Explanation of the Benefit Provisions in H.R. 10 (Public Law 107-90)


Explanation of the Benefit Provisions in H.R. 10 (Public Law 107-90)

I.                   New Widow’s and Widowers Initial Minimum Amount Provided under Section 101 of H.R. 10.  This provision is effective February 1, 2002:

·        Enactment of H.R. 10 put a new formula in the Railroad Retirement Act for the computation of annuities for widows and widowers.  The regular widows’ and widowers’ annuity formula contained in the Act prior to H.R. 10 also remains in the law.  Widows and widowers will be paid under whatever formula produces the higher annuity amount each month.

·        Under the Railroad Retirement Act as in effect prior to H.R. 10, the gross annuity for a widow or widower consists of a tier 1 equal to the deceased employee’s tier 1, and a tier 2 equal to 50% of the deceased employee’s tier 2.  Both components receive annual cost-of-living increases.  This "regular" formula still remains in effect for all widows and widowers.

·        The new formula put into the law by H.R. 10 uses the same tier 1 computation as the regular formula, but uses 100% rather than 50% of deceased employee’s tier 2 in computing the widow’s or widower’s tier 2.  Under both the regular formula and the new formula, the amount that the deceased employee’s tier 1 and tier 2 would have been as of the date the widow’s or widower’s annuity begins to accrue is the amount used to make the computations. The new annuity formula is called the widow’s or widower’s initial minimum amount.  The initial minimum amount does not get cost-of-living increases.  It is the same each and every month.

·        Each month, each widow and widower will have her or his annuity paid under the formula that produces the higher benefit amount.

·        For new annuity awards for widows and widowers on and after February 1, 2002, the new formula will usually produce a higher annuity since the tier 2 component equals 100%, rather than 50%, of the deceased employee’s tier 2.  So that formula will be used to determine the annuity amount for most new awards.  Since the annuity amount under the new formula does not change, after about six or seven years, the regular annuity formula, with the applications of annual cost-of-living increases, will produce a higher amount.  When that happens, widows and widowers will be switched over to the regular formula.

·        For widows and widowers already in pay status on February 1, 2002, the effective date for the new initial minimum amount formula, the Board will compute the annuity amount that would have been paid in each case under the new formula on the date the widow’s or widower’s annuity began.  In any case where the new formula produces a higher amount than the regular formula, the widow or widower will be paid the higher amount under the new formula.  This will happen for most widows and widowers whose annuities began in the last several years. These individuals will be switched back to the regular formula at some point in the future when the regular formula produces a higher annuity as a result of future cost-of-living increases.

·        In cases where individuals have been receiving widows’ or widowers’ annuities for a number of years, generally six or seven years, the regular annuity formula will already be higher than the initial minimum amount as a result of past annual cost-of-living increases.  There will be no adjustment in these cases.

·        It should be noted that even in new award cases, where the new formula will be used initially, the widow’s or widower’s annuity may not equal what the deceased employee would have received on the date the widow’s or widower’s annuity begins to accrue.  Differences can result from a number of factors, of which some of the more common are:

Ø     The widow or widower may be entitled to some other governmental benefit that may require a reduction in the tier 1 component.  Examples of such other governmental benefits include other railroad retirement annuities, social security benefits, and public service pensions. 

Ø     The employee may have been receiving a windfall dual benefit amount.  Windfall components cannot by law be awarded to widows and widowers.

Ø     The law may require that an age reduction be made in the widow’s or widower’s annuity, depending on when it begins to accrue.

Ø     The employee may have been receiving a supplemental annuity.  Supplemental annuities are payable only to employees.

Ø     A different Medicare premium deduction may be applicable.

·        Finally, it should be noted the applicability of the new formula to widows and widowers already on the annuity rolls before the effective date of the new legislation is unique.  Normally, changes in computations are enacted into law prospectively only and apply only to new award cases.  In fact, early drafts of the survivors’ provision put together before the formation of the Rail Labor and Management Coalition would have applied prospectively only.  However, the Rail Labor and Management coalition felt this would be unfair to those widows and widowers on the rolls who had not yet acquired enough cost-of-living increases to bring them up to the new initial minimum amount.  Accordingly, the coalition agreed to make the new formula applicable to cases on the rolls.  As a result, any widow or widower on the rolls whose accumulated cost-of-living increases to date has not brought the individual’s annuity up to the initial minimum amount will receive some increase under the bill.  This will affect almost 44,000 widows and widowers who were already on the Railroad Retirement Board’s annuity rolls prior to enactment of H.R. 10. 

II.                Restoration of Provision for Full Annuities at Age 60 for Employees with 30 or more years of Rail Service, and Annuities at Age 60 for Spouses of Such Employees under Section 102 of H.R. 10.  The effective date for this provision is January 1, 2002.

·        Employees who have attained age 60 but are not yet age 62 and have 30 or more years of railroad service can receive full annuities in cases where the annuity beginning date is on or after January 1, 2002.  In the past, employees with 30 or more years of rail service received a reduction in the tier 1 portion of their annuities if they retired between ages 60 and 62. 

·        The spouse of an employee who retires at age 60 or older with 30 or more years of rail service can also retire on an unreduced annuity at age 60 unless the employee began receiving a reduced annuity prior to the effective date of the new provision.

·        The spouse of a disability annuitant who had 30 or more years of rail service can receive an unreduced annuity at age 60, regardless of when the employee’s disability annuity began, if the employee has attained age 60 and the spouse’s annuity begins on or after January 1, 2002.

·        Employees with 30 or more years of rail service who began receiving reduced annuities prior to the effective date of the new legislation will not have the reductions restored by the new legislation.  Such employees do have the option under Board regulations of canceling their old applications, repaying the full amount of annuity payments they have already received, and applying for a new unreduced annuity beginning January 1, 2002.  For most of these employees, however, this procedure will not be practical or advantageous.

III.                Five Year Vesting under Section 103 of H.R. 10.  This section is effective January 1, 2002.

·        Under section 103 of H.R. 10, individuals who have acquired 5 years of rail service all of which occurred after 1995 will vest for benefits under the Railroad Retirement Act.

·        Prior to H.R. 10, individuals needed 10 years of rail service to vest for benefits under the Railroad Retirement Act.  The 10-year vesting provision still remains in effect for many situations, as will be explained below.

·        Individuals who left the industry with more than 5 but less than 10 years of service will not vest under the new provision unless at least five years of their service occurred after 1995.

·        Individuals who left the industry in the past with less than 10 years of service and return to the industry may vest under either the 10-year provision or the 5-year provision, whichever occurs first.  For instance, an individual who left the industry prior to 1995 with 7 years of service would vest under the 10-year provision after returning to the industry for three years.  An individual who left the industry with 7 years of service, of which 4 years were after 1995, would vest under the 5-year provision after one year back with the rail industry.

IV.                Repeal of the Railroad Retirement Maximum under Section 104 of H.R. 10.  This provision is effective January 1, 2002.

·        Enactment of H.R. 10 will abolish from the Railroad Retirement Act a provision that was causing a reduction in the annuities of about 14,000 individuals.  Of this number, 12,000 are spouses.

·        The repealed provision was misnamed the "Railroad Retirement Maximum."  The provision required that annuities be limited in amount to be consistent with the level of an employee’s average earnings during the 10 years immediately preceding retirement.

·        Unfortunately, the provision caused unfair reductions in cases where employees had low earnings but a large amount of rail service.  It also adversely affected employees whose last 10 years of earnings were lower than prior earnings because of loss of jobs, illness, displacement to lower paying jobs, or other adversities.

·        The maximum did not apply in the vast majority of cases.  In cases in which it did apply, the Board informed the individuals of the reason for, and amount of, the reduction at the time their annuities began to accrue. Annuitants who did not receive such reduction information can assume they were not receiving a reduction, and that they will not be affected by repeal of the provision.

·        Individuals whose annuities were being reduced by the maximum will see an increase in their future annuity payments as a result of the reduction being removed.  The annuity reductions made prior to January 1, 2002, will not be restored.

 January 24, 2002

Railroad Retirement Benefit and Financing Changes

President Bush signed the Railroad Retirement and Survivors’ Improvement Act of 2001 into law on December 21, 2001.

The legislation liberalizes early retirement benefits for 30-year employees, eliminates a cap on monthly retirement and disability benefits, lowers the minimum service requirement from 10 years to 5 years of service if performed after 1995, and provides increased benefits for some widow(er)s. The financing sections of the new law provide for the investment of railroad retirement funds in non-governmental assets, adjustments in the payroll tax rates paid by employers and employees, and the repeal of a supplemental annuity work-hour tax. 

The following is a summary of the changes in railroad retirement benefits and financing provided by the new law, which was based on joint recommendations to Congress negotiated by a coalition of rail labor organizations and rail freight carriers.

Railroad Retirement Benefit Provisions

60/30 retirement. The new law amends the Railroad Retirement Act by eliminating the early retirement reduction applied to the annuities of 30-year employees retiring between the ages of 60 and 62 if their annuities begin January 1, 2002, or later. The spouses of such employees would also be eligible for full annuities at age 60. Full 60/30 benefits have not been payable to 30-year employees retiring before age 62 since 1983 legislation reduced such early retirement benefits. 

This provision is not retroactive and not applicable to 30-year employees who retired on the basis of age and service prior to January 1, 2002, or to their spouses, even if their spouses retire after 2001. However, if a disability annuitant is age 60 and has 30 years’ service, his or her spouse can now receive an unreduced annuity as early as age 60 if the spouse’s annuity beginning date is January 1, 2002, or later. 

Maximum provision. The new law eliminates, effective January 1, 2002, a maximum on the amount of combined monthly employee and spouse benefit payments which had been intended to prevent benefits from exceeding an employee’s creditable earnings prior to retirement. This maximum provision had the unintended effect of reducing benefits for former employees with no earnings, or low earnings, in the 10-year period prior to retirement, and for long-service employees with moderate earnings. 

While not retroactive, the amendment will prospectively increase benefits, effective January 1, 2002, for almost 2,600 employee and 12,000 spouse annuitants on the Board’s rolls whose benefits were reduced by the maximum provision prior to 2002. 

In 2001, the average monthly employee benefit reduction under the maximum provision was $164, and the average spouse reduction was $78. The removal of any benefit reductions applied to affected annuitants should be completed by June 2002. Such annuitants can expect to receive accrual payments in late May 2002 retroactive to January, and increased regular monthly payments reflecting their new rates beginning with the monthly payment due on June 1, 2002. Notices are being sent by the Board to all affected annuitants in January 2002 advising them accordingly. 

Notices will also be sent in January to employees whose spouses may have been previously advised by the Board to defer filing for spouse benefits because of the adverse effects of the maximum provision, as their spouses would now want to consider filing for railroad retirement benefits. 

Basic service requirement. The new law lowers the minimum eligibility requirement for regular railroad retirement annuities from 10 years (120 months) of creditable railroad service to five years (60 months) of creditable railroad service for those with five years of service rendered after 1995. Benefits payable on the basis of this provision are not retroactive and are not payable earlier than January 1, 2002. 

Also, for those with less than 10 years of service, additional earnings credits acquired under social security coverage would be required for a tier I benefit. A tier II benefit would be payable even if the employee never worked under social security coverage. Additional requirements apply in disability cases. In addition, a deceased employee with five years’ service after 1995 must still have had a "current connection" with the rail industry in order for survivor annuities to be payable by the Board under this provision, rather than the Social Security Administration.

Anyone with five years of service performed after 1995, who was previously denied benefits because of the 10-year service requirement, will want to contact a Board office. 

Widow(er)s’ benefits. The new law establishes an "initial minimum amount" which is based on the two-tier annuity amount that would have been payable to the railroad employee at the time the widow(er)’s annuity is awarded. The initial minimum amount is computed with a widow(er)’s tier II amount equal to 100 percent of the employee’s tier II amount. Under prior law, the widow(er)’s tier II amount was equal to 50 percent of the employee’s tier II amount; only the tier I amount equaled 100 percent. Widow(er)s’ annuities computed on the basis of the new initial minimum amount will not be adjusted for annual cost-of-living increases until the annuity amount is exceeded by the annuity amount the widow(er) would have been paid under prior law, with all interim cost-of-living increases otherwise payable.

This provision is effective February 1, 2002, and is not payable retroactively. The Railroad Retirement Board estimates that about 20 to 25 percent of the widow(er)s on its rolls in 2001 will see some increase in their annuity.

This provision applies to widow(er)s on the rolls before the effective date only if the annuity the widow(er) is currently receiving is less than she or he would have received had the new law been in effect on the date the widow(er)’s annuity began. Most widow(er)s’ annuities awarded before October 1986 will not be increased. Many of the widow(er)s’ annuities currently being paid are already higher than the annuity that would be payable under the new law because of previous cost-of-living adjustments.

Widow(er)s affected by this change can expect to receive any accrual payments, retroactive to February, in late April of 2002, and increased regular monthly payments reflecting their new rates beginning with the payment they receive on May 1, 2002. Letters will be sent in January to affected widow(er)s on the Board’s rolls, advising them as to whether they will receive an increase. As a result, widow(er)s do not need to take any action or contact the Board.

Railroad Retirement Financing Provisions

Investment changes. The new law provides for the transfer of railroad retirement funds from the Railroad Retirement Accounts to a new National Railroad Retirement Investment Trust, whose Board of seven trustees is empowered to invest Trust assets in non-governmental assets, such as equities and debt, as well as in governmental securities.

The Trust will not be treated as an agency or instrumentality of the Federal Government. Its Board of Trustees will be comprised of seven members: three members selected by rail labor to represent the interests of labor; three members likewise selected by rail management to represent management interests; and one independent member selected by a majority of the other six members. The new law also provides that if the parties involved cannot agree on the selection of Trustees within 60 days of the law’s enactment date, an impartial umpire shall, at the petition of a party to the dispute, be appointed by the District Court of the United States for the District of Columbia. The Trustees will be appointed only from among persons who have experience and expertise in the management of financial investments and pension plans. The Trustees will be subject to reporting and fiduciary standards similar to those under the Employee Retirement Income Security Act.

The new law also allows for railroad retirement benefit payments in the future to be issued by a qualified non-governmental financial institution, rather than the Treasury Department. The selection of the financial institution would be made by the Railroad Retirement Board, after consulting with the Board of Trustees and the Secretary of the Treasury. Railroad retirement payments will continue to be processed through the U.S. Treasury in the meantime. 

Effect on payroll tax rates. The new law reduces the tier II tax rates on rail employers, including rail labor unions, in calendar years 2002 and 2003, and beginning with 2004 provides automatic adjustments in the tier II tax rates for both employers and employees. It also repeals the supplemental annuity work-hour tax rate paid by employers, beginning with calendar year 2002. 

The tier II tax rate on rail employers and rail labor organizations is reduced from 16.10 percent to 15.60 percent in 2002 and to 14.20 percent in 2003, but the tier II earnings base is not changed; and for 2002, that amount remains at $63,000. The tier II tax rate for rail employee representatives will be 14.75 percent in calendar year 2002 and 14.20 percent in 2003. 

While there will be no change in the tier II tax rate of 4.90 percent on employees in the years 2002 and 2003, beginning with the taxes payable for calendar year 2004 tier II taxes on both employers and employees will be based on the ratio of certain asset balances to the sum of benefits and administrative expenses (the average account benefits ratio). Depending on the average account benefits ratio, tier II taxes for employers will range between 8.20 percent and 22.10 percent, while the tier II tax rate for employees will be between 0 percent and 4.90 percent.

The new law does not affect tier I social security equivalent tax rates. The tier I tax on employees and employers remains the same as for social security covered employees and employers.

Other revenue provisions. While supplemental railroad retirement annuities provided by the Railroad Retirement Act continue to be due and payable, the new law, in addition to repealing the supplemental annuity work-hour tax, also eliminates the separate Supplemental Annuity Account under the Railroad Retirement Act. Supplemental annuities provided under the Railroad Retirement Act will now be funded through the new National Railroad Retirement Investment Trust.

No changes were effected in railroad unemployment insurance taxes on employers.

# # #

The Railroad Retirement Board is making every effort to notify by mail all parties affected by this legislation as soon as possible. Therefore patience on the part of annuitants would be appreciated when contacting Board offices, as a higher than usual volume of calls is expected as a result of the passage of this legislation.

Railroad Retirement Board offices are open to the public Monday through Friday, except on Federal holidays. Persons can find the address and telephone number of the Board office serving their area by calling the Board’s automated toll-free Help Line at 1-800-808-0772, or from the Board’s Web site at www.rrb.gov. E-mail inquiries about this legislation can be sent to the RRB by going to the Board’s Web site. Under "Latest News!" on the opening page, click on "Send us a secure message about the new Law or its effect on you."



A key provision of the February 15, 2000 historic agreement between rail labor and the National Railway Labor Conference (NRLC) to seek legislative changes to reform Railroad Retirement provided that, in the event legislation was enacted, eligibility for the Railroad Employees National Early Retirement Medical Benefit Plan (GA-46000) would commence at age 60 rather than at age 61 and the $75,000 lifetime maximum under the plan would increase with the medical cost component of the CPI.

With the enactment of the Railroad Retirement and Survivors’ Improvement Act, the NRLC has implemented the negotiated improvements to GA-46000 effective January 1, 2002. The $75,000 lifetime maximum was increased to $79,000 on that date, and it will increase each year based on the medical inflation rate.

These changes apply to all employees who are eligible for GA-46000 coverage. If you are in doubt, check with your General Chairman.

Printed below is a Release from United HealthCare explaining registration procedures and coverage changes for GA-46000.

The February 15, 2000 Railroad Retirement Agreement also called upon the NRLC (Burlington Northern Santa Fe, CSX, Kansas City Southern, Norfolk Southern and Union Pacific) and the rail unions "to make their best efforts to seek the modification of other health plans so that retired railroad employees not covered by the GA-46000 plan will receive similar improvements in their plan."

Such efforts were made, and several major carriers, including Amtrak and Canadian National, signed on. Other carriers refused, especially small carriers who did not already have early retirement health insurance plans in place to cover employees retiring at age 62. Another group of carriers, such as Long Island Rail Road and Soo Line, already had insurance plans available that applied to employees retiring at age 60. If you are in doubt as to coverage on your railroad, check with your General Chairman.

The legislated changes in the Railroad Retirement and Survivors’ Improvement Act, which include the improvement in the surviving spouse benefit and full retirement annuity at age 60 with 30 years service, apply to employees and retirees of all railroads subject to the Railroad Retirement Act, irrespective of whether the carrier signed the February 15, 2000 Agreement.


Changes to the Railroad Employees National Early Retirement Major Medical Benefit Plan (GA-46000)

Recent changes to the Railroad Retirement Act will allow employees who are 60 years old with 30 or more years of service to retire at age 60 with no reduction in their RRB annuity.

An important consideration for anyone thinking about retirement is health coverage after you retire. 

New Eligibility Rules

Along with the changes in the Railroad Retirement Act, the labor organizations representing railroad employees have negotiated a change in the eligibility rules under the Railroad Employees National Early Retirement Major Medical Benefit Plan (GA-46000), administered by United Healthcare.

Prior to January 1, 2002, GA-46000 required an employee to retire on or after reaching age 61.  After this date, you can retire at age 60 and will be eligible for coverage under this plan if you meet the following eligibility requirements.

For age annuitants:

·         You apply for a 60/30 annuity for which you are eligible:

·         on or after the date you reach age 60, or

·         anytime during the three months before your 60th birthday, provided you  continue working into the month before the month in which you turn age 60.

·         On the day before you apply for your annuity, you must be covered (other than under COBRA) under the Railroad Employees National Health and Welfare Plan.

For disability annuitants:

·         You have a current connection with the railroad industry,

·         You have applied for a disability annuity to which you are entitled,

·         You are covered under the Railroad Employees National Health and Welfare Plan (other than by COBRA) on the latest of the following dates:

·         The date you reach age 60,

·         The date you became disabled,

·         The date your railroad service equals 30 years.

In addition to the changes in eligibility rules, the lifetime maximum under GA-46000 will be adjusted each year by the medical cost component of the Consumer Price Index.  The amount of this adjustment for 2002 was not available at press time.

If you retire and are eligible for GA-46000, you can also purchase supplemental coverage under GA-23111, Plan E.  Generally, Plan E pays 70% of the expenses not paid under GA-46000 and has a lifetime maximum of $200,000.

Enrollment is Necessary

When you retire, your railroad will not report you to United Healthcare as a retiree eligible for GA-46000. You must enroll yourself and your family with  United Healthcare.  You can do this in two ways:

·         You can purchase GA-23111, Plan E. Your eligibility for GA-46000 will be verified when your enrollment for that coverage is processed.  ID cards for both GA-46000 and GA-23111 will be sent to you.   A booklet explaining the Plan E benefits and an enrollment form can be obtained by calling United Healthcare.

·         You can complete and return the "Retiree and Dependent Information" form found in the center of the GA-46000 employee booklet. Your eligibility will be verified and a GA-46000 ID card will be sent to you.  You can obtain a GA-46000 booklet from your employer or union representative.

If you have any questions about your eligibility for GA-46000 or the benefits provided under the Plan, call United Healthcare at 1-800-842-5252.

87:GA46000 News Article

December 24, 2001 


Dear Sisters and Brothers:

          Today, President Bush signed into law "The Railroad Retirement and Survivors’ Improvement Act of 2001."  This is truly a day of celebration for over one million active and retired Americans across the country. 

A major milestone has become a reality due to the tireless work of thousands supporting this bill.  Without your help and perseverance throughout this entire process, this bill would have never made it to the President to be signed today.

Words cannot express my gratitude for your efforts in helping to get this legislation passed.  During these difficult times that our country is facing, this legislation becoming law will give many Americans new hope for the future. 

For this, I THANK YOU!

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