Planning to work after retirement?
The Railroad Retirement Board provides key information that you need to know
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 nonrailroad 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 nonrailroad 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 nonrailroad 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 nonrailroad 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 nonrailroad 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 nonrailroad 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 nonrailroad employer, the retiree's annuity would be subject to earnings deductions for nonrailroad wages, and to additional deductions if he or she is considered to be working for a last nonrailroad 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 (800) 808-0772, or from the Board's Web site. Most Board offices are open to the public from 9:00 a.m. to 3:30 p.m., Monday through Friday, except on Federal holidays.
© 2005 Brotherhood of Locomotive Engineers and Trainmen