Focus on the Law: Railroad Retirement Benefits

By Sharon Frankenberg,
Attorney at Law

The Federal Railroad Retirement Act was first passed in 1934 in an attempt to address the numerous challenges facing the railroad industry’s private pension plans. The Great Depression had driven the industry’s pension system into crisis.  The planned Social Security system would not take effect for several years and would not cover work performed before 1937.  The railroad retirees needed immediate assistance.  After initially being declared unconstitutional, the law has been rewritten and the program transformed over the decades into their current incarnation.  The program is administered by the Railroad Retirement Board (RRB), an independent federal agency with over 50 field offices.

Both RRB and Social Security offer retirement, disability, spousal, and survivor benefits in a somewhat similar way.  These benefits are referred to as “Tier I” benefits and under the RRB take the place of Social Security.  Not every worker who has paid Railroad Retirement taxes will receive benefits through Railroad Retirement.  If they have fewer than 10 years of service in positions subject to railroad specific taxes (or fewer than 5 years after 1995), they are not considered vested under Railroad Retirement and have their accounts transferred into the Social Security program.  Survivor claims with railroad involvement require a finding that the RRB has jurisdiction over the deceased worker. The deceased must meet the vesting requirements just listed and be covered by RRB until retirement or death.

If this is not the case, jurisdiction lies with Social Security Administration rather than RRB.

RRB and SSA retirement benefits are generally first payable at age 62 and calculated in a similar fashion.  There are several differences, however.  Under RRB early retirement benefit reductions do not apply if the worker has at least 30 years of service in railroad employment.  That worker could begin receiving benefits at age 60 with no age-based reduction.  There is also a $43 per month supplemental annuity payable under RRB (and not under the SSA) if certain service-related conditions are met.

While RRB and SSA use the same definition of total disability benefits and the same substantial gainful activity amount, RRB offers an occupational disability benefit that does not exist under SS.  Total disability refers to inability to perform any job but occupational disability under RRB covers disabilities preventing work in an individual’s regular railroad position even if he or she could perform another job.  Occupational disability may be available at any age to workers with at least 20 years of service and a current connection to the railroad industry and to workers between ages 60 and full retirement age with at least 10 years of service and a current connection to the railroad industry.  The RRB occupational disability annuity is calculated in the same way as the total disability annuity.  Unlike under SS, children can only receive railroad benefits if the parent is deceased.  Children of retired or disabled workers can receive benefits under Social Security but not under the RRB.

RRB Tier II benefits mimic a private defined benefit pension for railroad workers and these benefits are not available under SS. The age restrictions are the same as for Tier I retirement benefits.  Tier II benefits have a cost of living adjustment.  Current spouses and survivors may also receive Tier II benefits.  Tier II spousal benefits are equal to 45% of the employee’s Tier II benefits and the survivor benefits under Tier II vary depending upon the type of survivor.

I have attempted to share a very general introduction to the RRB.  For a more thorough treatment of this subject, please read “An Overview of the Railroad Retirement Program” by Kevin Whitman, Social Security Bulletin, Vol. 68, No. 2 (2008).   You should always hire an experienced attorney if you need legal services.  My office number in Knoxville is (865)539-2100.

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