Understanding Your Railroad Retirement Benefits at CSX
By Jenn King
You are a Railroader….
You’ve worked for CSX Corporation or other lines… and now you are edging closer to RETIREMENT…
DO YOU KNOW HOW YOUR RAILROAD RETIREMENT BENEFITS WORK?
Here you’ll find a monthly blog series to help you navigate the world of railroad benefits: coordination with Social Security, how spousal/ex-spousal benefits work, benefits for your dependents, taxation, and so on. Since this is the first article, we’ll start with the basics of RAILROAD RETIREMENT BENEFITS.
The Railroad Retirement Board (RRB) is an independent agency in the Executive Branch of the Federal Government. It was started in the 1930s to nationalize railroad retirement. Railroaders already had individual company pension plans, but the Great Depression shook up that unstable system and created a retirement crisis for railroad retirees. The Social Security system was still in its planning stages and was only going to cover work performed AFTER 1937, so something more had to be done. Railroaders wanted a separate system that would create a uniform national retirement plan for railroad workers and were able to successfully lobby for the 1937 Railroad Retirement and Carriers’ Taxing Act, which established the National Railroad Retirement program. Later legislation in the early 1970’s restructured the retirement plan into 2 tiers, allowing full coordination of benefits with Social Security.
A good deal of confusion about Railroad Retirement centers around the two separate tiers, so we’ll start off by explaining those first.
Tier 1 – These benefits are based on the combined credits you have earned throughout your career both in the Railroad Retirement and the Social Security Systems.
How do I qualify for retirement benefits?
If you have 5-9 years of service (if at least 5 years were after 1995), you can start your retirement benefits at age 62 – with an age reduction prior to Full Retirement Age just like Social Security.
If you have 10-29 years of service, you can start your retirement benefits at age 62 – also with an age reduction prior to Full Retirement Age.
If you have 30 years of service, you can start my benefits at age 60 and there are NO age-based reductions. This last point is the HUGE advantage you have as a Railroader and why a lot of people love railroad retirement. Unlike Social Security, as long as you have worked 30 years in covered railroad service, you can retire at 60 and get your FULL benefits.
Like Social Security, the retirement benefit amount is based on your highest 35 years of railroad service income.
An additional benefit that is not available through Social Security the Supplemental Annuity. How do you qualify for that?
If you have 25 years of service that started BEFORE October 1, 1981, and you are still “connected” to a railroad company at the time of retirement, you are eligible for the Supplemental Annuity. What does “connected” mean? It means you have 12 months of railroad service in the 30 month period before you start your annuity.
You can start receiving the supplemental annuity at age 60 if you have 30 years of service. You’ll receive the annuity at age 65 if you have 25-29 years of creditable service.
Included in Tier 1 benefits are also Spousal Benefits, Disability, Survivor, and Unemployment and Sickness benefits - all of which will be covered in future monthly blog posts.
Tier 2- Tier 2 is an additional benefit for Railroaders that is not available in the Social Security system. It is built to resemble a defined benefit pension and is based on the tenure you have in the railroad system. This benefit is in addition to any pension, 401k, deferred compensation, or other retirement benefits you are entitled to by the specific railroad company your work for.
How do you qualify for this benefit?
You meet the same Age and Service requirement as with your Tier 1 benefits.
How is your benefit amount determined?
Your benefit is calculated by taking your average monthly earnings (up to the annual Tier 2 maximum of $75,900) of your highest 60 months. Then, that amount is multiplied by 7/10 of 1% (.007) and again by the number of years in railroad employment.
For example, you retire at the end of 2021 with your highest 60 months being the last five years. Your average monthly earnings during that period were $6000 per month and you will have 30 years of retirement service at the end of 2021.
Tier 2 Benefit = $6000 x .007 x 30 years = $1260/month
It is important to note that when you start taking your annuity retirement benefit, you give up any rights to work for another railroad employer. So, make sure you have no intention to go back to railroad work after you retire and start your retirement benefits. This is an important concept that we will explore later in our series.
As you start to consider retiring from CSX, make sure you fully understand the nuances of your benefits and how to maximize your railroad retirement benefits. Work with a planning firm that understands railroad retirement and how to best fit it into your overall family retirement plan.
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