Railroad Retirement Board
Payroll Tax Reduction & Unemployment Benefit Extension
December 2010
The Tax Relief, Unemployment Insurance
Reauthorization, and Job Creation Act of 2010, recently passed by the Congress
and signed into law by President Obama on
Payroll Tax Cut.--The Act provides a reduction of 2
percentage points in social security payroll taxes paid by employees. Railroad
retirement benefits are divided into two tiers, with tier I
being equivalent to social security benefits.
As a result, the tier I tax rate on railroad employees
will drop from 6.2 percent to 4.2 percent during 2011. Employees will continue
to pay a 1.45 percent tax for Medicare hospital insurance, for a total tier I payroll
tax rate of 5.65 percent. The maximum amount of earnings subject to the new
rate of 4.2 percent remains at $106,800, although there is no maximum on
earnings subject to the Medicare rate. The employer tier I tax rate remains
7.65 percent.
For a railroad employee making $70,000 a year, the
payroll tax reduction provides $1,400 in savings, while someone making the
maximum taxable amount of $106,800 would have savings of $2,136. On an
industry-wide basis, this reduction should provide more than $300 million in
tax savings to about 250,000 railroad employees.
The Act also provides for the transfer of money from
the general fund to the Social Security Equivalent Benefit Account, one of the
trust funds from which the Railroad Retirement Board (RRB) pays benefits, in an
amount equal to the revenue lost due to the reduced payroll tax rate.
Extended Unemployment Benefits.--Under previous law, railroad workers
with less than 10 years of service were eligible for up to 65 days of extended
unemployment benefits, while workers with 10 or more years of service could receive
up to 130 days of extended benefits. To qualify for these benefits, the
employee had to claim regular unemployment benefits between
The December 2010 law provides a 1-year extension,
offering extended benefits to anyone who claims regular unemployment benefits
through
As a result, unemployed workers with less than 10
years of service are eligible for up to 65 days of extended benefits within 7
consecutive 2-week registration periods. Those with 10 or more years of service
can receive up to 130 days within 13 consecutive 2-week registration periods.
The RRB will notify individuals of their rights to
extended benefits as they become eligible and also provide any applicable claim
forms. Employees may file these claims securely online at the agency’s website,
www.rrb.gov, or mail
them to the RRB office serving their area.
Besides viewing the website, railroad
workers can get more information about the law or find the RRB office serving
their area by calling the agency’s toll-free telephone number at 1-877-772-5772.
Public Affairs 312-751-4777
Posted: 01/01/11