TN 9 (10-12)
RS 01601.125 Railroad Retirement (RR) Annuity Amounts for Life Claims
A. RR tier I annuity
The tier I annuity approximately equals a social security (SS) benefit, based on both RR and SS earnings. For tier I eligibility, the employee must meet the quarters of coverage requirement for entitlement to benefits under the SS Act, based on combined SS and RR earnings. The Railroad Retirement Board (RRB) calculates the tier I amount in a manner similar to a SS benefit. They:
adjust or index earnings to inflation,
apply delayed retirement credits, and
calculate any necessary age reduction.
The RRB will reduce the tier I annuity if the individual receives any of the following:
public disability benefit, or
any Federal, State or local government pension.
B. RR tier II annuity
The RRB calculates the tier II annuity using only RR earnings, applying any necessary age reduction. The tier II amount guarantees that the total RR annuity will exceed the SS benefit, similar to industrial or private pensions that pay over and above SS benefits.
C. RR supplemental annuity
Some RR employees receive a supplemental annuity from the RRB if they have at least 300 months (25 years) of creditable RR service. It applies only to RR employees with RR service before October 1981. The supplemental annuity amount, awarded after 1974, equals $23 plus $4 for each year of service over 25 years, up to a maximum of $43. Receipt of a private pension paid for, entirely or in part, by a RR company will cause a reduction in the supplemental annuity amount.
D. RR vested dual benefit (VDB)
1. RR employee VDB
In addition to tiers I and II annuities, the RRB pays a VDB to employees at age 62 and to younger RR workers who meet SS disability benefit requirements. VDB annuitants must have met insured status requirements for both RR and SS benefits prior to 1975, along with other vesting conditions.
RRB computes the VDB using the SS benefit formula in effect at the end of 1974, counting earnings before 1975 or through the last year before 1975 with RR employment. The VDB equals the benefit based solely on RR earnings plus the benefit based solely on SS earnings, less the benefit based on combined RR and SS earnings. RRB raised the final amount by the cumulative cost-of-living increases that occurred after 1974 through the date of retirement, but not after June 1981.
The VDB protects the equity earned under SS prior to 1975. RRB pays the VDB from appropriated general funds rather than the RRB trust funds. Thus, an insufficient fiscal year appropriation causes a benefit reduction. This first occurred in October 1981, when VDB benefits were reduced 21%.
An employee who does not meet the vesting requirements for the VDB based on his or her earnings record may be eligible to receive a refund of excess SS taxes paid during the years 1951 through 1974. For more information on excess RR taxes, see RS 01601.210.
2. RR auxiliary VDB
RRB provided an auxiliary VDB for the wife, widow, dependent husband, or dependent widower of employees who, prior to 1975, had 120 or more months of RR service and met insured status under the SS Act. RRB eliminated the auxiliary VDB after August 1981.
E. RR spouse’s, divorced spouse’s, and independently entitled divorced spouse’s annuities
The spouse’s, divorced spouse’s, and independently entitled divorced spouse’s annuities are one-half of the worker's tier I benefit, less any SS benefit payable to the spouse, divorced spouse, or independently entitled divorced spouse. For the current spouse only, the annuity also includes one-half of the worker's tier II benefit and the auxiliary VDB, if applicable.
The tier I, tier II, and former auxiliary VDB benefits are subject to various reductions and maximums. Tier I benefits may be subject to a government pension offset known as a Public Service Pension (PSP) at the RRB.
F. RR employee and spouse’s minimum guaranty annuity
A special minimum provision guarantees that families will not receive less money as RR annuitants than they would receive under SS. This provision intends to account equitably for situations where one or more members of a family would be eligible for an SS benefit but ineligible for a RR annuity; e.g., the children of a retired or disabled annuitant.