As of September 30, 2015, total railroad retirement system assets, including those maintained in U.S. Treasury accounts and those maintained by the National Railroad Retirement Investment Trust (the Trust or NRRIT), equaled $26.3 billion, a decrease of $1.5 billion during the fiscal year. Amounts in the Railroad Retirement (RR) Account not needed to pay current administrative expenses and amounts in the Social Security Equivalent Benefit (SSEB) Account not needed to pay current benefits and administrative expenses are transferred to the NRRIT, whose Board of seven trustees is empowered to invest Trust assets in non-governmental assets, such as equities and debt, as well as in governmental securities.
Financial Operations - U.S. Treasury Accounts
During fiscal year 2015, railroad retirement and survivor benefit payments were financed through four U.S. Treasury accounts.
The SSEB Account, established in fiscal year 1985, pays the portion of railroad retirement benefits equivalent to a social security benefit from various income sources related to these benefits. The RR Account funds retirement, survivor and disability benefits, in excess of social security equivalent benefits, from payroll taxes on employers and employees and other income sources. Supplemental benefit payments are also paid from the RR Account. The Dual Benefits Payments (DBP) Account and Federal Payments (FP) Account, funded by congressional appropriations from general revenues, finance the phase-out costs of certain vested dual benefits and interest on unnegotiated checks, respectively. The four accounts together incurred $12.2 billion in benefit obligations (excluding $1.5 billion in social security benefits which were reimbursed by the Social Security Administration) during fiscal year 2015.
Financing Sources
Payroll Taxes
The primary source of income to the railroad retirement and survivor program is payroll taxes levied on covered employers and their employees. Payroll taxes amounted to $6.4 billion, representing 51.6 percent of total financing sources (excluding a decrease of $1,556.1 million, mostly due to a change in NRRIT net assets) and $443.6 million more than in fiscal year 2014.
Railroad employees and employers pay tier I taxes which, by law, are the same as social security taxes. The 2015 rate of 7.65 percent was split between 6.20 percent for retirement and 1.45 percent for Medicare hospital insurance. The maximum amount of earnings subject to the 6.20 percent rate in calendar year 2015 was $118,500, and all earnings were subject to the 1.45 percent Medicare tax.
Since 2013, employees pay an additional 0.9 percent Medicare tax on earnings above $200,000 (for those who file an individual return) or $250,000 (for those who file a joint return). This additional tax rate is not reflected in the tax rates shown above.
Both employees and employers also pay a tier II tax to finance railroad retirement benefit payments over and above social security levels. This tax, on earnings up to $88,200 and $87,000 in 2015 and 2014, respectively, was 4.9 percent on employees in 2015 and 4.4 percent in 2014. It was 13.1 percent on employers in 2015, and 12.6 percent in 2014.
Tier I and tier II taxes for fiscal year 2015 amounted to $3.1 billion and $3.3 billion, respectively.
Financial Interchange Transfers
The second major source of income to the railroad retirement and survivor program consists of transfers from the social security trust funds under a financial interchange between the two systems. The financial interchange is intended to place the Social Security Old-Age, Survivors and Disability Insurance and Hospital Insurance Trust Funds in the same position in which they would have been had railroad employment been covered by the Social Security and Federal Insurance Contributions Acts. This involves computing the amount of social security taxes that would have been collected on railroad employment, and computing the amount of additional benefits which social security would have paid to railroad retirement beneficiaries during the same fiscal year.
In the computation of the latter amount, credit is given for any social security benefits actually paid to railroad retirement beneficiaries. When benefit reimbursements exceed payroll taxes, the difference, with an allowance for interest and administrative expenses, is transferred from the Social Security Trust Funds to the SSEB Account. If taxes exceed benefit reimbursements (this has not happened since 1951), a transfer would be made in favor of the Social Security Trust Funds. The net financial interchange transfer to the SSEB Account during fiscal year 2015 amounted to $4.1 billion.
Retirement and Survivor Program
Financing Sources - Fiscal Year 2015 (In Millions)
GROSS TOTAL: $12,476.7
1 Excludes $1,556.1 million as shown under Other Financing Sources (see below).
Costs - Fiscal Year 2015 (In Millions)
TOTAL: $12,439.9
Note.--Percentages may not add to 100 due to rounding.
Interest on Investments and Other Revenue
Interest revenue increased from $39.3 million in fiscal year 2014 to $41.4 million in fiscal year 2015. Interest revenue was also earned from financial interchange advances.
Federal Income Tax Transfers
Legislation enacted in 1983 subjecting social security and railroad retirement benefits to Federal income taxes also provided for a transfer of the tax revenues to the social security and railroad retirement systems for the payment of benefits. Most of the revenue from income taxes on social security equivalent railroad retirement benefits is transferred to the SSEB Account, although a portion attributable to higher-income taxpayers is transferred to the Federal Hospital Insurance Trust Fund. Revenue derived from taxing regular railroad retirement benefits in excess of social security equivalent benefits is transferred to the RR Account. Revenue from taxing the vested dual benefits funded by the general revenue appropriations previously described is transferred to the DBP Account.
At the beginning of each quarter, income tax transfers are made from Treasury general funds to the SSEB, RR and DBP Accounts. These transfers are estimates of expected tax revenues for the quarter. Adjustments are made later to reconcile the estimates for a taxable year with actual tax revenues for the year. On a cash basis, original tax transfers for fiscal year 2015 amounted to $639 million during the year. Original transfers for fiscal year 2014 totaled $580 million. Net income tax transfers after adjustments were $720 million for fiscal year 2015, including an $81 million adjustment for calendar year 2011. Net transfers in fiscal year 2014 were $620 million, including $40 million in reconciliation adjustments.
The information in the preceding paragraph is on a fiscal year basis, while the table below shows income tax transfers to the Accounts for taxable (calendar) years 2006 through 2015, including reconciliation adjustments through 2011.
General Appropriations
General revenue appropriations were provided by the Railroad Retirement Act of 1974 to fund the phase-out costs of certain dual railroad retirement/social security benefits considered vested prior to 1975, and by the Railroad Retirement Solvency Act of 1983 to fund interest on unnegotiated checks. The total amounts appropriated by the Congress for vested dual benefits for fiscal years 2015 and 2014 were $32.0 million and $39.0 million, respectively. These amounts include Federal income tax transfers for 2015 and 2014. The amount appropriated for fiscal year 2015 was 17.9 percent less than fiscal year 2014, reflecting the continuing decrease in eligibility for these benefits, which are not increased for the cost of living. The total amount appropriated by the Congress for interest on unnegotiated checks was $150,000 for fiscal years 2015/2014 and also $150,000 for fiscal years 2014/2013.
Federal Income Tax Transfers
by Recipient Account and Benefit Component,
Taxable Years 2006-2015 (Millions)
|
SSEB
tier I
benefits
|
Tier II and
non-SSEB
tier I benefits
|
Vested
dual
benefits
|
|
SSEB Account
|
RR Account
|
DBP Account |
| Original transfers during the year |
| 2006 |
$125 |
$312 |
$7 |
| 2007 |
135 |
334 |
6 |
| 2008 |
144 |
325 |
5 |
| 2009 |
144 |
304 |
3 |
| 2010 |
159 |
315 |
3 |
| 2011 |
160 |
300 |
3 |
| 2012 |
194 |
318 |
4 |
| 2013 |
199 |
333 |
3 |
| 2014 |
250 |
348 |
2 |
| 2015 |
263 |
386 |
2 |
| Reconciliation adjustments |
| 2006 (2012) |
24 |
-39 |
-1 |
| 2007 (2012) |
35 |
-64 |
1 |
| 2008 (2012) |
24 |
-69 |
1 |
| 2009 (2013) |
20 |
2 |
1 |
| 2010 (2013) |
23 |
16 |
1 |
| 2011 (2015) |
32 |
49 |
-- |
| |
| 1Includes non-SSEB portion of tier I. |
| 2Receives taxes on social security equivalent benefit (SSEB) portion of tier I. |
| 3Receives taxes on vested dual benefit component beginning October 1, 1988. |
| 4The year in parentheses is the year the adjustments were made. |
Railroad Retirement and Survivor Program
| Consolidated Financing Sources, Costs, and Net Position (Millions) |
| Financing Sources: |
|
|
| Payroll Taxes |
$6,432.5 |
$5,973.2 |
| Financial Interchange |
4,057.0 |
4,037.5 |
| Interest on Investments and Other Revenue |
41.4 |
39.3 |
| Federal Income Taxes |
718.0 |
616.0 |
| General Appropriations |
36.8 |
39.2 |
| Other |
(1,566.1) |
1,127.9 |
Transfers to the National
Railroad Retirement Investment Trust |
0.0 |
0.0 |
Transfers from the National
Railroad Retirement Investment Trust |
1,191.0 |
1,429.0 |
| Total Financing Sources |
10,910.6 |
13,262.1 |
| Costs: |
|
|
 Benefit Payments |
12,199.7 |
11,950.8 |
| Interest Expense |
101.1 |
104.3 |
| Salaries and Expenses |
139.1 |
134.4 |
| Other |
(29.7) |
(18.8) |
| Total Costs |
12,410.2 |
12,170.7 |
| Financing Sources over Costs |
(1,499.6) |
1,091.4 |
| Net Position - Beginning of Period |
26,647.4 |
25,556.0 |
| Net Position - End of Period |
$25,147.8 |
$26,547.4 |
| |
|
| 1Prepared on an accrual basis of accounting. |
|
| 2Includes unemployment and sickness insurance salaries and expenses of approximately $18.1 million and $17.2 million in each of the fiscal years 2015 and 2014, respectively. |
National Railroad Retirement Investment Trust (NRRIT)
| Market value of assets managed by NRRIT on September 30, 2015 |
$24.5 billion |
Rate of return of investment portfolio managed by NRRIT for full year ended
September 30, 2015 |
-1.53%
|
|
Source: NRRIT
All NRRIT annual management reports and quarterly updates are available here.
|
|
Other Financing Sources
Other financing sources consisted of $6.9 million to be provided by the Office of Personnel Management to pay future retirement benefits to RRB employees and $24.8 million from the railroad unemployment trust funds in transfers-in for current budget fiscal year salaries and expenses. These financing sources were offset by a decrease in NRRIT net assets of $1,574.2 million, transfers-out of $7.4 million for salaries and expenses of the RRB's Office of Inspector General, a loss on contingency liability of $0.1 million, and a $2.0 million decrease in unexpended appropriations.
Costs
The RRB pays all salaries and expenses under a single administrative fund (Limitation on Administration) for both the railroad retirement and survivor program and the unemployment and sickness insurance program. Consequently, of the $139.1 million and $134.4 million shown here for salaries and expenses in fiscal years 2015 and 2014, respectively, about $18.1 million for fiscal year 2015 and $17.2 million for fiscal year 2014 were for the unemployment and sickness insurance program. About $0.9 million in other costs for fiscal year 2015 and $0.9 million for fiscal year 2014 were for the unemployment and sickness insurance program.
Excluding $19.0 million from total costs of $12.4 billion for fiscal year 2015 and $18.1 million from total costs of $12.2 billion for fiscal year 2014, total costs for the railroad retirement and survivor program for fiscal year 2015 increased $238.3 million or 2.0 percent.
Benefit Payments
In fiscal year 2015, railroad retirement benefit payments increased $248.9 million, or almost 2.1 percent, to about $12.2 billion on an accrual basis, including $31.9 million in vested dual benefits.
Interest Expense
Interest expense of $101.1 million represents interest on the financial interchange advances made by the U.S. Treasury during the fiscal year.
Salaries and Expenses
Excluding unemployment and sickness insurance salaries and expenses of $18.1 million for fiscal year 2015 and $17.2 million for fiscal year 2014, salaries and expenses for the railroad retirement and survivor program were about $121.0 million for fiscal year 2015 and about $117.2 million for fiscal year 2014, a $3.8 million or 3.2 percent increase. Adjusted by the $18.1 million in salaries and expenses and $0.9 million in other costs for the unemployment and sickness insurance program, fiscal year 2015 administrative expenses for the railroad retirement and survivor program were about 0.97 percent of total costs.
Other Costs
Other costs consisted primarily of post-retirement benefits (pensions, health and life insurance) for RRB employees of $6.0 million for the railroad retirement and survivor program and $0.9 million for the unemployment and sickness insurance program. In addition, carrier refunds of $0.1 million were incurred. These costs were offset by approximately $32.9 million in reimbursements from the Centers for Medicare & Medicaid Services for Part B Medicare costs, reimbursement of approximately $0.4 million from the RRB's Office of Inspector General for RRB-incurred expenses, and various other revenues of approximately $2,500.