If both you and the employee are Full Retirement Age (FRA), or older, on your ABD, you may skip to tier II Component Work Deductions. You are not affected by work deductions to your spouse annuity tier I component or divorced spouse annuity.
If either you are or the employee is under FRA, earnings from any nonrailroad employment (including self-employment) over the Annual Earnings Exempt Amount may cause work deductions to your spouse annuity tier I component or divorced spouse annuity.
- Definition of Annual Earnings Exempt Amount - The term Annual Earnings Exempt Amount means the amount of money you or the employee can earn in nonrailroad employment in a year without losing part of your annuity. 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.
Determining Your Work Deductions
| 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 Work Deductions - In general, earnings restrictions apply to gross earnings from employment and net earnings from self-employment. Gross earnings are all salaries, commissions, bonuses, retroactive wage increases, or any allowances for room or board. If these earnings are from an employer covered under the Social Security (SS) Act, the amount of the gross earnings is equal to the amount reported for social security tax under the Federal Insurance Contributions Act (FICA). Net earnings from self-employment equal 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 year for the purpose of 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.
When employees have earnings over the Annual Earnings Exempt Amount for their age group, the excess is charged against their annuity and the annuities of all others entitled on their earnings record. An exception applies for a divorced spouse who has been divorced from the employee for at least two years. The employee's earnings will not cause work deductions to the divorced spouse annuity effective from the second anniversary of the divorce.
- 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 after your annuity begins in which you have a non-work month. For many people, this is the year their annuity begins.
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 twelve) 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, no tier I work deductions for your own earnings are applied to any Non-Work Month. If you have high earnings before your annuity begins, but do not earn more than the Monthly Exempt Earnings Amount in any month after your annuity begins, Tier 1 work deductions for your own earnings will not be required.
- Special Rule Does Not Apply - If you do 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, 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 in your spouse annuity tier I component or divorced spouse annuity if you are receiving social security benefits. Earnings deductions may be made by the Social Security Administration in your social security benefit.