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Stop, Look & Listen: Railroad Retirement Benefits Q&A

Answers are provided by Robert S. Kaufman

Early Retirement Offer by Amtrak

(Posted September 6, 2001)

Question 133: Amtrak is offering early retirement to employees 55 or older. The company will pay a supplement equal to what I would receive at 66 if I continued to work for them. Those who accept the offer must retire by December 31, 2001.

What would the Tier 1 and Tier 2 tax status of the Amtrak supplement? How would accepting early retirement affect my "current connection" status under Railroad Retirement and my years of service credits?

Answer: You have asked some very important questions that need authoritive answers, before you can decide whether to accept Amtrak's offer.

I would suggest that you ask Amtrak if the supplement will be reported as "creditible service and compensation" to the Railroad Retirement Board. If it will be, both Amtrak and you will have to pay Tier 1 and Tier 2 taxes, as now is done for your salary. But your "current connection" will be preserved, and the settlement payment will increase your years of service for Railroad Retirement purposes.

It may well be that the Amtrak supplement is intended to be a pension type payment. If so, you will not have to pay Tier 1 and Tier 2 taxes, and the supplement will not increase your years of service. And you may lose your "current connection" if you get another job before you retire under Railroad Retirement and have substantial earnings.

There is a Railroad Retirement provision that protects a "current connection" when a rail worker with 25 years of service credits has to terminate rail work "involuntarily" due to no fault of his. The Railroad Retirement Board determines on a case-by-case basis whether this provision applies. But voluntarily accepting an early retirement offer probably would be considered a voluntary termination.

Important notice:

Answers are provided as general guidance on the subjects covered in the question and are not provided as legal advice to the questioner or to readers. Any legal issues should be reviewed by your legal counsel to apply the law to the particular facts of this and similar situations.

The law in this area changes frequently. Answers are believed to be correct as of the posting dates shown. The completeness or accuracy of a particular answer may be affected by changes in the law (statutes, regulations, rulings, court decisions, etc.) that occur after the date on which a particular Q&A is posted.

Copyright 1997-2017 Robert S. Kaufman
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