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

Answers are provided by Robert S. Kaufman

Post-Retirement Employment Restrictions for Retired Workers and Their Spouses

(Posted January 11, 2001(Revised February 1, 2001))

Question 83: I recently becames eligible for a wife's benefit. I'm self-employed as an independent contractor doing data entry services for a company. I pay self-employment Social Security taxes, I do not get any benefits from the company, and I have to furnish my own data entry equipment.

The Railroad Retirement Board told me that I am an employee of the company, not really self-employed. As a result, my wife's benefit has been reduced because of the "Last Person Employment" restriction under Railroad Retirement. I do not understand the logic of their position, or why my benefits are reduced for self-employment.

Answer: Yes, I would be confused too. Here's my simple answer to a very complex situation.

Railroad Retirement has two unique post-retirement employment penalties. One is for returning to work in the railroad industry. The other applies to continuing to work as an employee for the last non-railroad employer before retirement. Both of these restrictions apply to retired workers and their spouses (but not to a widow(er) or other survivor).

These post-retirement work restrictions are from the Depression when it was very difficult if not impossible for someone 65 or older to find a new job. It was designed to remove retired workers from the work force to open up jobs for younger workers who may be unemployed.

The penality for returning to work for a railroad is the complete loss of benefits for that month. The penalty for working in "Last Person Employment" is not as severe; it's loss of one-half of the Tier 2 component each month such work continues.

The RRB has complete authority to determine what is "Last Person Employment," notwithstanding any decision made by Social Security or by the Internal Revenue Service. RRB bases its decision on a number of factors, when determining the relationship between the worker and the company. Some of the most important are the amount of supervision the company exercises, where the work is actually performed, whether the worker performs services for any other parties, any past relationships between the two parties (e.g., was the worker once an employee but now is a contractor?), and when the contract went into effect (e.g., 5 years ago or just before retirement?).

RRB's decisions are based, to a large extent, on past precedents and court cases. The simplier ones are made by claim examiners; the more complex are made by higher management or even by the RRB's lawyers.

So it is possible for you to pay self-employment taxes to IRS and the SSA but still be considered by the RRB to be in an "employment relationship" with the company that is receiving the services.

You should ask the RRB to explain the rationale for their decision. Time is critical, because you have to ask for reconsideration in writing within 60 days of when your benefits were first awarded.

Even if the 60 days has passed, you should still ask for the RRB to give you a complete explanation of the basis of their decision. This will at least result in a different RRB staffer looking at your case. And RRB can always reopen your claim and change their decision if they see it was their error.

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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