Railroad Retirement Board
Deemed Service Months Credit
September 2011
Railroad retirement benefits are based on months of service
and earnings credits. Earnings are creditable up to certain annual
maximums on the amount of compensation subject to railroad retirement taxes.
Credit for a month of railroad service is given for every month
in which an employee had some compensated service for an employer covered by
the Railroad Retirement Act, even if only one day’s service is performed in the
month. (Local lodge compensation is disregarded for any calendar month in
which it is less than $25. However, work by a local lodge or division
secretary collecting insurance premiums, regardless of the amount of salary, is
creditable railroad work.) Also, under certain circumstances, additional
service months may be deemed in some cases where an employee does not actually
work in every month of the year.
The following
questions and answers describe the conditions under which an employee may
receive additional railroad retirement service month credits under the deeming
provisions of the Railroad Retirement Act.
1. What requirements
must be met before additional service months can be deemed?
In order for a month
to be deemed a service month, an employee must be in an “employment relation”
with a covered railroad employer, or be an employee representative, during that
month. (An employee representative is a labor official of a non-covered
labor organization who represents employees covered under the Acts administered
by the Railroad Retirement Board.)
For
this purpose, an “employment relation” generally exists for an employee on an
approved leave of absence (for example, furlough, sick leave, suspension,
etc.). An “employment relation” is severed by retirement, resignation,
relinquishing job rights in order to receive a separation allowance, or termination.
2. How is credit for
additional service months computed?
For additional
service months to be deemed, the employee’s compensation for the year, up to
the annual tier II maximum, must exceed an amount equal to 1/12 of the tier II
maximum multiplied by the number of service months actually worked. The
excess amount is then divided by 1/12 of the tier II maximum; the result, rounded up to the next whole number, equals the
maximum number of months that may be deemed as service months for that
year. Fewer months may be deemed, if an employment relation, as
defined in question 1, does not exist.
3. An employee works eight
months in 2011 before being furloughed, but earns compensation of
$80,300. How many additional service months could be credited to the
employee?
The employee could be
credited with four additional service months. One-twelfth of the 2011
$79,200 tier II maximum ($6,600) times the employee’s actual service months
(eight) equals $52,800. The employee’s compensation in excess of $52,800
up to the $79,200 maximum is $26,400, which divided by $6,600 equals
four. Therefore, four deemed service months could be added to the eight
months actually worked and the employee would receive credit for 12 service
months in 2011.
4. Another employee
works for eight months in 2011 and earns compensation of $64,300. How
many additional service months could be credited to this employee?
In this case, the excess amount ($64,300 minus $52,800) is $11,500, which divided by $6,600 equals 1.742. After rounding, this employee could receive credit for two deemed service months and be credited with a total of 10 months of service in 2011.
5. Another employee works for
nine months in 2011 before resigning on September 15, but earns compensation of $91,000. How
many additional service months could be credited to this employee?
In this case, the
excess amount ($79,200 minus $59,400) is $19,800, which divided by $6,600
equals three. However, since the employee resigned in September, there is
no employment relationship for the remaining months and no additional service
months may be deemed and credited.
6. Should an employee
preparing to retire take deemed service months into account when designating
the date his or her railroad retirement annuity is to begin?
Credit
for deemed service months is a factor an employee may wish to consider in
selecting an annuity beginning date. For instance, in some cases, a
designated annuity beginning date could be used to establish basic eligibility
for certain benefits, increase the tier II amount, or establish a current
connection. It should be noted that service months cannot be deemed after
the annuity beginning date.
7. What would be an
example of using deemed service months to establish benefit eligibility?
An
example would be an employee under age 60 who might be able to use deemed
service months to establish the 240 months of service needed to qualify for an
occupational disability annuity.
For instance, a
48-year-old employee applying for an occupational disability annuity last
performed service on
The employee’s excess
amount ($45,000 minus $33,000) is $12,000, which divided by $6,600 equals
1.818. Therefore, two deemed service months could be added to the five
months actually worked and the employee would receive credit for seven service
months in 2011 for a total of 240 service months.
In any case, a designated annuity beginning date should be
considered in disability cases because, except in the case of a traumatic
event, it is difficult to predict the onset date of a disability and the
resultant annuity beginning date. In addition, as in the preceding
example, other benefits may be involved.
8. How could deemed
service months be used to increase an employee’s tier II amount?
An employee worked in
the first five months of 2011 and received compensation of $39,600. He
does not relinquish his rights until
The excess amount
($39,600 minus $33,000) is $6,600, which yields one additional service month
for a total of six service months in 2011. Had the employee relinquished
his rights and applied for an annuity to begin on June 1, he would have been
given credit for only five service months.
The employee received
the maximum compensation in all of the last five years and had 360 months of service
through 2010. The additional service and compensation increases his tier
II from $1,350.80 to $1,357.25. However, delaying the annuity beginning
date past the second day of the month after the date last worked solely to
increase the tier II amount would not generally be to the employee’s advantage.
9. Can deemed service
months help an employee establish a current connection?
Yes. For
example, an employee left the railroad industry in 1999 and engaged in
employment covered by the Social Security Act. In August 2010, she
returned to railroad employment and worked through
In
this case, the excess amount ($40,150 minus $39,600) is $550, which yields one
deemed service month. Consequently, the employee is given credit for
seven service months in 2011. With five months of service in 2010 and
seven months in 2011, the employee establishes a current connection. Had she
designated the earliest annuity beginning date permitted by law, she would not
have met the 12-in-30-month requirement for a current connection. (An
employee who worked for a railroad in at least 12 months in the 30 months
immediately preceding the month his or her railroad retirement annuity begins
will meet the current connection requirement for a supplemental annuity,
occupational disability annuity or survivor benefits.)
10. Can an employee ever receive
credit for more than 12 service months in any calendar year?
No. Twelve
service months are the maximum that can be credited for any calendar year.
11. Where can an employee get more
information on how deemed service months could affect his or her own annuity?
Claimants with questions about deemed service months should
contact an RRB office by calling toll-free at 1-877-772-5772. Claimants
can also find the address of the RRB office serving their area and get
information about their claims and benefit payments by calling this toll-free
number. Most RRB offices are open to the public from
Employees 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. They can also get this information from the Board's Web site at www.rrb.gov.
Public Affairs 312-751-4777
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