|953||Back||Railroad Retirement Benefits|
Employers and employees covered by
Retirement Act pay higher retirement
taxes than those covered by the Social
Security Act, so that railroad
retirement benefits remain substantially higher than social security
1. How do the average monthly railroad retirement and social security benefits paid to retired employees and spouses compare?
The average age annuity
being paid by the Railroad Retirement Board at the end of fiscal year
2003 to career rail employees was $2,000 a month, and for all retired
rail employees the average was $1,555. The average age retirement
benefit being paid under social security was $900 a month. Spouse
benefits averaged $600 a month under railroad retirement compared to
$440 under social security.
2. Are the benefits awarded to recent retirees generally greater than the benefits payable to those who retired years ago?
Yes, because recent awards are based on higher average earnings. For career railroad employees retiring at the end of fiscal year 2003, regular annuity awards averaged over $2,625 a month while monthly benefits awarded to workers retiring at full retirement age under social security averaged about $1,205. If spouse benefits are added, the combined benefits for the employee and spouse would approximate $3,700 under railroad retirement coverage, compared to $1,805 under social security. Adding a supplemental annuity to the railroad family's benefit increases average total benefits for current career rail retirees to over $3,735 a month.
3. How much are the disability benefits currently awarded?
Disabled railroad workers
retiring directly from the railroad industry at the end of fiscal year
2003 were awarded over $2,240 a month on the average while awards for
disabled workers under social security averaged almost $925.
4. Can railroaders retire at earlier ages than workers under social security?
Railroad employees with 30 or more years of creditable service are
eligible for regular annuities based on age and service the first full
month they are age 60, and rail employees with less than 30 years of
creditable service are eligible for regular annuities based on age and
service the first full month they are age 62.
5. Does social security offer any benefits that are not available under railroad retirement?
Social security does pay
certain types of benefits that are not available under railroad
retirement. For example, social security provides children's benefits
when an employee is disabled, retired or deceased. Under current law,
the Railroad Retirement Act only provides children's benefits if the
employee is deceased.
6. How much are monthly benefits for survivors under railroad retirement and social security?
Survivor benefits are
generally higher if payable by the Board rather than social security. At
the end of fiscal year 2003, the average annuity being paid to all aged
and disabled widow(er)s averaged $980 a month, compared to $855 under
7. How do railroad retirement and social security lump-sum death benefit provisions differ?
Both the railroad retirement and social security systems provide a
lump-sum death benefit. The railroad retirement lump-sum benefit is
generally payable only if survivor annuities are not immediately due
upon an employee's death. The social security lump-sum benefit may be
payable regardless of whether monthly benefits are also due. Both
railroad retirement and social security provide a lump-sum benefit of
$255. However, if a railroad employee completed 10 years of service
before 1975, the average railroad retirement lump-sum benefit payable is
$960. Also, if an employee had less than 10 years of service, but had at
least 5 years of such service after 1995, he or she would have to have
had an insured status under social security law (counting both railroad
retirement and social security credits) in order for the $255 lump-sum
benefit to be payable.
8. How do railroad retirement and social security (PDF format) payroll taxes compare?
payroll taxes, like railroad retirement benefits, are calculated on a
two-tier basis. Rail employees and employers pay tier I taxes at the
same rate as social security taxes, 7.65 percent, consisting of 6.20
percent on earnings up to $87,900 in 2004 and 1.45 percent for Medicare
hospital insurance on all earnings.
9. How much are regular railroad retirement taxes for an employee earning $87,900 in 2004 compared to social security taxes?
The maximum amount of regular railroad retirement taxes that an employee earning $87,900 can pay in 2004 is $9,914.25, compared to $6,724.35 under social security. For railroad employers, the maximum annual regular retirement taxes on an employee earning $87,900 are $15,252.45 compared to $6,724.35 under social security. Employees earning over $87,900, and their employers, will pay more in retirement taxes than the above amounts because the Medicare hospital insurance tax of 1.45 percent is applied to all earnings.