 6,700.00 3,350.00 670.00

2000 6,350.00 3,175.00 635.00

1999 6,050.00 3,025.00 605.00

1998 5,700.00 2,850.00 570.00

1997 5,450.00 2,725.00 545.00

1996 5,225.00 2,612.50 522.50

1995 5,100.00 2,550.00 510.00

1994 5,050.00 2,525.00 505.00
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1993 4,800.00 2,400.00 480.00

1992 4,625.00 2,312.50 462.50

1991 4,450.00 2,225.00 445.00

1990 4,275.00 2,137.50 427.50

1989 4,000.00 2,000.00 400.00

1988 3,750.00 1,875.00 375.00

1987 3,650.00 1,825.00 365.00

1986 3,500.00 1,750.00 350.00

1985 3,300.00 1,650.00 330.00

1984 3,150.00 1,575.00 315.00

1983 2,975.00 1,487.50 297.50

1982 2,700.00 1,350.00 270.00

1981 2,475.00 1,237.50 247.50

1980 2,158.33 1,079.17 215.83

1979 1,908.33 954.17 190.83

1978 1,475.00 737.50 147.50

1035.15.3 Step 3 - 80% of FAMC

If the FAMC is greater than 50% of the monthly tier 1 taxable earnings limit, multiply the 

FAMC by .80.

1035.15.4 Step 4 - 10% of monthly T1 limit

If the FAMC is greater than 50% of the monthly tier 1 taxable earnings limit, take 10% of 

the monthly tier 1 taxable earnings limit. (The product for this step is shown above in 

step 2, column 4.)

In some calculation instructions, this calculation is expressed as 20% times 50% of the 

monthly tier I taxable earnings limit.
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1035.15.5 Step 5 - Add results for RRA maximum

Add the results of steps 3 and 4. The total is the RRA maximum.

Examples of the RRA maximum computation are shown below, followed by a table of 

the upper limits of RRA maximum amounts. 

1035.15.6 Example 1: RRA maximum equals FAMC

This example summarizes the initial calculation of the RRA maximum for an employee 

with:

• an ABD of 1/1/2000, and

• last RR service in 1987, and

• SS wages reported through 1998, and

• the highest earnings years in 1998 and 1992. (When lag wages are reported, the 

FAMC may be recomputed with 1999 replacing 1992.)

Computation Step Description Amount

1. FAMC 1998 Taxable Earnings 24,420.05

1992 Taxable Earnings 21,670.26

Sum 46,090.31

Divisor / 24

FAMC 1,920.43

2. T1 Limit Comparison 50% of 2000 monthly T1 Earnings 

Limit

3,175.00

3. RRA Maximum Step 2 exceeds step 1. The RRA 

maximum is the FAMC, which 

exceeds $1200.

1,920.43

1035.15.7 Example 2 - Full RRA maximum calculation

The calculation of the 1999 upper limit of the RRA maximum is summarized below (the 

complete table of upper limits is in subsection 1035.15.8):
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Computation Step Description Amount

1. FAMC 1999 T2 Taxable Earnings Limit 53,700

1998 T2 Taxable Earnings Limit 50,700

Sum 104,400

Divisor / 24

FAMC 4,350

2. T1 Limit Comparison 50% of 1999 monthly T1 Earnings 

Limit (Since less than FAMC, go to 

Step 3.)

3,025

3. 80% of FAMC FAMC 4,350

Multiplier * .8

Product 3,480

4. 10% T1 Limit 20% of Step 2 amount (or 10% of 1999 

monthly taxable T1 earnings limit)

605

5. RRA Maximum Sum of Step 3 and Step 4 4,085

1035.15.8 Upper limit of RRA maximum

The upper limit of the RRA Maximum is based on maximum creditable earnings in the 

ABD year and the 2 preceding calendar years:

ABD Upper Limit of 

RRA Maximum

ABD Upper Limit of 

RRA Maximum

2002 or later Not applicable Jan - Oct 1987 2,405.00

2001 4,550.00 December 1986 2,390.00

2000 4,315.00 November 1986 2,302.50

1999 4,085.00 Jan - Oct 1986 2,280.00

1998 3,880.00 December 1985 2,260.00

1997 3,715.00 November 1985 2,177.50
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December 1996 3,582.50 Jan - Oct 1985 2,160.00

Jan - Nov 1996 3,532.50 December 1984 2,145.00

December 1995 3,520.00 November 1984 2,066.67

Jan - Nov 1995 3,440.00 Jan - Oct 1984 2,015.00

December 1994 3,435.00 December 1983 1,997.50

Jan - Nov 1994 3,315.00 November 1983 1,923.33

December 1993 3,290.00 Jan - Oct 1983 1,847.50

Jan - Nov 1993 3,180.00 December 1982 1,820.00

December 1992 3,162.50 November 1982 1,752.50

Jan - Nov 1992 3,052.50 Jan - Oct 1982 1,690.00

December 1991 3,035.00 December 1981 1,667.50

November 1991 2,925.00 November 1981 1,605.83

Jan - Oct 1991 2,905.00 Jan - Oct 1981 1,557.50

December 1990 2,887.50 December 1980 1,523.83

November 1990 2,781.67 November 1980 1,469.17

Jan - Oct 1990 2,737.50 Jan - Oct 1980 1,435.83

December 1989 2,710.00 December 1979 1,410.83

November 1989 2,610.83 November 1979 1,358.33

Jan - Oct 1989 2,610.00 Jan - Oct 1979 1,330.83

December 1988 2,585.00 December 1978 1,287.50

Jan - Nov 1988 2,515.00 November 1978 1,238.33

December 1987 2,505.00 Jan - Oct 1978 1,207.50

November 1987 2,414.17 Before 1978 1,200.00
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1035.15.9 Comparing the RRA maximum to annuity totals

The RRA maximum was computed based on the individual circumstances of each case. 

The upper limits in the table above were only possible when the employee had 

consistent maximum earnings in the two-year period ending with the ABD year.

Annuitants would sometimes question the discrepancy between the upper limit of the 

RRA maximum and the total of annuities actually payable to the employee and spouse. 

Below are some reasons that annuities could be smaller than the annual upper limits:

• The FAMC was based on the two highest earnings years in the ten-year period 

ending with and including the ABD year. An employee with maximum earnings often 

had his highest two earnings years before the ABD year. For example, an employee 

retiring in the first half of the year was unlikely to have the ABD year as one of his 

two highest earnings years.

• There were two maximum earnings limits in the RRA maximum formula. An 

employee might have had earnings exceeding the taxable earnings limit for tier 2 but 

not for tier 1. For example, an employee earning $60,000 in 1999 exceeded the tier 

2 limit but not the tier 1 limit. 

• The upper limit of the RRA maximum was based on total family benefits. The 

employee comparing his regular annuity to the maximum total benefit would have 

had to consider his supplemental annuity and his spouse’s annuity, even if she was 

not yet receiving benefits. 

Historical Note: A reduction for the RRA maximum was based only on the 

components actually payable at the time of the test. Therefore, the RRA maximum 

calculation in an employee-only case excluded the spouse.

• The RRA maximum did not include reductions for early retirement, social security 

benefits, work deductions, etc. The employee could not necessarily compare the 

RRA maximum formula to the net annuity amounts payable to the family.

• Annuity components might not have credited lag earnings until a later date. When 

an employee annuity was initially calculated, tier 1 and tier 2 are based on reported 

earnings, which sometimes omitted up to two years of lag earnings. RRB mass 

adjustments eventually recomputed annuities to include these additional earnings.

ABD year wages and compensation are not credited in PIA 1 until January of the 

year after the ABD. (In reduced 60/30 cases, the recalculation does not occur until 

the first full month the employee is age 62. If the spouse is not yet 62, her 

recalculation is delayed until she is age 62 for a full month.)

Lag compensation for a given year is not posted until May of the following year. The 

RRA maximum was be retested when tier 2 is recalculated from the ABD. The 

updated FAMC may include a higher two-year sum of tier 2 taxable earnings limits.
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Therefore, annuitants were advised not compare total family maximum benefits to 

annuity components that are likely to increase after lag earnings are reported.

1035.20 Reductions for the RRA maximum

Annuities payable to an employee or the spouse had to be adjusted when the affected 

portions exceed the RRA maximum applicable to the case. Reductions were made only 

to certain components of the annuity, in the following order:

1. Spouse tier 2

2. Supplemental annuity

3. Employee tier 2.

1035.20.1 Components reduced for RRA maximum

The reduction for the RRA maximum is subtracted from components as follows:

1. Spouse tier 2

• ABD after 1983: tier 2 after restored amount and takebacks, but before COL 

increases and age reduction.

• ABD before 1984: tier 2 after reduction for RIB/DIB VDB, COL increase 

before 1984, and restored amount, but before age reduction, takebacks, and 

COL increases after 1983. 

• Deemed and legal spouses: the tier 2 reduction is divided equally between 

the spouses. However, after one spouse’s tier 2 has been reduced to zero, a 

second spouse with a greater tier 2 is subject to further reductions for the 

RRA maximum.

2. Gross supplemental annuity before reduction for an employer pension.

3. Employee tier 2 after reduction for a RIB/DIB VDB.

If the employee annuity was awarded under the 1974 RR Act, the reduction in 

tier 2 is applied in sequential order to components 1, 2, and 3.

The RRA maximum reduction could not exceed the sum of the components listed 

above. No other annuity components, such as tier 1 or the vested dual benefit,

were reduced for the RRA maximum.

1035.20.2 Example of RRA maximum reduction

In this example, total benefits to the employee and spouse exceed the RRA maximum 

by $164.00. Reductions are made as follows:
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COMPONENT 

SUBJECT TO 

REDUCTION

COMPONENT 

BEFORE 

REDUCTION

RRA MAX 

REDUCTION

COMPONENT 

AFTER 

REDUCTION

Spouse tier 2 $144.00 $144.00 0

Supplemental Annuity $43.00 $20.00 $23.00

Employee tier 2 $323.00 0 $323.00

1035.20.3 RRA maximum reduction and employer tax credits

When the employee's supplemental annuity had to be reduced for the RRA maximum, 

the reduction was applied to the gross amount, before any reduction for a railroad 

pension. In some cases, the railroad will lose tax credits equaling the RRA maximum 

reduction amount.

In the example above, the gross supplemental annuity is $43.00, but the railroad 

employer’s tax credit would be $23.00.

1035.25 RRA maximum and ABD selection before 2002

When selecting an ABD before 2002, a railroad employee had to consider:

• what his maximum would be in a possible month of retirement

• how much his family's benefit will be adjusted for the maximum 

• if retiring earlier or later would result in a different maximum reduction.

The employee also had to consider tier I and tier 2 COL increases. The next two 

sections provide information about how the ABD and COL increases affected the RRA 

maximum.

1035.30 Advantages of January ABD before 2002

Before the RRA maximum was repealed effective January 1, 2002, an employee 

considering retirement in December or January usually maximized family benefits by 

selecting an ABD in January. The RRA maximum may be higher in January if the 

employee has maximum earnings in the ABD year and the 2 preceding years.

1035.35 Advantages of May ABD before 1983

Before 1983, an employee had to consider the RRA maximum in selecting an ABD in 

May or June. An ABD before June 1 was generally advantageous to certain employees 
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who had spouses. The RRA maximum was considered before the June COL increase 

was added to tier 1. This tended to lessen the impact of the maximum reduction.

When selecting an ABD in May or June, an employee no longer needed to consider the 

interaction of the cost-of-living increase and the RRA maximum. Annual COL increases 

have been applied in December since 1983.