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Railroad Retirement Tier 2 Divorce

Why Do Retired Couples Divorce

The Cost of Gray Divorce in Railroad Retirement

Couples can divorce later in life for the same reasons younger couples split up infidelity, financial pressures, regrets about earlier decisions, or a desire for greater independence. But when youre over 50, these reasons are framed by aging and the realization that you have more years behind you than ahead of you.

Dividing Railroad Retirement Act Annuities In Nebraska Divorce

On Behalf of Higgins Law | Apr 19, 2019 | Firm News, Property Division |

When an employee or former employee in the railroad industry faces divorce, a key issue is how the parties will divide retirement benefits available to the rail employee under federal law. Whether the parties are negotiating a marital settlement agreement or facing a court trial in their divorce, the final agreement or order must comply with the Railroad Retirement Act or RRA and its detailed regulations.RRA annuities are also divisible in a legal separation or annulment.

Railroad employee retirement

Instead of paying into Social Security and earning Social Security retirement and disability benefits, people who work within the railway industry pay into a special rail fund and earn similar benefits, which are administered by the Railroad Retirement Board or RRB, a federal government agency.

RRA benefits may include, depending on an individuals work history:

Important requirements

Federal law has specific, detailed requirements that Nebraska state courts must follow in dividing eligible RRA benefits. Some of these requirements are:

The court order must be a final order of divorce.

Other issues

If the rail-employee spouse dies before the other ex-spouse, the ex-spouse will continue to receive his or her share of benefits, unless the divorce decree ordered that they stop at the covered employees death.

How To Get Portion Of Tier 2 Benefit Provided In Divorce Decree

Question 476:I am entitled to a part of my ex-husband’s Tier 2 benefit. I will qualify for Social Security on my own. How will the Tier 2 benefit be paid?

Answer: You or your attorney should have furnished the Railroad Retirement Board’s General Cousel with a copy of the divorce decree and your current address when the divorce was granted. Your portion of the Tier 2 benefit will not be paid until your former husband retires and files for an annuity. The RRB then should notify you that your monthly payments will start as of a certain date. Your entitlement to a Social Security benefit does not affect the amount of Tier 2 benefit you are entitled to receive from Railroad Retirement. You can contact the RRB General Counsel at 844 North Rush Street, Chicago IL 60611, to find out if the necessary information is on file. Be sure to include your former husband’s Social Security number.

Important notice:

Answers are provided as general guidance on the subjects covered in the question andare not provided as legal advice to the questioner or to readers. Any legal issues should be reviewedby your legal counsel to apply the law to the particular facts of this and similar situations.

The law in this area changes frequently. Answers are believed to be correct as of the posting dates shown.The completeness or accuracy of a particular answer may be affected by changes in the law that occur after the date on which aparticular Q& A is posted.

Copyright 1997-2017 Robert S. Kaufman

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The National Railroad Retirement Investment Trust

One unique aspect of the Railroad Retirement system is the private investment of some of its funds through the National Railroad Retirement Investment Trust . The trust is an independent organization, separate from the federal government. It is run by a board of trustees composed of three members selected by rail labor, three members selected by rail management, and an independent member selected by the other trustees . In fiscal year 2007, the NRRIT transferred $1.39 billion to the Treasury for payment of benefit obligations .

The program’s investments are diversified among a variety of asset classes. The NRRIT’s investment guidelines are frequently reexamined and adjusted, but the targeted investment allocations for the NRRIT in fiscal year 2007 are:

U.S. Equity40 percent

U.S. Fixed Income21 percent

Non-U.S. Fixed Income..7 percent

Convertibles2 percent

Cash….2 percent

In fiscal year 2007, the net rate of return on assets managed by the NRRIT was 16.38 percent, compared with the 5.3 percent return experienced by the Social Security Trust Fundwhich is limited to investments in federal securitiesduring calendar year 2007 .

Division Of Railroad Retirement Tier 2 In A Divorce

Question 1060:My husband is ready to retire at 60 with 42 years of service. His earlier marriage ended in divorce after 19 years. He recently was told at the Railroad Retirement office that his ex-wife would be receiving his full Tier 2 plus some type of annuity valued at $20,000 and that she is eligible for all this even if SHE remarries. She is 55. Is this true? Is it different for how it was done at divorce? This is NOT what he was told when he divorced and of course is upset.

Answer: A rail worker’s Tier 2 is considered property and can be divided or awarded as part of the property settlement in a divorce. The division should be clearly spelled out in the final divorce decree.

If you husband is not happy with the agreed upon property settlement, he needs to consult with the attorney who represented him in the divorce proceedings.

Important notice:

Answers are provided as general guidance on the subjects covered in the question andare not provided as legal advice to the questioner or to readers. Any legal issues should be reviewedby your legal counsel to apply the law to the particular facts of this and similar situations.

The law in this area changes frequently. Answers are believed to be correct as of the posting dates shown.The completeness or accuracy of a particular answer may be affected by changes in the law that occur after the date on which aparticular Q& A is posted.

Copyright 1997-2017 Robert S. Kaufman

Related links:

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Historical Synopsis Of The Railroad Retirement Program

The initiative for establishing a separate federal retirement program for railroad workers arose during the late 1920s as a response to the myriad problems facing the railroad industry’s private pension plans. During this period, more than 80 percent of railroad workers were employed by companies with existing pension plans, but the benefits provided by these plans were generally inadequate, liable to capricious termination, and of little assistance to disabled employees. When the Great Depression drove the already unstable railroad pension system into a state of crisis, the railroad industry was beset by retirees who needed immediate assistance. However, the planned Social Security system would not cover work performed before 1937 and was not scheduled to begin paying benefits for several years .

The revised Railroad Retirement and Carriers’ Taxing Acts were formulated and passed in 1937, establishing a national Railroad Retirement program. Almost 50,000 private railroad pensions were transferred into the system, which covered employees for retirement and disability. Initially, disability regulations were extremely stringent, and minimal benefits were provided for spouses or dependents of deceased workers. The program was financed with a tax of 2.75 percent, paid by both the employer and the employee on the first $300 of monthly income .

The following sections provide a summary of RRB’s current benefit structure, financing, and beneficiary population.

The Railroad Retirement Act: Tier I Benefits Upon Divorce

This is the fifth installment of a six-part blog series focused on the Railroad Retirement Act . You can read the full series . Although Tier I benefits are not divisible, an eligible divorced spouse can receive an annuity similar to the non-divisible Tier I annuity under the RRA. This is in addition to any divisible portion of the employees Tier II annuity awarded by way of equitable distribution by Court Order. Unlike an equitable distribution award, which provides the former spouse a share of the employees Tier II annuity, the payment of a Tier I type annuity to an eligible divorced spouse does not reduce the amount of the employees annuity. This is similar to SSA benefits available to a former spouse where the parties had been married for 10 years or more.

If you or your spouse have been railroad employees and thus may be eligible for a RRA annuity, it is strongly recommended that you speak to a legal professional to ensure that these unique benefits are properly accounted for and distributed incident to a divorce.

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Railroad Pensions And Divorce In Illinois

In the United States there are thirteen different unions that represent railroad workers with a total of over 140,000 members. These railroad workers do not pay social security taxes. Instead, they pay taxes to a separate fund administered by the Railroad Retirement Board, an independent government agency. The Railroad Retirement Board issues annuity payments to railroad workers when they retire in lieu of social security.

In an Illinois divorce, pensions are divisible but social security is not. So, what happens to railroad pensions and benefits after an Illinois divorce?

What Happens To Most Pensions In Illinois

After an Illinois divorce, most pensions get divided as marital property.

For purposes of distribution of property pursuant to this Section, all pension benefits acquired by or participated in by either spouse after the marriage and before a judgment of dissolution of marriage or legal separation or declaration of invalidity of the marriage are presumed to be marital property. 750 ILCS 5/503

The entirety of the pension is not divided, however. Only the portion which was earned during the marriage. So, theres a carve-out for property acquired before the marriage, except as it relates to retirement plans that may have both marital and non-marital characteristics 750 ILCS 5/503

Railroad pensions do not follow these rules in an Illinois divorce.

Railroad Benefits And Divorce

Supplemental Annuity is an additional payment for work beyond 25 years of service.

At What Age Is Railroad Retirement No Longer Taxed

Can My Wife Get Social Security & Tier 2 Railroad Retirement?

This is age 60 with 30 or more years of railroad service or age 62 with less than 30 years of railroad service. beginning date. Partition payments are not subject to tax-free calculations using the EEC amount. Note The RRB does not provide or compute the tax-free amount of railroad retirement annuities.

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Other Survivor Annuities Are Payable To:

  • An unmarried child under age 18.
  • An unmarried child age 18 in full-time attendance at an elementary or secondary school or in approved homeschooling, until the student attains age 19 or the end of the school term in progress when the student attains age 19. In most cases where a student attains age 19 during the school term, benefits are limited to the 2 months following the month age 19 is attained.
  • An unmarried disabled child over age 18 if the child became totally and permanently disabled before age 22.
  • An unmarried dependent grandchild meeting any of the requirements described above for a child, if both the grandchild’s parents are deceased or disabled.
  • A parent at age 60 who was dependent on the employee for at least half of the parents support. If the employee was also survived by a widow, surviving divorced spouse or child who could ever qualify for an annuity, the parent’s annuity is limited to the amount that social security would pay.

Railroad Retirement And Survivor Benefits

Annuities are payable to surviving widows and widowers, children and certain other dependents. Lump-sum benefits are payable after the death of a railroad employee only if there are no qualified survivors of the employee immediately eligible for monthly annuities. With the exception of a residual lump-sum death benefit, eligibility for survivor benefits depends on whether or not the employee was insured under the Railroad Retirement Act at the time of death.

An employee is insured if he or she has at least 10 years of railroad service, or 5 years performed after 1995, and a current connection with the railroad industry as of the month the annuity begins or the month of death, whichever occurs first. The current connection requirement is described at the beginning of this publication.

If a deceased employee was not so insured, jurisdiction of any survivor benefits payable is transferred to the Social Security Administration and any survivor benefits are paid by that agency instead of the Board. Regardless of which agency has jurisdiction, the deceased employee’s railroad retirement and social security credits will be combined for the purpose of benefit computations.

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Survivors With Dual Benefits

Social Security Benefits

The tier I portion is reduced by the amount of any social security benefits received by a survivor annuitant, even if the social security benefits are based on the survivors own earnings. This reduction follows the principles of social security law which, in effect, limit payment to the higher of any two or more benefits payable to an individual at one time. When both railroad retirement annuities and social security benefits are payable, they are generally combined into a single payment issued through the Board. A survivor annuitant must notify the Board if any benefits are received directly from the Social Security Administration or if those benefits increase other than for an annual cost-of-living increase.

Employee And Spouse Annuity Estimates

Railroad employees can get estimates of future annuities for themselves and their spouses through the Railroad Retirement Board .

  • Estimates are based on the service and earnings records maintained by the Board and show the earliest date the employee can receive a full annuity and, if applicable, the earliest date the employee can receive a reduced annuity.
  • Nonagreement employees can also review their company-provided Annual Benefits Statement for an estimate of their Railroad Retirement benefits at ages 60 , 62 and 65.

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Claiming Railroad Retirement Benefits After Divorce

Question 98:About 20 years ago, I divorced a railroad worker following 23 years of marriage. He’s now retired and I receive a Tier 1 benefit as a divorced spouse. I’m now trying to get a portion of his Tier 2 benefit. Our divorce decree awards me his retirement benefit, but it does not specify an exact amount or percentage. And it was never filed with the Railroad Retirement Board . Can I file the divorce decree now and start receiving a portion of my ex-husband’s Tier 2 benefit?

Answer: Your excellent question gave me an opportunity to review the RRB requirements for awarding Tier 2 benefits to a former wife or husband based on a divorce settlement. The RRB follows very strict requirements in evaluating legal documents submitted to support this type of claim. The RRB Web site at www.rrb.gov has an excellent attorney’s guide which lists the full requirements,contains sample language for settlement agreements, & detailed instructions on submitting the rquired documentation to the RRB.Among the most important ones are:

  • The court order must require the RRB, not the railroad worker, to make the payments.
  • The court order must specify either an exact monthly amount to be paid or an exact percentage of the monthly benefit to be paid.
  • The court order must be filed with the RRB, and there is no retroactivity of payments. The apportionment of Tier 2 begins with the month of filing with the RRB.
  • Important notice:

    Copyright 1997-2017 Robert S. Kaufman

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    How Are Railroad Retirement Benefits Calculated

    • Railroad Retirement benefits are based on months of service and earnings credit.
    • Earnings are creditable up to certain annual maximums on the amount of compensation subject to railroad retirement taxes.

    Railroad employees and employers pay a Tier I tax which is the same as the Social Security tax. Employees and employers also pay a Tier II tax which contributes to financing Railroad Retirement benefit payments in excess of coverage provided under Social Security.

    2022 Employee Tax Withholding:

    • Tier I – 6.20 percent
    • Tier II 4.90 percent
    • Medicare – 1.45 percent *Starting in 2013, an additional tax of 0.9 percent will be withheld by the employer on earnings over $200,000.

    2022 Employer Tax Withholding:

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    Applying For A Railroad Retirement Annuity

    Your Railroad Retirement annuity does not begin automatically you must apply for benefits by contacting the nearest Railroad Retirement Board office. To contact your local RRB office, call 772-5772 or use the RRB Zip Locator at www.rrb.gov to find the office nearest you.

    Applications for a Railroad Retirement Annuity are accepted by the Railroad Retirement Board up to three months in advance of an annuity beginning date. Since the rules and requirements are complex, applicants should contact their local Board office for a pre-retirement consultation.

    An Overview Of The Railroad Retirement Program

    Understanding Spouse Annuities in Railroad Retirement

    The Railroad Retirement program was established in the 1930s. It provides retirement, survivor, unemployment, and sickness benefits to individuals who have spent a substantial portion of their career in railroad employment, as well as to these workers’ families. This article describes the history, benefit structure, and funding of the Railroad Retirement program.

    The author is with the Office of Retirement and Disability Policy, Social Security Administration.

    Acknowledgments: The author would like to thank Kathleen Romig, David Weaver, Denise Lamaute, Barbara Lingg, and Larry DeWitt for their helpful comments and suggestions.

    The findings and conclusions presented in the Bulletin are those of the authors and do not necessarily represent the views of the Social Security Administration.

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    What Is Railroad Tier 2 Tax

    Tier II Tax. The railroad retirement tier II tax rates in 2022 will remain at 4.9 percent for employees and 13.1 percent for employers. The maximum amount of earnings subject to railroad retirement tier II taxes in 2022 will increase from $106,200 to $109,200.

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