The payment of a railroad retirement annuity can be affected by entitlement to social security benefits, as well as certain other governmental benefits. Such dual entitlement, if not reported to the Railroad Retirement Board, can result in benefit overpayments which have to be repaid, sometimes with interest and penalties. The following questions and answers describe how dual benefit payments are adjusted by the Railroad Retirement Board for annuitants eligible for social security benefits and/or other government benefit payments.

How are dual benefits paid to persons entitled to both railroad retirement and social security benefits?

Since 1975, if a railroad retirement annuitant is also awarded a social security benefit, the Social Security Administration determines the amount due, but a combined monthly dual benefit payments should, in most cases, be issued by the Railroad Retirement Board after part or all of the railroad retirement annuity has been reduced for the social security benefit.

Why is a railroad retirement annuity reduced when a social security benefit is also payable?

The tier I portion of a railroad retirement annuity is based on both railroad retirement and nonrailroad social security credits acquired by an employee and reflects what social security would pay if railroad work were covered by social security. Tier I benefits are, therefore, reduced by the amount of any actual social security benefit paid on the basis of nonrailroad employment, in order to prevent a duplication of benefits based on the same earnings.

The tier I dual benefit reduction also applies to the annuity of an employee qualified for social security benefits on the earnings record of another person, such as a spouse. And, the tier I portion of a spouse or survivor annuity is reduced for any social security entitlement, even if the social security benefit is based on the spouse's or survivor's own earnings. The reductions follow principles of social security law which, in effect, limit payment to the higher of any two or more benefits payable to an individual at one time.

However, the tier II portion of a railroad retirement annuity is based on railroad service and earnings alone, is computed under a separate formula, and is not reduced for entitlement to a social security benefit.

Are there any exceptions to the railroad retirement annuity reduction for social security benefits?

No. However, if an employee qualified for dual benefits before 1975 meets certain vesting requirements, he or she can receive an additional annuity amount which offsets, in part, the dual benefit reduction. This additional amount, reflecting the dual benefits payable prior to 1975, is called a vested dual benefit payment.

Awards of these vested dual benefit amounts are now limited only to vested railroad employees with dual coverage on their own earnings. Spouses and widow(er)s retiring since 1981 no longer qualify. Of some 12,000 employee annuities awarded in fiscal year 1996, only 1,000 contained vested dual benefit payments.

Are there any funding limitations on the payment of vested dual benefits?

Vested dual benefit payments are funded by annual appropriations from general U.S. Treasury revenues, rather than the railroad retirement payroll taxes and other revenues that finance 97% of the railroad retirement system's benefit payments. Payment of these 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 by proration. Vested dual benefits are not increased by cost-of-living adjustments.

What other benefit payments, besides social security benefits, require dual benefit reductions in a railroad retirement annuity?

If an employee is receiving a disability annuity, tier I benefits for the employee and spouse may, under certain circumstances, be reduced for receipt of worker's compensation or public disability benefits. Also, for employees first eligible for a railroad retirement annuity and a federal, state or local government pension based, in part or in whole, on employment not covered by social security or railroad retirement after 1956. This also applies to certain other payments not covered by social security, such as payments from a non-profit organization or from a foreign government or a foreign employer. However, it 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.

The tier I portion of a spouse's or widow(er)'s annuity may also be reduced for receipt of any federal, state or local pension separately payable to the spouse or widow(er) based on her or his own earnings, unless the employment on which the public pension is based was covered by social security on the last day of public employment. For spouses and widow(er)s subject to the government pension reduction, the tier I reduction is equal to 2/3 of the amount of the government pension.

What dual benefit restrictions apply when both a husband and wife are rail employees entitled to railroad retirement annuities?

If both the husband and wife are qualified railroad employees and either has some railroad service before 1975, both can receive separate railroad retirement employee and spouse annuities, without a full dual benefit reduction. However, if both the husband and wife started railroad employment after 1974, only the railroad retirement employee annuity or the spouse annuity, whichever he or she chooses, is payable.

If a widow(er) is qualified for a railroad retirement employee annuity as well as a survivor annuity, a special guaranty applies in some cases. If both the widow(er) and the deceased employee started railroad employment after 1974, the survivor annuity payable to the widow(er) is reduced by the amount of the employee annuity.

If either the deceased employee or the survivor annuitant had some railroad service before 1975 but had not completed 120 months of service before 1975, the employee annuity and the tier II portion of the survivor annuity would be payable to the widow(er). The tier I portion of the survivor annuity would be payable only to the extent that it exceeds the tier I portion of the employee annuity.

If either the deceased employee or the survivor annuitant completed 120 months of railroad service before 1975, the widow or dependent widower would receive both an employee annuity and a survivor annuity, without a full dual benefit reduction.

How can an annuitant find out if receipt of any dual benefits might affect his or her railroad retirement annuity?

If an annuitant becomes entitled to any of the previously discussed dual benefit payments, or if there is any question as to whether a dual benefit payment requires a reduction in an annuity, a Board field office should be contacted. In any situation, the best rule of thumb is, "When in doubt--report."

For the phone number or address of the nearest Board field office, annuitants should look in the telephone directory under "United States Government," or check with their local union official, rail employer, post office, or Federal Information Center. They may also check the Board's Web Site at http://www.rrb.gov. Most Board field offices are open to the public from 9:00 a.m. to 3:30 p.m., Monday through Friday.

V. M. Speakman, Labor Member of the Railroad Retirement Board, wrote the following:

In reviewing the February 1998 edition of the BMWE Journal, it appears that some misinformation was given concerning eligibility for railroad retirement benefits. The following will hopefully add some clarification.

Under current law, an employee must be age 62 and have 30 years of service to qualify for a regular annuity with full tier I and tier II benefits. Beginning in the year 2000, the age requirements for some unreduced railroad retirement benefits are scheduled to rise just like the social security requirements, however, the annuities of 30-year employees retiring at age 62 are not affected by this future change in age reductions. Full benefits will still be payable at age 62 in these cases.

Under current law, widows’ and widowers’ annuities may be payable as early as age 50 if the widow(er) is totally and permanently disabled; and, they may still be payable at any age if the widow(er) is caring for an unmarried child of the deceased employee over age 18 if the child became totally disabled before age 22.