[Federal Register Volume 60, Number 87 (Friday, May 5, 1995)]
[Rules and Regulations]
[Pages 22261-22269]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-11142]
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RAILROAD RETIREMENT BOARD
20 CFR Parts 226 and 232
RIN 3220-AA58
Computing Employee, Spouse, and Divorced Spouse Annuities
AGENCY: Railroad Retirement Board.
ACTION: Final rule.
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SUMMARY: The Railroad Retirement Board (Board) hereby revises its
regulations dealing with the computation of retirement annuities under
the Railroad Retirement Act of 1974 (Act). The regulations regarding
the computation of these annuities, which are being replaced, were
promulgated under the Railroad Retirement Act of 1937 and no longer
reflect the computational provisions contained in the Act.
EFFECTIVE DATE: May 5, 1995.
ADDRESSES: Secretary to the Board, Railroad Retirement Board, 844 North
Rush Street, Chicago, Illinois 60611.
FOR FURTHER INFORMATION CONTACT: Thomas W. Sadler, Assistant General
Counsel, Railroad Retirement Board, 844 North Rush Street, Chicago,
Illinois 60611, telephone (312) 751-4513, TTD (312) 751-4701.
SUPPLEMENTARY INFORMATION: The revision to part 226 (formerly
``Computation of Annuity'') provides the rules for computing the amount
of the employee, spouse and divorced spouse annuity, under the Railroad
Retirement Act of 1974. In general, the annuity consists of two
components or tiers. The first tier (tier I) is a social security level
benefit that is computed under social security rules based on the
employee's earnings under both the railroad retirement and the social
security systems and is reduced by the amount of any social security
benefit payable. The second tier (tier II) is based solely on the
employee's railroad earnings.
In limited circumstances the employee annuity may be increased by a
``vested dual benefit''. An employee who has completed 25 years of
railroad service may also be eligible for a supplemental annuity.
The rule is divided into seven (7) subparts:
Subpart A sets forth definitions and lists other regulations
related to this part.
Subpart B describes the computation of the employee annuity which
includes the social security level component (tier I) (Sec. 226.10),
the component based solely on railroad service (tier II) (Sec. 226.11);
the vested dual benefit (Sec. 226.12), and a supplemental annuity
(Sec. 226.16). Section 226.13 describes how cost-of-living increases
apply to the annuity.
Subpart C (Secs. 226.30-226.35) parallels subpart B and describes
the computation of the spouse and divorced spouse annuities. However,
the divorced spouse is not entitled to a tier II benefit and no
supplemental annuity or vested dual benefits are payable to spouses.
Section 226.31 explains how the spouse and divorced spouse annuity are
reduced due to receipt of a public pension which was not based upon
employment covered by the Social Security Act on the last day of
employment.
Subpart D (Secs. 226.50-226.52) describes the Railroad Retirement
Family Maximum which is a statutory ``cap'' placed upon the total
benefits payable under the RRA. Section 226.51 describes how the
maximum is determined (the higher of $1,200 or an amount based upon the
employee's final average monthly compensation (FAMC)). Section 226.52
describes how the ``reduction amount'' is computed when the maximum is
exceeded and Sec. 226.50 describes how the spouse, then the employee
annuity is reduced until the total employee and spouse annuity equal
the maximum. The railroad retirement maximum is computed at the
employee's annuity beginning date but will be recomputed if the spouse
later divorces the employee or the employee later becomes entitled to a
vested dual benefit or supplemental annuity. A divorced spouse annuity
is not counted in determining whether the RRA maximum is exceeded.
Subpart E (Secs. 226.60-226.63) explains how years of service and
average monthly compensation (AMC) are determined. The tier II of the
employee annuity is seven tenths of 1% (.007) times the product of an
employee's years of service times his or her AMC. The spouse's tier II
is 45% of the employee's tier II. See Secs. 226.11 and 226.32.
Subpart F (Secs. 226.70-226.74) describes the reduction required
due to receipt of workers' compensation benefits. The tier I of an
employee, spouse, or divorced spouse annuity is reduced if the employee
is under age 65 and is entitled to a disability annuity and another
periodic benefit based upon disability pursuant to some other Federal
or state law or plan (Sec. 226.70). The reduction amount is first
applied to the tier I of any spouse or divorced spouse annuity payable,
then to the employee tier I (Sec. 226.71). Certain disability payments
do not cause a reduction. These are listed in Sec. 226.72.
The formula for the reduction amount is found at Sec. 226.71. The
reduction provided for in this part applies if the total tier I
components payable to the employee and spouse (or divorced spouse) plus
workers' compensation or public disability benefit exceed 80% of the
employee's prior average current earnings. Section 226.73 explains what
events cause a change in the reduction amount. Section 226.74 provides
that ``average current earnings'' must be recomputed periodically to
take into account inflation. The redetermined average current earnings
are used only if it results in a lower reduction amount.
Subpart G of the rule (Secs. 226.90-226.92) explains how and when
an annuity is recomputed to take into account railroad service and
social security earnings after an annuitant retires.
PART 232--SPOUSES' ANNUITIES is obsolete and is removed.
On February 9, 1995, the Board published this rule as a proposed
rule (60 FR 7729), inviting comments on or before March 13, 1995. No
comments were received.
The Board, in conjunction with the Office of Management and Budget,
has determined that this is not a significant regulatory action under
Executive Order 12866; therefore, no regulatory impact analysis is
required. There are no information collections associated with this
rule. [[Page 22262]]
List of Subjects in 20 CFR Part 226 and Part 232
Pensions, Railroad employees, Railroad retirement.
1. For the reasons set out in the preamble, part 226 of title 20 of
the Code of Federal Regulations (formerly ``Computation of Annuity'')
is revised as follows:
PART 226--COMPUTING EMPLOYEE, SPOUSE, AND DIVORCED SPOUSE ANNUITIES
Subpart A--General
Sec.
226.1 Introduction.
226.2 Definitions.
226.3 Other regulations related to this part.
Subpart B--Computing An Employee Annuity
226.10 Employee tier I.
226.11 Employee tier II.
226.12 Employee vested dual benefit.
226.13 Cost-of-living increase in employee vested dual benefit.
226.14 Employee regular annuity rate.
226.15 Deductions from employee regular annuity rate.
226.16 Supplemental annuity.
Subpart C--Computing a Spouse or Divorced Spouse Annuity
226.30 Spouse or divorced spouse tier I.
226.31 Reduction for public pension.
226.32 Spouse tier II.
226.33 Spouse regular annuity rate.
226.34 Divorced spouse regular annuity rate.
226.35 Deductions from regular annuity rate.
Subpart D--Railroad Retirement Family Maximum
226.50 General.
226.51 Maximum monthly amount.
226.52 Total annuity subject to maximum.
Subpart E--Years of Service and Average Monthly Compensation
226.60 General.
226.61 Use of military service.
226.62 Computing the average monthly compensation.
226.63 Determining monthly compensation.
Subpart F--Reduction for Workers' Compensation and Disability Benefits
Under a Federal, State, or Local Law or Plan
226.70 General.
226.71 Initial reduction.
226.72 Benefits that do not cause a reduction.
226.73 Changes in reduction amount.
226.74 Redetermination of reduction.
Subpart G--Recomputation To Include Additional Railroad Service and
Compensation
226.90 When recomputation applies.
226.91 How an employee annuity rate is recomputed.
226.92 Effect of recomputation on spouse and divorced spouse
annuity.
Authority: 45 U.S.C. 231f(b)(5).
Subpart A--General
Sec. 226.1 Introduction.
This part explains how employee, spouse, and divorced spouse
annuities are computed. It describes how to determine the years of
railroad service and average monthly compensation used in computing the
employee annuity rate. The railroad retirement family maximum, cost-of-
living increases, and the recomputation of an annuity to include
additional railroad earnings are also explained in this part.
Sec. 226.2 Definitions.
Except as otherwise expressly noted, as used in this part--
Annuity means a payment due an entitled individual for a calendar
month and payable to him or her on the first day of the following
month.
Eligible means that an individual meets all the requirements for
payment of an annuity but has not yet applied for one.
Employee means an individual who is or has been in the service of
an employer as defined in part 202 of this chapter.
Entitled means that an individual has applied for and has
established his or her rights to benefits.
Railroad Retirement Act means the Railroad Retirement Act of 1974,
as amended.
Retirement age means, with respect to an employee, spouse or
divorced spouse who attains age 62 before January 1, 2000, age 65. For
an employee, spouse or divorced spouse who attains age 62 after
December 31, 1999, retirement age means the age provided for in section
216(l) of the Social Security Act.
Social Security Act means the Social Security Act as amended.
Sec. 226.3 Other regulations related to this part.
This part is closely related to part 216 of this chapter, which
describes when an employee, spouse, or divorced spouse is eligible for
an annuity, part 225 of this chapter, which explains the primary
insurance amounts (PIA's) used in computing the employee, spouse and
divorced spouse annuity rates, and part 229 of this chapter, which
describes when and how employee and spouse annuities can be increased
under the social security overall minimum. The creditable service and
compensation used in determining the years of service and average
monthly compensation are explained in parts 210 and 211 of this
chapter. The beginning and ending dates of annuities are explained in
part 218 of this chapter.
Subpart B--Computing an Employee Annuity
Sec. 226.10 Employee tier I.
Tier I of an employee annuity is an amount similar to the social
security benefit the employee would receive based on combined railroad
and social security earnings. The tier I benefit is computed as
follows:
(a) A tier I PIA is computed based on combined railroad and social
security earnings, as shown in Sec. 225.11 of this chapter. This PIA is
adjusted for any delayed retirement credits or cost-of-living
increases, as shown in subparts D and E of part 225 of this chapter,
and is reduced for receipt of a pension based upon non-covered service
in accordance with section 215(a)(7) of the Social Security Act. The
tier I of a disability annuity may also be adjusted for other benefits
based on disability, as shown in Secs. 226.70-226.74 of this part.
Except in the case of an employee who retires at age 60 with 30 years
of service, if the result is not a multiple of $1, it is rounded to the
next lower multiple of $1. In the case of an employee who retires with
an age reduced annuity based upon 30 years of service (see Sec. 216.31
of this chapter) the tier I is not rounded until all reductions have
been made.
(b) If the employee is entitled to a reduced age annuity (see
Sec. 216.31 of this chapter), the rate from paragraph (a) of this
section is multiplied by a fraction for each month the employee is
under retirement age on the annuity beginning date. The result is
subtracted from the rate in paragraph (a) of this section. At present
the fraction is \5/9\ of 1% (or \1/180\). If the employee retires
before age 62 with at least 30 years of service, the employee is deemed
age 62 for age reduction purposes and a 20% reduction is applied. This
reduction remains in effect until the first full month throughout which
the employee is age 62, at which time the tier I is recomputed to
reflect interim increases in the national wage levels and the age
reduction factor is recomputed, if necessary, in accordance with this
paragraph.
(c) The amount from paragraph (a) or (b) of this section is reduced
by the amount of any monthly benefit payable to the employee under
title II of the Social Security Act, including any social security
benefit payable under a totalization agreement between the Social
Security Administration and another country. The social security
benefit used to reduce the tier I may be an age or disability benefit
on the employee's own earnings record, a benefit based on the earnings
record of [[Page 22263]] another person, or the total of two types of
benefits. The amount of the social security benefit used to reduce tier
I is before any deduction for excess earnings. It is after any
reduction for other benefits based on disability. The result cannot be
less than zero.
(d) The tier I is subject to automatic annual increases as provided
for in subpart E of part 225 of this chapter.
Example: An employee born on November 3, 1919, becomes entitled
to an age annuity effective October 1, 1982. Retirement age for
individuals born in 1919 is age 65. He has less than 30 years of
service. His tier I PIA Is $712.60, which is rounded down to $712.
Since the employee is 25 months under age 65 when his annuity
begins, $712 is multiplied by \25/180\ (\1/180\ for each month under
age 65), to produce an age reduction of $98.89, and a tier I rate
after age reduction of $613.11. The employee is also entitled to a
social security benefit of $190 a month. The employee's final tier I
rate is $423.11.
Sec. 226.11 Employee tier II.
The tier II of an employee annuity is based only on railroad
service. For annuities awarded after September 1981, the tier II
benefit is computed as follows:
(a) The product obtained by multiplying the employee's creditable
years of service by the average monthly compensation, determined as
shown in subpart E of this part, is multiplied by seven-tenths of 1
percent (.007).
(b) If the employee is entitled to a vested dual benefit (see
Sec. 226.12 of this part), the result from paragraph (a) of this
section is reduced by 25 percent of the vested dual benefit amount.
This reduction is made before reduction of the tier II benefit for age.
The result cannot be less than zero.
(c) If the railroad retirement family maximum applies, as shown in
Secs. 226.50-226.52 of this part, the amount from paragraph (a) or (b)
of this section is reduced by the smaller of--
(1) The difference between the total railroad retirement maximum
reduction amount and the reductions in the spouse and supplemental
annuities; or
(2) The total tier II amount from paragraph (a) or (b) of this
section.
(d) If the employee is entitled to a reduced age annuity (see
Sec. 216.31 of this chapter), the rate from paragraph (a) through (c)
of this section is reduced in the same manner as the tier I as provided
for in Sec. 226.10 of this part. In the case of an employee with 30
years of service who is entitled to a reduced age annuity (see
Sec. 216.31 of this chapter), the age reduction only applies to the
tier I component; no age reduction applies to the tier II component.
(e) The total tier II amount (paragraphs (a) through (d) of this
section), is increased by 32.5 percent of the percentage increase in
the cost-of-living increase to the tier I annuity component. Each cost-
of-living increase is paid only to an employee whose annuity begins on
or before the effective date of the increase. The increases are
effective on the same date as any cost-of-living increase to the tier I
annuity component.
Sec. 226.12 Employee vested dual benefit.
(a) General. An employee vested dual benefit is payable, in
addition to tiers I and II, to an employee who meets one of the
following requirements:
(1) Employee worked in the railroad industry in 1974. An employee
who worked for a railroad in 1974 and retired after 1974 is considered
vested if on December 31, 1974, he or she had both 10 years of railroad
service and sufficient quarters of coverage under the Social Security
Act to qualify for a social security benefit. An employee qualified on
this basis is eligible for vested dual benefit amounts computed on his
or her railroad and social security credits through December 31, 1974.
(2) Employee who did not work for a railroad in 1974. An employee
who did not work in the railroad industry in 1974, but who had 25 or
more years of railroad service before 1975 or a current connection with
the railroad industry on December 31, 1974, as defined in part 216 of
this chapter, or a current connection when he or she retired, is also
considered vested under the same conditions as an employee who had
worked in the railroad industry in 1974.
(3) An employee who completed 10 years or more years of railroad
service (but less than 25) before 1975 but left the industry before
1975 and did not have a current connection on December 31, 1974 or when
he or she retired. Such an employee is considered vested only if he or
she had sufficient social security quarters of coverage to qualify for
a social security retirement benefit as of the end of the year prior to
1975 in which he or she left the railroad industry. The vested dual
benefit amount is based only on credits acquired through the last year
of pre-1975 railroad service instead of through December 31, 1974.
(b) Computation. The employee vested dual benefit is computed as
follows:
(1) The combined earnings dual benefit PIA is subtracted from the
total of the railroad earnings dual benefit PIA and the social security
earnings dual benefit PIA (see part 225 of this chapter for an
explanation of these PIA's).
(2) The result from paragraph (b)(l) of this section is adjusted
for any applicable cost-of-living increase, as shown in Sec. 226.13 of
this part.
(3) If the employee is entitled to a reduced age annuity (see
Sec. 216.1 of this chapter), the rate from paragraph (b)(2) of this
section is reduced in the same manner as the tier I as provided for in
Sec. 226.10 of this part. In the case of an employee with 30 years of
service who is entitled to an annuity reduced for age, the age
reduction applies only to the tier I component; no age reduction
applies to the vested dual benefit.
(4) The vested dual benefit payable in a given year may also be
reduced for insufficient funding as shown in part 233 of this chapter.
Example: An employee born on November 3, 1919, becomes entitled
to an annuity including a vested dual benefit on October 1, 1982.
His combined earnings dual benefit PIA is $254.90, his railroad
earnings dual benefit PIA is $93.80, and his social security
earnings dual benefit PIA is $244.70. The vested dual benefit before
cost-of-living increase is $83.60 ($93.80 + $244.70 -$254.90 =
$83.60). A cost-of-living increase of $67.72 (81 percent of $83.60.
See Sec. 226.13 of this part) results in a vested dual benefit of
$151.32. Retirement age for a person born in 1919 is age 65. Since
the employee is 25 months under age 65 when the annuity begins,
$151.32 is multiplied by 25/180, to produce an age reduction of
$21.02 and a vested dual benefit rate after age reduction of
$130.30.
Sec. 226.13 Cost-of-living increase in employee vested dual benefit.
If the employee's annuity begins June 1, 1975 or later, a cost-of-
living increase is added to the total vested dual benefit amount. This
increase is based on the cost-of-living increases in social security
benefits during the period from January 1, 1975, to the earlier of the
date the employee's annuity begins or January 1, 1982. The increases
are effective on June 1 of each year through 1981. The percentage
increase for annuities that begin June 1, 1981, or later is 81 percent.
Sec. 226.14 Employee regular annuity rate.
The regular annuity rate payable to the employee is the total of
the employee tier I, tier II, and vested dual benefit amounts, from
Secs. 226.10-226.12.
Sec. 226.15 Deductions from employee regular annuity rate.
The employee annuity as computed under this subpart may be reduced
by premiums required for supplemental medicare coverage, income tax
withholding, recovery of debts due the Federal government, garnishment
pursuant to part 350 of the chapter and [[Page 22264]] property awards
as provided for in part 295 of this chapter.
Sec. 226.16 Supplemental annuity.
A supplemental annuity is payable in addition to tiers I and II and
the vested dual benefit to an employee who meets the requirements of
Sec. 216.41 of this chapter. The supplemental annuity is equal to $23
plus $4 for each full year of service, over 25 years of service, up to
a maximum of $43. The supplemental annuity may be reduced by the
railroad retirement family maximum as shown in Secs. 226.50-226.52 of
this part, or for the receipt of a private pension benefit as explained
in part 227 of this chapter.
Subpart C--Computing a Spouse or Divorced Spouse Annuity
Sec. 226.30 Spouse or divorced spouse tier I.
(a) General. The tier I of a spouse or divorced spouse annuity is
an amount similar to the social security benefit the spouse or divorced
spouse would receive based on the employee's combined railroad and
social security earnings. In the case of an employee who retires before
age 62 with 30 years of service, the spouse tier I is simply 50% of the
employee tier I until the first month throughout which both the
employee and spouse are age 62 at which time the tier I is an amount
similar to the social security benefit on the employee's combined
railroad and social security earnings.
(b) Reduction for other disability benefits. The spouse or divorced
spouse tier I may be adjusted for other disability benefits received by
a disabled employee, as shown in Secs. 226.70-226.74 of this part.
(c) Reduction for government pension. The amount in paragraphs (a)
or (b) of this section is reduced (but not below zero) by the amount of
any government pension payable on the spouse's or divorced spouse's
earnings record, as described in Sec. 226.31 of this part.
(d) Rounding. The last tier I rate from paragraph (a), (b) or (c)
of this section, if not a multiple of $1, is rounded to the next lower
multiple of $1. However, in cases in which the spouse is in receipt of
an age reduced 60/30 annuity or in which the employee with 30 years of
service began a disability annuity July 1, 1984, or later, the spouse
tier I is not rounded until all reductions have been made. See
Sec. 226.10(a).
(e) Age reduction. If the spouse or divorced spouse is entitled to
a reduced age annuity (see Secs. 216.51 and 216.52 of this chapter),
the rounded tier I rate from paragraph (d) of this section is
multiplied by a fraction for each month the spouse or divorced spouse
is under retirement age on the date the annuity begins. The result is
subtracted from the rate from paragraph (d) of this section. At present
the fraction is 25/36 of 1% (or 1/144). In the case of an employee with
30 years of service who is awarded a disability annuity on July 1,
1984, or later, where the spouse does not have a child of the employee
under age 18 in care, the spouse tier I is reduced for each month the
spouse is under retirement age on the date the spouse annuity begins.
If the spouse is age 60 or 61, he or she is deemed to be age 62 for
purposes of the age reduction. The age reduction is applied before
reduction for a government pension.
(f) Reduction for social security benefit. The previous tier I
rate, from paragraph (d) or (e) of this section, is reduced by the
amount of any monthly benefit payable to the spouse or divorced spouse
under title II of the Social Security Act. The social security benefit
used to reduce tier I may be an age or disability benefit on the
spouse's or divorced spouse's own earnings record, a benefit based on
the earnings record of another person, or the total of two types of
benefits. The result cannot be less than zero.
(g) Reduction for employee annuity. If the spouse or divorced
spouse is entitled to an employee annuity on his or her own wage
record, the spouse or divorced spouse tier I is reduced for the
spouse's own employee annuity as follows:
(1) Spouse. If either the employee or the spouse had some railroad
service before 1975, the previous tier I rate from paragraphs (d)
through (f) of this section, whichever applies, is reduced (but not
below zero) by the spouse's own employee tier I rate, as computed under
Sec. 226.10 of this part. If both the employee and spouse began
railroad service after 1974, the spouse's total annuity rate, as shown
in Sec. 226.33, is reduced (but not below zero) by the spouse's own
employee total annuity rate, as shown in Sec. 226.14. These reductions
are effective from the later of the date the employee or spouse annuity
begins.
(2) Divorced spouse. The previous tier I rate from paragraphs (d)
through (f) of this section, whichever applies, is reduced (but not
below zero) by the divorced spouse's own employee total annuity rate as
shown in Sec. 226.14.
Example: The computation of the spouse tier I may be illustrated
as follows: A railroad employee's wife who was born on September 16,
1920 becomes entitled to a spouse annuity on October 1, 1982. She is
also entitled to a social security benefit of $190 a month effective
October 1, 1982. Her husband's employee tier I PIA is $712.60. The
spouse tier I is $356.30 (50 percent of $712.60). This is rounded
down to $356. Since she is 35 months under age 65, the present
retirement age when the annuity begins, $356 is multiplied by 35/
144, to produce an age reduction of $86.53 and a tier I rate after
age reduction of $269.47. Her final tier I rate effective October 1,
1982, after reduction for social security benefits, is $79.47
($269.47 -$190.00).
Sec. 226.31 Reduction for public pension.
(a) The tier I annuity component of an spouse/divorced spouse
annuity, as described in the preceding sections of this part, is
reduced if the spouse/divorced spouse is in receipt of a public
pension.
(b) When reduction is required. Unless the spouse or divorced
spouse annuity meets one of the exceptions in paragraph (d) of this
section, the tier I annuity component is reduced each month the
annuitant is receiving a monthly pension from a Federal, state, or
local government agency (government pension), but excluding a pension
paid by a government of a foreign country, for which he or she was
employed in work not covered by social security on the last day of such
employment. For purposes of this section, Federal government employees
are not considered to be covered by social security if they are covered
for Medicare but are not otherwise covered by social security.
(c) Payment in a lump sum. If the government pension is not paid
monthly or is paid in a lump-sum payment, the Board will determine how
much the pension would be if it were paid monthly and then reduce the
monthly railroad retirement annuity accordingly. The number of years
covered by a lump-sum payment and thus the period when the annuity will
be reduced, will generally be clear from the pension plan. If one of
the alternatives to a lump-sum payment is a life annuity, and the
amount of the monthly benefit for the life annuity can be determined,
the reduction will be based on that monthly benefit amount. Where the
period or the equivalent monthly pension benefit is not clear, it may
be necessary for the Board to determine the reduction period on an
individual basis.
(d) Exceptions. The reduction does not apply:
(1) If the annuitant is receiving a government pension based on
employment for an interstate instrumentality; or
(2) If the annuitant receives or is eligible to receive a
government pension for one or more months in the period December 1977
through November 1982 and he or she meets the requirements
[[Page 22265]] for social security benefits that were applied in
January 1977 (even though he or she did not actually claim such
benefits nor become entitled to such benefits until a later month). The
January 1977 requirements are, for a man, a one-half support test (see
paragraph (e) of this section), and, for a woman claiming benefits as a
divorced spouse, marriage for at least 20 years to the insured worker.
A person is considered eligible for a government pension for any month
in which he or she meets all the requirements for payment except that
he or she is working or has not applied; or
(3) If the annuitant was receiving or eligible (as defined in
paragraph (d)(2) of this section) to receive a government pension for
one or more months before July 1983, and he or she meets the one-half
support test (see paragraph (e) of this section). If the annuitant
meets the exception in this paragraph but he or she does not meet the
exception in paragraph (d)(2) of this section, December 1982 is the
earliest month for which the reduction will not affect his benefits; or
(4) If the annuitant has been eligible for a government pension in
a given month except for a requirement which delayed eligibility for
such pension until the month following the month in which all other
requirements were met, the Board will consider the annuitant to be
eligible in that given month for the purpose of meeting one of the
exceptions in paragraphs (d)(2) and (d)(3) of this section. If the
annuitant meets an exception solely because of this paragraph, his or
her benefits will be unreduced for months after November 1984 only.
(e) The one-half support test. For a man to meet the January 1977
requirement as provided in the exception in paragraph (d)(2) of this
section and for a man or a woman to meet the exception in paragraph
(d)(3) of this section, he or she must meet a one-half support test.
One-half support is defined in part 222 of this chapter. One-half
support must be met at one of the following times:
(1) If the employee upon whose compensation the spouse or divorced
spouse annuity is based had a period of disability, as defined in part
220 of this chapter, which did not end before he or she became entitled
to an age and service or disability annuity, the spouse/divorced spouse
annuitant must have been receiving at least one-half support from the
employee either--
(i) At the beginning of the employee's period of disability; or
(ii) At the time the employee became entitled to an age and service
or disability annuity.
(2) If the employee upon whose compensation the spouse or divorced
spouse annuity is based did not have a period of disability, as defined
in part 220 of this chapter, at the time of his or her entitlement, the
spouse or divorced spouse annuitant must have been receiving at least
one-half support from the employee at the time the employee became
entitled to an age and service or disability annuity.
(f) Amount of reduction. (1) If the spouse/divorced spouse
annuitant becomes eligible for a government pension after June 1983,
the Board will reduce (to zero, if necessary) the tier I annuity
component by two-thirds of the amount of the monthly pension. If the
amount of the reduction is not a multiple of 10 cents, it will be
rounded to the next higher multiple of 10 cents.
(2) If the spouse/divorced spouse annuitant became eligible for a
government pension before July 1983 and he or she did not meet one of
the exceptions in paragraph (d) of this section, the Board will reduce
(to zero, if necessary) the tier I component by the full amount of the
pension for months before December 1984 and by two-thirds the amount of
his or her monthly pension for months after November 1984. If the
amount of the reduction is not a multiple of 10 cents, it will be
rounded to the next higher multiple of 10 cents.
(g) Reduction not applicable. This reduction is not applied to
claimants who both filed and were entitled to a spouse benefit prior to
December 1977.
Sec. 226.32 Spouse tier II.
The spouse tier II benefit is computed as follows:
(a) The employee's tier II amount as computed under Sec. 226.11 of
this part, after any reduction for entitlement to a vested dual benefit
but before reduction for the railroad retirement family maximum, is
multiplied by 45 percent. The spouse tier II is recomputed if the
employee's tier II rate is reduced for entitlement to a vested dual
benefit after the beginning date of the spouse annuity.
(b) If tier I of a spouse annuity is reduced for the spouse's
employee annuity, as provided for in Sec. 226.30(g) of this part, the
reduction is restored in tier II. The restored amount is payable on the
effective date of the spouse or the employee tier I benefit, whichever
is later. The previous tier II rate is increased by the restored
amount, which is determined as follows:
(1) Initial restored amount. The restored amount is the amount by
which the spouse tier I was reduced by reason of receipt of an employee
annuity on the date the restored amount is first payable. The restored
amount is only payable if either the employee or spouse had railroad
service prior to 1975.
(2) Recomputation of restored amount. The restored amount is
recomputed if the spouse becomes entitled to a government pension, a
social security benefit, or a different type of social security benefit
after the date the initial restored amount is effective. The recomputed
amount is the amount by which the spouse tier I is reduced by reason of
receipt of an employee annuity on the effective date of the entitlement
to a government pension or social security benefit.
(3) Cost-of-living increase in restored amount. If an initial or
recomputed restored amount is effective before the effective date of
the cost-of-living increase shown in paragraph (e) of this section, the
restored amount is multiplied by the percentage increase that applies.
The result is added to the restored amount on the effective date of the
increase for each year that the increase is payable.
(c) If the employee's tier II has been reduced pursuant to section
3(g)(2) of the Railroad Retirement Act (takeback provision) the spouse
tier II is reduced by one half of the ``takeback'' in the employee tier
II.
(d) If the railroad retirement family maximum applies, as shown in
Secs. 226.50-226.52 of this part, the spouse tier II rate, as
determined in paragraphs (a) through (c) of this section, is reduced by
the smaller of--
(1) The total railroad retirement maximum reduction amount; or
(2) The previous spouse tier II rate.
(e) The tier II rate, from paragraphs (a) through (d) of this
section, is increased by the same percentage as the employee tier II
increase described in Sec. 226.11(e) of this part.
(f) If the spouse is entitled to a reduced age annuity (see
Sec. 216.51 of this chapter), the tier II rate, as determined in
paragraphs (a) through (e) of this section is reduced in the same
manner as the tier I as provided for in Sec. 226.30(e) of this part.
Example: An employee's tier II rate is $329.63 effective October
17, 1981. The spouse rate is $148.33 (45 percent x $329.63)
effective October 17, 1981. This is increased to $151.89 effective
June 1, 1982, by a cost-of-living increase of 2.4 percent. The
spouse is 35 months under age 65, the present retirement age, when
the annuity begins. The $151.89 rate is multiplied by 35/144 to
produce an age reduction of $36.92. This is
[[Page 22266]] subtracted from $151.89 to produce a final rate of
$114.97.
Sec. 226.33 Spouse regular annuity rate.
The final tier I and tier II rates, from Secs. 226.30 and 226.32,
are added together to obtain the total spouse regular annuity rate.
Sec. 226.34 Divorced spouse regular annuity rate.
The regular annuity rate of a divorced spouse is equal to his or
her tier I amount. The divorced spouse is not entitled to a tier II
benefit.
Sec. 226.35 Deductions from regular annuity rate.
The regular annuity rate of the spouse and divorced spouse annuity
may be reduced by premiums required for supplemental medicare coverage,
income tax withholding (spouse annuity only), recovery of debts due the
Federal government, and garnishment pursuant to part 350 of this
chapter.
Subpart D--Railroad Retirement Family Maximum
Sec. 226.50 General.
There is a monthly ceiling on total family benefits which limits
the amount of certain portions of the employee and spouse annuity. This
railroad retirement family maximum amount varies according to the
employee's earnings in the ten-year period that ends with the year in
which his or her annuity begins. If the employee and spouse annuity
amounts described in Sec. 226.52 of this part are higher than the
maximum from Sec. 226.51 of this part, first the spouse tier II, then
the supplemental annuity and, finally, the employee tier II are reduced
until the total annuity amount is equal to the maximum or until the
spouse tier II and the employee supplemental annuity and tier II have
been reduced to zero, whichever comes first. The reduction for the
railroad retirement family maximum is first computed from the date the
employee's annuity begins. It is recomputed if the employee's tier II
rate is reduced for entitlement to a vested dual benefit. It is also
recomputed if a workers' compensation or other disability benefit
begins or ends, or the employee's tier I benefit or supplemental
annuity begins after the beginning date of the regular employee
annuity. Finally, it is recomputed if a spouse who was entitled to an
annuity divorces the employee or the spouse annuity entitlement ends.
Sec. 226.51 Maximum monthly amount.
The railroad retirement family maximum is equal to an employee's
``final average monthly compensation'' (FAMC) up to \1/2\ of \1/12\ of
the annual maximum tier I earnings as shown in part 224 of this chapter
in the year the annuity begins plus 80 percent of so much of his or her
FAMC as exceeds \1/2\ of \1/12\ of the tier I maximum in the year the
annuity begins. For this purpose, the FAMC is determined by dividing
the individual's total earnings up to the tier II earnings limit as
shown in part 211 of this chapter for the two highest-earnings years
out of the last 10 calendar years, including the year of retirement, by
24. The railroad retirement maximum cannot be more than the FAMC and
cannot be less than $1,200.
Example: An employee's annuity begins on December 2, 1982. He
has yearly earnings that exceed the tier II annual maximum of
$24,300 in 1982 and $22,200 in 1981. The FAMC is the sum of the tier
II maximum for 1981 and 1982 divided by 24 ($24,300 +
$22,20024) or $1,937.50. The maximum which may be credited
to a month for tier I in 1982 is $2,700. The family maximum is
$1,350 (\1/2\ of \1/12\ of the annual tier I maximum) plus $470 (80%
of the difference between $1,937.50 and $1,350) or $1,820.
Sec. 226.52 Total annuity subject to maximum.
The total annuity amount which is compared to the maximum monthly
amount to determine if a reduction for the railroad retirement family
maximum applies is determined by adding together the amounts in
paragraphs (a) and (b) of this section. A hypothetical spouse annuity
amount is included from the beginning date of the employee annuity if
the spouse is not entitled to an annuity at the time the maximum
calculation is made.
(a) Employee annuity amounts. The following amounts are added
together--
(1) The employee tier I amount, effective on the date the
employee's tier I benefit begins or, if later, on the date a reduction
for other disability benefits begins or ends, as shown in Sec. 226.71
of this part. This amount is before any reduction for age or social
security benefits but after including any delayed retirement credits,
after any reduction for other disability benefits, and after rounding;
and
(2) The employee tier II rate before reduction for the railroad
retirement family maximum, effective on the employee's annuity
beginning date and, if later, on the date the tier II is first reduced
for a vested dual benefit, as shown in Sec. 226.11 of this part; and
(3) The initial supplemental annuity rate effective on the date the
supplemental annuity begins, before any reduction for a private
pension, as shown in part 227 of this chapter.
(b) Spouse annuity amounts. The following amounts are added
together--
(1) The spouse tier I amount, which is or would be effective on the
date the employee's annuity or tier I benefit begins, as shown in
Sec. 226.30. This amount is before any reduction for other disability
benefits, age, or social security benefits, but after any reduction for
a government pension or employee annuity; and
(2) The spouse tier II rate which is or would be effective on the
employee's annuity beginning date, the date the employee's tier I
benefit begins, or the date the employee's tier II rate is reduced for
a vested dual benefit, as shown in Sec. 226.11. This rate includes the
restored amount but does not include any cost-of-living increase in the
tier II original rate or restored amount. It is the rate before
reduction for the railroad retirement family maximum or age minus any
cost-of-living increases.
Subpart E--Years of Service and Average Monthly Compensation
Sec. 226.60 General.
The years of service and average monthly compensation used in
computing an employee's tier II annuity rate are based on the
employee's creditable railroad service and compensation as described in
parts 210 and 211 of this chapter. In computing the average monthly
compensation, the compensation for each year cannot be higher than
twelve times the tier II monthly maximum creditable for that year, as
described in part 211 of this chapter.
Sec. 226.61 Use of military service.
(a) Claim for use of military service. An employee is deemed to
have filed a claim for the use of military service and earnings as
service and compensation under the Railroad Retirement Act if--
(1) The employee indicates on the annuity application or another
signed statement that he or she has military service;
(2) The employee does not specifically request that the military
service be credited as wages under the Social Security Act;
(3) The military service is creditable under the Railroad
Retirement Act, as shown in part 212 of this chapter; and
(4) Using the military service as railroad service and compensation
would be to the employee's advantage (the employee and his or her
family would receive higher total benefits than if the military service
were credited under the Social Security Act).
(b) Effective date for use of military service. Military service
can be used as service and compensation under the
[[Page 22267]] Railroad Retirement Act starting with the date the
annuity begins but no earlier than twelve months before the employee
files an application or statement showing that he or she has military
service.
Sec. 226.62 Computing average monthly compensation.
The employee's average monthly compensation is computed by first
determining the employee's highest 60 months of railroad compensation
(disregarding compensation in excess of the maximum creditable tier II
compensation for that year). The total of the highest 60 months is then
divided by 60 to determine the average monthly compensation.
Sec. 226.63 Determining monthly compensation.
(a) Based on yearly compensation. If Board records do not show
monthly compensation for a year, the monthly compensation is determined
by dividing the total compensation reported for the year by the number
of months of service credited to the employee for that year.
(b) For employee with government employment and no railroad service
for 60-month period before annuity begins--(1) General. The
compensation used in determining the average monthly compensation (AMC)
is indexed for an employee who has not worked in the railroad industry
for the 60-month period before the month the employee's annuity begins
and whose major employment during that period was for a government
agency listed in Sec. 216.16 of this chapter. The compensation is
indexed by multiplying it by the quotient obtained by dividing the
average annual wage for the indexing year by the average annual wage
for the year being indexed. If the month for which compensation is
being indexed is before 1951, the average annual wage for 1951 is used.
(2) Indexing year defined. The indexing year is the second year
before the year in which the annuity begins.
Subpart F--Reduction for Workers' Compensation and Disability
Benefits Under a Federal, State or Local Law or Plan
Sec. 226.70 General.
For any month an employee disability annuitant is entitled to
workers' compensation or a public disability benefit, the tier I
benefit of the spouse or divorced spouse is reduced due to receipt of
such benefits. (If both spouse and divorced spouse annuities are
payable, the reduction amount is divided and applied in equal amounts
to both the spouse and divorced spouse tier I benefits.) The employee
tier I is reduced by the difference between the total reduction amount,
described in Sec. 226.71 of this part, and the reduction in the spouse
and divorced spouse tier I benefits.
Sec. 226.71 Initial reduction.
(a) When reduction is effective. A reduction for other disability
benefits begins with the first month the employee is receiving both a
disability annuity and workers' compensation or a public disability
benefit. The reduction ends with the month before the month in which
the employee becomes 65 years old or with the month in which the
workers compensation or public disability benefit ends.
(b) Amount of reduction. The reduction for other disability
benefits equals the difference between--
(1) The total tier I rates of the employee, spouse, and divorced
spouse, before any reductions (age, public pension, social security
benefits, etc.) plus the monthly amount of the workers' compensation of
public disability benefit; and
(2) The higher of--
(i) Eighty percent of the employee's average current earnings, as
defined in this section; or
(ii) The total tier I rates, as described in paragraph (b)(1) of
this section.
Example 1: Harold is entitled to a monthly disability annuity
with a tier I component of $507 and a monthly public disability
benefit of $410 from the state. Eighty percent of Harold's average
current earnings is $800. Because this amount is higher than
Harold's tier I component, to determine the reduction for other
disability benefits the Board subtracts this amount ($800) from the
total of Harold's tier I component ($507) and public disability
benefit ($410) which results in a reduction amount of $117 ($917-
$800). This leaves Harold with a reduced tier I amount of $390
($507-$117).
Example 2: Tom is entitled to a disability annuity with a tier I
component of $560. His wife and divorced wife are both entitled to
annuities with tier I components of $280 each. Total benefits are
$1,120. Tom is receiving a monthly workers' compensation benefit of
$500 from the state. Eighty percent of Tom's average current
earnings is $820. Because the total benefit ($1,120) is higher than
Tom's average current earnings, to determine the reduction for other
disability benefits the Board subtracts this amount from $1,620
($1,120 plus $500) which results in a reduction amount of $500. This
means that the tier I of the spouse and divorced spouse annuity are
each reduced by $250.
(c) Average current earnings, defined. An employee's ``average
current earnings'' is the highest of--
(1) The average monthly wage (AMW) used to compute the tier I AMW
PIA. (The earnings are not indexed, even if the tier I PIA which is
being paid is based on average indexed monthly earnings. See part 225
of this chapter.); or
(2) One-sixtieth of the employee's total earnings covered under
either the Social Security or Railroad Retirement Acts (including
earnings that exceed the maximum earnings used in computing social
security benefits) for the five consecutive years after 1950 in which
the employee had the highest earnings. The result, if not a multiple of
$1, is rounded to the next lower multiple of $1; or
(3) One-twelfth of the employee's total earnings covered under
either the Social Security or Railroad Retirement Acts (including
earnings that exceed the maximum earnings used in computing social
security benefits) for the year of highest earnings in the period which
includes the year in which the employee became disabled and the five
preceding years. The result, if not a multiple of $1, is rounded to the
next lower multiple of $1.
Sec. 226.72 Benefits that do not cause a reduction.
The tier I is not reduced for the following types of benefits:
(a) A benefit paid under a law or plan that provided, on February
18, 1981, for reducing the benefit for entitlement to a disability
insurance benefit under the Social Security Act.
(b) A Federal disability benefit based on service for other than a
state or local government, if all or part of that service is covered
under the Social Security Act.
(c) A disability benefit paid by the Federal government or a state
or local government based on state or local employment, if all or
substantially all of that employment is covered under the Social
Security Act. ``Substantially all'' means 85 percent or more of the
employment.
(d) A benefit paid by the Veteran's Administration.
(e) Private disability benefits.
(f) Amounts paid under the Federal Employers' Liability Act (FELA).
(g) Benefits based on need, such as welfare benefits or
supplemental security income.
Sec. 226.73 Changes in reduction amount.
The reduction amount is not changed when a tier I benefit increases
because of a recomputation or a general adjustment in annuity rates,
such as a cost-of-living increase. However, the reduction amount may
change for the following reasons:
(a) A spouse or divorced spouse becomes entitled to a tier I
benefit after [[Page 22268]] the effective date of the reduction. The
reduction amount is recomputed as if the spouse or divorced spouse were
entitled to a tier I benefit on the date the reduction first applied.
The new reduction amount applies beginning with the date the spouse or
divorced spouse tier I benefit begins.
Example: An employee became entitled to an annuity with a tier I
component of $500 on May 1, 1991. He was also receiving a state
disability benefit of $300 a month based on employment not covered
under the Social Security Act. On June 1, 1991, the employee's tier
I increased to $520.70. On October 1, 1991, the employee's wife
becomes entitled to an annuity with a tier I benefit of $260.00. The
tier I amount ($250) that would have been payable to the wife on May
1, 1991 (assuming she had been eligible for a benefit at that time)
is used to determine the reduction for other disability benefits
beginning October 1, 1991.
(b) The tier I benefit of a spouse or divorced spouse annuity ends
after the effective date of the reduction. The new reduction amount is
computed using the tier I rate to which the employee was entitled when
the reduction first applied. The new reduction amount applies beginning
with the month after the month in which the spouse or divorced spouse
tier I benefit ends.
(c) The average current earnings are redetermined, as shown in
Sec. 226.74.
(d) The amount of the other disability benefit changes. The
reduction amount is recomputed to use the new benefit rate beginning
with the date on which the new rate is payable. Any increases in the
tier I amounts which were effective after the reduction first applied
are not included in computing the new reduction amount.
Example: The employee's tier I benefit is $500 on May 1, 1991,
when the annuity is first reduced for other disability benefits. The
tier I increases to $520 effective June 1, 1991. When the amount of
the disability benefit changes on October 1, 1991, $500, not $520,
is used as the employee tier I amount in recomputing the reduction
amount.
Sec. 226.74 Redetermination of reduction.
(a) General. The average current earnings are redetermined in the
second year after the year the reduction for other disability benefits
was first applied and every third year after that. The redetermined
amount is used only if it results in a lower reduction amount. The new
reduction amount is effective with January of the year after the
redetermination is made.
(b) Redetermined average current earnings. The average current
earnings are redetermined by multiplying the initial average current
earnings amount by--
(1) The average of the total wages (including wages that exceed the
maximum used in computing social security benefits) of all persons for
whom wages were reported to the Secretary of the Treasury for the year
before the year of redetermination, divided by the average of the total
wages reported to the Secretary of the Treasury for 1977 or, if later,
the year before the year for which the reduction was first computed. If
the result is not a multiple of $1, it is rounded to the next lower
multiple of $1; or
(2) If the reduction was first computed before 1978, the average of
all taxable wages reported to the Secretary of Health and Human
Services for the first quarter of 1977, divided by the average of all
taxable wages reported to the Secretary of Health and Human Services
for the first quarter of the year before the year for which the
reduction was first computed. If the result is not a multiple of $1, it
is rounded to the next lower multiple of $1.
Subpart G--Recomputation To Include Additional Railroad Service and
Compensation
Sec. 226.90 When recomputation applies.
An employee's annuity may be recomputed to include additional
railroad service and compensation and social security wages which the
employee earns after the beginning date of the employee annuity. The
annuity is recomputed only if the recomputation increases the annuity
rate by more than $1 a month or results in a lump-sum payment of more
than $5. Before a recomputed rate can be paid, the employee must stop
working in the railroad industry. A recomputed tier I component is
payable beginning with January 1 of the year after the year in which
the wages or compensation are earned or (provided the employee is age
62 or disabled), in the case of railroad compensation, in the year
after the employee stops working in the railroad industry. A recomputed
tier II component is payable from the date the annuity is reinstated
after the employee has ceased railroad work.
Sec. 226.91 How an employee annuity rate is recomputed.
(a) Tier I. A recomputation is made if any social security wages or
railroad compensation for a year in which the employee returned to work
are higher than the earnings for a year included in the previous
computation of the tier I PIA, as shown in part 225 of this chapter.
The higher earnings are used instead of the lower earnings for the
earlier year to determine the average monthly wage or average indexed
monthly earnings. Part 225 of this chapter describes how a PIA is
recomputed.
(b) Tier II. The additional service is added to the years of
service previously used in computing the tier II rate. The additional
compensation is used to recompute the average monthly compensation, if
the compensation for a month in which the employee returned to railroad
service is higher than the compensation for a month used in the
previous computation of the average monthly compensation. The higher
monthly compensation is used instead of the lower compensation for a
previous month to determine the new average monthly compensation as
shown in Sec. 226.62 of this part. The increased years of service and
average monthly compensation are used in computing a new tier II rate,
as shown in Sec. 226.11 of this part.
Example: An employee receiving an annuity which began on January
1, 1992, returns to railroad service for 10 months in 1992 and 2
months in 1993. He stops work on February 20, 1993. He has earnings
of $34,500.00 in 1992 and $5,200.00 in 1993. His tier II rate
effective January 1, 1992, was based on 26 years (312 months) of
service and an average monthly compensation of $2,995
($179,70060). The additional 12 months of service increases
the year of service used in computing the tier II rate to 27 (312
months + 12 months = 324 months 12 = 27). The 1992 earnings
of $34,500.00 are used instead of 1987 earnings of $32,700.00. The
1993 earnings are not used because they are lower than the earnings
for previous months used in computing the average monthly
compensation. The additional $1,800.00 in earnings increases the
average monthly compensation to $3,025 ($179,100 + $1,800.00 =
$181,500.0060). The initial tier II amount is increased from
$545.09 (26 x $2,995 x .007) to $571.73 (27 x $3,025 x .007),
effective with the date of annuity reinstatement, March 1, 1993.
Sec. 226.92 Effect of recomputation on spouse and divorced spouse
annuity.
The annuity of a spouse or divorced spouse is recomputed to use the
employee's recomputed tier I PIA and tier II rate, if the recomputation
results in a lump-sum payment of more than $5 or an increase in the
spouse or divorced spouse annuity rate of more than $1 a month. The
spouse or divorced spouse annuity rate is recomputed beginning with the
same date the employee's annuity rate is recomputed.
PART 232--SPOUSES' ANNUITIES--[REMOVED]
2. For the reasons set out in the preamble, Part 232--Spouses'
Annuities, is removed.
Dated: April 28, 1995. [[Page 22269]]
By authority of the Board.
For the Board,
Beatrice Ezerski,
Secretary to the Board.
[FR Doc. 95-11142 Filed 5-4-95; 8:45 am]
BILLING CODE 7905-01-P
