The following questions and answers describe these railroad retirement work restrictions and earnings limitations on post-retirement employment, and how these rules can affect retirees engaging in self-employment.

What are the basic railroad retirement work restrictions and earnings limitations that apply to post-retirement work?

Neither a regular railroad retirement annuity nor a supplemental annuity is payable for any month in which a retired employee works for a railroad employer, including labor organizations. This is true even if only one day's service is performed during the month and includes local lodge compensation totaling $25 or more for any calendar month.

A spouse annuity is not payable for any month in which the employee's annuity is not payable, or for any month the spouse works for a railroad employer or railroad union. A survivor annuity is not payable for any month the survivor works for a railroad or railroad union.

Railroad retirement annuities generally consist of tier I and tier II benefits and may include certain vested dual benefit payments and/or a supplemental benefit. Like social security benefits, railroad retirement tier I benefits and vested dual benefits paid to employees and spouses, and tier I, tier II and vested dual benefits paid to survivors, are subject to earnings deductions if post-retirement earnings exceed certain exempt amounts. In 1998, the amounts are $9,120 for annuitants under age 65, and $14,500 for annuitants age 65-69. For those under age 65, the deduction is $1 for every $2 of earnings over the exempt amount, and for those 65-69, the deduction is $1 for every $3 over the exempt amount.

Earnings consist of all wages received for services rendered, plus any net earnings from self-employment. Interest, dividends, certain rental income or income from stocks, bonds, or other investments are not considered earnings for this purpose.

These earnings limitations do not apply to any annuitants age 70 or older, starting with the month in which they are 70.

Additional deductions are assessed for retired employees and spouses who work for their last pre-retirement nonrailroad employer and special restrictions apply to disability annuitants.

What are the additional deductions applied to the annuities of retired employees and spouses working for their last pre-retirement nonrailroad employer?

Such employment will reduce tier II benefits and supplemental annuity payments, which are not otherwise subject to earnings deductions, by $1 for each $2 of compensation received subject to a maximum reduction of 50 percent. The deductions in the tier II benefits and supplemental annuities of individuals who work for pre-retirement nonrailroad employers apply even if earnings do not exceed the tier I exempt earnings limits. Also, while tier I and vested dual benefit earnings deductions stop when an annuitant attains age 70, these tier II and supplemental annuity deductions continue to apply after the attainment of age 70.

Can a retired employee's earnings also reduce a spouse's benefit?

A spouse benefit is subject to reductions not only for the spouse's earnings, but also for the earnings of the employee, regardless of whether the earnings are from service for the last pre-retirement nonrailroad employer or other post-retirement employment.

What are the special restrictions applied to disability annuitants?

The amount disabled railroad retirement employee annuitants can earn without reducing their benefits is $400 per month, exclusive of disability-related work expenses. While a disabled employee's annuity is not payable for any month in which he or she earns more than $400 in any employment or self-employment, withheld payments will be restored if earnings for the year are less than $5,000. Otherwise, the annuity is subject to a deduction of one month's benefit for each multiple of $400 earned over $4,800 (the last $200 or more of earnings over $4,800 counts as $400). However, if a disabled annuitant works after retirement, this may also raise a question about the possibility of that individual's recovery from disability, regardless of the amount of earnings, and such work must be reported.

These disability work restrictions apply until the disabled employee annuitant is full retirement age, currently 65, when the annuitant becomes subject to the work and earnings restrictions applicable to employee annuitants based on age and service. This transition is effective no earlier than full retirement age, currently 65, even if the annuitant had 30 years of service.

After retirement, I'm thinking of becoming a self-employed contractor or consultant, and might be providing services for a railroad or my last pre-retirement nonrailroad employer. How would this affect my railroad retirement annuity?

It depends on whether or not the Railroad Retirement Board considers you to be truly engaging in self-employed contracting or consulting, or whether the Board considers you to be functioning as an employee, and if so, who the Board considers to be the actual employer for railroad retirement purposes.

If a retiree is considered to be functioning as a self-employed contractor or consultant, his or her annuity is subject to tier I and vested dual benefit earnings deductions for net self-employment earnings.

However, if a retiree is considered to be functioning as an employee of a railroad or railroad labor organization, rather than as a self-employed contractor or consultant, the retiree's annuity would be subject to suspension. If the retiree is considered the employee of a nonrailroad employer, the retiree's annuity would be subject to earnings deductions for nonrailroad wages, and to additional deductions if he or she is considered to be working for a last nonrailroad pre-retirement employer.

Board determinations on contracting or consulting services take into account multiple factors which could be evaluated differently depending on the circumstances of the individual situation. Since no single rule covers every case, an annuitant requiring a determination as to whether contractor or consultant service is valid self-employment should contact the Board for a determination well in advance of making a commitment so as to be sure of the effect on benefit payments.

Treasury Proposal to Implement Mandatory Electronic Funds Transfer

The Debt Collection Improvement Act of 1996 enacted with bipartisan congressional support on April 26, 1996, requires the use of electronic funds transfer (EFT) for all Federal payments (except for tax refunds) starting January 2, 1999. This includes railroad retirement, social security, veterans' and other benefit payments.

The Department of Treasury has issued a proposed rule to implement this legislation. The proposed rule addresses how current and new recipients of Federal payments will arrange to have their payments delivered electronically, how those without accounts at financial institutions will receive their payments, and who is eligible for a waiver.

The following questions and answers provide information on the proposed rule.

How is EFT advantageous to beneficiaries and the Government?

EFT is advantageous to beneficiaries because those enrolled do not have to be concerned about a benefit check being lost or stolen, do not become inconvenienced by mail delays, do not have to go to the bank or remail a check to deposit it, or worry about a check sitting in the mailbox when they're away from home. EFT payments begin to earn interest at once if the payments are deposited in an interest-bearing account, and benefit payments are available in a beneficiary's account the morning of the payment date.

The program is also to the advantage of the government and the public because current costs for issuing a check payment are 43 cents as compared to 2 cents for issuing a direct deposit payment. For example, if all payments issued by the Railroad Retirement Board were now issued through EFT, the Board could save $1.5 million each year.

EFT will save the federal government as a whole as much as $100 million a year in processing costs alone. This savings is in addition to the $65 million lost each year by individuals, businesses and the government as a result of forgery, theft and counterfeiting of government checks.

How will the proposed rule affect persons still getting paper checks who also have bank accounts?

All federal payment recipients with an account at a financial institution (bank, credit union, or savings and loan) must designate that account to receive their payments by EFT.

What will happen to beneficiaries without bank accounts?

Federal recipients without an account at a financial institution may choose to open an account at a financial institution on their own, or to be provided with an account in their name that allows them to access their funds at a reasonable cost and that has the same consumer protections as other accounts at the same financial institution.

These recipients would be able to continue receiving paper checks until these accounts, being designed by the Department of the Treasury, are available or until January 2, 2000, whichever is earlier. These newly created "Electronic Transfer Accounts" would permit ATM and point-of-sale access.

Are any waivers for individuals included in the proposed rule?

Under the proposed rule, hardship waivers for individuals would be granted in the following cases:

Individuals who began receiving federal payments before July 26, 1996, and who have an account with a financial institution, would not be required to receive their payments by EFT if they certify that payment by EFT will impose hardship due to a physical disability or geographic barrier.

Individuals who certify that they do not have an account with a financial institution and that payment by EFT would impose hardship due to a physical disability or geographical barrier, or would impose a financial hardship, would not be required to receive their payments by EFT.

The proposed rule defines an authorized payment agent as any person or entity that is appointed as a representative payee or fiduciary, under regulations of the Railroad Retirement Board, the Social Security Administration, the Department of Veterans Affairs or other agencies, to act on behalf of a beneficiary of a federal benefit payment. Common examples include relatives of the recipient or a nursing home designated to manage the recipient's finances.

Can EFT payments be made to an account in the name of an individual other than the recipient?

The proposed rule requires that all payments must be made to an account in the name of the federal payment recipient with two exceptions. The first exception addresses cases in which a representative payee or fiduciary has been designated by an agency to manage the beneficiary's finances and receive payments on his or her behalf. These relationships could continue under the proposed rule.

The second exception involves situations in which beneficiaries choose to have their payments deposited in an account in the name of a broker or dealer registered under the Securities Act of 1934. Many brokers and dealers offer cash management accounts that combine investment and transaction features. In these cases, funds deposited into an account at a financial institution, which may be in the name of the securities broker or the name of the recipient are "swept" out of the account on a regular basis and into an investment vehicle.

What will the Department of Treasury do to provide public education and notice of the EFT provisions?

The Department of the Treasury, working closely with consumer and community organizations, is initiating an extensive public education campaign to encourage all check recipients to make an informed choice about how they receive their payments. Public hearings were held during October in Dallas, New York and Baltimore at which the public provided feedback on the proposed rule. After the 90-day comment period on the proposed rule, which ended December 16, 1997, the Department of Treasury began reviewing all comments and will publish a final rule. Once the final rule is in place, the public education campaign will continue.

How many railroad retirement annuitants are currently receiving their monthly benefit payments via EFT?

Over 750,000 railroad retirement annuitants receive benefit payments from the U.S. Railroad Retirement Board each month. While many annuitants still receive checks by mail, over 66 percent currently receive their payments through EFT. In addition, over 83 percent of the claimants for railroad unemployment and sickness insurance benefits receive these benefits through EFT.

For more information on railroad retirement work restrictions and earnings limitations or other railroad retirement matters, contact the nearest Railroad Retirement Board office. Most Board offices are open to the public from 9:00 a.m. to 3:30 p.m., Monday through Friday. The address of the nearest field office can be located by visiting the Board's Web Site at http://www.rrb.gov, looking in the telephone directory under "United States Government," or checking with a union representative, rail employer, local post office or Federal Information Center.