Railroad Retirement Board
Working After Retirement
May
2005
Retirees, and those planning retirement, should be
aware of the railroad retirement laws governing benefit payments to annuitants
who work after retirement.
The following questions and answers describe these railroad
retirement work restrictions and earnings limitations on post-retirement
employment, and how these rules can affect retirees engaging in
self-employment.
1. What are the basic railroad retirement work restrictions and
earnings limitations that apply to post-retirement work?
Neither a regular railroad retirement annuity (whether based
on age and service or on disability) nor a supplemental annuity is payable for
any month in which a retired employee works for a railroad employer, including
labor organizations. This is true even if only one day's service is
performed during the month and includes local lodge compensation totaling $25
or more for any calendar month.
A spouse annuity is not payable for any month in which the
employee's annuity is not payable, or for any month in which the spouse works
for an employer covered under the Railroad Retirement Act. A
survivor annuity is not payable for any month the survivor works for an
employer covered under the Railroad Retirement Act.
Like social security benefits, railroad retirement tier I
benefits 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 deductions do not apply to those who have
attained full social security retirement age. Full retirement age for
employees and spouses ranges from age 65 for those born before 1938 to age 67
for those born in 1960 or later. Full retirement age for survivor
annuitants ranges from age 65 for those born before 1940 to age 67 for those
born in 1962 or later. Deductions for all annuitants, however,
remain in effect for the months before the month of full retirement age during
the calendar year of attainment.
2. What are the current exempt earnings amounts for those annuitants
subject to earnings limitations?
For those under full retirement age throughout 2005, the
exempt earnings amount is $12,000. For beneficiaries attaining full
retirement age in 2005, the exempt earnings amount is $31,800 for the months
before the month full retirement age is attained.
For those under full retirement age throughout the year, the
earnings deduction is $1 in benefits for every $2 of earnings over the exempt
amount. For those attaining full retirement age in 2005, the
deduction is $1 for every $3 of earnings over the exempt amount in the months
before the month full retirement age is attained.
Earnings received for services rendered, plus any net
earnings from self-employment, are considered when assessing deductions for
earnings. Interest, dividends, certain rental income or income from
stocks, bonds, or other investments are not considered earnings for this
purpose.
Additional deductions are assessed for retired employees and
spouses who work for their last pre-retirement non-railroad employer and
special restrictions apply to disability annuitants.
3. What are the additional deductions applied to the annuities of
retired employees and spouses working for their last pre-retirement non-railroad
employer?
Such employment will reduce tier II benefits and
supplemental annuity payments, which are not otherwise subject to earnings
deductions, by $1 for each $2 of compensation received subject to a maximum
reduction of 50 percent. The deductions in the tier II benefits and
supplemental annuities of individuals who work for pre-retirement non-railroad
employers apply even if earnings do not exceed the tier I exempt earnings
limits. Also, while tier I and vested dual benefit earnings
deductions stop when an annuitant attains full retirement age, these tier II
and supplemental annuity deductions continue to apply after the attainment of
full retirement age.
4. Can a retired employee's earnings also reduce a spouse's benefit?
A spouse benefit is subject to reductions not only for the
spouse's earnings, but also for the earnings of the employee, regardless of
whether the earnings are from service for the last pre-retirement non-railroad
employer or other post-retirement employment.
5. What are the special earnings restrictions applied to disability
annuitants?
The amount disabled railroad retirement employee annuitants
can earn without reducing their benefits is $400 per month, exclusive of
disability-related work expenses. While a disabled employee's
annuity is not payable for any month in which he or she earns more than $400 in
any employment or self-employment, withheld payments will be restored if
earnings for the year are less than $5,000. Otherwise, the annuity
is subject to a deduction of one month's benefit for each multiple of $400
earned over $4,800 (the last $200 or more of earnings over $4,800 counts as
$400). However, regardless of the amount of earnings, if a disabled
annuitant works after retirement, this may also raise a question about the
possibility of that individual's recovery from disability, and such work must
be reported.
These disability work restrictions apply until the disabled
employee annuitant is full retirement age. This transition is
effective no earlier than full retirement age, even if the annuitant had 30
years of service. Earnings deductions continue to apply to those
working for their last pre-retirement non-railroad employer.
6. After becoming entitled to a
railroad retirement annuity, a retired employee is thinking of becoming a
self-employed contractor or consultant, and might be providing services for a
railroad or last pre-retirement non-railroad employer. How would
this affect his or her railroad retirement annuity?
It depends on whether or not the Railroad Retirement Board
considers the employee to be truly engaging in self-employed contracting or
consulting, or whether the Board considers him or her to be functioning as an
employee, and if so, who the Board considers to be the actual employer for
railroad retirement purposes.
If a retiree is considered to be functioning as a self-employed
contractor or consultant, his or her annuity is subject to tier I and vested
dual benefit earnings deductions for net self-employment earnings.
However, if a retiree is considered to be functioning as an
employee of a railroad or railroad labor organization, rather than as a
self-employed contractor or consultant, the retiree's annuity would be subject
to suspension. If the retiree is considered the employee of a non-railroad
employer, the retiree's annuity would be subject to earnings deductions for non-railroad
wages, and to additional deductions if he or she is considered to be working
for a last non-railroad pre-retirement employer.
Board determinations on contracting or consulting services
take into account multiple factors which could be evaluated differently
depending on the circumstances of the individual situation. Since no
single rule covers every case, anyone requiring a determination as to whether
contractor or consultant service is valid self-employment should contact the
Board for a determination well in advance of making a commitment so as to be
sure of the effect on benefit payments.
7. How can individuals get more information about these railroad
retirement work restrictions and earnings limitations?
They should contact the nearest field office of the Board
for information or refer to the Board's Web site at www.rrb.gov.
Persons 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, or from the Board's Web site. Most Board offices are
open to the public from
Public
Affairs 312-751-4777
Posted: