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1121.05 Background

Under the 1988 amendments to the Railroad Retirement Act, effective 12-1-1988, an 

employee and spouse may continue to work for their last pre-retirement non-railroad 

employer and receive an annuity. Throughout various procedures, earnings of this type 

are referred to as Last Person Service (LPS) or Last Person Earnings (LPE) which can 

be used interchangeably. For simplicity, this procedure will utilize “LPE”, but the 

meaning is to be interpreted as if using LPS. 

Work deductions are applied to tier II and the supplemental annuity based on LPE. If 

the LPE exceed the yearly earnings exempt amount, they may also cause regular work 

deductions to apply to tier I and the vested dual benefit.

Unlike deductions for excess earnings, LPE work deductions apply regardless of the 

annuitant's age, and regardless of the amount of the LPE. LPE work deductions are 

applied on a monthly basis, rather than on an annual basis.

1121.10 Last Person Earnings

Last Person Earnings (LPE) is the gross earnings after the ABD from the last person, 

company or institution an employee or spouse was employed with before the annuity 

began. Earnings from LPE employment in the ABD month will not cause a reduction if 

the ABD follows the date last worked in LPE. Refer to FOM1 330.15.1for a broader 

explanation on what constitutes LPE.

Self-employment (SEI) activities are not LPE. If the annuitant has both SEI and LPE in 

the same earnings year, a net loss in SEI (reported on Form 1040 Schedule SE) cannot 

be deducted from earnings from an LPE employer (wages reported on Form W-2) when 

determining the amount of LPE earnings.

For the purpose of computing the reduction to tier 2 and the supplemental annuity:

• A "Work Deduction Insured Status" is not required to apply LPE work deductions; 

and,

• The annual exempt amounts listed in Appendix A and the monthly exempt amounts 

listed in Appendix B do not apply to LPE earnings; and,

• Deductions are not applicable for months in which no services are rendered. 

• Deductions apply, even if the annuitant has attained full retirement age.

If the amount of the LPE earnings exceeds the annual exempt amount, those earnings 

will also create tier 1 and vested dual benefit work deductions
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1121.15 Special Payments and Employment

A. Deductions for Months in Which Services Rendered - LPE work deductions are 

to be applied for any month after the ABD in which an annuitant performs service 

for pay, regardless of when the payment is actually made, as in the following 

examples.

1. Teacher - If a teacher receives his or her salary in 12 monthly 

installments, but only works in nine months, work deductions only apply to 

the nine months in which the teacher actually worked.

2. Salesperson - If a salesperson receives commissions in one month for 

sales made in prior months and does not work in that month, LPE work 

deductions only apply to the months in which the annuitant actually 

worked. Commissions should be attributed to months in which the 

salesperson did work.

 Note: If a salesperson did not perform significant services and received 

residual or renewal commissions for policies renewal, the payment 

received should not be considered earnings for work deduction purposes 

and any subsequent earnings for policy renewal will not constitute 

earnings for work restriction purposes. See Legal Opinions L-2016-42 and 

L-2008-09, citing Legal Opinion L-94-4. 

The annuitant's signed report of earnings (usually Form G-19L) is 

sufficient for RBD's assessment of work deductions. However, RBD may 

ask you to contact the LPE employer when there is conflicting evidence in 

file.

B. Contributions to a 401(k) Plan from Last Person Earnings 

If an annuitant has contributions to a plan under section 401(k) of the Internal 

Revenue Code, LPE work deductions are to be based on the earnings amount 

before deduction for the 401(k) contribution.

C. Earnings from Employment Outside of the U.S.

Foreign currency must be converted into U.S. dollars. Whenever possible, 

contact representatives should do the conversion and annotate Remarks when 

entering the average LPE salary in on-line applications. If the conversion is not 

done, the application must be coded for manual review on the Form G-230 

screen.

When the annuitant provides the final earnings report, RBD will use the rate of 

exchange that was effective on the first business day of the earnings year.
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D. Earnings while Incarcerated

If an incarcerated annuitant is receiving an annuity in accordance with FOM1 

Article 3 procedures and performing a service to an employer after their ABD, 

their earnings are subject to work deductions. These earnings for final earnings 

monitoring purposes most likely will not show up on DEQY/EDMA if they are not 

reported to the IRS each year as income. Refer to FOM1 1110.5.14 for 

instructions on handling.

1121.20 Calculations

1121.20.1 Reduction In The Employee Annuity For Last Person Earnings

The employee's tier II and supplemental annuity are reduced by $1.00 for every $2.00 of 

the employee's last person earnings (LPE). If the result of dividing the LPE by 2 is not a 

multiple of $1.00, the deductible earnings are rounded down to the nearest multiple of 

$1.00. For example, if the employee had an LPE of $403.00 in a month, the deductible 

earnings would be $201.00.

The deductions cannot exceed 50% of the total of the net tier II and supplemental 

annuity. Work deductions are applied to the amount of the supplemental annuity after 

any reduction for an employer pension, but before any legal process deductions or 

cutback. If the deductible earnings are less than half of the total of the tier II and 

supplemental annuity, the deduction is applied proportionately to the two components. 

(An example of this prorated deduction follows the discussion of LPE deductions in the 

spouse annuity.)

If only the spouse has LPE earnings, no deduction is applied to the employee annuity.

Until a final report of earnings is obtained, temporary work deductions are applied based 

on average monthly earnings.

1121.20.2 Reduction In The Spouse Annuity For Last Person Earnings

The spouse tier II is reduced if either the employee or spouse has LPE.

A. Only the Employee or Spouse Has LPE - The spouse tier II is reduced by $1.00 

for every $2.00 of LPE, not to exceed 50% of the spouse tier II.

B. Both the Employee and Spouse Have LPE - The spouse tier II is reduced by 

$1.00 for every $2.00 of the employee's LPE earnings and $1 for every $2 of the 

spouse's LPE earnings, not to exceed 50% of the spouse's tier II.

Until a final report of earnings is obtained, temporary work deductions are applied 

based on average monthly earnings.

EXAMPLE 1: An employee stopped LPE employment on 12-15-1990, earning 

$401.00 for the month. He and his wife filed annuity applications the same day. 
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They requested the earliest ABD of 12-1-1990. LPE work deductions apply to his 

tier II, his wife's tier II and the supplemental annuity for any annuity payment due 

for December.

The LPE WD is $200.00 or one-half the LPE earnings. (Any remaining cents are 

dropped.) Both annuitants have components large enough to permit recovery of 

the LPE WD in full, without limiting the deduction to 50% of the annuity 

components. The annuity components and deductions are as follows:

COMPONENT LPE WD NET COMPONENT

EE T2 $1,000.00 $191.75 * $ 808.25

Supp 43.00 8.25 * 34.75

MA T2 450.00 200.00 250.00

Total 1,493.00 $400.00 $1,093.00

• The employee's LPE work deduction is the product of one-half the LPE, and 

the ratio of each LPE WD component to the sum of the LPE WD components.

For example, the EE T2 LPE WD is the product of $200.00 times 

($1,000.00/$1,043.00), which equals $191.75.

LPE work deductions apply on the basis of a formula that can produce higher 

deductions for the spouse than for the employee. (See example 2 below.) A 

spouse who is also receiving an employee annuity could have a larger LPE work 

deduction because her tier II includes a restored amount to compensate for the 

tier I offset.

EXAMPLE 2: A male employee continues LPE employment and expects to earn 

$1,000.00 per month. He has a small tier II of $20.00 and is not entitled to a 

supplemental annuity.

His wife is not employed. She receives an annuity as a railroad employee which 

zeroes out the tier I of the annuity she receives as a spouse. She has a tier II of 

$400.00 after restoration of the EE annuity deducted from her tier I.

Although half the LPE earnings is $500.00, neither annuitant can lose more than 

50% of tier II. While the employee's tier II is subject to an LPE work deduction of 

$10.00, the spouse's tier II is subject to a deduction of $200.00.

If the employee (male, in this example) files for a spouse's annuity, that annuity 

would also be subject to LPE work deductions without regard to the deductions 

applied under his own claim number.

Where more than two annuities (i.e., a working male employee’s own employee 

annuity, his female spouse’s spouse annuity, and the male employee’s own 
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spouse annuity on his female spouse’s earnings record) are subject to the same 

LPE work deductions, the total amount of annuities reduced for LPE cannot 

exceed the amount of the actual earnings. The LPE reductions are to be applied 

in the following order up to the amount of the LPE earnings total:

1) the worker’s own employee annuity;

2) the spouse annuity on the worker’s earnings record;

3) the worker’s own spouse annuity.

EXAMPLE: The working employee earns $700 per month in LPE. The 

working employee’s tier 2 is $600; the spouse annuity tier 2 is $270, and 

the working employee’s spouse tier 2 on his spouse’s earnings record is 

$600. No supplemental annuities are payable. Under normal conditions, 

the working employee’s tier 2 is reduced by $300, the spouse’s tier 2 is 

reduced by $135, and the working employee’s own spouse tier 2 is 

reduced by $300. However, because the total amount being reduced 

($300 + $135 + $300 = $735) exceeds the LPE earnings ($700), the 

employee’s own spouse annuity tier 2 can be reduced by only $265 ($300 

+ $135 + $265 = $700).

Where the rounding down of earnings causes a LPE reduction slightly less 

(usually $1 or $2) than the earnings total, it is not necessary to apply a 

LPE reduction for the amount of that rounding difference to the other 

earnings record. If the worker’s own spouse annuity is not being reduced 

for LPE due to this provision, a note to file should be placed in that folder 

explaining why LPE work deductions are not being applied to the spouse 

annuity.

1121.30 Temporary Deductions

If an employee or spouse is continuing in LPE when the annuity is awarded or when the 

annuitant returns to last person earnings (LPE), temporary deductions are applied to tier 

II and the supplemental annuity to prevent an overpayment when the case is handled 

for a final adjustment. The amount of the temporary deduction is based on the average 

monthly LPE.

Temporary deductions ordinarily apply to LPE in the current year. They may also be 

used, if necessary, to avoid making an overpayment in a previous year, if it is not 

possible to make a final adjustment for LPE earnings at the time the annuity is being 

certified. LPE earnings in excess of the yearly exempt amount may also result in 

temporary work deductions for excess earnings in tier I and the VDB.
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1121.30.1 Retirement Award Processing 

Employee, spouse, and divorced spouse applications are processed by the APPLE 

Automated Retirement Payments (ARP) batch programs, and paid through ROC. 

Temporary work deductions (TWD) are generally started or handled during this process. 

Cases not processed by ARP are handled manually by claims examiners. See FOM1 

1581. 

A. General - ARP will apply temporary LPE work deductions to the employee and/or 

spouse if their applications indicate LPE employment after the ABD. Deductions 

are based on the average monthly earnings indicated on the applications. If the 

LPE earnings are not available, work deductions are not applied. If LPE 

employment ceases during the accrual period of the initial award, ARP will apply 

TWDs, and remove them, beginning with the month following the date last 

worked in LPE.

B. Spouse LPE TWDs Based on Employee's Earnings - ARP applies work 

deductions to the spouse annuity when the employee has LPE. If the employee's 

earnings are not available in the initial application, ARP will use the employee’s

tier II as the monthly earnings amount to assess work deductions. 

If work deductions had been applied to an employee annuity but PREH indicates 

that they have been removed, ARP will apply LPE work deductions based on the 

spouse LPE only However, work deductions will be applied to the spouse annuity 

for the employee's LPE, if:

• The employee has continuing LPE;

• The employee has a net tier II of zero; and

• The spouse has a net tier II greater than zero due to an employee annuity 

restored amount.

C. Both Employee and Spouse Have LPE - ROC computes a work deduction 

amount for the spouse based on the combined earnings of the employee and 

spouse, rounded down to the dollar. As a result, the LPE TWDs for the spouse 

may be slightly overstated if the LPE deduction is less than 50% of the spouse's 

tier II.

D. Prior year TWDs - If LPE work deductions are applied in a year prior to the 

voucher year, ARP cannot apply permanent work deductions. Final work 

deductions will be applied when a SPEED Final Report is entered for that year.

E. Two LPE employers - If the application indicates two periods of non-railroad 

employment, ARP will use the combined earnings in the LPE temporary 

deductions for any overlapping months. ROC will exclude the appropriate LPE 

salary the month after an LPE employment period ends. 
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F. Employment after the ABD - If the employee or spouse has a period of nonrailroad employment that begins after the ABD, ARP determines the employment 

is not LPE and does not apply LPE deductions.

1121.30.2 Applying TWDs in ROC or PC Awards

Temporary deductions for LPE are applied to initial manual awards based on the 

average monthly earnings on the annuity application. If the applicant provided a 

monthly breakdown of prior year earnings (e.g., on Form G-19L), the claims examiner 

will calculate final work deductions for the ABD year.

1121.30.3 Partial Rate Exceeds Final Rate

A partial annuity rate might exceed the final rate if the IMPACT or SPAR did not include 

deductions for LPE. ROC will produce an award. Examiners are responsible for 

reviewing the awards and taking necessary actions. Because temporary work 

deductions are based on estimated earnings, the annuity cannot be considered 

overpaid until there is a final report of earnings. 

If the employee stopped working in LPE after the ABD and ROC was not able to 

withhold TWDs, TWDs may be withheld later in the year.

EXAMPLE: TWDs should have been applied in January through March. ROC 

produces an award in April. TWDs can be applied in May and removed in August.

1121.30.4 Cases in Payment Status

If an annuitant resumes LPE after the annuity is in force, examiners withhold temporary 

LPE work deductions effective with the award voucher month.

If an annuitant notifies the RRB that he expects to earn more in LPE than he previously 

estimated, the examiner adjusts the annuity rate only if:

• Less than 50% of the tier II and supplemental annuity are being withheld; and

• The revised estimate would result in a change of more than $1.00 per month in the 

annuity payments. 

In all other cases, the examiner will acknowledge the annuitant's revised estimate and 

note that any required adjustments will be made after the end of the year when the 

annual report of earnings is reviewed.

1121.31 Action When Earnings Report Received

Annuitants are instructed to return Forms G-19L released during the annual monitoring 

to the Program Evaluation and Management Services - Program Evaluation Section, 

Retirement/Survivor/Tax/Medicare (PEMS - PES RSTM). When a report of excess 

earnings from a Form G-19L or other report is received from a retirement annuitant, 
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whether during the annual monitoring or outside of monitoring, enter the earnings 

information into SPEED. See FOM 1-15125.5 for detailed instructions for accessing and 

using SPEED. Returned documents are to be scanned and imaged as they are 

received (See FOM 1-1115.35.3). Screen prints, route slips, or other unnecessary 

attachments should not be scanned with earnings reports.

1121.40 Final Work deductions

1121.40.1 Control for Final Adjustment

Cases that have been adjusted for temporary LPE work deductions are controlled for an 

adjustment for final earnings. For records with prior year earnings deductions, ARP is 

including an award message to alert that PWDs may apply and should be handled by 

RBD. 

Annuitants who had recurring or nonrecurring LPE TWDs on record at the end of the 

year will receive a questionnaire (Form G-19L), usually in late April/early May, on which 

to make a final report of earnings. Spouses will receive a questionnaire if PREH 

indicates that LPE deductions are based on the spouse's own LPE.

Applicants who expect their annuity to begin in the year prior to filing, and who had LPE 

earnings after the ABD, are asked to make a final report of earnings when they file their 

application.

Annuitants having LPE earnings and an ABD in the year of filing, but who are not paid 

final until the following year, will not be included in the ABD year monitoring program. In 

these cases, examiners manually release Form G-19L to secure a final earnings report 

for the ABD year.

1121.40.2 Earnings Reports

A. General

After the end of each year, annuitants are required to report the final amount of 

their earnings for the previous year. As part of its annual monitoring program, 

the RRB mechanically releases Form G-19L to secure this report from annuitants 

who had LPE in the previous year. The form is generally released in late 

April/early May. Form G-19L also collects information on regular and disability 

excess earnings.

In addition to annual earnings information, a report of LPE earnings for an earlier 

year must show the actual gross earnings for every month that the annuitant 

worked in LPE, the employer's name and address and an estimate of average 

monthly earnings. Annuitants receiving Form G-19L are instructed to return 

completed earnings reports to PEMS - PES RSTM. Return envelopes are 

provided. The form can also be found on RRAILS, and can be used when 

requesting earnings information outside of the monitoring period. Use Form 
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G-19L, Annual Earnings Questionnaire and Form G-19L.1, Instructions for 

Completing the Annual Earnings Questionnaire, for retirement annuitants in LPE 

for the year in question when:

1. The annuitant did not make an earnings report for an earlier year.

2. The annuitant did not make a timely report of LPE; or

3. The annuitant says he did not receive a Form G-19L (an indication that he 

was bypassed in the annual earnings operation).

Form G-19F is also used to request annual earnings information. The form can 

be found on RRAILS. It is designed for use during the initial application process 

to request last pre-retirement non-railroad employment earnings in retirement 

cases when:

1. The ABD is in a prior year, or

2. The ABD is in the current year and the applicant has ceased work after

the month of the ABD.

B. Discrepant Report of Earnings - A discrepancy between the annual earnings 

amount reported to SSA and the sum of the monthly earnings amounts may need 

to be investigated. The reported earnings are used to adjust the annuity unless:

• The total earnings reported for the year are less than the earnings reported to 

SSA; and

• The annuity is subject to less than the maximum offset of 50% of tier II and 

the supplemental annuity using the earnings reported to the RRB; and

• The difference between the total earnings reported to RRB and SSA is more 

than $50.00 (twice the tolerance amount for overpayments.)

If SSA employment data shows that all of the earnings are from LPE 

employment, the field office is asked to contact the annuitant to resolve the 

discrepancy.

1121.40.3 Final Adjustment for LPE Earnings

The final LPE adjustment compares what was paid with what should have been paid 

based on actual rather than estimated LPE. If there was an underpayment because too 

much money was withheld for temporary deductions, the additional amount due will be 

certified for payment at the time the final adjustment is made. If there is an 

overpayment, the overpayment will be recovered according to the usual overpayment 

recovery procedure.
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If an annuitant is uncooperative in providing a breakdown for the yearly earnings, work 

deductions should be assessed by dividing the annual amount by 12 to determine the 

monthly LPE amount.

1121.50 When Annuitant Ceases LPE

If an annuitant reports that he has stopped LPE employment, the claims examiner will 

recertify the annuity to remove temporary LPE deductions. The adjustments effective 

with the month after the date last worked. If the annuitant expects no LPE in the current 

year, the case will be coded in PREH, to prevent the release of a questionnaire at the 

beginning of the following year. If the annuitant had LPE in the current year, the case 

will be coded as having had nonrecurring work deductions. This will indicate that, 

although LPE work deductions are no longer in effect, a final report of earnings must be 

obtained for the current year. 

When an annuitant reports that he has stopped LPE employment, enter the earnings 

information into SPEED. See FOM 1-15125.5 for detailed instructions for accessing 

and using SPEED.

1121.55 Examiner Handling of LPE Cease Work Reports 

When SPEED cannot process the LPE cease-work report, the case is referred off for 

manual handling. Examiners should use the same ALTA code paragraphs and RRAILS 

letters as SPEED uses. SPEED uses the following ALTA code paragraphs when 

creating a ROC award to remove LPE work deductions:

5005 Employee Cease Work LPE – Removing Employee Tier 2 WD 

Since you stopped working for your last person employer on (1), the reduction applied 

to your Tier 2 has been removed effective (2). Please notify us of any changes in 

earnings or employment involving your last person employer. 

1) Enter date last worked 

2) Enter effective date 

5006 Employee Cease Work LPE – Removing Employee Sup WD

Since you stopped working for your last person employer on (1), the reduction applied 

to your supplemental annuity has been removed effective (2). Please notify us of any 

changes in earnings or employment involving your last person employer. 

(1) Enter date last worked 

(2) Enter effective date 

5007 Employee Cease Work LPE – Removing Employee Tier 2 & Sup WD
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Since you stopped working for your last person employer on (1), the reduction applied 

to your Tier 2 and supplemental annuity has been removed effective (2). Please notify 

us of any changes in earnings or employment involving your last person employer. 

1) Enter date last worked 

2) Enter effective date 

5008 Employee Cease Work LPE – Removing Spouse Tier 2 WD 

Since the railroad employee stopped working for his/her last person employer on (1), 

the reduction applied to your Tier 2 has been removed effective (2). 

1) Enter date last worked 

2) Enter effective date 

5009 Spouse Cease Work LPE – EE not in LPE - Removing Spouse Tier 2 WD 

Since you stopped working for your last person employer on (1), the reduction applied 

to your Tier 2 has been removed effective (2). Please notify us of any changes in 

earnings or employment involving your last person employer. 

1) Enter date last worked 

2) Enter effective date 

If the examiner is creating a PREH Update award only for the spouse, the RRAILS 

SPEED letter RL-169SR should be released to the spouse. The inserts for this letter is 

either code paragraph 5012 or 5020 as described below.

5012 Spouse Cease Work LPE - EE Still in LPE 

We have received notification that you stopped working for your last person employer 

on (1). The reduction applied to your Tier 2 cannot be removed at this time because the 

railroad employer is still working for his/her last person employer. Please notify us of 

any changes in earnings or employment involving your last person employer.

1) Enter date last worked

5020 Employee Cease Work LPE – Spouse Still Working

We have received notification that the railroad employee has stopped working for 

his/her last person employer. The reduction applied to your Tier 2 cannot be removed 

at this time because you are still working for your last person employer. Please notify 

us of any changes in earnings or employment involving your last person employer.

Also, SPEED creates PREH update only awards when the LPE work deductions cannot 

be removed from the spouse annuity, (either the employee or the spouse is still 
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working). Examiners should not create a PREH update award for the spouse in this 

situation. Instead, examiners should use the PREH on-line correction facility to update 

the SP-WD-MONIT-FLG code, (3200 screen) and release the appropriate award letter 

to the spouse using either code paragraph 5012 or 5020 above.