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Railroad Retirement Board:
Retirement,
Survivor, Disability,
Unemployment, and
Sickness Benefits
Alison M. Shelton
Analyst in Income Security
January 11, 2012
Congressional Research Service
7-5700
www.crs.govJuly 17, 2012
The House Ways and Means Committee is making available this version of this Congressional Research Service
(CRS) report, with the cover date shown, for inclusion in its 2012 Green Book website. CRS works exclusively for
the United States Congress, providing policy and legal analysis to Committees and Members of both the House
and Senate, regardless of party affiliation.
Congressional Research Service
RS22350
CRS Report for Congress
Prepared for Members and Committees of Congress
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Railroad Retirement Board:RRB: Retirement, Survivor, Disability, Unemployment, and Sickness Benefits
Summary
The Railroad Retirement Board (RRB) administers retirement, survivor, disability,
unemployment, and sickness insurance for railroad workers and their families. This report
describes Railroad Retirement Act (RRA) and Railroad Unemployment Insurance Act (RUIA)
eligibility requirements, benefit types and compensation amounts, and program financing. This
report also covers temporary extended railroad unemployment provisionsbenefits in the 2009 stimulus
package (the American
Recovery and Reinvestment Act, P.L. 111-5) and follow-on legislation concerning temporary
extended unemployment benefits for railroad workers, as amended, and temporary
payroll tax relief for railroad employees in 2011 and 2012. The report will be updated annually.
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Railroad Retirement Board:RRB: Retirement, Survivor, Disability, Unemployment, and Sickness Benefits
Contents
Introduction...................................................................................................................................... 1
Railroad Retirement, Survivor, and Disability Benefits .................................................................. 1
Retirement Benefits for Railroad WorkersTier I Retirement Annuities ................................................................................ 2
Tier I Retirement Annuities ....................... 2
Tier II Retirement Annuities.......................................................................... 2
Tier II Retirement Annuities............................ 2
Other Retired Worker Benefits: Supplemental Annuities and Vested Dual Benefits................. 3
Retirement Benefits for Railroad Workers’ Families.................................................................... 2
Other Retired Worker Benefits: Supplemental Annuities and Vested Dual Benefits .............. 3
RetirementSurvivor Benefits for Railroad Workers’ Families ................................................................... 3
Survivor. 4
Disability Benefits for Railroad Workers’ Families ................................................................................. 4
Disability Benefits for Railroad Workers . 5
Financing of Retirement, Survivor, and Disability Benefits Under the Railroad
Retirement Act.......................................................................................... 5
Financing of Retirement and Survivor Benefits Under the Railroad Retirement Act .............................. 6
Railroad Unemployment and Sickness Benefits.............................................................................. 7
Financing of Unemployment and Sickness Benefits Under the Railroad
Unemployment Insurance Act ................................ 7
RRA and RUIA Benefits Since 2009................................................................ 7
Legislation Affecting Railroad Earned Entitlements Since 2009 .................................................... 8
American Recovery and Reinvestment Act of 2009.................................................................. 8
One-Time Payment for RRA Beneficiaries......................................................................... 8
Temporary Federal Income Tax Exclusion of Railroad Unemployment Benefits............... 8
Temporary Extension of Extended Unemployment Benefits.............................................. 8
Worker, Homeownership, and Business Assistance Act of 2009 .............................................. 89
Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010............ 9
Temporary Payroll Tax Cut Continuation Act of 2011 .............................................................. 9
The American Jobs ActMiddle Class Tax Relief and Job Creation Act of 2012 ........................................................ 9
H.Con.Res. 112...................................................... 9
Contacts
Author Contact Information............................................................................................................. 9
Congressional Research Service
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Railroad Retirement Board: 10
Congressional Research Service
RRB: Retirement, Survivor, Disability, Unemployment, and Sickness Benefits
Introduction
The Railroad Retirement Board (RRB), an independent federal agency, administers retirement,
survivor, disability, unemployment, and sickness insurance for railroad workers and their families
under the Railroad Retirement Act (RRA) and Railroad Unemployment Insurance Act (RUIA).1
Workers covered by those acts include those employed by railroads engaged in interstate
commerce and related subsidiaries, railroad associations, and railroad labor organizations. During
FY2010FY2011, the RRB paid almost $10.8$10.9 billion in retirement and survivor benefits to about 582578,000
beneficiaries. Unemployment and sickness benefits totaling $160101 million, including over $209
million in temporary extended unemployment benefits, were paid to more than 3828,000 claimants.2
Lifelong railroad workers receive railroad retirement benefits instead of Social Security benefits;
railroad workers with non-railroad experience receive benefits from either railroad retirement or
from Social Security, depending on the length of their railroad service.
Railroad retirement is separate from the Social Security system, but the two programs are closely
coordinated. The first legislation to establish a federal retirement program for railroad workers
passed shortly before the Social Security Act of 1935. The funding of railroad retirement and
Social Security was first linked in 1951, when a financial interchange was established. This
annual exchange of funds places the Social Security Trust Funds in the same financial position
they would have been in if railroad service had been covered by Social Security. The two
programs’ benefits are also coordinated. In 1974, railroad retirement benefits were divided into
two tiers (discussed below). Tier I benefits are computed using the Social Security benefit
formula based on earnings covered by either program. Tier II benefits are similar to private
pension benefits and are based only on railroad work.
This report provides general information on railroad benefits. Certain exceptions and special
cases are not covered. Individual railroad workers and beneficiaries should contact the RRB for
more specific information on their benefits.3
Railroad Retirement, Survivor, and Disability
Disability Benefits
The Railroad Retirement Act (45 U.S.C. §231) authorizes retirement, survivor, and disability
benefits for railroad workers and their families. To be insured for RRA benefits, a worker must
generally have at least 10 years of covered railroad work, or 5 years performed after 1995 and
“insured status” under Social Security rules (generally 40 quarters of coverage) based on
combined railroad retirement and Social Security-covered earnings. The . The
family of an insured
railroad worker may be entitled to receive railroad retirement benefits. If a
worker does not
qualify for railroad retirement benefits, his or her railroad work counts toward
Social Security
benefits.
1
The RRB is governed by three board members: one recommended by railroad employers, one recommended by
railroad labor organizations, and one appointed to represent the public interest.
2
Railroad Retirement Board, An Agency Overview, January 20112012, available at http://www.rrb.gov/opa/
agency_overview.asp.
3
To find the nearest RRB office, see http://www.rrb.gov/field/field.asp or call 1-877-772-5772.
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Railroad Retirement Board: Benefits
Retirement Benefits for Railroad Workers
At the age of 60, railroad workers with at least 30 years of covered railroad work may receive
unreduced retirement annuities. At full retirement age, which is gradually increasing from 65 to
67, insured workers with fewer than 30 years of service may also receive full retirement
annuities.4 Workers with fewer than 30 years of service may receive reduced retirement annuities
starting at the age of 62. Retirement annuities are not payable to workers who continue to work in
a covered railroad job or who return to railroad work after retirement. At the end of FY2011,
about one-third of railroad retirement beneficiaries received age-based annuities (190,100 of
542,834 beneficiaries in September 2011). The average age-based retirement annuity was about
$2,244 per month, including tier I, tier II, and vested dual benefits (described below).5
Tier I Retirement Annuities
Tier I benefits are designed to be equivalent to Social Security benefits. Tier I benefits are
calculated using the Social Security benefit formula with the railroad retirement age and service
requirements, and are based on both railroad retirement and Social Security-covered employment.
After tier I benefits are first paid, they increase annually with a cost of living adjustment (COLA)
in the same manner as Social Security benefits.6
Tier I benefits may be reduced for retirees who receive Social Security benefits or government
pensions, retire early, or continue to work after retirement. Generally, Social Security benefits are
subtracted from tier I benefits, since work covered by Social Security is counted towards tier I
benefits. (Beneficiaries insured by both systems receive a single check from the RRB.) Railroad
retirement benefits may also be reduced for certain pensions earned through federal, state, and
local government work. Tier I benefit reductions for early retirement are similar to those in the
Social Security system. As the full retirement age rises, so will the reduction for early retirement.7
For early retirees who continue to work outside the railroad industry, tier I benefits are reduced by
$1 for every $2 earned above an exempt amount ($14,640 in 2012).8 If a railroad retiree also
receives social security benefits, the retiree’s social security benefits are reduced if the retiree
earns more than the exempt amount, but the retiree’s tier I railroad retirement benefits are not
reduced because of earnings.RRB: Retirement, Survivor, Disability, Unemployment, and Sickness Benefits
Tier I Retirement Annuities
Tier I benefits are designed to be nearly equivalent to Social Security benefits. Tier I benefits are
calculated using the Social Security benefit formula and are based on both railroad retirement and
Social Security-covered employment. At the full retirement age, which is gradually increasing
from 65 to 67 for Social Security and railroad retirement beneficiaries, insured workers with
fewer than 30 years of service may receive full retirement annuities.4 Alternatively, workers with
fewer than 30 years of service may, starting at age 62, receive annuities that have been reduced
actuarially for the additional years the worker is expected to spend in retirement. Tier I benefit
reductions for early retirement are similar to those in the Social Security system. As the full
retirement age rises, so will the reduction for early retirement.5 Tier I benefits are more generous
than Social Security benefits in that, at the age of 60, railroad workers with at least 30 years of
covered railroad work may receive unreduced retirement annuities.
Generally, Social Security benefits are subtracted from tier I benefits, because work covered by
Social Security is counted toward tier I benefits. (Beneficiaries insured by both systems receive a
single check from the RRB.) Railroad retirement benefits may also be reduced for certain
pensions earned through federal, state, and local government work that is not covered by Social
Security. For early retirees who continue to work while receiving the retirement benefit, tier I
benefits are reduced by $1 for every $2 earned above an exempt amount ($14,640 in 2012).6
After tier I benefits are first paid, they increase annually with a cost-of-living adjustment (COLA)
in the same manner as Social Security benefits.7
Retirement annuities are not payable to workers who continue to work in a covered railroad job or
who return to railroad work after retirement. In March 2012, a little more than one third of
railroad retirement beneficiaries received age-based annuities (189,775 of 540,080 beneficiaries).
The average age-based retirement annuity was about $2,335 per month, including tier I, tier II,
and vested dual benefits (described below).8
Tier II Retirement Annuities
Tier II retirement annuities are paid in addition to tier I annuities and any private pension and
retirement savings plans offered by railroad employers.9 They are similar to private pensions and
4
Full retirement age is rising from 65 for those born before 1938 to 67 for those born after 1959.
Railroad Retirement Board, Bureau of the Actuary, Quarterly Benefit Statistics, July-September 2011, December 15,
Table 1, 2011, at http://www.rrb.gov/pdf/act/stat_qbs911.pdf.
6
For more on Social Security’s benefit formula and COLA, see CRS Report 94-27, Social Security: Brief Facts and
Statistics, by Gary Sidor.
7 They are similar to private pensions and
based solely on covered railroad service. Tier II benefits for current retirees are equal to seventenths of 1 percent of the employee’s average monthly earnings in the 60 months of highest
earnings, times the total number of years of railroad service. Tier II benefits are increased
annually by 32.5% of the Social Security COLA.
4
Full retirement age is rising from 65 for those born before 1938 to 67 for those born after 1959.
The reduction at the age of 62, Social Security’s earliest eligibility age, is rising from 20% to 30% as the normal
retirement age rises from age 65 to age 67.
86
During the calendar year that a retiree will reach the full retirement age, the formula for calculating the early
retirement reduction changes: benefits are reduced $1 for every $3 earned above the exempt amount ($38,880 in 2012)
until the beneficiary reaches full retirement age.
9
Annual tier II benefits are 7/10% of a worker’s average taxable monthly compensation for the highest 60 months of
(continued...)
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Railroad Retirement Board: Benefits
based solely on covered railroad service. Tier II benefits are increased annually by 32.5% of the
Social Security COLA.
Tier II benefits are not reduced if a worker receives Social Security benefits or a government
pension. 7
For more on Social Security’s benefit formula and COLA, see CRS Report 94-27, Social Security: Brief Facts and
Statistics, by Gary Sidor.
8
Railroad Retirement Board, Bureau of the Actuary, Quarterly Benefit Statistics, January-March 2012, June 18, 2012,
Table 1, at http://www.rrb.gov/pdf/act/stat_qbs312.pdf.
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RRB: Retirement, Survivor, Disability, Unemployment, and Sickness Benefits
Tier II benefits are not (in contrast to tier I benefits) reduced if a worker receives Social Security
benefits or a pension from government employment that was not covered by Social Security.
Generally, the early retirement reductions for tier II benefits are the same as for tier I
benefits.
The reductions for earnings are different. For railroad retirees who continue to work at
the non-railroad job they held at the time they retiredwhile
receiving retirement benefits, tier II benefits are reduced by $1 for every
$2 earned, up to 50% of the benefit. The benefit reduction for earnings applies to all tier II
beneficiaries, regardless of age
the tier II benefit (there is no cap to the earnings-related reduction in railroad tier I or Social
Security benefits). In addition, the earnings-related reduction applies to all tier II beneficiaries,
regardless of age (for railroad tier 1 and Social Security benefits, the earnings-related reduction
applies only until the beneficiary reaches the normal retirement age).
Other Retired Worker Benefits: Supplemental Annuities and
Vested Dual
Benefits
Tier II payroll taxes also finance a supplemental annuity program. Supplemental annuities are
payable to employees first hired before October 1981, aged 65 and over, with at least 25 years of
covered railroad
service and a current connection with the railroad industry.10 At the end of FY2011, about
121,4229 In March 2012,
about 121,359 retired railroad employees received supplemental annuities which averaged $42 a
month.1110
In addition, general revenues finance a vested dual benefit for those who were insured for both
railroad retirement and Social Security in 1974 when the two-tier railroad retirement benefit
benefit structure was
established. Neither supplemental annuities nor vested dual benefits are adjusted for
changes in the cost of
living living during retirement. Supplemental annuities are subject to the same
earnings reductions as tier II benefits;
vested dual benefits are subject to the same earnings
reductions as tier I benefits.
Retirement Benefits for Railroad Workers’ Families
In any month that a worker collects a railroad retirement benefit, his or her spouse may also be
eligible for a retirement benefit equal to or greater than the benefits he or she would have
received if the worker’s railroad work had been covered by Social Security.1211 A spouse qualifiesis eligible
for a retirement annuity when he or she reaches the same minimum age required for the worker to
collect a retirement annuity (i.e., either at the age of 60 or 62, depending on years of service). At
any age, a spouse may be eligible for a retirement annuity if he or she cares for the retired
worker’s unmarried child under the age of 18 (or a child disabled before the age of 22). A
qualifying spouse receives 50% of the worker’s tier I benefit before reductions (or, if higher, a
Social Security benefit based on his or her own earnings). Spouses may also receive 45% of the
worker’s tier II benefit before reductions. At the end of FY2011In March 2012, about a quarter of railroad
(...continued)
earnings times the individual’s years of service, less 25% of any vested dual benefit.
10
retirement
9
People have a current connection if they worked in a covered railroad job for at least 12 of the 30 months before
death or receipt of a railroad annuity. The current connection is not broken during employment at certain U.S.
government agencies, or in other special circumstances.
1110
Railroad Retirement Board, Bureau of the Actuary, Quarterly Benefit Statistics, July-September 2011, December 15,
2011, January-March 2012, June 18, 2012,
Table 1, at http://www.rrb.gov/pdf/act/stat_qbs911.pdf.
12stat_qbs312.pdf.
11
Divorced spouses of retired railroad workers may also be eligible for retirement annuities. A divorced spouse may
receive 50% of the worker’s tier I benefit before reductions, but no tier II benefits. To qualify, the former spouse must
have been married to the worker for at least 10 years and must not be remarried; both the worker and former spouse
must be at least 62 years old.
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Railroad Retirement Board: Benefits
retirement beneficiaries (134,254RRB: Retirement, Survivor, Disability, Unemployment, and Sickness Benefits
beneficiaries (134,785) received spouse annuities. The average spouse annuity was
$848 per month.13 $881 per
month.12 Divorced spouses who were married to the railroad employee for 10 or more years may
also be eligible for spousal benefits; in March 2012, about 4,074 divorced spouses received
benefits averaging $542 per month.
For spouses, as for railroad workers, Social Security benefits are subtracted from tier I benefits.
The benefit reductions for government pensions and post-retirement earnings are also the same
for spouses and post retirement earnings and for government pensions from
government employment that was not covered by Social Security also apply to spouses and
workers as under Social Security. Spouses are subject to reductions based on the
primary primary
worker’s earnings as well as on their own earnings. As for early retirement, spouses are
subject to
different benefit reductions than are workers.1413 Finally, spouses’ benefits are reduced by
the the
amount of any railroad benefits they earned based on their own work.
Retired workers may also receive benefits on behalf of their children, if the children are
unmarried and under the age of 18 (or 19 if still in high school). These benefits are subject to
certain maximums based on the total benefits paid to the worker’s family.
Survivor Benefits for Railroad Workers’ Families
Surviving spouses, former spouses, children, and other dependents of railroad workers may be
eligible to receive survivor benefits after the worker’s death. These benefits are paid in addition to
any private life insurance offered by railroad employers. To be insured for survivor benefits, a
worker the
worker on whose record the survivor benefits are based must have had a current connection15 with connection14 with
the railroad industry at the time of death.
Railroad survivor benefits are generally higher than
comparable Social Security benefits because
families of railroad workers may be entitled to tier II
benefits as well as tier I benefits (which are
as noted above, tier 1 benefits are equivalent to Social Security
benefits). In cases where no monthly survivor benefits are paid, a
lump-sum payment may be
made to certain survivors.
The widows and widowers of railroad workers may be eligible to receive survivor benefits. At
full retirement
age, a surviving spouse may be eligible for 100% of the worker’s tier I benefit (or
his or her own
Social Security or railroad retirement tier 1 benefit, if higher). The widow(er) may
also receive up to 100% of the worker’s
tier II benefit. As early as the age of 60 (or age 50, if
disabled), widows and widowers may
receive reduced survivor benefits.1615 At any age, a
widow(er) caring for a deceased worker’s child
under the age of 18 may receive a survivor benefit of
benefit equal to 75% of the worker’s tier I benefit, as well as
up to 100% of the worker’s tier II
benefit. At the end of FY2011In March 2012, about 20% of railroad retirement
beneficiaries (110,372108,025) received aged
widow(er) benefits, which averaged $1,366 per month.
Less than 1% of railroad retirement beneficiaries (745) received benefits as widowed mothers and
fathers; these benefits averaged $1,663 per month.17
Children of railroad workers may also receive survivor benefits. To qualify, a child must be
unmarried and under the age of 18 (or 19 if still in high school). Disabled adult children may
13406 per month. About 4,106 disabled survivors received
benefits averaging $1,167 per month, and about 688 widowed mothers and fathers received
benefits averaging $1,669 per month.16
12
Railroad Retirement Board, Bureau of the Actuary, Quarterly Benefit Statistics, July-September 2011, December 15,
2011January-March 2012, June 18, 2012,
Table 1, at http://www.rrb.gov/pdf/act/stat_qbs911.pdf.
14stat_qbs312.pdf.
13
For spouses, the reduction at the age of 62 is gradually rising from 25% to 35%.
1514
People have a current connection if they worked in a covered railroad job for at least 12 of the 30 months before
death or receipt of a railroad annuity. The current connection is not broken during employment at certain U.S.
government agencies or in other special circumstances.
1615
For widow(er)s, the reduction at the age of 60 (Social Security’s earliest eligibility age for widowed spouses) is
rising from 17.10% to 20.36%.
1716
Railroad Retirement Board, Bureau of the Actuary, Quarterly Benefit Statistics, July-September 2011, December 15,
2011January-March 2012, June 18, 2012,
Table 1, at http://www.rrb.gov/pdf/act/stat_qbs911stat_qbs312.pdf.
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Railroad Retirement Board: Benefits
RRB: Retirement, Survivor, Disability, Unemployment, and Sickness Benefits
Children of railroad workers may also receive survivor benefits. To qualify, a child must be
unmarried and under the age of 18 (or 19 if still in high school). Disabled adult children may
qualify if their disability began before the age of 22. Eligible children receive 75% of the
worker’s tier I benefit and 15% of the worker’s tier II benefit. At the end of FY2011In March 2012, about 2% of
railroad retirement beneficiaries (9,881826) received children’s survivor benefits, which averaged
$941979 per month.1817 In addition, if a parent of a railroad worker was dependent on the worker for at
least half of the parent’s support, he or she may receive 82.5% of the worker’s tier I benefit and
35% of the worker’s tier II benefit.
Survivor benefits are not payable to a current railroad employee, and survivor benefits are
reduced by any railroad retirement benefit the survivor has earned through his or her own railroad
work. Survivors receive the same reductions as retired workers for Social Security benefit receipt;
they also have reductions for government pension receipt and earnings. A family maximum
applies to survivor benefits, usually applicable when three or more survivors receive benefits on a
worker’s record (not counting divorced spouses).
Disability Benefits for Railroad Workers
Railroad workers may be eligible for benefits if they become disabled. The Railroad Retirement
Board determines whether a worker is disabled based on the medical evidence provided during
the application process. Railroad workers found to be totally and permanently disabled from all
work may be eligible for total disability annuities. Totally disabled workers may receive tier I
benefits after a five-month waiting period and tier II benefits at the age of 62 if they have 10 or
more years of service. Occupational disability annuities are also payable to workers found to be
permanently disabled from their regular railroad occupations, at least 60 years old with 10 years
of service (or any age with 20 years of service), and with a current connection to the railroad
industry. In 2008, the RRB reported that it approved nearly 98% of the occupational disability
applications it received.19
At the end of FY201118
In March 2012, about 15% of railroad retirement beneficiaries (83,10982,703) received disability
benefits. The average disability annuity paid to workers younger than the full retirement age was
$2,437517; the average paid to those at or above the full retirement age was $1,995.202,076.19
Disability annuities are not payable if a worker is currently employed in a covered railroad job.
Disability benefits are suspended for beneficiaries below the full retirement age who earn more
than $1,365 a month during unemployment periods starting after July 2012.2120 After the full
retirement age, the earnings reductions for retired railroad workers apply. The tier I portion of
disability benefits may be reduced for the receipt of workers compensation or government
disability benefits.
1817
Railroad Retirement Board, Bureau of the Actuary, Quarterly Benefit Statistics, July-September 2011, December 15,
2011January-March 2012, June 18, 2012,
Table 1, at http://www.rrb.gov/pdf/act/stat_qbs911.pdf.
19stat_qbs312.pdf.
18
Railroad Retirement Board, Semiannual Report to the Congress, October 31, 2008, http://www.rrb.gov/pdf/oig/
SEMIRPTS/semi908.pdf.
2019
Railroad Retirement Board, Bureau of the Actuary, Quarterly Benefit Statistics, July-September 2011, December 15,
2011January-March 2012, June 18, 2012,
Table 1, at http://www.rrb.gov/pdf/act/stat_qbs911.pdf.
21stat_qbs312.pdf.
20
Railroad Retirement Board, Notice of Annual Rates (2012), Program Letter 2012-2, December 9, 2011, at
http://www.rrb.gov/AandT/pl/pl1202.asp.
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Railroad Retirement Board:RRB: Retirement, Survivor, Disability, Unemployment, and Sickness Benefits
Financing of Retirement, Survivor, and Disability and Survivor Benefits Under
the Railroad
Retirement Act
Payroll taxes, which provided almost 42% of RRA funding in FY2010,21 are a major funding
source for railroad retirement, survivor, and disability benefits.
Railroad retirement payroll taxes
are divided into two tiers. The tier I tax is the same as the Social
Security payroll tax: railroad
employers and employees each pay 6.2%22 on earnings up to
$110,100 in 2012. Tier I payroll
taxes are transferred todeposited in the Social Security trust funds in a financial
interchange, then used to pay tier I benefits.Equivalent Benefit Account (SSEBA), which pays the
Social Security-level of benefits and administrative expenses allocable to those benefits. The
SSEBA also receives or pays the financial interchange transfers between the railroad retirement
and Social Security systems. The financial interchange with Social Security provided almost 36%
of RRA funding in FY2010.23 The tier II tax is set each year based on the railroad
retirement retirement
system’s asset balances as well as benefit, benefit payments and administrative costs. TheIn 2012, the tier II tax is
12.1% for employers and 3.9% for employees on earnings up to $81,900 in 2012.23.24 Tier II taxes
are used to finance tier II benefits, supplemental annuities, and a portion of tier I benefits. Payroll
taxes provided almost 42% of RRA funding in FY2010. 24
Railroad benefits are also funded from several other sources. The financial interchange with
Social Security provided almost 36% of RRA funding in FY2010. Revenues not needed to pay
to finance tier II benefits, “excess” tier I benefits (that is, to the extent that tier I benefits are more
generous than Social Security retirement benefits), and supplemental annuities.
Revenues not needed to pay current benefits and administrative costs are held in the National
Railroad Retirement Investment
Trust Trust (NRRIT), which is invested in both government securities
and private equities. Transfers and interest
from this fund from the NRRIT provide another revenue source for
railroad benefits, and were about 18% of RRA
funding in FY2010. Federal income taxes levied on railroad retirement benefits made up about
4% of funding. General fund transfers to pay the costs of phasing out vested dual benefits were
less than 1% of funding.
funding in FY2010. Prior to the Railroad
Retirement and Survivors’ Improvement Act of 2001 (P.L. 107-90), surplus
railroad retirement
assets could only be invested in U.S. government securities—just as the Social
Security trust
funds must be invested in specially issued securities issued or guaranteed by the U.S. government securities. The 2001 act
established the National Railroad Retirement Investment Trust to manage and invest part of the
RRB’sNRRIT to manage and invest the RRB’s surplus tier II assets in the same way that
the assets of private-sector and most state and local
government pension plans are invested. The
remainder of the railroad retirement system’s assets
(tier I assets) continue to be invested solely in
securities issued or guaranteed by the U.S. government securities. The trust. The NRRIT is designed to maintain
four four
to six years’ worth of benefits in case of lower-than-expected returns. To maintain this
balance,
the tier II tax is set to automatically adjust to maintain the fund balance at four to six
years. This
tax adjustment woulddoes not require congressional action. No tax increase is scheduled at
the time of
this writing.25
22
In December 2010 and again in December 201121
U.S. Railroad Retirement Board, 2011 Railroad Retirement Board Annual Report, page 9, at http://www.rrb.gov/pdf/
opa/annualrprt/annualreport.pdf.
22
During 2011 and 2012, Congress provided a temporary reduction of two percentage points
in the payroll tax rate paid
by employees, from 6.2% to 4.2%. For more information, see “RRA and RUIA Benefits
Since 2009” below.
23
Railroad Retirement Board, Notice of Annual Rates (2012), Program Letter 2012-2, December 9, 2011, at
http://www.rrb.gov/AandT/pl/pl1202.asp. See also Railroad Retirement Board, Reminders for 2012,
http://www.rrb.gov/forms/g34.asp.
24
U.S. Railroad Retirement Board, 2011 Railroad Retirement Board Annual Report, page 9, at http://www.rrb.gov/pdf/
opa/annualrprt/annualreport.pdf.
25
For more information, see CRS Report RS22782, Railroad Retirement Board: Trust Fund Investment Practices, by
Scott Szymendera.
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Railroad Retirement Board: BenefitsLegislation Affecting Railroad Earned Entitlements
Since 2009” below.
23
The Railroad Retirement system and the Social Security system have been coordinated financially since 1951. The
purpose of the financial interchange is to place the Social Security trust funds in the same position they would have
been in, if railroad employment had been covered under Social Security since that program’s inception.
24
Railroad Retirement Board, Notice of Annual Rates (2012), Program Letter 2012-2, December 9, 2011, at
http://www.rrb.gov/AandT/pl/pl1202.asp. See also Railroad Retirement Board, Reminders for 2012,
http://www.rrb.gov/forms/g34.asp.
25
For more information, see CRS Report RS22782, Railroad Retirement Board: Trust Fund Investment Practices, by
Scott Szymendera.
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Federal income taxes levied on railroad retirement benefits made up about 4% of funding.
General fund transfers to pay the costs of phasing out vested dual benefits were less than 1% of
funding.
Railroad Unemployment and Sickness Benefits
Railroad workers may qualify for daily unemployment and sickness benefits under the Railroad
Unemployment Insurance Act (45 U.S.C. §351-369). These benefits are paid in addition to any
paid leave or private insurance an employee may have. For sickness benefits, a worker must be
unable to work because of illness or injury. Sickness benefits are distinct from disability benefits
because they are intended to cover a finite, temporary period of time. Workers may not earn any
money while receiving unemployment or sickness benefits.
Eligibility for railroad unemployment and sickness benefits is based on recent railroad service
and earnings. Each year, the benefit year begins on July 1. Eligibility is based on work in the prior
year, or the base year. To qualify, railroad workers must have a minimum amount of creditable
earnings in the base year ($3,412.50 in the 2012 base year), not counting earnings above a
monthly maximum ($1,763 in the 2012 base year).26 New railroad workers must also have at least
five months of covered railroad work in the base year. To receive unemployment benefits, a
worker must be ready, willing, and able to work.
Unemployment and sickness beneficiaries receive a maximum of $66 a day for benefit year 2011
(between July 2011 and July 2012).27 Railroad workers only receive these benefits to the extent
that they are higher than other benefits they receive under the Railroad Retirement Act, the Social
Security Act, or certain other public programs, including workers compensation. Unemployment
and sickness beneficiaries may receive normal benefits for up to 26 weeks in a benefit year, or
until the benefits they receive equal their creditable earnings in the base year (if sooner).28
Employees with at least 10 years of covered railroad service may qualify for extended benefits for
13 weeks after they have exhausted normal benefits. The 2009 stimulus package included an
additional, temporary, extension of extended railroad unemployment benefits (see below for more
details). Workers who apply for unemployment benefits will be enrolled automatically in a free
job placement service run by railroad employers and the RRB.
Financing of Unemployment and Sickness Benefits Under the
Railroad Unemployment
Insurance Act
Railroad unemployment and sickness benefits are financed solely by railroad employers.
Employers’ contributions are based on the taxable earnings of their employees. The employer’s
tax rate depends on the past rates of unemployment and sickness claims by employees. For
calendar year 2012 the rate ranges from 3.15% to 12.0% on the first $1,365 in paid to each
employee per month. Railroad unemployment funds not needed immediately are deposited into
an account that is part of the national unemployment insurance trust fund and the railroad account
receives interest based on these deposits.
26
26
Railroad Retirement Board, Notice of Annual Rates (2012), Program Letter 2012-2, December 9, 2011, at
http://www.rrb.gov/AandT/pl/pl1202.asp. See also Railroad Retirement Board, Reminders for 2012,
http://www.rrb.gov/forms/g34.asp.
27
Railroad unemployment benefits are paid biweekly. A full biweekly claim is $660 (in each two-week period,
unemployed workers are compensated for 10 days of unemployment).
28
There is essentially a one-week waiting period for unemployment and sickness benefits. There is a two-week waiting
period for unemployment benefits if a worker participates in a legal strike.
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Railroad Retirement Board: Benefits
RRA and RUIA Benefits RRB: Retirement, Survivor, Disability, Unemployment, and Sickness Benefits
calendar year 2012 the tax rate ranges from 3.15% to 12.0% on the first $1,365 in paid to each
employee per month. Railroad unemployment funds not needed immediately are deposited into
an account that is part of the national unemployment insurance trust fund and the railroad account
receives interest based on these deposits.
Legislation Affecting Railroad Earned Entitlements
Since 2009
American Recovery and Reinvestment Act of 2009
One-Time Payment for RRA Beneficiaries
The 2009 stimulus package (the American Recovery and Reinvestment Act of 2009, P.L. 111-5,
“ARRA”) provided a one-time economic recovery payment of $250 to all adult railroad
retirement beneficiaries within 120 days after enactment of the act (February 17, 2009).29 The act
appropriated such funds as were necessary to make the payments as well as $1.4 million for the
RRB to administer the one-time payments.
Temporary Federal Income Tax Exclusion of Railroad Unemployment Benefits
Railroad unemployment benefits are subject to federal income taxes, as are unemployment
benefits paid under state government programs. The Railroad Unemployment Insurance Act
(RUIA) specifically provides that railroad unemployment and sickness benefits are not subject to state
state income taxes.
ARRA stipulatesstipulated that individuals who receive Railroad Unemployment Insurance (RUIA)
benefits may benefits could
exclude from gross income up to $2,400 in benefits received in 2009. The exclusion
is was
applicable for taxable years beginning after December 31, 2008.
Temporary Extension of Extended Unemployment Benefits
ARRA also temporarily extended the availability of extended unemployment benefits for railroad
workers. Railroad workers who previously were not eligible for extended unemployment benefits
because they did not have 10 years of service may be eligible for benefits of up to 65 days within
an extended period consisting of seven consecutive two-week registration periods. Railroad
workers who previously were eligible for extended unemployment benefits of up to 65 days
(because they had 10 years of service) may now be eligible for benefits of up to 130 days within
an extended period consisting of 13 consecutive two-week registration periods.
29
For more details, see CRS Report R40188, Social Security Provisions in the American Recovery and Reinvestment
Act of 2009: Supplemental Appropriations, Economic Recovery Payments, and Tax Credits for Certain Government
Retirees, by Scott Szymendera.
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RRB: Retirement, Survivor, Disability, Unemployment, and Sickness Benefits
The provision applied to railroad employees who received normal unemployment benefits during
the benefit year beginning July 1, 2008, and ending June 30, 2009. No extended benefits under
the act could begin after December 31, 2009.
Worker, Homeownership, and Business Assistance Act of 2009
On November 6, 2009, the President signed P.L. 111-92, the Worker, Homeownership, and
Business Assistance Act of 2009, into law. Section 9 extended the availability of ARRA’s
29
For more details, see CRS Report R40188, Social Security Provisions in the American Recovery and Reinvestment
Act of 2009: Supplemental Appropriations, Economic Recovery Payments, and Tax Credits for Certain Government
Retirees, by Scott Szymendera.
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Railroad Retirement Board: Benefits
extended railroad unemployment benefits by one year to June 30, 2010. The special extended
unemployment benefit periods could begin no later than December 31, 2010.
Tax Relief, Unemployment Insurance Reauthorization, and Job
Creation Act of 2010
On December 17, 2010, the President signed P.L. 111-312 into law. Section 505 extended the
availability of ARRA’s extended railroad unemployment benefits by one year to June 30, 2011.
The special extended unemployment benefit periods could begin no later than December 31,
2011.
P.L. 111-312 also provided for a temporary, one-year reduction, in the2011, of the tier I payroll tax rate paid by
employees, from 6.2% to 4.2%, (analogous to the temporary payroll tax reduction Congress
provided to workers covered by Social Security). P.L. 111-312 also authorized the transfer of
general revenues to the Social Security Equivalent Benefit Account in amounts equivalent to
revenues lost through the payroll tax holiday.
Temporary Payroll Tax Cut Continuation Act of 2011
On December 23, 2011, ARRA’s temporary, extended railroad unemployment benefits were
extended for two additional months, to August 31, 2011, by Section 202 of the Temporary Payroll
Tax Cut Continuation Act of 2011 (P.L. 112-78). The special extended unemployment benefit
periods may begin no later than February 29, 2012. A further extension of some of the provisions
is included in H.R. 3630, which has passed the House and Senate and awaits conference.30 P.L.
112-78 also provided a two-month extension of the temporary reduction in the payroll tax paid by
employees.
The American Jobs Act
The proposed American Jobs Act (H.R. 12 and S. 1549) would, among other provisions, extend
the availability of ARRA’s extended railroad unemployment benefits for an additional year
through June 30, 2012. The funds would continue to be financed with funds still available under
the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (P.L.
111-312).
Author Contact Information
Alison M. Shelton
Analyst in Income Security
ashelton@crs.loc.gov, 7-9558
30
For a complete discussion of legislation to extend or expand unemployment benefits, see CRS Report R41662,
Unemployment Insurance: Legislative Issues in the 112th Congress, by Katelin P. Isaacs and Julie M. Whittaker and
CRS Report R41508, Expiring Unemployment Insurance Provisions, by Katelin P. Isaacs.
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extension, through February 2012, of the temporary reduction in railroad employees’ tier 1
payroll tax rate.
The Middle Class Tax Relief and Job Creation Act of 2012
In February 2012, Congress approved P.L. 112-96, the Middle Class Tax Relief and Job Creation
Act of 2012, to authorize extended unemployment benefits through June 2012; the special
extended unemployment benefit periods may begin no later than December 31, 2012. P.L. 112-96
also extended the temporary reduction in railroad employees’ tier 1 payroll tax rate through
December 2012.
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RRB: Retirement, Survivor, Disability, Unemployment, and Sickness Benefits
H.Con.Res. 112
On March 29, 2012, the House passed H.Con.Res. 112, the FY2013 Budget Resolution. The
House Budget Committee report (H.Rept. 112-421, p. 101) accompanying this bill included the
following provision:
Conform Railroad Retirement Tier 1 Benefits to Social Security Benefits. Tier 1 benefits for
railroad retirees are supposed to mimic Social Security benefits, but they are more generous
than Social Security in many ways. This option would conform Tier 1 so that its benefits
would equal those of Social Security, with an estimated savings to taxpayers of $2 billion
over 10 years.
H.Con.Res. 112 does not detail specific proposed changes to Tier I benefits.
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