Railroad Retirement Board
Year
2010 Railroad Retirement and Unemployment Insurance Taxes
December 2009
The amounts of compensation subject to
railroad retirement tier I and tier II payroll taxes and the tier I and tier II
tax rates on employees and employers remain unchanged in 2010. Railroad unemployment
insurance tax rates paid by employers will continue to include a 1.5 percent
surcharge in 2010.
Tier
I and Medicare Tax.--The railroad retirement tier I payroll tax rate on covered
rail employees and employers for the year 2010 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 remains at $106,800 in 2010 but there is no
maximum on earnings subject to the 1.45 percent Medicare rate.
Tier
II Tax.--The railroad retirement tier II tax rate on employees will remain at
3.9 percent in 2010, and the rate on employers will remain at 12.1
percent. The maximum amount of earnings
subject to railroad retirement tier II taxes remains at $79,200 in 2010. 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
compensation up to $1,330 in 2010, the same compensation base as in 2009. 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 2004-2009.
Since the accrual balance of the Railroad Unemployment Insurance Account
was $73.5 million on June 30, 2009, which was less than the indexed threshold
of $134.4 million, a surcharge of 1.5 percent will again be added to the basic
tax rates in 2010, but will not increase the maximum 12 percent rate.
The
unemployment insurance tax rates on railroad employers in 2010 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 2010, and new
employers will initially pay a tax rate of 2.51 percent, which represents the
average rate paid by all employers in the period 2006-2008.
For
77 percent of covered employers, the unemployment insurance rate assessed will
be 2.15 percent in 2010.
Public Affairs 312-751-4777
Posted: 12/30/09