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Answers are provided by Robert S. Kaufman
Working After Leaving the Railroad But Before Retiring
(Posted October 21, 2003)
Question 321: I plan to take early retirement from the railroad on November 1, 2003 after 36 years of rail work, when I am 55. I plan to be an independent consultant, working as an expert witness. Although I will work with other clients, I hope to sign a technical consultant agreement with an engineering firm, which will make me a contractor for approximately 12 to 18 months. Can my work be as an LLC or a corporation, rather than as a sole proprietor? How would my railroad benefits be affected?
Answer: If your planned post-railroad work is "self-employment," your 60/30 benefits will not be subject to the special "Last Person Employment" deductions from Tier 2 or the Supplemental Annuity. If they applied, those deductions could result in the loss of up to 50% of those benefits.
Your Tier 1 would be subject to the regular deductions for "excess earnings," even if your work is self-employment. With at least $5,000 in monthly income, most (if not all) of your Tier 1 would be reduced. The excess earnings rule ends when you reach "normal" retirement age, which would be 66 for you.
If the RRB determines your work activities as an LLC or a corporation are not self-employment, then your 60/30 benefits are subject to both regular and "Last Person Employment" restrictions. In addition, you will lose your "Current Connection" before you reach 60 and you will not receive a Supplemental Annuity ($43 a month). Also, following your death, it would be Social Security rather than Railroad Retirement that would pay benefits to your survivors.
I am not an attorney, so I sure can't give you legal advice. But based on my experience, RRB usually holds that self-employed people who incorporate their businesses are "employees" of the corporation and hence are not self-employed for Railroad Retirement purposes.
I recommend that you contact the nearest RRB office to discuss your planned post-railroad work activities. You might even ask for a formal written decision by the RRB headquarters in Chicago.
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