Question 1: I recently applied for a job with the Burlington-Northern RR. The human resources person I talked to told me I would be covered by the Railroad Retirement program instead of Social Security. This is the first I've ever heard of Railroad Retirement.
What exactly is it, and how come railroad workers aren't under Social Security like most other workers?
Answer: Railroad employes are covered by a separate Federal law that provides for their retirement, disability, and death benefits. The program is administered by an independent Federal agency, the U.S. Railroad Retirement Board (RRB) , which is headquartered in Chicago, Illinois. The RRB also administered the Railroad Unemployment and Sickness program and it maintains over 50 local offices in major cities and railroad centers.
The program is similar, in many respects, to Social Security, but it also has elements of a private pension plan. Payroll taxes paid by railroads and workers, as well as the level of benefit payments, are significantly higher than Social Security. In addition, some General Revenue funds and transfers from the Social Security Trust Funds are used to finance the program.
Railroad Retirement has some unique features, such as retirement at age 60 with 30 or more years in the railroad industry, benefits for workers who become disabled in their specific occupation, and supplemental monthly payments for career workers.
Railroad Retirement counts calendar months of work, not quarters of coverage. Vesting is at 10 years (120 calendar months) of railroad work, but some benefits require more service months. Credits earned by workers who retire or die before they have 10 years revert to Social Security and are combined with any Social Security earnings.
There are many historical reasons why the Railroad Retirement program is separate. Railroads were the first large interstate business, and they always have had separate Federal employment and labor laws. Railroads were among the first U.S. companies with pension plans. Railroad workers are highly unionized, and their unions (called "brotherhoods") vigorously fought for Federal legislation guaranteeing their retirement & death benefits in the early 1930's, as the financial condition of railroads and their underfunded pension plans deteriorated. Railroad Retirement is a bit like an early version of ERISA, but for a specific industry.
The original program was enacted in 1934, a year before the first Social security Act. After several court challenges, Congressional revisions, and the intervention of President Roosevelt, the permanent program began in January 1937.
There have been proposals over the last 25 years to extend Social Security to railroad workers and convert the pension component to a private plan, but none has been seriously advanced in Congress.