Railroad Retirement Board: Retirement, Survivor, Disability, Unemployment, and Sickness Benefits
Railroad Retirement Board: Retirement,
Survivor, Disability, Unemployment, and
Social Science Analyst
Domestic Social Policy Division
The Railroad Retirement Board (RRB) administers retirement, survivor, disability,
unemployment, and sickness insurance for railroad workers and their families. This
report describes RRB eligibility requirements, benefit types and compensation amounts,
and program financing. The report will be updated annually.
The Railroad Retirement Board (RRB), an independent federal agency, administers
retirement, survivor, disability, unemployment, and sickness insurance for railroad
workers and their families. Workers covered by RRB include those employed by
railroads engaged in interstate commerce and related subsidiaries, railroad associations,1
and railroad labor organizations. In FY2006, RRB paid about $9.4 billion in retirement,
survivor, and disability benefits to about 619,000 beneficiaries and $73 million in2
unemployment and sickness benefits to 28,000 beneficiaries. Lifelong railroad workers
receive RRB benefits instead of Social Security benefits; railroad workers with non-
railroad experience receive benefits from either RRB or from Social Security, depending
on the length of their railroad service.
RRB is separate from the Social Security system, but the two programs are closely
coordinated. The first legislation to establish a federal retirement program for railroad
workers passed shortly before the Social Security Act of 1935.3 The funding of RRB and
Social Security was first linked in 1951, when a financial interchange was established.
1 RRB is governed by three board members: one recommended by railroad employers, one
recommended by railroad labor organizations, and one appointed to represent the public interest.
2 Railroad Retirement Board, 2007 Annual Report for Fiscal Year Ended September 30, 2006,
at [http://www.rrb.gov/pdf/opa/AnnualRprt/AnnualReport.pdf]. (Hereafter, RRB Annual Report.)
3 RRB was created to stabilize the railroads when their finances were troubled. (See Ways and
Means Committee, 2004 Green Book, at [http://www.gpoaccess.gov/wmprints/green/2004.html].)
This annual exchange of funds places the Social Security Trust Funds in the same
financial position they would have been in if railroad service had been covered by Social
Security. The two programs’ benefits are also coordinated. In 1974, railroad retirement
benefits were divided into two tiers (discussed below). Tier I benefits are computed using
the Social Security benefit formula based on earnings covered by either program. Tier II
benefits are similar to private pension benefits and are based only on railroad work.
This report provides general information on railroad benefits. Certain exceptions
and special cases are not covered. Individual railroad workers and beneficiaries should
contact RRB for more specific information on their benefits.4
Railroad Retirement, Survivor, and Disability Benefits
The Railroad Retirement Act (45 U.S.C. § 231) authorizes retirement, survivor, and
disability benefits for railroad workers and their families. To be insured for RRB
benefits, a worker must generally have at least 10 years of covered railroad work, or five
years performed after 1995. The family of an insured railroad worker receives RRB
benefits equal to or greater than the Social Security benefits they would have received if
the worker’s railroad work had been covered by Social Security. If a worker does not
qualify for RRB benefits, his or her railroad work counts toward Social Security benefits.
Retirement Benefits for Railroad Workers. At age 60, railroad workers with
at least 30 years of covered railroad work may receive full retirement annuities. At full
retirement age, which is gradually increasing from 65 to 67, insured workers with fewer
than 30 years of service may also receive full retirement annuities.5 These workers may
receive reduced retirement annuities starting at age 62. Retirement annuities are not
payable to workers who continue to work in a covered railroad job or who return to
railroad work after retirement. At the end of FY2007, about one-third of RRB
beneficiaries (193,000) received age-based annuities. The average retirement annuity was6
about $1,880 per month, including both tier I and tier II benefits (described below).
Tier I Annuities. Tier I benefits are equivalent to Social Security benefits. Tier
I benefits are calculated using the Social Security benefit formula with the RRB age and
service requirements, and are based on both RRB- and Social Security-covered
employment. After tier I benefits are first paid, they increase annually with a cost of7
living adjustment (COLA) in the same manner as Social Security benefits.
Tier I benefits may be reduced for retirees who receive Social Security benefits or
government pensions, retire early, or continue to work after retirement. Generally, Social
Security benefits are subtracted from tier I benefits, since work covered by Social Security
4 To find the nearest RRB office, see [http://www.rrb.gov/field/field.asp] or call 1-800-808-0772.
5 Full retirement age is rising from 65 for those born before 1938 to 67 for those born after 1959.
6 Railroad Retirement Board, Bureau of the Actuary, Quarterly Benefit Statistics, December
2007, at [http://www.rrb.gov/pdf/act/stat_qbs907.pdf]. All FY2007 benefit figures are in this
7 For more on Social Security’s benefit formula and COLA, see CRS Report 94-27, Social
Security: Brief Facts and Statistics, by Gary Sidor.
is counted towards tier I benefits. (Beneficiaries insured by both systems receive a single
check from the RRB.) Railroad retirement benefits may also be reduced for certain
pensions earned through federal, state, and local government work. Tier I benefit
reductions for early retirement are similar to those in the Social Security system. As the
full retirement age rises, so will the reduction for early retirement.8 For early retirees who
continue to work outside the railroad industry, tier I benefits are reduced by $1 for every
$2 earned above the exempt amount ($13,560 in 2008).9 The reductions for earnings do
not apply if a railroad retiree’s annuity is reduced due to Social Security benefit receipt.
Tier II Annuities. Tier II retirement annuities are paid in addition to tier I annuities10
and any private pension and retirement savings plans offered by railroad employers.
They are similar to private pensions and based solely on covered railroad service. Tier
II benefits are increased annually by 32.5% of the Social Security COLA.
Tier II benefits are not reduced if a worker receives Social Security benefits or a
government pension. Generally, the early retirement reductions for tier II benefits are the
same as for tier I benefits. The reductions for earnings are different. For railroad retirees
who continue to work at the non-railroad job they held at the time they retired, tier II
benefits are reduced by $1 for every $2 earned, up to 50% of the benefit. The benefit
reduction for earnings applies to all tier II beneficiaries, regardless of age.
Other Retired Worker Benefits. Railroad employers finance a supplemental
annuity program. Supplemental annuities are payable to employees hired before October
railroad industry. At the end of FY2007, about 121,000 railroad retirees received
supplemental annuities, which averaged $42 a month. In addition, general revenues
finance a windfall benefit to vested dual beneficiaries. Vested dual beneficiaries were
insured for both RRB and Social Security in 1974 when the two-tier benefit structure was
established. In FY2006, about 44,200 retirees received vested dual benefits, averaging
$160 per month.12 Neither supplemental annuities nor vested dual benefits are adjusted
for the cost of living. Supplemental annuities are subject to the same earnings reductions
as tier II benefits; vested dual benefits are subject to the same earnings reductions as tier
Retirement Benefits for Railroad Workers’ Families. In any month that a
worker collects a railroad retirement benefit, his or her spouse may also be eligible for a
8 The reduction at age 62, Social Security’s earliest eligibility age, is rising from 20% to 30%.
9 During the calendar year that a retiree will reach the full retirement age, the formula for
calculating the early retirement reduction changes: benefits are reduced $1 for every $3 earned
above the exempt amount ($36,120 in 2008) until the beneficiary reaches full retirement age.
10 Annual tier II benefits are 7/10% of a workers’ average taxable monthly compensation for the
highest 60 months of earnings times their years of service, less 25% of any vested dual benefit.
11 People have a current connection if they worked in a covered railroad job for at least 12 of the
30 months before death or receipt of a railroad annuity. The current connection is not broken
during employment at certain U.S. government agencies, or in other special circumstances.
12 RRB Annual Report.
retirement benefit.13 A spouse qualifies for a retirement annuity when he or she reaches
the same minimum age required for the worker to collect a retirement annuity (i.e., either
age 60 or 62, depending on years of service). At any age, a spouse may be eligible for a
retirement annuity if he or she cares for the retired worker’s unmarried child under age
18 (or a child disabled before age 22). A qualifying spouse receives 50% of the worker’s
tier I benefit before reductions (or, if higher, a Social Security benefit based on his or her
own earnings). Spouses may also receive 45% of the worker’s tier II benefit before
reductions. At the end of FY2007, about a quarter of RRB beneficiaries (137,000)
received spouse annuities. The average spouse annuity was $712 per month.
For spouses, as for railroad workers, Social Security benefits are subtracted from tier
I benefits. The benefit reductions for government pensions and post-retirement earnings
are also the same for spouses and workers, but spouses are subject to reductions based on
workers’ earnings as well as on their own earnings. As for early retirement, spouses are
subject to different benefit reductions than are workers.14 Finally, spouses’ benefits are
reduced by the amount of any railroad benefits they earned based on their own work.
Retired workers may also receive benefits on behalf of their children, if the children
are unmarried and under the age of 18 (or 19 if still in high school). These benefits are
subject to certain maximums based on the total benefits paid to the worker’s family.
Survivor Benefits for Railroad Workers’ Families. Surviving spouses,
former spouses, children, and other dependents of railroad workers may be eligible to
receive survivor benefits after the worker’s death. These benefits are paid in addition to
any private life insurance offered by railroad employers. To be insured for survivor
benefits, a worker must have had a current connection to the railroad industry at the time
of death. Railroad survivor benefits are generally higher than comparable Social Security
benefits since families of railroad workers may be entitled to tier II benefits as well as tier
I benefits (which are equivalent to Social Security benefits). In cases where no monthly
survivor benefits are paid, a lump-sum payment may be made to certain survivors.
The widows and widowers of railroad workers may receive survivor benefits. At full
retirement age, a surviving spouse may be eligible for 100% of the worker’s tier I benefit
(or his or her own Social Security benefit, if higher). The widow(er) may also receive
widows and widowers may receive reduced survivor benefits.15 At any age, a widow(er)
caring for a deceased worker’s child under age 16 may receive a survivor benefit of 75%
of the worker’s tier I benefit, as well as 50% to 100% of the worker’s tier II benefit. At
the end of FY2007, about a quarter of RRB beneficiaries received aged widow(er)
benefits, which averaged $1,168 per month. Less than 1% of RRB beneficiaries (867)
received benefits for widowed mothers and fathers, which averaged $1,464 per month.
13 Divorced spouses of retired railroad workers may also be eligible for retirement annuities. A
divorced spouse may receive 50% of the worker’s tier I benefit before reductions, but no tier II
benefits. To qualify, the former spouse must have been married to the worker for at least 10
years and must not be remarried; both the worker and former spouse must be at least age 62.
14 For spouses, the reduction at age 62 is gradually rising from 25% to 35%.
15 For widow(er)s, the reduction at age 60 (Social Security’s earliest eligibility age for widowed
spouses) is rising from about 17% to 20%.
Children of railroad workers may also receive survivor benefits. To qualify, a child
must be unmarried and under the age of 18 (or 19 if still in high school). Disabled adult
children may qualify if their disability began before age 22. Eligible children receive 75%
of the worker’s tier I benefit and 15% of the worker’s tier II benefit. At the end of
FY2007, about 2% of RRB beneficiaries (11,000) received children’s survivor benefits,
which averaged $850 per month. In addition, if the parents of a railroad worker were
dependent on the worker for at least half of their support, they may receive 82.5% of the
worker’s tier I benefit and 35% of the worker’s tier II benefit.
Survivor benefits are not payable to a current railroad employee, and survivor
benefits are reduced by any RRB benefit the survivor has earned through his or her own
railroad work. Survivors receive the same reductions as retired workers for Social
Security benefit receipt, government pension receipt, and earnings (unless they are
disabled). A family maximum applies to survivor benefits, usually applicable when three
or more survivors receive benefits on a worker’s record (not counting divorced spouses).
Disability Benefits for Railroad Workers. Railroad workers may be eligible
for benefits if they become disabled. The Railroad Retirement Board determines whether
a worker is disabled based on the medical evidence provided during the application
process. Railroad workers found to be totally and permanently disabled from all work
may be eligible for total disability annuities. Totally disabled workers may receive tier
I benefits after a five-month waiting period and tier II benefits at age 62. Occupational
disability annuities are also payable to workers found to be permanently disabled from
their regular railroad occupations, at least 60 years old with 10 years of service (or any age
with 20 years of service), and with a current connection to the railroad industry. At the
end of FY2007, about 15% of RRB beneficiaries (84,000) received disability benefits.
The average disability annuity paid to workers younger than the full retirement age was
about $2,200; the average paid to those above the full retirement age was about $1,700.
Disability annuities are not payable if a worker is currently employed in a covered
railroad job. Disability benefits are suspended for beneficiaries who earn more than $730
a month in 2008 before the full retirement age.16 After the full retirement age, the earnings
reductions for retired railroad workers apply. The tier I portion of disability benefits may
be reduced for the receipt of workers compensation or government disability benefits.
Financing of Benefits Under the Railroad Retirement Act. Payroll taxes
are a major funding source for railroad retirement, survivor, and disability benefits. RRB
payroll taxes are divided into two tiers. The tier I tax is the same as the Social Security
payroll tax: railroad employers and employees each pay 6.2% on earnings up to $102,000
in 2008. Tier I taxes are transferred to the Social Security trust funds in a financial
interchange, then used to pay tier I benefits. The tier II tax is set each year based on
RRB’s asset balances as well as benefit and administrative costs. The tier II tax is 12.1%
for employers and 3.9% for employees on earnings up to $75,900 in 2008. Tier II taxes
are used to finance tier II benefits, supplemental annuities, and a portion of tier I benefits.
16 P.L. 109-478, passed in 2006, increased the earnings limit for RRB disability beneficiaries
from $400 to $700 and indexed future disability earnings limits to the Average Wage Index.
In addition to payroll taxes, which provided about 48% of RRB funding in FY2006,
railroad benefits are funded from several other sources.17 The financial interchange with
Social Security provided 36% of RRB funding in FY2006. Revenues not needed to pay
current benefits and administrative costs are held in the National Railroad Retirement
Investment Trust, which is invested in both government securities and private equities.
Transfers and interest from this fund provide another revenue source for railroad benefits,
and were about 10% of RRB’s funding in FY2006. Federal income taxes levied on RRB
benefits made up about 5% of funding. General fund transfers to pay the costs of phasing
out vested dual benefits amounted to about 1% of funding.
Railroad Unemployment and Sickness Benefits
Railroad workers may qualify for daily unemployment and sickness benefits under
the Railroad Unemployment Insurance Act (45 U.S.C. § 351-369). These benefits are
paid in addition to any paid leave or private insurance an employee may have. Eligibility
for RRB unemployment and sickness benefits is based on recent railroad service and
earnings. Each year, the benefit year begins on July 1. Eligibility is based on work in the
prior year, or the base year. To qualify, railroad workers must have a minimum amount
of creditable earnings in the base year ($3,200 in the 2008 base year), not counting
earnings above a monthly maximum ($1,653 in the 2008 base year). New railroad
workers must also have at least five months of covered railroad work in the base year. To
receive unemployment benefits, a worker must be willing and able to work. For sickness
benefits, a worker must be unable to work because of illness or injury. Workers may not
earn any money while receiving unemployment or sickness benefits.
Unemployment and sickness beneficiaries will receive $61 a day for benefit year
2008 (beginning in July 2008). Railroad workers only receive these benefits to the extent
that they are higher than other benefits they receive under the Railroad Retirement Act,
the Social Security Act, or certain other public programs, including workers
compensation. Unemployment and sickness beneficiaries may receive normal benefits
for up to 26 weeks in a benefit year, or until the benefits they receive equal their creditable
earnings in the base year (if sooner).18 Employees with at least 10 years of covered
railroad service may qualify for extended benefits for 13 weeks after they have exhausted
normal benefits. Workers who apply for unemployment benefits will be enrolled
automatically in a free job placement service run by railroad employers.
Financing of Benefits Under the Railroad Unemployment Insurance Act.
Railroad unemployment and sickness benefits are financed solely by railroad employers.
Employers’ contributions are based on the taxable earnings of their employees. The tax
rate depends on the past rates of unemployment and sickness claims by employees, and
ranges from 2.15% to 12.0%. Employers also pay a 1.5% surcharge to build up the
railroad unemployment insurance trust fund. Railroad unemployment funds not needed
immediately are deposited into an account that is part of the national unemployment
insurance trust fund; the railroad account receives interest based on these deposits.
17 RRB Annual Report.
18 There is essentially a one-week waiting period for unemployment and sickness benefits. There
is a two-week waiting period for unemployment benefits if a worker participates in a legal strike.