Railroad Retirement Board
Year
2009 Railroad Retirement and Unemployment Insurance Taxes
December 2008
The amounts of compensation subject to railroad
retirement tier I and tier II payroll taxes will increase in 2009. However, the tier I tax rate on employees and
employers remains unchanged. Under the Railroad Retirement and Survivors’
Improvement Act of 2001, tier II tax rates are determined annually by an
average account benefits ratio. Based on
this ratio, the tier II tax rates on employees and employers will remain at
their 2008 level in 2009. Railroad
unemployment insurance tax rates paid by employers will continue to include a
1.5 percent surcharge in 2009.
Tier I and Medicare Tax.--The railroad
retirement tier I payroll tax rate on covered rail employees and employers for
the year 2009 remains at 7.65 percent.
The railroad retirement tier I tax rate is the same as the social security
tax, and for withholding and reporting purposes is
divided into 6.20 percent for retirement and 1.45 percent for Medicare hospital
insurance. The maximum amount of an
employee’s earnings subject to the 6.20 percent rate will increase to $106,800
in 2009 from $102,000 in 2008, but there is no maximum on earnings subject to
the 1.45 percent Medicare rate. The
increase in the amount of earnings subject to railroad retirement and social
security taxes is based on indexing to increases in average national wages.
Tier II Tax.--The railroad retirement
tier II tax rate on employees will remain at 3.9 percent in 2009, and the rate
on employers will remain at 12.1 percent.
The maximum amount of earnings subject to railroad retirement tier II
taxes, however, will increase to $79,200 in 2009 from $75,900 in 2008. Tier II tax rates under the 2001 Railroad
Retirement and Survivors’ Improvement Act are based on an average account
benefits ratio reflecting railroad retirement fund levels. Depending on this ratio, the tier II tax rate
for employers can range between 8.2 percent and 22.1 percent, while the tier II
rate for employees can be between 0 percent and 4.9 percent.
Unemployment Insurance Tax.--Employers,
but not employees, also pay railroad unemployment insurance taxes, which are
experience-rated by employer. The basic tax rates range from a minimum of 0.65
percent to a maximum of 12 percent on monthly earnings up to $1,330 in 2009, up
from $1,280 in 2008. However, the
Railroad Unemployment Insurance Act also provides for a surcharge in the event
the Railroad Unemployment Insurance Account balance falls below an indexed
threshold amount, and such a surcharge of 1.5 percent applied in
2004-2008. Since the accrual balance of
the Railroad Unemployment Insurance Account was $122.5 million on
The unemployment insurance tax rates on
railroad employers in 2009 therefore will range from 2.15 percent (the minimum
basic rate of 0.65 percent plus the 1.5 percent surcharge) to a maximum of 12
percent on monthly compensation up to $1,330.
The 1.5 percent surcharge will not apply
to new employers in 2009, and new employers will initially pay a tax rate of
2.61 percent, which represents the average rate paid by all employers in the
period 2005-2007.
For 80 percent of covered employers, the
unemployment insurance rate assessed will be 2.15 percent in 2009.
Public Affairs 312-751-4777
Posted: 12/06/08