Prior to calendar year 2002, the railroad retirement supplemental annuity program was financed by a work hour tax on a pay-as-you-go basis under 26 USC 3221 (C) of the Internal Revenue Code. The Railroad Retirement and Survivor’s Improvement Act of 2001 (RRSIA) repealed the Railroad Retirement Supplemental Annuity Tax effective January 1, 2002. Supplemental annuities provided under the Railroad Retirement Act were not eliminated by the RRSIA, but are now funded through the National Railroad Retirement Investment Trust.

Who is Eligible for a Supplemental Annuity?

A supplemental annuity can be paid to a retired employee who:

• has at least 25 years of railroad service with at least one month of railroad service before October 1981;
   
• is entitled to a railroad retirement annuity; and
   
• has a current connection or “deemed current connection” with the railroad industry on the annuity beginning date.

Supplemental Annuity Benefit Amount

The gross supplemental annuity rate is based on an individual’s years and months of creditable railroad service. The minimum gross rate is $23 for 25 years of railroad service. An additional $4 is added for each full year of railroad service over 25 and up to 30. The maximum supplemental annuity is $43 for employees with 30 or more years of railroad service.

Employees, who are entitled to a private pension from a railroad employer, will have their supplemental annuity reduced by that part of the private pension financed by employer contributions. Supplemental annuities are not payable to spouse or survivor annuitants.

When Can a Supplemental Annuity Begin?

The supplemental annuity can begin as early as:·

• Age 60, if the employee has at least 360 months of creditable service; or,
   
• Age 65, if the employee has 300 – 359 months of creditable service.

Type of Employer Pension Which Will Reduce the Supplemental Annuity

“Employer pension” is a pension, other than Railroad Retirement benefits, provided to the employee by a railroad employer and which is based wholly or in part on employer contributions. Employer contributions do not include amounts deducted from an employee’s payroll or any contributions to the pension fund made by an employer in lieu of a wage increase under provisions of a collective bargaining agreement.

An “employee pension” must have a written plan which:

• is communicated to the employee to whom it applies;
   
• covers a defined group of employees; and
   
• provides for the regular payment of benefits to employees under a set formula over a period of years.

Pension Plans Paid by Labor Organizations

Any employer pension paid by a labor organization to its office employees or employee representatives was excluded from the legislation that established the reduction to the supplemental annuity. These employer pensions are not considered to be a supplemental pension plans and do not cause a reduction to the RRB supplemental annuities.