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Financial Position of the Railroad Retirement System

The financial condition of the railroad retirement system is closely related to the size of the railroad work force. This is because, as mentioned previously, payroll taxes on covered employers and their employees are the primary source of income to the system. Clearly, a large labor force will generate more revenue for the system than a small labor force. Although railroad employment has declined significantly from the historical high in the 1940s, the chart below shows that employment has been fluctuating in recent years.

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Office of Inspector General

The Office of Inspector General (OIG) for the RRB focuses its audit and investigative efforts on protecting the integrity of the agency's trust funds by providing comprehensive program and operational oversight. Reports issued by the OIG, and other documents referenced in this section, can be accessed at here.

Office of Audit

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Public Information Activities

The RRB maintains direct contact with railroad retirement beneficiaries through its field offices located across the country. Field personnel explain benefit rights and responsibilities on an individual basis, assist railroad employees in applying for benefits and answer any questions related to the benefit programs. The RRB also relies on railroad labor groups and employers for assistance in keeping railroad personnel informed about its benefit programs.

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Office of Equal Opportunity

Diversity Program

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6. Taxation of Railroad Retirement Benefits

Social security amendments in 1983 subjected railroad retirement tier I benefits to Federal income taxes on the same basis as social security benefits, and subsequent railroad retirement legislation subjected benefits over and above social security levels to Federal income tax on the same basis as private pensions, beginning with taxable year 1984. Revenues raised from income taxes on tier I, tier II, and vested dual benefits are used for benefit payments.

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5. Appropriations from General Revenues

As previously noted, under the financial interchange, the railroad retirement system gives the social security system the taxes social security would have collected, and the social security system gives the railroad retirement system the additional benefits social security would have paid to railroad workers and their families over what it actually pays them.

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4. Borrowing from General Revenues Related to the Financial Interchange

Financial interchange transfers are made in a lump sum for a whole fiscal year in the June following the close of a fiscal year. For example, the transfer reflecting transactions which occurred from October 2014 through September 2015 took place in June 2016. At any time, therefore, there are between 9 and 21 months' worth of financial interchange transfers which, in a sense, are owed the RRB. The RRB receives interest on this money, so this practice does no long-term harm to the financial condition of the Railroad Retirement Account.

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3. Investments

The National Railroad Retirement Investment Trust was established by the Railroad Retirement and Survivors' Improvement Act of 2001. The Trust, a tax-exempt entity independent from the Federal Government, became effective February 1, 2002.

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2. Financial Interchange

The financial interchange between the railroad retirement and social security systems is intended to put the Social Security Old-Age, Survivors, and Disability Insurance (OASDI) and Hospital Insurance (HI) trust funds in the same position they would have been had railroad employment been covered under the Social Security and Federal Insurance Contributions Acts. It follows that all computations under the financial interchange are performed according to social security law. The amount of benefits payable under the Railroad Retirement Act has no effect on the results.