Railroad Retirement Board
Benefits Under
Railroad Retirement and Social Security
April 2012
The following questions and answers show the
differences in railroad retirement and social security benefits payable at the
close of the fiscal year ending
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 2011 to career rail
employees was $2,835 a month, and for all retired rail employees the average
was $2,245. The average age retirement benefit being paid under
social security was almost $1,185 a month. Spouse benefits averaged $840
a month under railroad retirement compared to $565 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 2011 averaged nearly $3,405 a
month while monthly benefits awarded to workers retiring at full
retirement age under social security averaged some $1,640. If spouse
benefits are added, the combined benefits for the employee and spouse would
total $4,805 under railroad retirement coverage, compared to $2,465 under
social security. Adding a supplemental annuity to the
railroad family’s benefit increases average total benefits for current career
rail retirees to over $4,835 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 2011 were awarded more than $2,840
a month on the average while awards for disabled workers under social security
averaged about $1,150.
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 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 security.
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 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 deceased.
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 2011, the
average annuity being paid to all aged and disabled widow(er)s averaged $1,360 a month, compared to $1,115 under social
security.
Benefits awarded by the RRB at the end of fiscal year
2011 to aged and disabled widow(er)s
of railroaders averaged nearly $1,785 a month, compared to almost $895 under
social security.
The annuities being paid at the end of fiscal year
2011 to widowed mothers/fathers averaged $1,665 a month and children’s
annuities averaged $940, compared to $855 and $755 a month for widowed
mothers/fathers and children, respectively, under social security.
Those awarded at the end of fiscal year 2011 averaged
$1,450 a month for widowed mothers/fathers and $1,230 a month for children
under railroad retirement, compared to $820 and $750 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 $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(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.
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, 5.65
percent for employees and 7.65 percent for employers, consisting of 4.2 percent
and 6.2 percent, respectively, for retirement on earnings up to $110,100 in
2012, 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 levels.
In 2012, the tier II tax rate on earnings up to
$81,900 is 3.9 percent for employees and 12.1 percent for employers.
9. How much are regular railroad
retirement taxes for an employee earning $110,100 in 2012 compared to social
security taxes?
The maximum amount of regular railroad retirement
taxes that an employee earning $110,100 can pay in 2012 is $9,414.75, compared
to $6,220.65 under social security. For railroad employers, the maximum
annual regular retirement taxes on an employee earning $110,100 are $18,332.55,
compared to $8,422.65 under social security. Employees earning over
$110,100, and their employers, will pay more in retirement taxes than the above
amounts because the Medicare hospital insurance tax of 1.45 percent is applied
to all earnings.
Persons can find the address
and phone number of the Board office serving their area by calling the
automated toll-free RRB Help Line at 1-800-808-0772, or from the Board's Web
site. Most Board offices are open to the public from
Public Affairs 312-751-4777
Posted: 03/29/12