FOM1 214 

214.1 General 

The 1981 amendments to the Railroad Retirement Act provide that the compensation 

used to compute an employee's average monthly compensation (AMC) used to 

compute the tier II of an annuity payable under those amendments should be indexed if: 

A. The employee did not work in the railroad industry in the 60-month period 

immediately preceding the annuity beginning date (ABD); and 

B. The employee's major employment during that 60-month period was with one of 

the government agencies listed in FOM 225.35.2. L-95-10 defines "major 

employment to include employment with such agencies when that employment 

was for a greater period of time during the 60 months preceding the ABD than 

was employment not for such agencies." If the employee did not work for any 

other employer in the 60-month period, the government agency would be his 

"major employer," even if he only worked for that agency for a short time. 

If an employee did not work in the railroad industry in the 60-month period preceding the 

ABD and (s)he claims employment during that period with one of the government 

agencies listed above, verification of that employment must be obtained before the AMC 

can be indexed. Until verification is received, the annuity computation must be based 

on the unindexed AMC shown on Form G-90. Once verification of the government 

service employment is received, the annuity can be recertified using the indexed AMC. 

214.2 Requesting Verification of Government Service Employment 

The field office should secure from the employee a verification statement from his/her 

qualifying government service employer, or enter information from a DEQY on the 

APPLE proof screen, when the employee files his/her application. If neither is possible, 

RBD will request verification of government service employment for the 60-month period 

preceding the railroad annuity beginning date by obtaining a DEQY or by completing 

RL-610 on RRAILS. The address of the employer may be obtained from RCM 10.6.8. 

214.3 Action upon Verifying Employment 

If the DEQY indicates employment for one of the government agencies listed above as 

the employee claims, and it was the employee's major employment during the 60-month 

period immediately preceding the annuity beginning date (ABD), RBD requests an 

indexed AMC computation via Form G-563. Effective with annuities initially awarded on 

or after October 1, 1983, RBD also requests an indexed FAMC computation on the 

Form G-563. RBD adjusts the annuity accordingly. 

If the DEQY indicates that the employee did not work for one of the government 

agencies listed above during any of the 60 months in the period immediately preceding 

the ABD, the employee's compensation cannot be indexed when computing the 

Average Monthly Compensation (AMC) or Final Average Monthly Compensation 

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(FAMC). RBD will notify the employee and the field office if the employee claimed this 

service (i.e., shown in remarks section of APPLE, etc.) to advise that the annuitant is 

not entitled to the increase in tier II. 

NOTE: If the employee did not have any other employment during the 60-month period 

preceding his ABD, the government employment was his major employment, even if he 

worked in only 1 month during that period. If the employee had another employer 

during any month in that 60-month period and you are unable to determine whether the 

government employment was his major employment, refer the case to RAC. 

214.4 Indexed AMC 

The indexed AMC is calculated as follows: 

Step 1) Index all tier 2 compensation as follows: 

(Average annual wage for 

indexing year) 

(Unindexed Monthly X = (Indexed Monthly 

Compensation) Compensation) 

(Average annual wage for 

year N) 

The Average Annual Wage for 1951 is used for compensation being indexed prior to 

1951. The ABD year is used as the eligibility year. 

Step 2) Determine the 60 highest months of indexed compensation. 

Step 3) Add the indexed compensation for the 60 highest months. 

Step 4) Determine whether the High 60 month indexed compensation total exceeds the 

tier 2 annual raw compensation maximum total for the five calendar years preceding the 

ABD year. (This provision ensures that an employee entitled to an indexed tier 2 will 

not receive a higher tier 2 amount than what an individual with the same ABD year, 

maximum tier 2 earnings, and entitlement to a regular (unindexed) tier 2 would receive.) 

	 If so, cut back the high 60 indexed earnings total to the five year tier 2 annual raw 

compensation maximum total (see example below). 

	 If not, use the indexed earnings for the actual compensation posted. 

Example: The employee’s ABD is 10/1/2005. The maximum indexed earnings that can 

be used is limited to $309,000 (2004 = $65,100, 2003 = $64,500, 2002 = $63,000, 2001 

= $59,700, 2000 = $56,700). The employee’s indexed earnings from actual 

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compensation (using 1990-1994 earnings) totals $313,840.63. The employee’s high 60 

month total must be cutback to $309,000. 

Step 5) Divide the total of (4) by 60. 

214.5 Indexed FAMC 

The Railroad Retirement Solvency Act of 1983 provides a unique final FAMC for 

employees whose AMC is determined under the indexed AMC computation above and 

whose annuities are first awarded on or after October 1, 1983. The FAMC is calculated 

as follows: 

Step 1: Determine the 24 months of highest indexed compensation used in calculating 

the AMC. (This will not necessarily be months in the 10 years before the annuity 

beginning date); 

Step 2: Divide by 24. 

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