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BenefitsLink > Q&A Columns >

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

Answers are provided by Robert S. Kaufman

Impact on Rail Pension Fund When Rail Worker Not Yet Vested

(Posted December 4, 2000)

Question 76: I work in the rail industry, and I'm a regular reader of your column. I completely understand that rail workers and railroads both pay more to support the Railroad Retirement program than do workers and employers covered by Social Security. What I'm not clear on is, what happens to my employer's Railroad Retirement taxes for employees who are not vested? In other words, does the Railroad Retirement Fund keep both the Social Security portion and the rail industry portions of the employer's payroll taxes?

Answer: There is an annual complicated financial interchange between the Railroad Retirement Trust Fund and the two Social Security Trust Funds. It is designed to put the Social Security program in the exact financial position it would have been in, if railroad work were covered by that program.

In the interchange, Railroad Retirement transfers an amount equal to what rail workers and railroads pay in taxes at the Social Security tax rate to the Social Security Trust Funds. Social Security transfers the toal of disability and retirement benefits it would have to pay to rail workers if their rail work were covered by Social Security.

The annual tranfers, involving billions of dollars, have generally resulted in net gains for the Railroad Retirement Trust Fund except for a few years. They began in 1951 but were retroactive to 1937, the beginning of both programs.

You are right that the Railroad Retirement Fund does keep the payroll taxes above the Social Security rates for nonvested employees, including the railroads' share.

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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