MASTER THE BASICS

PART I

Presented by 

Patrick Keenan

Compensation Reporting Specialist

11th Triennial Virtual National Rail Employer Training Seminar

Chicago, IL

August 3-5, 2021
Railroad Retirement Board – Benefitting the Rail Industry Since 1935
THREE FEDERAL AGENCIES
Railroad Retirement Board – Benefitting the Rail Industry Since 1935

STATUTES THAT COMPRISE THE RAILROAD

RETIREMENT (RRB) SYSTEM

• RRA

◦ Railroad Retirement Act

• RUIA

◦ Railroad Unemployment Insurance Act

• RRTA

◦ Railroad Retirement Tax Act
Railroad Retirement Board – Benefitting the Rail Industry Since 1935

AGENCY OVERVIEW

Primary Function of the RRB

To administer comprehensive 

retirement-survivor and 

unemployment-sickness 

insurance benefit programs for 

the nation’s railroad workers and 

their families under the RRA and 

RUIA.

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Railroad Retirement Board – Benefitting the Rail Industry Since 1935

AGENCY OVERVIEW

RRB was created in the 1930’s.

Legislation enacted in 1934, 1935, and 1937 to 

establish a railroad retirement system separate 

from the social security program legislated in 

1935.

Congress subsequently enacted the Railroad 

Unemployment Insurance Act in 1938.

Legislation enacted in 1974 restructured railroad 

retirement benefits into two tiers.

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Railroad Retirement Board – Benefitting the Rail Industry Since 1935

AGENCY OVERVIEW

Railroad Retirement Act – provides payment of 

retirement and survivor benefits.

Tier I Benefit – is calculated exactly like a social 

security benefit, so you are always guaranteed to 

receive as much as you would have received had you 

been covered under the Social Security Act.

Tier II Benefit – is based exclusively on your railroad 

service so it is similar to a private pension.

Railroad Unemployment Insurance Act – provides 

unemployment and sickness benefits to workers 

who are unemployed or can’t work due to sickness 

or injury.

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Railroad Retirement Board – Benefitting the Rail Industry Since 1935

COMPENSATION AND EMPLOYER SERVICES

Jeffrey T. Archbold

Chief of Compensation and Employer Services

Quality Reporting 

Service Center CESC Protest

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Railroad Retirement Board – Benefitting the Rail Industry Since 1935

COMPENSATION AND EMPLOYER SERVICES

CENTER (CESC)

• CESC maintains lifetime records of creditable 

service and compensation for each employee. 

• Provides training, instructional material, handles 

inquiries from employers, and acts as liaison 

between employers and other RRB offices.
Railroad Retirement Board – Benefitting the Rail Industry Since 1935

SERVICE MONTHS

Three Types of Service Months

1. Reported – information provided to 

RRB by employer

2. Deemed – determined by RRB, but 

based on information provided by 

employer

3. Military – information provided to 

RRB by employee
Railroad Retirement Board – Benefitting the Rail Industry Since 1935

SERVICE MONTHS

• A (reported) service month is any 

calendar month or part of a calendar 

month for which an employee receives 

compensation for services performed 

for a covered employer; or

• A period of time that an employee 

receives compensation which is 

determined to be pay for time lost 
Railroad Retirement Board – Benefitting the Rail Industry Since 1935

SERVICE MONTHS

• Service is always credited to the month service was 

performed, regardless of when the payment was 

made.

• There is no minimum requirement of time worked, nor 

compensation earned for a month of service.

• Service months should be reported for every month 

service was performed regardless of when the 

maximum creditable compensation bases are 

reached.

• An employee must have an employment relation with 

employer to receive a service month.
Railroad Retirement Board – Benefitting the Rail Industry Since 1935

EMPLOYMENT RELATION AND SERVICE

MONTHS

Service months can only be credited if an

employment relation exists with a covered

employer in that month. Employment relation ends

if the employee:

• resigns;

• retires or receives company pension;

• relinquishes employment rights;

• dies; or

• loses their employment relation for any reason.
Railroad Retirement Board – Benefitting the Rail Industry Since 1935

PAYMENTS THAT RESULT IN CREDITABLE

SERVICE MONTHS

• Payments made through normal payroll 

process;

• Vacation pay for vacation period;

• Pay for time lost;

• Displacement or dismissal allowance;

• Holiday pay

• Personal or Sick Days
Railroad Retirement Board – Benefitting the Rail Industry Since 1935

PAYMENTS THAT DO NOT RESULT IN

CREDITABLE SERVICE MONTHS

• Sick Pay (Payments made under an RRB 

Approved Plan)

• Cost of Group Term Life Insurance

• Some payments are associated with service but 

the service was already performed and credited 

for a previous period. No additional service is 

generally creditable for back pay (retroactive 

wage increase), bonus pay, profit sharing, 

stock awards or productivity fund.
Railroad Retirement Board – Benefitting the Rail Industry Since 1935

DEEMED SERVICE MONTHS

Deemed Service Months Criteria

1. Employee has less than 12 service months in 

the year. 

2. EE has sufficient Tier II compensation in the 

year.

3. EE has an employment relationship in “open” 

months (non-reported months).

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Railroad Retirement Board – Benefitting the Rail Industry Since 1935

Deemed Service Months

This example is for an employee who worked for 22 years He worked all twelve months

initially but in the last seven years before his retirement, he began seasonal work. This

seasonal work began in 2011 and ended in 2017. He had no work from late December to

March from 2011 – 2017.

If no deeming applies, AMC = 7280 (based on $436,750 / 60). 

If deeming months applied, AMC = 7370 (based on $442,200 / 60).

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Year

Reported

Tier II 

Compensation

Reported 

Months

Deemed 

Months AMC Total Months YOS Tier II Benefit

2017 $ 94,500.00 10 2

2016 $ 88,200.00 10 2

2015 $ 88,200.00 10 2

2014 $ 87,000.00 10 2

2013 $ 84,300.00 10 2 7370 262 21.8333 $1,126.38

2012 $ 81,900.00 10 2 7280 250 20.8333 $1,061.67

2011 $ 79,200.00 10 0
Railroad Retirement Board – Benefitting the Rail Industry Since 1935

CREDITABLE COMPENSATION

Regular/Reported Compensation:

• Any payments made for services rendered 

through the regular payroll system. (i.e., 

wages, salaries, commissions)

• Non-monetary earnings paid as a commodity, 

service or privilege. (Must have an agreed 

upon value)
Railroad Retirement Board – Benefitting the Rail Industry Since 1935

CREDITABLE COMPENSATION

• Creditable compensation is:

◦ compensation paid for services rendered 

as an employee and pay for time lost.

◦ creditable as Tier 1, Tier 2 and RUIA 

compensation (Sick Pay is only creditable 

as Tier 1)

◦ reported to the RRB on Form BA-3. Should 

be submitted by the last day of February 

every year.
Railroad Retirement Board – Benefitting the Rail Industry Since 1935

CREDITABLE COMPENSATION

2021 Annual Compensation Maximums

• Creditable as Tier I up to the Maximum

2021 Annual Maximum = $142,800

• Creditable as Tier II up to the Max

2021 Annual Max = $106,200

• Creditable as Railroad Unemployment Insurance 

Compensation (RUIA I)

2021 Monthly Max = $1,710

• Creditable as Railroad Unemployment Insurance 

Maximum Compensation (RUIA II)

2021 Monthly Max = $2,209
Railroad Retirement Board – Benefitting the Rail Industry Since 1935

WHAT IS INCLUDED AS CREDITABLE AND

TAXABLE COMPENSATION

• Wages, salaries, advances on salaries

• commissions, tips, bonuses

• stand by pay, back pay

• vacation pay, holiday pay

• pay for time lost

• separation/severance pay

• retention or incentive pay

• productivity payments

• profit sharing

• purchase of employee benefits

• non-monetary earnings
Railroad Retirement Board – Benefitting the Rail Industry Since 1935

WHAT IS EXCLUDED FROM CREDITABLE AND

TAXABLE COMPENSATION

• Excluded payments are those which are also 

excluded as income under the Internal Revenue 

Code such as:

◦ Cafeteria plans

◦ contributions to qualified profit sharing plans

• Reimbursements for qualified employment expenses 

such as training, room and board while traveling on 

business, and use of car on business.

• Payments to persons other than employees.
Railroad Retirement Board – Benefitting the Rail Industry Since 1935

CREDITABLE SICK PAY COMPENSATION

• Sick pay is:

• compensation paid under an RRB approved plan 

or agreement;

• available on the same basis to employees 

generally or in a like class or craft; and

• payable for days not worked on account of injury, 

illness, sickness, disease, pregnancy, or 

childbirth.
Railroad Retirement Board – Benefitting the Rail Industry Since 1935

SICK PAY (CONT’D)

• Is creditable & taxable as Tier I only;

• Is not creditable or taxable as Tier II 

compensation;

• Is not creditable or taxable as RUIA 

compensation; and

• Is reportedly separately on employer’s annual 

report (BA-3)

• Sick pay does not yield service months.

• Combined Regular earnings and Sick Pay 

should not exceed the Tier I Max.
• paid by the RRB under the RUIA and based on an 

on-the-job-injury;

• paid subsequent to the sixth month following the 

month the employee last worked;

• paid after the tier 1 compensation maximum is 

reached;

• paid in the year after an employee dies.
Railroad Retirement Board – Benefitting the Rail Industry Since 1935

VACATION PAY

• Vacation Taken –Vacation days were used by 

employee. Service and compensation are 

creditable for the vacation period.

• Vacation Pay in Lieu of Vacation Taken -

Vacation days were not used by employee, but the 

accrued vacation due was instead paid as a lump 

sum payment. Compensation is creditable, but no 

service months are creditable. 
Railroad Retirement Board – Benefitting the Rail Industry Since 1935

SEPARATION/SEVERANCE PAY

• Separation and Dismissal Allowances are 

payments that result from the abolition of an 

employee’s job.

• Separation Allowance: Compensation paid 

to an employee who agrees to relinquish job 

rights to obtain a payment.

• Dismissal Allowance: Monthly 

compensation payments made to an 

employee who retains employee rights 

throughout payment period.
Railroad Retirement Board – Benefitting the Rail Industry Since 1935

SEPARATION/SEVERANCE PAY

• Separation Allowance

◦ Creditable only as Tier I compensation after 

relinquishment of rights date. 

◦ Not creditable for service month(s) or Tier II 

compensation after the employment relinquishment 

date. 

• Dismissal Allowance

◦ Compensation creditable as Tier I, Tier II, and RUIA.

◦ EE receives service month credit as a result of the 

monthly payments.
Railroad Retirement Board – Benefitting the Rail Industry Since 1935

PAY FOR TIME LOST

Compensation for wages lost for an identifiable 

period of absence from active service.

Pay for Time lost includes:

 personal injury awards/settlements

 reinstatement awards/settlements

 dismissal allowances

 guaranteed wage payments

 displacement allowances
Railroad Retirement Board – Benefitting the Rail Industry Since 1935

PAY FOR TIME LOST

GENERAL PRINCIPLES

1. Payment Must be Made with Respect to an 

Identifiable Period of Time.

2. Employment Relationship must exist in the 

Identifiable Period of Time.

3. Service Month Allocation must relate to the Actual 

Period of Absence for which payment is made. 

4. Payment is based upon the employee’s daily pay 

rate in effect on the date of injury or last 

employment.

5. Payment must be a minimum of 10 Times the 

Employee's Daily Pay Rate multiplied by the 

number of months to be credited.
Railroad Retirement Board – Benefitting the Rail Industry Since 1935

PAY FOR TIME LOST

6. Do not allocate the payment to months which 

were already reported as a service months.

7. Do not consider Deemed Service Months in 

the Allocation Period.

◦ Contact the RRB for “open” service months.

◦ Military Service may, under certain circumstances, 

be counted as Railroad Service under the RRA. 

Contact a RRB field office for creditability of 

Military Service.
Railroad Retirement Board – Benefitting the Rail Industry Since 1935

TAXABLE COMPENSATION

• Taxable compensation is essentially the same as 

creditable compensation. However, taxable Tier 1 & 

Tier 2 compensation are reported to the IRS on the 

CT-1 and RUIA I compensation to the RRB on the 

DC1 to substantiate your tax deposits which fund 

benefits under the RRA and RUIA.

• With the exception of sick pay, compensation is 

subject to both Tier 1 and Tier II tax up to an annual 

maximum, and RUIA contribution up to a monthly 

maximum. Sick pay is only creditable as Tier 1 

compensation and the Tier 1 tax.
Railroad Retirement Board – Benefitting the Rail Industry Since 1935

Taxable Compensation

 Tier I annual maximum

 2021 = $142,800

 Tier II annual maximum

 2021 = 106,200

 Medicare has no maximum

 Tier I Tax 

 2021 = 6.2% - Employee

 2021 = 6.2% - Employer 

 Tier II Tax

 2021 = 4.9% - Employee

 2021 = 13.1% - Employer 

 Medicare Tax 

 2021 = 1.45% - Employee

 2021 = 1.45% - Employer 

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Railroad Retirement Board – Benefitting the Rail Industry Since 1935

Conclusiveness of Service and 

Compensation

The RRB’s compensation records are 

considered conclusive unless the error is called 

to the attention of the Board within four years 

after the date on which the compensation was 

required to be reported to the Board.

The four year period begins with the last day the 

applicable annual report was due to be filed.

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Railroad Retirement Board – Benefitting the Rail Industry Since 1935

Conclusiveness of Service and 

Compensation

• Exceptions for Reconsideration

• Fraud

• Erroneously reported

• RRB Board Order

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Railroad Retirement Board – Benefitting the Rail Industry Since 1935

Helpful Websites

 WWW.RRB.GOV – Organization news, benefit program, tax rate 

information, earnings bases & Employer Reporting Instructions.

 WWW.IRS.GOV- Forms, publications, and policy information.

 WWW.SSA.GOV- Guide to filing Forms W-2 and verifying employee 

social security numbers.

 WWW.EFTPS.COM – the Electronic Federal Tax Payment System 

is provided by the US Treasury to pay federal taxes.

 WWW.PAY.GOV – Secure electronic payments to federal agencies 

(i.e. RUIA contributions (DC-1) to RRB)

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QUESTIONS ???

ADDITIONAL Assistance

Quality Reporting Services Center

TELEPHONE: 312-751-4992

FAX: 312-751-7123

EMAIL: QRSC@RRB.GOV