Railroad Retirement Benefits

The Railroad Retirement Board (RRB), a New Deal agency of the United States Government, administers the retirement, survivor, unemployment and sickness benefits to Americaís railroad workers.

Railroad Retirement pensions are divided into two types: Tier I, which is virtually identical to Social Security and cannot be divided by a court order, although like Social Security the benefit may be received by the nonparticipant spouse as a payment in his or her own right, and Tier II, which is a divisible pension, with a coverture portion of the workerís benefit.

A lawyer dividing pension benefits in a divorce should remember that some railroad employees may also receive a defined benefit pension from the railroad at which they are employed, and in some cases, the RRB pension is offset from any company pension.

Tier I benefits closely follow those of Social Security and employee the same benefit formula based on the 35 years of indexed earnings. To be eligible for RRB benefits, a worker must have worked at least 10 years in covered service, or at least five years after 1995.

Tier II benefits are calculated by taking the five-year high average salary, times the years of service, times 0.7 percent. For example, a worker with a five-year average of $50,000 and 30 years of service would have a monthly benefit of $875. This monthly benefit is marital property, and it may be divided to insure the alternate payee a lifetime of benefits.

As of 2007, the RRB makes lifetime independent payments to all alternate payees as long as the order dividing the pension does not specify an end date for such payments. RRB suggests that the language of the order read "payable even upon death." This produces a separate interest benefit to all surviving former spouses. Moreover, as of 2007, the nonparticipant may retire before the participant. Up to then, the divorced former spouse had to wait until the participant retired to receive benefits.

A nonparticipant spouse divorcing a Tier II participant worker must be mindful that the 45 percent independent benefit he or she receives while married or separated from the railroad worker ceases in the event of a divorce.

Authored By: Theodore K. Long, Jr., President, Pension Appraisers Online, Inc.

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