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Benefits and Beneficiaries

Benefits paid under the Railroad Retirement and Railroad Unemployment Insurance Acts totaled almost $12.3 billion in the fiscal year ending September 30, 2015. Retirement and survivor benefits were paid by the RRB to about 558,000 beneficiaries during the fiscal year, of whom 525,000 were on the RRB's annuity rolls at the end of the year. Approximately 25,000 railroad employees were paid unemployment and/or sickness insurance benefits. Almost 2,000 beneficiaries received payments under both the Railroad Retirement Act and the Railroad Unemployment Insurance Act.

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The Report in Brief

Railroad retirement and unemployment insurance benefits totaling almost $12.3 billion were paid by the Railroad Retirement Board (RRB) to about 581,000 beneficiaries in fiscal year 2015. Financial reports issued in 2016 on the solvency of the railroad retirement and railroad unemployment insurance systems were both favorable. Total railroad retirement system assets equaled $26.3 billion as of September 30, 2015.

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The Railroad Retirement Act of 1937 and Later Amendments

The 1937 Act set up a staff retirement plan which provided annuities to aged retired employees based on their creditable railroad earnings and service. The amounts of retirement annuities awarded were directly related to the employee's earnings and length of service, with a maximum of $120 a month. Creditable earnings were limited to a maximum of $300 a month, while no more than 30 years of service could be credited when service before 1937 was counted.

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The Railroad Retirement Acts of 1934 and 1935

The Railroad Retirement Act of 1934 set up the first retirement system for nongovernmental workers in this country to be administered by the Federal Government. However, the Act was declared unconstitutional by a Federal district court, and this decision was sustained by the Supreme Court. The Railroad Retirement and Carriers' Taxing Acts of 1935 were enacted to avoid the constitutional difficulties encountered by the 1934 Act.

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Development of the Railroad Retirement System

Private pension plans originated in the railroad industry in 1874 when the first formal industrial pension plan in North America was established. By 1927, over 80 percent of all railroad employees in the United States worked for employers who had formal plans in operation, but only a small proportion of employees ever received benefits under these plans. The pension plans had a number of serious defects. They generally paid inadequate benefits and had limited provisions for disability retirement.

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Fiscal Year 2016 Annuity Awards to 30-Year Employees Retiring Before Full Retirement Age

Table 1.--Fiscal Year 2016 Annuity Awards to
30-Year Employees Retiring Before Full Retirement Age

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Fiscal Year 2015 Annuity Awards Based on Service Averaging Less than 30 Years

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Survivor Annuity

TIER I
The survivor tier I amount is based on the deceased employee's combined railroad retirement and social security credits, and is computed using social security formulas. In general, the survivor tier I amount is equal to the amount of survivor benefits that would have been payable under social security.

The gross survivor tier I amount (before reductions for early retirement, or other benefits) is generally equivalent to the unreduced tier I retirement benefit the deceased employee had, or would have, received.

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Spouse Annuities

The age requirements for a spouse annuity depend on the employee's age and date of retirement and the employee's years of railroad service. Benefits can be paid to eligible spouses in same-sex marriages.

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Employee Retirement Annuity

The amount of a regular annuity is the total of portions which are computed separately under different formulas and called tiers, plus any vested dual benefit payment also due.

Tier I
The first tier is calculated in generally the same way as a social security benefit. Any social security credits of an employee are combined with his or her railroad retirement credits for tier I computation purposes.

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