Railroad Retirement Age Reductions
Summary Questions & Answers
May 2010
Railroad retirement benefits are
subject to reduction if an employee with less than 30 years of service retires
before attaining full retirement age. While employees with less than 30
years of service may still retire at age 62, the age at which full retirement benefits
are payable has been gradually increasing since the year 2000, the same as for
social security.
The following questions and answers explain how these
early retirement age reductions are applied to railroad retirement annuities.
1.
What is the full retirement age for employees with less than 30
years of service and is it the same for all employees?
Full retirement age, the earliest age at which a person
can begin receiving railroad retirement or social security benefits without any
reduction for early retirement, ranges from age 65 for those born before 1938
to age 67 for those born in 1960 or later, the same as for social security.
2.
How are the changes in the maximum age reduction being phased in?
Since 2000, the age
requirements for some unreduced railroad retirement benefits have been rising
just like the social security requirements. For employees with less than
30 years of service and their spouses, full retirement age increases from 65 to
66, and from 66 to 67, at the rate of two months per year over two separate
six-year periods. This also affects how reduced benefits are computed for
early retirement.
The gradual increase in full retirement age from age 65 to
age 66 affects those people who were born in the years 1938 through 1942.
The full retirement age will remain age 66 for people born in the years 1943
through 1954. The gradual increase in full retirement age from age 66 to
age 67 affects those who were born in the years 1955 through 1959. For
people who were born in 1960 or later the full retirement age will be age 67.
3. How does this affect the
early retirement age reductions applied to the annuities of those who retire
before full retirement age?
The early retirement annuity reductions applied to
annuities awarded before full retirement age are increasing. For employees retiring between age 62 and full retirement age with
less than 30 years of service, the maximum reduction will be 30 percent by the
year 2022. Prior to 2000, the maximum reduction was 20 percent.
Age reductions are applied
separately to the tier I and tier II components of an annuity. The tier I
reduction is 1/180 for each of the first 36 months the employee is under full
retirement age when his or her annuity begins and 1/240 for each additional
month. This will result in a gradual increase in the reduction at age 62
to 30 percent for an employee once the age 67 retirement age is in effect.
These same reductions
apply to the tier II component of the annuity. However, if an employee
had any creditable railroad service before
Employee
Retires with Less than 30 Years of Service
--If
the employee was born in 1937* or earlier, his or her full retirement age** is
65 and the maximum annuity reduction at age 62 is 20%.
--If
the employee was born in 1938*, his or her full retirement age** is 65 years
and 2 months and the maximum annuity reduction at age 62 is 20.833%.
--If
the employee was born in 1939*, his or her full retirement age** is 65 and 4
months and the maximum annuity reduction at age 62 is 21.667%.
--If
the employee was born in 1940*, his or her full retirement age** is 65 and 6
months and the maximum annuity reduction at age 62 is 22.50%.
--If
the employee was born in 1941*, his or her full retirement age** is 65 and 8
months and the maximum annuity reduction at age 62 is 23.333%.
--If
the employee was born in 1942*, his or her full retirement age** is 65 and 10
months and the maximum annuity reduction at age 62 is 24.167%.
--If
the employee was born in 1943 through 1954*, his or her full retirement age**
is 66 and the maximum annuity reduction at age 62 is 25%.
--If
the employee was born in 1955*, his or her full retirement age** is 66 and 2
months and the maximum annuity reduction at age 62 is 25.833%.
--If
the employee was born in 1956*, his or her full retirement age** is 66 and 4
months and the maximum annuity reduction at age 62 is 26.667%.
--If
the employee was born in 1957*, his or her full retirement age** is 66 and 6
months and the maximum annuity reduction at age 62 is 27.50%.
--If
the employee was born in 1958*, his or her full retirement age** is 66 and 8
months and the maximum annuity reduction at age 62 is 28.333%.
--If
the employee was born in 1959*, his or her full retirement age** is 66 and 10
months and the maximum annuity reduction at age 62 is 29.167%.
--If
the employee was born in 1960* or later, his or her full retirement age** is 67
and the maximum annuity reduction at age 62 is 30%.
* A person attains a given age the day before
his or her birthday. Consequently, someone born on
January 1 is considered to have attained his or her given age on December 31 of
the previous year.
**If
an employee has less than 10 years of railroad service and is already entitled
to an age-reduced social security benefit, the tier I reduction is based on the
reduction applicable on the beginning date of the social security benefit, even
if the employee is already of full retirement age on the beginning date of the
railroad retirement annuity.
4. What are some
examples of how this will affect the amounts payable to employees retiring
before full retirement age with less than 30 years of service?
Take the example of an employee born on
Upon retirement at age 62, the employee’s tier I benefit
would be reduced by 25 percent, the maximum age reduction applicable in
2012. This would yield a tier I monthly benefit of $900; the employee’s
tier II benefit would also be reduced by 25 percent, providing a tier II amount
of $600 and a total monthly rate of $1,500. However, if the employee had
any rail service before
As a second example, take an employee born on
5. How are railroad
retirement spouse benefits affected by this change?
If an employee retiring
with less than 30 years of service is age 62, the employee’s spouse is also
eligible for an annuity the first full month the spouse is age 62. Early
retirement reductions are applied to the spouse annuity if the spouse retires
prior to full retirement age. Beginning in the year 2000, full retirement
age for a spouse gradually began to rise to age 67, just as for an employee,
depending on the year of birth. While reduced spouse benefits are still
payable at age 62, the maximum reduction will be 35 percent by the year
2022. However, if an employee had any creditable rail service prior to
Take for an example the
spouse of a railroader with less than 30 years of service, none of it prior to
August 12, 1983, who was born on April 2, 1960, and is retiring in 2022 at age
62, with a spouse annuity, in terms of today’s dollars and current benefit
payments and before any reductions for age, of $1,000 a month. With the
maximum reduction of 35 percent applicable in 2022, her net monthly benefit
would be $650.
As a second example, if
the same spouse had been born on
The following chart shows
how this will affect the spouses of railroad employees if the employee retires with
less than 30 years of service.
Spouse
Age Reductions
--If
the employee retires with less than 30 years of service and the employee’s
spouse was born in 1937* or earlier, the spouse’s full retirement age** is 65
and the spouse’s maximum annuity reduction at age 62 is 25%.
--If
the spouse was born in 1938*, the spouse’s full retirement age** is 65 years
and 2 months and the spouse’s maximum annuity reduction at age 62 is 25.833%.
--If
the spouse was born in 1939*, her or his full retirement age** is 65 and 4
months and the maximum annuity reduction at age 62 is 26.667%.
--If
the spouse was born in 1940*, her or his full retirement age** is 65 and 6
months and the maximum annuity reduction at age 62 is 27.50%.
--If
the spouse was born in 1941*, her or his full retirement age** is 65 and 8
months and the maximum annuity reduction at age 62 is 28.333%.
--If
the spouse was born in 1942*, her or his full retirement age** is 65 and 10
months and the maximum annuity reduction at age 62 is 29.167%.
--If
the spouse was born in 1943 through 1954*, her or his full retirement age** is
66 and the maximum annuity reduction at age 62 is 30%.
--If
the spouse was born in 1955*, her or his full retirement age** is 66 and 2
months and the maximum annuity reduction at age 62 is 30.833%.
--If
the spouse was born in 1956*, her or his full retirement age** is 66 and 4
months and the maximum annuity reduction at age 62 is 31.667%.
--If
the spouse was born in 1957*, her or his full retirement age** is 66 and 6
months and the maximum annuity reduction at age 62 is 32.50%.
--If
the spouse was born in 1958*, her or his full retirement age** is 66 and 8
months and the maximum annuity reduction at age 62 is 33.333%.
--If
the spouse was born in 1959*, her or his full retirement age** is 66 and 10
months and the maximum annuity reduction at age 62 is 34.167%.
--If
the spouse was born in 1960* or later, her or his full retirement age** is 67
and the maximum annuity reduction at age 62 is 35%.
* A person attains a given age the day before
his or her birthday. Consequently, someone born on January 1 is
considered to have attained his or her given age on December 31 of the previous
year.
** If the employee has less than 10 years of railroad service and
the spouse is already entitled to an age-reduced social security benefit, the
age reduction in her or his tier I will be based on the age reduction
applicable on the beginning date of the spouse’s social security benefit, even
if the spouse is already of full retirement age on the beginning date of her or
his railroad retirement annuity.
6. Are age reductions applied to employee disability
annuities?
Employee annuities based on disability are not subject to
age reductions except for employees with less than 10 years of service,
but who have 5 years of service after 1995. Such employees may qualify
for a tier I benefit before retirement age based on total and permanent
disability, but only if they have a disability insured status (also called a
“disability freeze”) under Social Security Act rules, counting both railroad
retirement and social security-covered earnings. Unlike with a 10-year
employee, a tier II benefit is not payable in these disability cases until the
employee attains age 62. And, the employee’s tier II benefit will be
reduced for early retirement in the same manner as the tier II benefit of an
employee who retired at age 62 with less than 30 years of service.
7. Do these changes also affect
survivor benefits?
Yes. The eligibility age for a full widow(er)’s annuity is also gradually rising from age 65 for
those born before 1940 to age 67 for those born in 1962 or later. A
widow(er), surviving divorced spouse or remarried
widow(er) whose annuity begins at full retirement age
or later will generally receive an annuity unreduced for early
retirement. However, if the deceased employee received an annuity that
was reduced for early retirement, a reduction would be applied to the tier I
amount payable to the widow(er), surviving divorced
spouse or remarried widow(er). The maximum age
reductions will range from 17.1 percent to 20.36 percent, depending on the
widow(er)’s date of birth. (These age
reductions apply to both tier I and tier 2.) For a surviving divorced
spouse or remarried widow(er), the maximum age
reduction is 28.5 percent. For a disabled widow(er),
disabled surviving divorced spouse or disabled remarried widow(er), the maximum reduction is also 28.5 percent, even if
the annuity begins at age 50.
8. Does the increase in full retirement age affect the age
at which a person becomes eligible for Medicare benefits?
No. Although the age
requirements for some unreduced railroad retirement benefits have risen just like the social security requirements,
beneficiaries are still eligible for Medicare at age 65.
9. Do these increases in full retirement age also apply to
the earnings limitations and work deductions governing benefit payments to
annuitants who work after retirement?
Like social security benefits, railroad retirement tier I
and vested dual benefits paid to employees and spouses, and tier I, tier II,
and vested dual benefits paid to survivors are subject to deductions if an
annuitant’s earnings exceed certain exempt amounts. These earnings
limitations and work deductions apply to all age and service annuitants and
spouses under full retirement age regardless of the employee’s years of
service. Although employees retiring at age 60 with 30 years of service
have no age reduction, these earnings limitations and work deductions still
apply until they reach their full retirement age. These earnings
limitations also apply to survivor annuitants, with the exception of disabled
widow(er)s under age 60 and
disabled children.
Likewise, while special earnings restrictions apply to
employees entitled to disability annuities, these disability earnings
restrictions cease upon a disabled employee annuitant’s attainment of full
retirement age. This transition is effective no earlier than full
retirement age even if the annuitant had 30 years of railroad service.
The additional deductions applied to the annuities of
retired employees and spouses who work for their last pre-retirement nonrailroad employer continue to apply after the attainment
of full retirement age.
10. How can individuals
get more information about railroad retirement annuities and their eligibility
requirements?
Employees should contact a
field office of the RRB by calling toll-free 1-877-772-5772 or via the RRB’s web site at www.rrb.gov. Most RRB offices are
open to the public from
Posted: 05/23/10