Q. I worked for a railroad for a short time. During that time, my employer withheld taxes for Railroad Retirement. What will happen to that money? Also, my employer withheld no Social Security taxes. Will this reduce my Social Security benefits?
A. Railroad workers don't pay Social Security taxes. Instead, they pay into their own social insurance system, Railroad Retirement.
Many workers, of course, will move between the two systems as they move in and out of railroad employment during their careers. Although no one can get both Social Security and Railroad Retirement benefits anymore, workers never lose credit for their work because the Railroad Retirement Board can use Social Security's credits and vice versa.
The work requirement for an RRB annuity is 120 months (10 years) of creditable railroad service. The 120 service months need not be consecutive, and in some cases RRB gives credit for military service.
If a retiree has fewer than 120 months of railroad service, RRB transfers all railroad employment credits to the Social Security Administration. And SSA computes a Social Security retirement benefit based on the combined RRB and Social Security credits.
If a retiree had 120 months or more of railroad service, he or she gets a Railroad Retirement benefit. Railroad Retirement comes in two parts: Tier 1 and Tier 2 benefits. Tier 1 benefits are similar to Social Security. Tier 2 is more like a private pension.
RRB computes Tier 1 benefits by combining RRB and Social Security credits, and using Social Security's benefit formulas. Tier 1 benefits approximate what Social Security would have paid if the railroad work had been covered by the Social Security system.
Either RRB or SSA -- but never both -- pays benefits to the survivors of a deceased worker. RRB decides which agency pays. If the deceased had at least 120 months of railroad service, and had a "current connection" to the railroad industry, RRB pays the survivors. Otherwise, SSA pays.
RRB's rules about current connection are too complex to fully explain here. But usually, railroad work in 12 of the 30 months immediately before retirement or death maintains a current connection.
RRB and SSA keep close accounts of the taxes and benefits of workers and retirees who worked in both systems. SSA reimbursed RRB $4 billion last year for benefits RRB paid based on Social Security-covered work.
For more information about RRB, go to their website: www.rrb.gov or call 1-800-808-0772.