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

Answers are provided by Robert S. Kaufman

Tier 2 Amount Like a Private Pension

(Posted February 1, 1999)

Question 16: I have a couple questions about the Tier 2 Amount of a Railroad Retirement Annuity. First, how is it computed? Are all of the career earnings used or only the highest two years in the last 10 years of Railroad work?

Also, if I don't have 10 years of Railroad Credits when I retire, can I apply for a refund of my Tier 2 taxes?

D. Reaves
Atlanta, GA

Answer: The Tier 2 component is very similiar to a private pension in how it's calculated. All of the career railroad earnings are used(up to the annual maximum limits) to first figure the "Average Monthly Compensation". The result is then multiplied by the wage earner's years of creditible Railroad & Military Service, & a specific "factor" provided in the law.

There is a special formula used when a railroad worker leaves the railroad to work for specific Federal agencies which are connected the Railroad Industry. Probably less than 100 people qualify for the special calculation which in part, use the highest 2 years of earnings in the last 10 years of rail work to figure the Tier 2 amount.

At the present time, there is no refund of Tier 2 taxes provided for. However, there is a Residual Lump Sum Death benefit which using the payroll taxes paid from 1937 thru 1974. It guarantees that a railroad employee & his/her survivors will not receive less than taxes paid for that period.

Robert S. Kaufman

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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