If it appears you may be entitled to a residual lump-sum, please read this part of the booklet thoroughly. It will provide information which you will need to understand the residual lump-sum.

Definition Of A Residual Lump-Sum

The residual lump-sum is the means by which railroad employees and their survivors are guaranteed to receive at least as much in benefits as the employee paid in railroad retirement taxes for the years 1937 through 1974. A residual lump-sum is not taxable for Federal income tax purposes.

The amount of the residual lump-sum equals the amount of the railroad retirement taxes paid by the employee prior to 1975 plus an allowance for interest.

The gross residual amount is reduced by:

• The amount of all retirement benefits which the employee received based on his or her railroad work; and
• The total amount of any survivor benefits based on the employee’s account which were paid by either the RRB or the Social Security Administration.

In most cases, there is no residual lump-sum because the total amount of benefits paid is more than the gross residual amount.

In addition, even if a residual lump-sum exists, it cannot be paid if any railroad retirement or social security benefits are currently being paid based on the employee’s account or if benefits can be paid in the future. There is one exception. A widow(er) or parent who is not currently entitled can elect to receive the residual lump-sum instead of future payments. (See the section, "Person Eligible For Monthly Benefits May Receive A Residual Lump-Sum Instead Of Monthly Benefits.")

People Eligible To Receive The Residual Lump-Sum

A residual lump-sum is paid according to the following priorities:

1. A beneficiary designated by the employee on a form or statement on file with the RRB. If there is no designated beneficiary, the residual lump-sum can be paid to:
2. the employee’s widow(er) if the employee and widow(er) were living together when the employee died. If there is no widow(er) who meets this qualification, the residual lump-sum can be paid to:
3. the children of the employee. If no children survive the employee, the residual lump-sum can be paid to:
4. the parents of the employee. If no parents survive the employee, the residual lump-sum can be paid to:
5. the brothers and sisters of the employee. Finally, if there are no brothers and sisters who survive the employee, the residual lump-sum can be paid to:
6. the employee’s estate.

If there is more than one person in the category of people to whom the residual lump-sum is being paid, the residual lump-sum will be split equally among all qualified people in that category.

Person Eligible For Monthly Benefits May Receive A Residual Lump-Sum Instead of Monthly Benefits

If there are no survivor benefits currently being paid by either the RRB or the Social Security Administration and the only benefits which will become payable in the future are benefits for a widow(er) or parent, the widow(er) or parent, if under age 60, can waive the right to ever receive monthly benefits based on the employee’s railroad work in order to allow the residual lump-sum to be paid. Any eligible widow(er) or parent must complete a Form G-126, Election to Receive Residual Payment Instead Of Future Monthly Insurance Benefits Based On Service Under the Railroad Retirement Act , to waive the benefits before the benefits become payable. (See the section, " Form G-126, Election to Receive A Residual Payment Instead of Future Monthly Insurance Benefits Based On Service Under The Railroad Retirement Act.")