This section concerns payments that you may receive from your employer after the actual date you last performed service for the railroad, but after you resigned and relinquished your rights to railroad employment. These payments do not have an effect on your annuity beginning date.
Under the Railroad Retirement Act, a Separation Allowance is compensation paid, from railroad operating funds, to an employee who agrees to relinquish job rights to obtain the payment. The payment can be made in a lump sum or in periodic installment payments.
The entire amount of the Separation Allowance is creditable to your Tier 1 component, as of the date you relinquish your rights, up to the annual Tier 1 maximum for that year. However, only the amount up to the Tier 2 monthly maximum times the number of creditable railroad service months for the year in which you relinquish your rights is creditable to your Tier 2 component. No railroad service months are credited to any month after the month in which you relinquish your rights, even if the Separation Allowance is paid in monthly installments.
However, you may be entitled to a Separation Allowance Lump-Sum Payment (SALSA). This amount is a refund of any Tier 2 taxes withheld from Separation Allowance payments when they do not result in railroad service months or Tier 2 credit.
In cases where an employee, with at least 25 years of railroad service, has no option to remain in the service of the railroad employer, the acceptance of a Separation Allowance does not mean that the termination is voluntary. The employee can still qualify for a Deemed Current Connection.
However, if you are offered a job of equal class and craft, regardless of the distance you would have to travel, and you chose a Separation Allowance instead of keeping your seniority rights to railroad employment, you would be considered to have voluntarily terminated railroad employment and would not be protected by the Deemed Current Connection.
If you accept a Separation Allowance, you cannot receive RUIA benefits for roughly the period of time (called the disqualification period) it would have taken to earn the amount of the Separation Allowance, whether the Separation Allowance is paid in a lump-sum or installments.
If you have not obtained new employment by the end of the disqualification period and are still actively seeking work, you may be eligible for unemployment benefits at that time. You must meet all the usual eligibility requirements, including the availability for work requirement. An employee can establish availability for work by demonstrating a willingness to work and making significant efforts to obtain work. In judging your willingness to work, the RRB considers, among other factors, the reason you accepted the Separation Allowance and the extent of your work-seeking efforts during the disqualification period. Therefore, if you are offered a job of equal class and craft and you chose a Separation Allowance instead of keeping your seniority rights to railroad employment, you would be considered to have voluntarily terminated railroad employment and may not qualify for RUIA benefits.
Example- If your salary was $3,000 a month without overtime pay, and your Separation Allowance was $12,000, you would be disqualified from receiving RUIA benefits for approximately four months. You could receive RUIA benefits for the months after the end of the four month disqualification period only if you meet the availability for work requirement.
Note that lump-sum payments from a pension trust fund are not considered to be Separation Allowances under the RRA, even if the railroad or the RUIA refers to them as Separation Allowances. These payments are not subject to Tier 1 or Tier 2 taxes and do not increase the Tier 1 component. However, they can create a disqualification period for benefits under the RUIA and can cause a reduction to supplemental annuity benefits.