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Difference Between Tier 1 and Tier 2
(Posted January 27, 2014)
Question 1104: What is the difference between Tier 1 and Tier 2? I'm a divorced ex-wife (married 24 years); my ex-husband is a railroad worker who has 31 years of service (age 58-1/2). Our divorce decree specifies 50% of his retirement benefits come to me, provided I do not remarry, which I have not done.
Answer: Most Railroad retirement Annuities have two components: Tier 1 and Tier 2.
Tier 1 basically is a Social Security-type benefit that is based on earnings, whether for an employer covered by Railroad Retirement or an employer covered by Social Security. It is reduced by any Social Security benefits actually received. It cannot be divided by a divorce decree.
Tier 2 is more like a private pension; it is based only on earnings from the rail industry. It is not reduced for Social Security or Public pensions. It can be divided in a property settlement pursuant to a divorce.
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