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Answers are provided by Robert S. Kaufman
Railroad Retirement & Long Term Disability (LTD) Insurance
(Posted October 17, 2002)
Question 198: I receive Railroad Retirement based on my disability and my previous employment. I also receive payments from a Long Term Disability (LTD) policy carried by my last employer. The insurance carrier wants to reduce my LTD payments by the amount of my Railroad Retirement.
I can understand the reduction for Tier 1 because it's supposed to be like Social Security. But I don't agree with the reduction for Tier 2. I consider Tier 2 to be entirely my funds, which I have set aside for retirement and disability. Am I correct in my thinking?
Answer: Unfortunately, your question is not really a Railroad Retirement issue but how your LTD insurance treats Social Insurance and private pension payments.
Your understanding of Tier 1 is correct. It is Railroad Retirement's version of Social Security benefits. Your insurance carrier should treat Tier 1 as it would a Social Security payment.
Tier 2 is more like the private contributory pensions that many large industrial corporations pay. It is based on contributions made by both railroads and rail workers. The formula used to determine the Tier 2 rate is similar to that used by many private pension systems; average monthly compensation and years of creditable service. I might point out that Tier 2 taxes are mandatory and, unlike voluntary investments in saving accounts or bonds, workers cannot elect out of the program.
If your LTD plan reduces benefits for private contributory pensions, it would seem reasonable that your Tier 2 should treated in the same manner.
I would recommend that you present this information to the insurance carrier. If you feel that their decision in your claim is not correct, you might want to consult with an attorney who specializes in employment issues to determine what options you have.
Answers are provided as general guidance on the subjects covered in the question and are not provided as legal advice
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