There are 8 steps in computing a tier 1 benefit amount for those whose first year of eligibility is in 1991 or later. They are listed below.

**Step 1**

Determine the number of computation years to use.

The number of computation years is 35 for employees whose first year of eligibility was in 1991 or later (it will likely be fewer than 35 years if disabled).

**Step 2**

Index creditable earnings.

Determine the employee's first year of eligibility.

**Step 3**

Compute the AIME as follows:

- Select the highest 35 years of indexed creditable earnings from Step 2, if the person's first year of eligibility is 1991 or later (it will likely be fewer than 35 years if disabled).
- Total them.
- Divide by 420 months (which is 35 years expressed in months).
- Round the result to the nearest lower dollar.

EXAMPLE:

For a person attaining age 62 in 2014, the highest 35 years of indexed earnings are used.

If the sum of these earnings equals $500,000, the AIME is $1,190 ($500,000 divided by 420 months = $1,190.48, rounded to $1,190).

**Step 4**

Compute the PIA.

- Determine the "bend points" for the first year of eligibility.
- Using the AIME, calculate:

90% of the first AIME bend point, plus 32% of the amount in excess of the first bend point but less than or equal to the second bend point, plus 15% of the amount over the second bend point.

NOTE. Receipt of a pension from noncovered employment based, in part or in whole, on employment not covered by social security or railroad retirement after 1956 may cause a reduced percentage amount to be applied to the first AIME bend point.

An explanation of this calculation is contained in the Appendix.

- Round the result to the nearest lower ten cents.
- Apply a cost-of-living increase (if needed) for each year between the first year of eligibility and the year of retirement.
- Round the result to the nearest lower ten cents.

Examples of PIA computations:

For retired employees who attained age 62 in 2014, the bend points are $816 and $4,917.

Thus the formula is 90% of the first $816 of AIME; plus 32% of the next $4,101 of AIME; plus 15% of the AIME above $4,917.

The following are examples of PIA computations for such employees who attained age 62 in 2014 with different AIME amounts:

1 |
$600 |
$540 |
90% of $600. |

2 |
$1,800 |
$1049.28 rounded $1049.20 |
90% of $816 ($734.40); plus 32% of $984 ($314.88). |

3 |
$5,102 |
$2074.47 rounded $2074.40 |
90% of $816 ($734.40); plus 32% of $4,101 ($1312.32); plus 15% of $185 ($27.75). |

For retired employees who attained age 62 in prior years, the bend points will be different and the PIA is increased to reflect cost-of-living adjustments between the year of attainment of age 62 and the year of retirement.

After the PIA is calculated for the year of attainment of age 62, apply the cost-of-living increases due for each year through 2013. The result is the 2014 PIA.

EXAMPLE:

An employee who attained age 62 in 2011 would receive cost-of-living adjustments for the years 2011-2013. The adjustments are cumulative, with each step rounded to the next lower ten cents.

If the age 62 PIA was $600, the cost-of-living adjustments would be:

2011 |
$600 |
1.036 |
$621.60 |

2012 |
$621.60 |
1.017 |
$632.10 |

2013 |
$632.10 |
1.015 |
$641.50 |

$641.50 would be the PIA effective December 2013.

**Step 5**

Consider if delayed retirement credits are due.

Did the worker delay retirement past full retirement age

or

were benefits withheld because of work deductions after full retirement age?

If yes, the delayed retirement credit is 2/3 of 1% per month up until age 70 for those who attain full retirement age January 1, 2009, or later with a birth date January 2, 1943 or later.

Delayed retirement credits earned in a particular year are payable effective with January of the following year. (If earned in the year the worker turns age 70, the delayed retirement credits are payable effective with the month age 70 is attained).

If no, go to Step 6 below.

**Step 6**

Consider receipt of workers' compensation or public disability benefits.

For employees who are under age 65 and receiving a disability annuity, the tier I amount is, under certain circumstances, reduced for receipt of workers' compensation or public disability benefits.

**Step 7**

Consider age reductions.

Is the employee retiring at age 60 or older with 30 years of railroad service

or

full retirement age or older with less than 30 years of railroad service?

If yes, go to Step 8. No age reductions apply.

If no, the tier I benefit is actuarially reduced.

The monthly benefit is reduced by 5/9 of 1% (or 1/180) for each of the first 36 months the employee is under full retirement age when the annuity begins and 5/12 of 1% (or 1/240) for each additional month.

Refer to Table 2 to determine maximum reductions in the year 2000 and later.

**Step 8**

Consider reducing for receipt of any social security benefits.

Is the employee receiving any social security benefits (whether paid on the employee's own earnings record or on another person's earnings record)?

If yes, reduce the tier I amount by the amount of the social security benefit.

If no, this is the net tier I payable to the employee.