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 career employees.
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, 2012. They also
show the differences in age requirements and payroll taxes under the two
1. How do the average monthly railroad
retirement and social security benefits paid to retired employees and spouses
The average age annuity being paid
Railroad Retirement Board (RRB) at the end of fiscal year 2012 to career rail
employees was $2,975 a month, and for all retired rail employees the average was
$2,365. The average age retirement benefit being paid under
social security was over $1,235 a month. Spouse benefits averaged $880 a month
under railroad retirement compared to $590 under social security.
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 2012 averaged nearly $3,510 a month while monthly benefits
awarded to workers retiring at full retirement age under social
security averaged some $1,750. If spouse benefits are added, the combined
benefits for the employee and spouse would total $4,890 under railroad
retirement coverage, compared to $2,625 under social security. Adding a
supplemental annuity to the railroad family's benefit increases average total
benefits for current career rail retirees to over $4,920 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 2012 were awarded almost
$2,900 a month on the average while awards for disabled workers under social
security averaged about $1,190.
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 security?
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
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 security.
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 retirement?
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 social security?
Survivor benefits are generally higher if payable by the RRB rather than social
security. At the end of fiscal year 2012, the average annuity being paid
to all aged and disabled widow(er)s averaged $1,415 a month, compared to $1,165
under social security.
Benefits awarded by the
RRB at the end of fiscal year 2012 to aged and disabled widow(er)s of
railroaders averaged nearly $1,845 a month, compared to almost $940 under social
The annuities being paid at the end of
fiscal year 2012 to widowed mothers/fathers averaged $1,700 a month and
children's annuities averaged $980, compared to $890 and $785 a month for
widowed mothers/fathers and children, respectively, under social security.
Those awarded at the end of fiscal year 2012 averaged $1,640 a
month for widowed mothers/fathers and $1,215 a month for children under railroad
retirement, compared to $840 and $770 for widowed mothers/fathers and children,
respectively, under social security.
7. How do railroad
retirement and social security lump-sum death benefit provisions differ?
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 $995. 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(er) 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(er), the lump sum may be paid to the
funeral home or the payer of the funeral expenses.
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
$113,700 in 2013, and 1.45 percent for Medicare hospital insurance on all
earnings. Beginning in 2013, an additional 0.9 percent in Medicare taxes (2.35
percent in total) will be withheld from employees on earnings above $200,000.
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 2013, the tier II tax rate on earnings up to $84,300
is 4.4 percent for employees and 12.6 percent for employers.
9. How much are regular railroad retirement taxes for an employee
earning $113,700 in 2013 compared to social security taxes?
The maximum amount of regular railroad retirement taxes that an employee earning
$113,700 can pay in 2013 is $12,407.25, compared to $8,698.05 under social
security. For railroad employers, the maximum annual regular retirement taxes on
an employee earning $113,700 are $19,319.85, compared to $8,698.05 under social
security. Employees earning over $113,700, and their employers, will pay more in
retirement taxes than the above amounts because the Medicare hospital insurance
tax is applied to all earnings.