AUDITS OF EMPLOYERS

PRESENTED BY

NATHANIEL T. WILLIAMS

11TH TRIENNIAL NATIONAL RAIL EMPLOYER TRAINING SEMINAR

US RAILROAD RETIREMENT BOARD HEADQUARTERS

CHICAGO, IL

AUGUST 3 – 5, 2021
Railroad Retirement Board – Benefitting the Rail Industry Since 1935

AGENDA

 Audit and Compliance Section

 Background & Primary Functions

 Employer Audits 

 Audit Objectives 

 Audit Process

 Common Discrepancies

 Tips For Success

 Keep It Moving

 Confidentiality of Information

 RRB and IRS Relationship

 Memo of Understanding

 RRB Audit vs. IRS Audit
Railroad Retirement Board – Benefitting the Rail Industry Since 1935

AUDIT AND COMPLIANCE SECTION

 Established April 1993

 RRB’s Audit Authority

 Railroad Retirement Act Section 7

 Railroad Unemployment Insurance Act Section 12

 Power to Issue Subpoenas

 Audit Universe
Railroad Retirement Board – Benefitting the Rail Industry Since 1935

PRIMARY FUNCTION

The Audit and Compliance Section (ACS) is responsible for:

 Conducting audits of railroad employers
EMPLOYER AUDITS
Railroad Retirement Board – Benefitting the Rail Industry Since 1935

AUDIT OBJECTIVES

An employer audit has six objectives:

1. To reconcile creditable compensation reported to the RRB with taxable 

compensation reported to the IRS

2. To determine the accuracy of the creditable compensation and service 

3. To reconcile RUIA compensation on Form DC-1 with the RUIA reported on 

Forms BA-3 and BA-4

4. To determine whether the railroad is making proper and timely contributions 

for employees covered under the RUIA

5. To ensure compliance with Sections 2(f) and 12(o) provisions of the RUIA

6. To identify potential coverage issues
Railroad Retirement Board – Benefitting the Rail Industry Since 1935

OVERVIEW OF AUDIT PROCESS

 Audit Plan

 Prepare audit plan

 Submit to CFO for approval 

 Once approved – Copies are sent to the Board Members 

 Employer Notification – via Telephone

 Announce audit

 Audit objectives

 Audit scope 

 Discuss what records are needed and where they are located

 Secured email messaging system

 On-site visit 
Railroad Retirement Board – Benefitting the Rail Industry Since 1935

OVERVIEW OF AUDIT PROCESS

 Issuance of Audit Confirmation Letter

 Information Document Request (IDR)

 Employer questionnaire 

 Obtain as much of the information needed as possible prior to the 

on-site visit

 Reduces time on-site

 Begin reconciliations 
Railroad Retirement Board – Benefitting the Rail Industry Since 1935

OVERVIEW OF AUDIT PROCESS

 On-Site Visit

 Conduct an entrance conference

 Gain an understanding of the payroll system and payroll records 

 Obtain any outstanding IDR requests 

 Discuss any preliminary audit findings

 Answer employer questions 

 End of Fieldwork

 Conduct an exit conference

 Explain each audit finding and recommendation

 Strive to reach management agreement 

 If employer agrees with the audit finding(s), obtain any adjusted reports

 If the employer disagrees with the audit finding(s) they are to provide a 

written explanation
Railroad Retirement Board – Benefitting the Rail Industry Since 1935

OVERVIEW OF AUDIT PROCESS

 Appeals Process

 Informal conference with the Director of Audit Affairs & Compliance 

 Conference with the Chief Financial Officer 

 If significant issues remain unresolved, ACS will involve the Office of 

General Counsel

 Draft Audit Report

 After the closing conference - ACS prepares a draft report

 Request employer’s written reply to each finding and recommendation –

30 days to reply

 Final Audit Report

 Once reply to draft is received and reviewed – Final report is prepared

 The employer’s written reply is included as an attachment 

 A report is issued to the employer, the bureaus within the RRB, and to the 

IRS if there are any unresolved issues relating to the Railroad Retirement 

Tax Act (RRTA)
Railroad Retirement Board – Benefitting the Rail Industry Since 1935

COMMON DISCREPANCIES

 Differences Between Creditable vs. Taxable Compensation

 Inaccurate Reporting of Third Party Sick Pay

 Untimely Reporting of Separations

 Untimely Reimbursement of RUIA Benefits

 Inaccurate Reporting of Pay for Time Loss
Railroad Retirement Board – Benefitting the Rail Industry Since 1935

TIPS FOR A SUCCESSFUL AUDIT

 Read the initial and all subsequent IDRs:

 Ask Questions - There is no such thing as a stupid question

 Delegate items that are not your responsibility

 Identify any items that are not applicable to your railroad

 Resolve audit findings during course of the audit
Railroad Retirement Board – Benefitting the Rail Industry Since 1935

KEEP THE AUDIT MOVING

 Keep the lines of communication open

 Answer questions in a timely manner

 Provide requested information in a timely manner

 Keep a log of the information you’ve submitted and the information 

you need to work on
Railroad Retirement Board – Benefitting the Rail Industry Since 1935

CONFIDENTIALITY OF INFORMATION

 ACS protects the confidentiality of information received during the course 

of an audit.

 The RRB receives certain Form CT-1 information from the IRS. The nondisclosure provisions of the IRS Code (26 U.S.C. 6103) apply to RRB 

employees

 RRB regulations incorporate the Privacy Act of 1974, which includes 

rules on non-disclosure of information about individuals 

 Other business information obtained from employers is protected from 

disclosure

 ACS uses a secured email messaging system
RRB – IRS RELATIONSHIP
Railroad Retirement Board – Benefitting the Rail Industry Since 1935

MEMORANDUM OF UNDERSTANDING

 In November 2009, the RRB and the IRS executed a Memorandum of 

Understanding (MOU)

 The agreement provides that the RRB will send the IRS any final audit 

reports that involve unresolved RRTA issues

 The IRS forwards copies of railroad employment tax audit results (6103 of 

the Internal Revenue Code) to the RRB

 The agreement also allows for:

 the RRB to request the IRS to protect the statutes of limitations from 

expiring, and

 RRB and IRS personnel to participate in audit training sessions, 

conferences and seminars
Railroad Retirement Board – Benefitting the Rail Industry Since 1935

RRB AUDIT VS. IRS AUDIT

 While it may appear audits conducted by the RRB and IRS are redundant, 

the purpose of the respective audits is very different

 RRB audits ensure compliance with Railroad Retirement and 

Railroad Unemployment Insurance benefit programs 

 IRS audits assess employment tax compliance
Railroad Retirement Board – Benefitting the Rail Industry Since 1935

RRB AUDIT VS. IRS AUDIT

 The primary purpose of the RRB audit is to check the accuracy of creditable 

service and compensation reports filed with the RRB 

 These reports include Forms BA-3, BA-4, BA-9 and BA-11 reports

 An RRB audit also ensures the accuracy of RUIA compensation and 

contributions, Forms DC-1 and that recoveries of benefits are paid under 

Section 2(f) and 12(o) of the Act

 The IRS RRTA audit is focused on the proper tax withholding, tax deposits, 

treatment of compensation as taxable or non-taxable, and treatment of 

individuals as employees or independent contractors
Railroad Retirement Board – Benefitting the Rail Industry Since 1935

SOURCES

1. Railroad Retirement Act 45 U.S.C. Sections 231 et seq.

2. Railroad Unemployment Insurance Act 45 U.S.C. Sections 351 et seq.

3. RRB Regulations 20 C.F.R. parts 1 to 399

4. Employer Reporting Instructions 

5. RRB Website (www.RRB.gov)
Railroad Retirement Board – Benefitting the Rail Industry Since 1935

CONTACT INFORMATION

Chiquita Lowery, Supervisory Auditor

Email: Chiquita.lowery@rrb.gov

Ph.: (312) 469-2428

Nathaniel Williams, Auditor

Email: Nathaniel.Williams@rrb.gov

Ph.: (312) 469-4613