Prepared by Public Affairs 312-751-4777
Employers and employees covered by the Railroad Retirement Act pay higher
retirement taxes than those covered by the Social Security Act, so that railroad
retirement benefits remain higher than social security benefits, especially for
The following questions and answers show the differences in railroad retirement
and social security benefits payable at the close of the fiscal year ending
September 30, 2008. It also shows the differences in age requirements and
payroll taxes under the two systems.
1. How do the average monthly railroad retirement and social security benefits
paid to retired employees and spouses compare?
The average age annuity being paid by the Railroad Retirement Board (RRB) at the
end of fiscal year 2008 to career rail employees was $2,510 a month, and for all
retired rail employees the average was $1,980. The average age retirement
benefit being paid under social security was over $1,085 a month. Spouse
benefits averaged $740 a month under railroad retirement compared to $520 under
The Railroad Retirement Act also provides supplemental railroad retirement
annuities of between $23 and $43 a month, which are payable to employees who
retire directly from the rail industry with 25 or more years of service.
2. Are the benefits awarded to recent retirees generally greater than the
benefits payable to those who retired years ago?
Yes, because recent awards are based on higher average earnings. Age annuities
awarded to career railroad employees retiring at the end of fiscal year 2008
averaged over $3,165 a month while monthly benefits
awarded to workers retiring
at full retirement age under social security averaged about $1,530. If spouse
benefits are added, the combined benefits for the employee and spouse would
approximate $4,490 under railroad retirement coverage, compared to $2,295 under
social security. Adding a supplemental annuity to the railroad family's benefit
increases average total benefits for current career rail retirees to nearly
$4,525 a month.
3. How much are the disability benefits currently awarded?
Disabled railroad workers retiring directly from the railroad industry at the
end of fiscal year 2008 were awarded $2,685 a month on the average while awards
for disabled workers under social security averaged about $1,060.
While both the Railroad Retirement and Social Security Acts provide benefits to
workers who are totally disabled for any regular work, the Railroad Retirement
Act also provides disability benefits specifically for career employees who are
disabled for work in their regular railroad occupation. Career employees may be
eligible for such an occupational disability annuity at age 60 with 10 years of
service, or at any age with 20 years of service.
4. Can railroaders receive benefits at earlier ages than workers under social
Railroad employees with 30 or more years of creditable service are eligible for
regular annuities based on age and service the first full month they are age 60,
and rail employees with less than
30 years of creditable service are eligible for regular annuities based on age
and service the first full month they are age 62.
No early retirement reduction applies if a rail employee retires at age 60 or
older with 30 years of service and his or her retirement is after 2001, or if
the employee retired before 2002 at age 62 or older with 30 years of service.
Early retirement reductions are otherwise applied to annuities awarded before
full retirement age—the age at which an employee can receive full benefits with
no reduction for early retirement. This ranges from age 65 for those born before
1938 to age 67 for those born in 1960 or later, the same as under social
Under social security, a worker cannot begin receiving retirement benefits based
on age until age 62, regardless of how long he or she worked, and social
security retirement benefits are reduced for retirement prior to full retirement
age regardless of years of coverage.
5. Does social security offer any benefits that are not available under railroad
Social security does pay certain types of benefits that are not available under
railroad retirement. For example, social security provides children's benefits
when an employee is disabled, retired or deceased. Under current law, the
Railroad Retirement Act only provides children's benefits if the employee is
However, the Railroad Retirement Act includes a special minimum guaranty
provision which ensures that railroad families will not receive less in monthly
benefits than they would have if railroad earnings were covered by social
security rather than railroad retirement laws. This guaranty is intended to
cover situations in which one or more members of a family would otherwise be
eligible for a type of social security benefit that is not provided under the
Railroad Retirement Act. Therefore, if a retired rail employee has children who
would otherwise be eligible for a benefit under social security, the employee's
annuity can be increased to reflect what social security would pay the family.
6. How much are monthly benefits for survivors under railroad retirement and
Survivor benefits are generally higher if payable by the RRB rather than social
security. At the end of fiscal year 2008, the average annuity
being paid to all
aged and disabled widow(er)s averaged $1,215 a month, compared to $1,030 under
Benefits awarded by the RRB at the end of fiscal year 2008 to aged and disabled
widow(er)s of railroaders averaged approximately $1,650 a month, compared to
$825 under social security.
The annuities being paid at the end of fiscal year 2008 to widowed
mothers/fathers averaged $1,530 a month and children's annuities averaged $880,
compared to $790 and $705 a month for widowed mothers/fathers and children,
respectively, under social security.
Those awarded at the end of fiscal year 2008 averaged $1,920 a month for widowed
mothers/fathers and $1,295 a month for children under railroad retirement,
compared to $775 and $705 for widowed mothers/fathers and children,
respectively, under social security.
7. How do railroad retirement and social security lump-sum death benefit
Both the railroad retirement and social security systems provide a lump-sum
death benefit. The railroad retirement lump-sum benefit is generally payable
only if survivor annuities are not immediately due upon an employee's death. The
social security lump-sum benefit may be payable regardless of whether monthly
benefits are also due. Both railroad retirement and social security provide a
lump-sum benefit of $255. However, if a railroad employee completed 10 years of
creditable railroad service before 1975, the average railroad retirement
lump-sum benefit payable is $1,000. Also, if an employee had less than 10 years
of service, but had at least 5 years of such service after 1995, he or she would
have to have had an insured status under social security law (counting both
railroad retirement and social security credits) in order for the $255 lump-sum
benefit to be payable.
The social security lump sum is generally only payable to the widow or widower
living with the employee at the time of death. Under railroad retirement, if the
employee had 10 years of service before 1975, and was not survived by a
living-with widow or widower, the lump sum may be paid to the funeral home or
the payer of the funeral expenses.
The railroad retirement system also provides, under certain conditions, a
residual lump-sum death benefit which ensures that a railroad family receives at
least as much in benefits as the employee paid in railroad retirement taxes
before 1975. This benefit is, in effect, a refund of an employee's pre-1975
railroad retirement taxes, after subtraction of any benefits previously paid on
the basis of the employee's service. This death benefit is seldom payable.
8. How do railroad retirement and social security payroll taxes compare?
Railroad retirement payroll taxes, like railroad retirement benefits, are
calculated on a two-tier basis. Rail employees and employers pay tier I taxes at
the same rate as social security taxes,
7.65 percent, consisting of 6.20 percent for retirement on earnings up to
$106,800 in 2009 and
1.45 percent for Medicare hospital insurance on all earnings.
In addition, rail employees and employers both pay tier II taxes which are used
to finance railroad retirement benefit payments over and above social security
In 2009, the tier II tax rate on employees is 3.90 percent and on rail employers
it is 12.10 percent on employee earnings up to $79,200.
9. How much are regular railroad retirement taxes for an employee earning
$106,800 in 2009 compared to social security taxes?
The maximum amount of regular railroad retirement taxes that an employee earning
$106,800 can pay in 2009 is $11,259, compared to $8,170.20 under social
security. For railroad employers, the maximum annual regular retirement taxes on
an employee earning $106,800 are $17,753.40 compared to $8,170.20 under social
security. Employees earning over $106,800, and their employers, will pay more in
retirement taxes than the above amounts because the Medicare hospital insurance
1.45 percent is applied to all earnings.