May 17, 2021
In Wisconsin Central Ltd., et al v. United States, the U.S. Supreme Court ruled that non-qualified stock options granted to railroad employees are not considered compensation under the Railroad Retirement Tax Act of 1937, and are, therefore, not subject to taxation.
As a result, certain railroad employers and employees who previously paid railroad retirement taxes based on the exercise of such stock options were eligible for tax refunds through the Internal Revenue Service. On May 17, 2021, the RRB released letters to those employees who claimed tax refunds for compensation credited to their accounts for the years 2014 and later, advising that compensation records will be adjusted. It is important to note that your reported compensation will not be adjusted if an annuity is already being paid, based on your record, or an application is filed for an annuity prior to June 15, 2021.
If the employee’s service and compensation record is adjusted, all annuities paid based on the employee’s earnings record will be paid based on the adjusted compensation. Please know that employers are now being notified that they need to submit adjusted compensation reports for the individuals who filed for these tax refunds. Until we receive those adjusted reports, we will be unable to provide revised annuity rate estimates to anyone whose compensation amounts may be changing.
A copy of the text of the letter is available online. Compensation records for the years prior to 2014 will not be adjusted, as the records were administratively final at the time the Wisconsin Central decision was issued.