Tier I, Vested Dual Benefit, or Special Guaranty Computation work deductions do not apply for any months you are Full Retirement Age (FRA) or older. If you are FRA, or older, on your annuity beginning date, you may skip to tier II work deductions. If you are under FRA, earnings from any nonrailroad employment (including self-employment) over the Annual Earnings Exempt Amount cause work deductions to your Tier 1, any Vested Dual Benefit payable, and to any Special Guaranty computation.
The term Annual Earnings Exempt Amount means the amount of money you can earn in nonrailroad employment in a year without losing part of your annuity or the annuities of others entitled on your earnings record. There are separate Annual Earnings Exempt Amounts for persons under FRA, and for the year in which the person attains FRA, as explained in the following chart.
When you have earnings over the Annual Earnings Exempt Amount for your age group, the excess is charged against your annuity and the annuities of all others entitled on your earnings record. However, if a divorced spouse is entitled on your earnings record, effective from the second anniversary of the divorce, your earnings have no effect on the divorced spouse annuity.
| Determining Amount of Your Work Deductions |
| For a year in which: |
you may lose up to $1 in Tier I Components for every: |
The reduction: |
| you attain FRA, |
$3.00 of earnings over the Annual Earnings Exempt Amount for your age group. However, your earnings are only counted for months before the month in which you attain FRA. |
is removed effective the month in which you attain FRA. |
| you are under FRA for the entire year, |
$2.00 of earnings over the Annual Earnings Exempt Amount for your age group. |
applies for the full year. |
| you work outside the U.S. for 45 or more hours per month, |
$2.00 of earnings. There is no Annual Earnings Exempt Amount for work outside the U.S. However, your earnings are only counted for months before the month in which you attain FRA. |
is removed effective the month in which you attain FRA. |
Refer to Form G-77a , "How Work Affects Your Railroad Retirement Benefits" for the Annual Earnings Exempt Amount to use when completing the earnings items on your annuity application.
- Definition of Earnings for Tier I, Vested Dual Benefit, or Special Guaranty Computation - In general, earnings restrictions apply to gross earnings from employment and net earnings from self-employment. Gross earnings are all salaries (including amounts deferred to a 401(k) pension account), commissions, bonuses, retroactive wage increases, or any allowances for room or board earned in the calendar year. If these earnings are from an employer covered under the Social Security Act, the amount of the gross earnings is the amount reported for social security tax under the Federal Insurance Contributions Act (FICA). Net earnings from self-employment equals the amount of gross income minus expenses that were reported for social security tax under the Self-Employment Contributions Act (SECA). Add your earnings from employment and self-employment together to determine the total earnings for the calendar year for the purpose of Tier 1, Vested Dual Benefit, or Special Guaranty Computation work deductions.
Do not include as earnings any money that you received for any reason other than work, such as interest from savings, income from investments, gifts, inheritances, pensions or other retirement benefits.
- Exception for First Year of Entitlement - In the year your annuity begins, deductions for your own earnings are based on your earnings for the entire year, not just the earnings after you retire. However, a special rule may be used to apply work deductions in the first year you are entitled to an annuity and have a non-work month.
A Non-Work Month is a month in which you earn less than the Monthly Earnings Exempt Amount for your age (the Annual Earnings Exempt Amount for your age divided by 12) or, if self-employed, render no substantial services. (The RRB uses Form AA-4, "Self-Employment and Substantial Service Questionnaire" to determine months in which you rendered no substantial services.)
- Special Rule Applies - In the year the special rule is applied, deductions for your own earnings are not applied to any Non-Work Month. If you have high earnings before your annuity begins but do not earn more than the Monthly Earnings Exempt Amount in any month after your annuity begins, Tier I deductions for your own earnings will not be required.
- Special Rule does not Apply - If you earn more than the Monthly Earnings Exempt Amount in one or more months after your annuity begins, deductions are assessed to those months up to the amount required based on your total earnings for the year. Also, after the first year in which you have a Non-Work Month, this monthly test does not apply. If your earnings are high enough, tier I, Vested Dual Benefit, or Special Guaranty Computation work deductions will be assessed to your annuity for the entire year, even if you only work part of the year.
- Exception for Social Security Benefit Entitlement - No earnings deductions are made by the RRB to your tier I component if you are receiving social security benefits. Earnings deductions may be made by the Social Security Administration in your social security benefit. If your annuity includes a Vested Dual Benefit, however, earnings deductions are still assessed to that part of your annuity.
- Exception for Those Who do not have a Work Deduction Insured Status - Ask your RRB field office if this exception applies to you. Most employees currently retiring are not eligible for this exception because they do have a Work Deduction Insured Status.
However, there are a few employees who may not have accumulated the number of wage Quarters of Coverage, or compensation Quarters of Coverage after 1974, to have a Work Deduction Insured Status. For example, employees working for Canadian railroads have not accumulated Quarters of Coverage since 1983.
This exception only affects the Tier I component or Vested Dual Benefit work deductions. A Work Deduction Insured Status is not required for work deductions under the Special Guaranty Computation.