Blue Ridge ESOP Associates
(Charlottesville VA / Telecommute)
Retirement Plan Consultant
Cetera Retirement Plan Specialists
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|Question 707: What happens to a railroad retiree's Tier I benefit if the Social Security system ever goes broke?|
Answer: Most of the Tier 1 benefits are financed through the Social Security system. A financial problem with the Social Security system would affect Tier 1.
Each year, there is an exchange of large sums of monies between the Railroad Retirement and the Social Security systems. Railroad Retirement deposits most Tier 1 taxes in the Social Security Trust Funds. In turn, Social Security deposits in the Railroad Retirement Trust Funds the amount that Social Security would have paid in benefits if rail work was covered by that system.
Both systems' financial conditions are monitiored by objective experts outside of the systems, and the results reported on frequently to the President, the Congress and the public.
The 2009 report on the Social Security Trust Funds by the SSA Board of Trustees shows that:
(1) The Trust Funds will continue to receive more in payroll taxes then the amount of benefits paid, until sometime in 2016.
(2) If no changes are made in payroll taxes or income from investments, the Trust Funds will be exhausted sometime in 2037.
The new administration is expected to recommend changes in Social Security benefits as well as their funding, in order to keep the the Social Security system financially sound into the 22nd century.
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.