Regular railroad retirement annuities are calculated under a two-tier formula. The annuity formula components for employees and spouses are described under Railroad Retirement Annuity Formula Components.
The first tier is based on railroad retirement credits and any social security credits an employee has acquired. The amount of the first tier is calculated using social security formulas, but with railroad retirement age and service requirements.
The second tier is based on railroad retirement credits only, and may be compared to the retirement benefits paid over and above social security benefits to workers in other industries.
An additional amount may also be payable as part of the regular annuity if an employee had at least 10 years of railroad service and acquired sufficient quarters of coverage for an insured status under the Social Security Act before 1975 and also met certain vesting requirements.
Employees with Railroad Retirement and Social Security Benefits
If a retired or disabled railroad retirement annuitant is also awarded social security benefits, the Social Security Administration determines the amount of the social security benefit due. The RRB then issues a combined monthly benefit payment after the railroad retirement annuity has been reduced by the amount of the social security benefit.
The tier I portion of an employee annuity is based on his or her combined railroad retirement and social security credits, figured under social security formulas, and approximates what social security would pay if railroad work were covered by that system. It is reduced by the amount of any actual social security benefit paid on the basis of the employee's nonrailroad employment in order to prevent a duplication of benefits based on social security covered earnings. The tier I amount is also reduced in the event a social security benefit is payable to the employee on the basis of another person's earnings. This reduction follows principles of social security law which limit payment to the higher of any two or more benefits payable to an individual at one time. An annuitant is required to advise the RRB if any benefits are received directly from the Social Security Administration or if those benefits increase other than for a cost-of-living increase.
If an employee qualified for dual benefits before 1975 and met certain vesting requirements, he or she can receive an additional annuity amount, which offsets, in part, the dual benefit reduction. This additional amount, which reflects the dual benefits payable prior to 1975, is called the vested dual benefit payment. The vested dual benefit cannot be paid prior to the date the employee could begin to receive a social security benefit if he or she were to file for such a benefit.
Employees who do not qualify for a vested dual benefit may be eligible for a refund of any excess social security taxes they paid (see Dual Taxes Payments).
Limitations on vested dual benefits
Vested dual benefit payments are funded by annual appropriations from general U.S. Treasury revenues. These appropriations account for less than one percent of total financing sources for the railroad retirement system.
Payment of vested dual benefits is dependent on the time and amount of such appropriations. If the appropriation in a fiscal year is for less than the estimated total vested dual benefit payments, individual payments must be reduced.
Employees with Public, Non-Profit, or Foreign Pensions
For employees first eligible for a railroad retirement annuity and a Federal, State, or local government pension after 1985, there may be a reduction in the tier I amount for receipt of a public pension based, in part or in whole, on employment not covered by social security or railroad retirement after 1956. This may also apply to certain other payments not covered by railroad retirement or social security, such as payments from a non-profit organization, a foreign government, or a foreign employer. This does not include military service pensions, payments by the Department of Veterans Affairs, or certain benefits payable by a foreign government as a result of a totalization agreement between that government and the United States.
If an employee is receiving a disability annuity, the tier I portion may, under certain circumstances, be reduced for receipt of workers' compensation or public disability benefits.
If an annuitant becomes entitled to any pensions or benefits as described above, the RRB must be notified immediately.