Railroad Retirement Board: What It Is, How It Works

The RRB replaces Social Security benefits for railroad workers. The payroll deductions are higher, but so are the benefits.

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Updated · 4 min read
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Written by Kurt Woock
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Edited by Tina Orem
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Fact Checked

The Railroad Retirement Board (RRB) is a government agency that provides retirement, disability and unemployment benefits for railroad workers

RRB.gov. Agency Overview. Accessed Sep 18, 2023.
. RRB benefits typically replace Social Security for qualifying workers. Compared to people with Social Security, most people with RRB benefits pay higher taxes but receive larger retirement benefits.

How Railroad Retirement Board benefits work

RRB benefits include retirement, unemployment and disability and are an alternative to Social Security benefits for workers in the railroad industry.

Like Social Security, RRB benefits are funded with payroll taxes from employees and employers. The National Railroad Retirement Investment Trust invests these funds in a diversified portfolio, and the funds pay for the RRB benefits.

The typical railroad retirement benefit is a monthly check with two main components

RRB.gov. Tier I And Tier II. Accessed Sep 20, 2023.
:

  • Tier I benefits, which can include benefits that resemble Social Security, a private pension or a combination of both.

  • Tier II benefits, which are similar to a private pension

These two tiers are calculated separately and combined for a retiree’s monthly payment.

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Are Railroad Retirement Board benefits higher than Social Security benefits?

Most people with RRB benefits receive larger retirement benefits but pay higher payroll taxes.

For example, monthly benefits for RRB’s 2022 fiscal year averaged $1,434.19 more for retired rail employees and $2,244.19 more for career railroad employees than the 2022 average monthly Social Security retirement benefit

.

Did you know...

The RRB adds between $23 and $43 per month to retirement benefits for employees who retire from a covered job, worked in an RRB-covered job before October 1981 and worked for at least 25 years in the rail industry.

The RRB’s higher benefits are tied to higher payroll tax contributions.

2023 Railroad Retirement Board Tax and Contribution Rates

Employee tax rate

Employer tax rate

Annual maximum taxable income

Maximum annual employee contribution

Maximum annual employer contribution

Total

RRB Tier I

7.65%

7.65%

$160,200

$12,255.30

$12,255.30

$24,510.60

RRB Tier II

4.90%

13.10%

$118,800

$5,821.20

$15,652.80

$21,474.00

Total RRB contribution

$18,076.50

$27,908.10

$45,984.60

Social Security

6.2%

6.2%

$160,200

$9,932.40

$9,932.40

$19,864.80

2024 Railroad Retirement Board Tax and Contribution Rates

Employee tax rate

Employer tax rate

Annual maximum taxable income

Maximum annual employee contribution

Maximum annual employer contribution

Total

RRB Tier I

7.65%

7.65%

$168,600

$12,897.90

$12,897.90

$25,795.80

RRB Tier II

4.90%

13.10%

$125,100

$6,129.90

$16,388.10

$22,518.00

Total RRB contribution

$19,027.80

$29,286.00

$48,313.80

Social Security

6.2%

6.2%

$168,600

$10,453.20

$10,453.20

$20,906.40

  • Someone who retires from the RRB may pay up to $18,076.50 a year in RRB taxes, whereas someone retiring from a Social Security-covered job may only contribute up to $9,932.40. 

  • Although employers may contribute a maximum of $9,932.40 per year to an employee’s Social Security record, employers in the railroad industry may contribute up to $27,908.10 per employee to the RRB. 

  • These tax rates allow an employee covered by the RRB to contribute $26,119.80 more per year than a nonrailroad employee might contribute to Social Security.

Who is eligible for RRB benefits?

RRB benefits are available to workers who spent a large part of their careers working for a railroad company

.

Your years of service determine when you become eligible for retirement benefits. The table below shows the requirements depending on your years of service.

Years of service and date requirements

Retirement age

Tier I or Tier II benefits reductions occur if you...

30 or more at any time.

First full month at age 60.

Tier I: (1) Turned 60 or hit 30 years of service between June 1984 and January 2022, (2) have an annuity that starts before 2022 and (3) retired before turning 62.

Tier II: No reduction.

10 years to 29 years 11 months, with some service before 8/12/1983.

First full month at age 62.

Tier I: Retire before full retirement age.

Tier II: Retire before 65.

10 years to 29 years 11 months with no service before 8/12/1983.

First full month at age 62.

Tier I: Retire before full retirement age.

Tier II: Retire before full retirement age.

5 years to 9 years 11 months with some service after 1995.

First full month at age 62.

Tier I: Retire before full retirement age.

Tier II: Retire before full retirement age.

People who receive RRB retirement benefits can’t work in a job that is covered by the RRB, but they can work for a company that doesn’t participate in the RRB program.

Like Social Security, RRB retirees get annual cost-of-living adjustments, or COLAs. The formula is the same as for Social Security’s COLA.

Some of your RRB benefits may be taxable. What you owe depends on your total retirement income and the tax deductions and credits you take.

🤓Nerdy Tip

If you receive RRB benefits and Social Security benefits, you may need to report both on your federal income tax return. You’ll receive a Form 1099 (Form 1042S for nonresident aliens) from the SSA and RRB showing the amounts you received from each. You’ll add this information to your Form 1040 to determine if you need to pay taxes on the benefits.

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How does the RRB calculate retirement benefits?

For the Tier I portion of RRB retirement benefits: The calculation includes any employment outside the RRB system, and it uses the same benefit formula as the Social Security Administration — that is, benefits are largely based on an index of a worker’s highest 35 years of earnings

. But, as mentioned, the age and work requirements for RRB are different from Social Security.

The formula uses a retiree’s average monthly earnings, applies bend points to calculate how much of the average monthly earnings is included in the benefits and determines the total monthly benefit by the number of years of service the person has on their RRB record

RRB.gov. Determining the Tier I Amount. Accessed Sep 21, 2023.
.

For the Tier II portion of RRB retirement benefits: The math is different here than what the Social Security Administration uses. The basic steps in the RRB formula are

:

  • Find the average of your highest 60 months of earnings, up to a maximum. 

  • Multiply the monthly average by 0.007.

  • Multiply the result by the number of years worked at an RRB-covered job.

Calculating the Tier I amount

Georgia just retired from a railroad company. To calculate her Tier I amount, the RRB uses her 36 years of qualifying years. Because she became eligible for retirement after 1991, she’ll get to use her highest 35 years of earnings. The RRB adds together these 35 years of earnings, which equals $845,000. It then divides the number by 420 (the number of months that make up 35 years) to find the average monthly earnings.

845,000 \ 420 = $2,011.90

The RRB rounds to the nearest dollar, so $2,012 is used as the monthly earnings. Using the bend points for the year Georgia retired, the RRB calculates the primary insurance amount by taking 90% of the first $1,115

SSA.gov. Primary Insurance Amount. Accessed Sep 21, 2023.
.

$1,115 x 0.9 = $1,003.50

The remaining portion up to $6,721 is multiplied by 32%.

$2,012 - $1,115 = $897 x 0.32 = $287.04 = $287.00 when rounded to the nearest lower ten cents.

The RRB then adds these dollar amounts together.

$1,003.50 + $287.00 = $1,290.50

Because Georgie retired at her full retirement age, isn’t receiving workers’ compensation or disability benefits, and isn’t receiving Social Security benefits, the RRB doesn’t reduce her retirement benefits. Her Tier I amount is $1,290.50.

Calculating the Tier II amount

To calculate her Tier II amount, the RRB takes her highest 60 months of earnings — which happen to be her last five years of employment — and adds them together. Then it finds the average monthly pay.

$48,800 + $51,240 +$53,802 + $56,492 + $59,316 = $269,650 / 60 = $4,494.16

Next, the RRB multiplies the average monthly earnings by 0.007.

$4,494.16 x 0.007 = $31.45

Finally, the RRB multiplies this amount by the years of service covered by the retirement plan. In Georgia’s case, that’s 36 years.

$31.45 x 36 = $1,132.20

Finding the total benefit

Her Tier I and Tier II amounts combined are her monthly retirement benefit.

$1,290.50 + $1,132.30 = $2,422.80

Georgia will receive $2,422.80 a month from RRB.

Estimate your Social Security retirement benefits

Your actual benefit may be lower or higher than estimate made with this calculator, because it does not take into account your actual earnings history.

We assume you have earnings every year until you begin receiving Social Security benefits. If you had several years of noncovered employment or your earnings changed significantly from year to year, this calculator will overestimate or underestimate your benefit.

Desired age to begin Social Security

You will qualify for benefits at age 62.

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