Attorney's Guide to the Partition of Railroad Retirement Annuities
FEBRUARY 1999 Bureau of Law
|6 101 Purpose of Guide||6 106 Summary of Board Requirements for Partition Order|
|6 102 The Railroad Retirement Act||6 107 Division of Railroad Retirement Disability Annuities|
|6 103 Funding of Railroad Retirement Annuities||6 108 Board Action on Receipt of Order|
|6 104 Railroad Retirement Annuity Components||6 109 Garnishment for Support Enforcement|
|6 105 Statement or Estimate of Railroad Retirement Benefits||6 110 Frequently Asked Questions|
|A. Sample Language and Sample Court Order||C. Statement or Estimate of Benefits|
|B. Divorced Spouse Annuity|
This booklet is a guide to the partition of employee railroad retirement annuities as property in a state court action for divorce, annulment, or legal separation. It explains how to effect an annuity partition in compliance with the Railroad Retirement Act (RRA) (45 U.S.C. ' 231 et seq.) and the regulations of the Railroad Retirement Board (20 CFR Part 295).
Questions or comments concerning the information in this booklet should be submitted in writing to: Deputy General Counsel, Railroad Retirement Board, 844 North Rush Street, Chicago, IL 60611.
The Railroad Retirement Act (RRA) is a Federal statute administered by the Railroad Retirement Board (RRB), an agency of the Federal government, that replaces the Social Security Act for rail industry employers and employees. The RRA provides monthly annuities for employees who meet certain age and service requirements, including annuities based on disability.
Accordingly, although the RRA provides annuities for spouses, divorced spouses and survivors, a state court can not award such an annuity to the former spouse or child of an employee (the Board will disregard any mention in a state court order of the divorced spouse or surviving divorced spouse benefit; only employee benefits may be allocated by state court order). Similarly, railroad retirement benefits cease upon the death of the beneficiary, and a state court may not designate a former spouse or child as a surviving beneficiary.
Further, the Employee Retirement Income Security Act (ERISA), as amended by the Retirement Equity Act of 1984, does not apply to annuities under the Railroad Retirement Act. Consequently, the Board will accept a Qualified Domestic Relations Order (QDRO) only if it provides for an annuity partition that is valid under the Board's regulations. Conversely, a separate order is not required. An effective annuity partition may be made by means of appropriate language incorporated within the divorce decree itself. Appendix A contains sample language for this purpose, as well as a sample court order for instances where that is wanted.
An eligible spouse, divorced spouse, or surviving divorced spouse can receive an annuity under the RRA in addition to any divisible portion of the employee's annuity awarded to her/him as property by state court order. The payment of an annuity to an eligible spouse, divorced spouse, or surviving divorced spouse does not reduce the amount of the employee's annuity.
A booklet that explains retirement and survivor benefits under the Railroad Retirement Act may be obtained from any Board office.
The Board does not administer the private pension plans of rail industry employers.
Railroad employees and employers pay employment taxes under the Railroad Retirement Tax Act (RRTA) (26 U.S.C. ' 3201 et seq.) to fund payment of railroad retirement annuities. The taxes paid are credited to trust funds from which annuities are paid. RRTA taxes are analogous to contributions under the Federal Insurance Contributions Act (FICA). The Internal Revenue Service collects RRTA taxes just as it collects FICA and other federal taxes. Like FICA contributions, properly collected RRTA taxes are not refundable.
6 103.01 "Valuation" and Railroad Retirement Annuities. Railroad retirement taxes are not credited to individual employee "accounts" that accrue value over time as an independent monetary asset. Rather, an employee's monthly annuity rate is computed solely on the basis of his or her length of service and earnings in covered employment. A court order that divides an employee's "account" instead of his or her retirement annuity will not be valid under the Railroad Retirement Act.
6 103.02 Status of Railroad Retirement Tax as Marital Asset. The amount of taxes paid by an individual employee under the RRTA is not a marital or community property asset available for division by court order.
An employee's railroad retirement annuity is a monthly benefit comprised of several components as described below.
6 104.01 Non-divisible Tier I component. The Tier I component of an employee's annuity is calculated by applying the benefit formula in section 215 of the Social Security Act to the employee's earnings record. For this purpose, an employee's earnings record includes both rail industry earnings and any earnings from employment covered by the Social Security Act. Tier I is the same benefit amount that the Social Security Act would provide if the employee's railroad employment had been covered by that Act. Important: The Railroad Retirement Act prohibits partition of the Tier I component.
6 104.02 Divisible annuity components. In addition to Tier I, an employee's annuity includes a Tier II component and may also include certain other components, as described below. The RRA does not prohibit allocation as property of the following annuity components:
(A) Tier II component. An employee's Tier II component is based solely upon rail industry service and earnings. It is calculated under section 3(b) of the Railroad Retirement Act.
(B) Supplemental annuity. An employee who completes 25 years of railroad service and who had railroad service before 1981 may receive a supplemental annuity under section 2(b) of the Railroad Retirement Act. A supplemental annuity ranges in amount from $23 to $43 per month.
(C) Vested dual benefit. The vested dual benefit is an additional amount available to railroad employees who meet certain vesting requirements and are fully insured under both RRA and SSA prior to 1975.
(D) Overall minimum increase. In some cases, an employee's annuity under the Railroad Retirement Act may be less than the amount he or she could receive under the Social Security Act if rail industry employment were covered by that Act. The annuity may be increased so that the employee receives at least as much as he or she would receive under the Social Security Act. The amount of this increase is divisible.
Upon request, the Board will provide a report of the amount of the monthly annuity being paid to a retired railroad employee and a breakdown of the divisible and non-divisible components. If the employee is not retired but has completed 10 years of railroad service, the Board will estimate the divisible and non-divisible monthly benefit amounts that would be payable if the employee were of retirement age at the time of the request. Estimates are not available until the employee has completed 10 years of railroad service.
6 105.01 Basis of Statement or Estimate. The Board computes benefit estimates on the basis of its record of the employee's service and earnings. The Board's records are updated annually on the basis of employer reports of employee service and earnings in the previous year. Benefit estimates do not reflect reductions that may be applied because of early retirement. The annuity may also be reduced for work deductions and Medicare premiums.
6 105.02 Report of Creditable Service and Compensation. Each year, the Board issues Form BA-6 to railroad employees, showing the employee's service for the previous calendar year and his or her total creditable railroad service and compensation. The amount of creditable railroad compensation does not in any way reflect the "value" of the employee's railroad retirement benefits.
6 105.03 Future Benefits. The Board cannot furnish the present value of future benefits. Further, the Board will not make computations based upon statistics or procedures not maintained by the Board in its administration of the Railroad Retirement Act. The Board can provide information only to the extent it is maintained in its official records.
6 105.04 Disclosure of Employee Information. The Board can provide other information about the employee only if the employee authorizes the Board to release it to another party. Information concerning an individual is not subject to disclosure even though it has been made the subject of a subpoena. See 20 CFR ' 295.6and 20 CFR ' 200.8. See also Hubbard v. Southern Railway Company, 179 F. Supp. 244 (D.C. M.D. Ga., 1959). As stated in 20 CFR ' 295.6, the Board treats a subpoena as a request for a benefit report or estimate.
The Board's regulations implementing section 14(b)(2) of the Act (45 U.S.C. ' 231m(b)(2)) have been published as 20 CFR Part 295. The Board will honor a decree of divorce, legal separation or annulment (or a court-approved property settlement incident to such a decree) that complies with these regulations. The key provisions of the regulations are as follows:
6 106.01 Final Decree. The decree must be final, and issued in accordance with the laws of the jurisdiction of that court (20 CFR 295.2).
6 106.02 Statutory Authority. The decree must provide for the division of the employee's benefits under the Railroad Retirement Act, as distinguished from payments under a private pension (>20 CFR 295.3(a)(1)).
6 106.03 Final Disposition of Property. The decree must provide for the division of the employee's benefits as part of a final disposition of property between the parties, rather than as an award of spousal support. (20 CFR 295.2).
6 106.04 Direct Payments to Former Spouse. The decree must obligate the Railroad Retirement Board rather than the employee to make direct payments to the spouse (20 CFR 295.3(a)).
6 106.05 Division of Certain Benefits Only. The decree may not divide the tier I amount (20 CFR '' 295.1(b) and 295.5(a)). The Board applies a decree only to the employee's non-tier I benefits without regard to the wording of the decree (20 CFR 295.4(b)).
6 106.06 Statement of Award. A decree may state the award as a percentage, dollar amount, or as a fraction of the employee's benefits subject to division (see Appendix B for sample language). The Board will deduct any amount or fraction allowed under state law, but the Board cannot deduct an amount greater than the total benefits subject to division payable to the employee for any month.
6 106.07 Service of Certified Copy. A certified copy of any decree awarding the spouse an interest in the employee's benefits should be forwarded to the Deputy General Counsel, Railroad Retirement Board, 844 North Rush Street, Chicago, Illinois 60611. Any correspondence should identify the employee by name and social security number and should contain the current addresses of both parties or their counsel.
6 106.08 Obligation of Spouse. The spouse or former spouse of an employee must complete an "Agreement of Spouse or Former Spouse" as a condition for receiving payment of the amount awarded. The spouse or former spouse will also be required to complete an Electronic Funds Transfer(EFT) statement prior to payment.
6 106.09 When Deductions Begin. Deductions from the employee's annuity pursuant to the decree may begin the later of the employee's annuity beginning date or the month the Bureau of Law receives the decree. See & 108 for additional information on this topic.
6107 Division of Railroad Retirement Disability Annuities
Disability annuities paid under the Railroad Retirement Act are subject to partition as property in the same manner as age and service annuities.
6 107.01 Effect of Order. The Board will apply a valid court order to any type of annuity that the Board pays an employee, unless the court order expressly exempts an employee's disability annuity from partition. If the order contains such an exemption and does not otherwise prohibit division of an age and service annuity, the Board will apply the court order when the disability annuity is converted to an age and service annuity.
6 107.02 Conversion of Disability Annuity. The Board converts an employee's annuity from a disability annuity to an age and service annuity when the employee attains "retirement age." For those employees born before 1938, retirement age is age 65. It increases gradually for those born after 1937 so that for those born in 1960 or later, retirement age is age 67.
Upon receipt of a court-certified copy of a decree or court order, the Board will take the following actions:
1. Determine whether the order complies with 20 CFR Part 295.
2. Advise the parties or their legal representatives of the determination.
3. Request the employee's spouse or former spouse to execute an Agreement of Spouse or Former Spouse regarding payment of the amount to be withheld from the employee's annuity and paid to the spouse or former spouse as her/his property. If the employee is currently receiving an annuity, the Board will request the spouse or former spouse to execute an Electronic Funds Transfer (EFT) statement.
4. Withhold the court-ordered partition amount from any annuity payments currently being made to the employee and initiate payment to the former spouse as soon as the Agreement of Spouse or Former Spouse and EFT statement are returned to the Bureau of Law of the Railroad Retirement Board. The Board will withhold a partition award from the employee's annuity for three months pending receipt of the Agreement and EFT statement; after three months, if these documents have not been received in the Bureau of Law, the Board no longer has any obligation to withhold the annuity partition, and the withheld amounts are released to the employee. Withholding will not begin again until the signed Agreement and EFT statement are received in the Bureau of Law, and no arrearage accrues to the former spouse at that time.
5. If the employee is not retired, file the order in the Board's official records and apply it when the employee begins to receive an annuity. Payment will be dependent upon the completion of an EFT statement.
6 108.01 Effect of Ambiguity. If the decree or court order does not comply with 20 CFR Part 295, or if it contains an ambiguity that cannot be resolved, the Board will explain the nature of the problems that prevent approval.
6 108.02 Effect of Other Provisions. The Board will disregard any provision of an order that attempts to require a division of the employee's Tier I component or that requires payment of a divorced spouse benefit or a survivor benefit under the Railroad Retirement Act. The Board will also disregard any provision of an otherwise valid order if such provision runs contrary to the Railroad Retirement Act.
6 108.03 Name and Address Changes. The former spouse is responsible for informing the Board in writing of any name and address changes. When the employee's annuity becomes payable, the Board will notify the former spouse at the most recent address contained in its records and secure EFT information.
Annuity payments under the Railroad Retirement Act (and payments under the Railroad Unemployment Insurance Act) may be subject to proceedings to enforce an employee's legal obligation to provide child support or alimony (maintenance). Such legal process should be in accord with state law and should be directed to the Deputy General Counsel, Railroad Retirement Board, 844 N. Rush Street, Chicago, Illinois 60611.
6 109.01 Portions Subject to Garnishment. All components of an employee's annuity, including Tier I, are subject to legal process for support enforcement, subject to applicable state and federal exemptions.
6 109.02 Regulations Concerning Garnishment. Regulations of the Railroad Retirement Board concerning garnishment of benefit payments have been published in Title 20 of the Code of Federal Regulations, Part 350.
6 109.03 Disclosure of Benefit Information. Upon request, the Board will provide information about any benefit payments being made to an employee that may be attached to enforce his or her support obligation. The Board can not, however, disclose the employee's current address or any other information the disclosure of which is prohibited by Federal statute. The Parent Locator Service, Office of Child Support Enforcement, Department of Health and Human Services, Aerospace Building, 370 L'Enfant Promenade, S.W., Washington, D.C. 20447 (202-401-9373) has the authority to obtain information as to addresses in certain cases.
1. Does the employee have a divisible account balance? An employee does not have a divisible "account balance" with respect to any specific period of time, such as the period of the marriage, or as of any given date, such as the date of divorce.
2. What happens to a partitioned annuity upon the death of the employee or the former spouse? Payments to a spouse or former spouse under a court order terminate upon the death of the employee, or the former spouse, whichever takes place first. If the former spouse dies first, payment of the amount that the spouse or former spouse was receiving, or could receive under the order, reverts to the employee as his property and does not become the property of the estate of the spouse or former spouse. If the employee dies first, the former spouse may qualify for payment of an annuity as a surviving divorced spouse.
3. What is the maximum amount that can be awarded to a former spouse in a state court order partitioning the employee's benefits? The Railroad Retirement Act does not set or limit the amount that a court may award to a spouse or former spouse as his or her share of the employee's divisible benefits, except that an amount greater than the amount of the divisible benefits may not be awarded. Rather, the court sets the award by applying relevant state domestic relations law or by approving the provisions of a property settlement agreement between the parties.
4. Can the Railroad Retirement Board be joined as a party to a divorce action? No. The Railroad Retirement Board cannot be joined as a party to any action for divorce, separation, or annulment. As an agency of the Federal government, the RRB is immune from suit in state domestic relations actions and the records it maintains are not subject to subpoena by the Court.
5. Can the RRB report whether an employee has a profit sharing plan, 401(k) plan, or other similar monetary asset through his employment? No. The RRB does not maintain any such information. The only information the RRB can supply is information about the employee's actual or potential right to receive an annuity under the RRA. The amount of any actual or estimated annuity payments under the RRA may also be reported in connection with a state court action for divorce, legal separation, or annulment.
6. Does remarriage of the former spouse affect payment of the amount of the partition? Remarriage would have no effect unless the court order that granted the partition requires termination of payment upon remarriage. Since the partitioned amount is an "award of property" and not a "benefit" that could be affected by remarriage, the partition payment is ordinarily payable regardless of the marital status of either party.
7. Does an employee's marriage have to last at least 10 years before a court can order a partition of his annuity? No. As explained in Appendix B, the 10-year marriage requirement applies only to eligibility for a divorced spouse annuity.
8. What is the difference between a divorced spouse annuity and a partition? A divorced spouse annuity is a monthly benefit payable to a former spouse who meets the conditions as described in Appendix B. This payment does not reduce the employee's annuity. A partition is a specified payment of a portion of the employee's divisible components of his/her annuity pursuant to a court order. The employee's annuity is therefore reduced.
Sample Language and Sample Court Order
The following are examples of language for an award that may be incorporated within the divorce decree itself. The sample formula award provides an equal division of property in proportion to the period of the marriage but may be revised to produce a different result.
[SPOUSE'S NAME] is awarded, and the Railroad Retirement Board is directed to pay, an interest in the portion of [EMPLOYEE'S NAME] benefits under the Railroad Retirement Act (45 U.S.C. ' 231, et seq.) which may be divided as provided by Section 14 of that Act (45 U.S.C. ' 231m). [SPOUSE'S NAME] share shall be computed by multiplying the divisible portion of [EMPLOYEE'S NAME] monthly benefit by a fraction, the numerator of which is the number of years [EMPLOYEE'S NAME] worked for a railroad employer during the period of the marriage, [MONTH/YEAR] through [MONTH/YEAR], and the denominator of which shall be [EMPLOYEE'S NAME] total number of years employed by a railroad employer at retirement, and then dividing the product by two.
[SPOUSE'S NAME] is awarded, and the Railroad Retirement Board is directed to pay, an interest in the portion of [EMPLOYEE'S NAME] benefits under the Railroad Retirement Act (45 U.S.C. ' 231, et seq.) which may be divided as provided by section 14 of that Act (45 U.S.C. ' 231m). [SPOUSE'S NAME] share shall be computed as an amount equal to [PERCENTAGE] of [EMPLOYEE'S NAME] monthly divisible benefits. &ob;The percentage award should only be used when the employee is currently in receipt of benefits. If your intent is to award a percentage of the employee's divisible benefits at a particular point in time, this will be converted to a fixed dollar award (see below)&cb;.
[SPOUSE'S NAME] is awarded, and the Railroad Retirement Board is directed to pay, an interest in the portion of [EMPLOYEE'S NAME] benefits under the Railroad Retirement Act (45 U.S.C. ' 231, et seq.) which may be divided as provided by section 14 of that Act (45 U.S.C. ' 231m). [SPOUSE'S NAME] share shall be computed as an amount equal to [DOLLAR AMOUNT] of [EMPLOYEE'S NAME] monthly divisible benefits.
(1) Unless the award applies only to the Tier II portion of the employee's benefits, the Board will apply the award to the sum of the employee's divisible components.
(2) Unless the order expressly exempts a disability annuity from partition, the Board will apply an award to either a retirement or disability annuity under the Railroad Retirement Act. The parties may avoid partition of a disability annuity by a statement such as, "The parties expressly agree that this paragraph shall not apply to any disability annuity paid by the Railroad Retirement Board." The Board will then partition the employee's disability annuity only upon its conversion to an age and service annuity.
(3) Under the above Formula Award or Percentage Award, a share of any cost-of-living increase in the employee's divisible benefits would also accrue to the spouse or former spouse. No cost-of-living increase, however, is applicable to a Fixed Dollar Award. Similarly, in the event that the parties award a percentage of divisible benefits as of a certain date, such as the date of the decree, such percentage award constitutes a fixed award with no applicable cost-of-living increases.
If a separate order is necessary, a sample court order is set forth below.
SAMPLE COURT ORDER
[C A P T I O N]
ORDER DIVIDING RAILROAD RETIREMENT BENEFITS
1. The purpose of this order is to divide the [employee's] non-tier I benefits under the Railroad Retirement Act as part of a final distribution of property between the parties. The parties in this action were divorced by order of this court entered [date].
2. The court finds in accord with the law of this state that the [employee's] non-tier I benefits under the Railroad Retirement Act are marital/community property between the parties and may be allocated by order of this court. The Railroad Retirement Act prohibits any allocation of the [employee's] tier I benefits. The Railroad Retirement Board administers the Railroad Retirement Act.
3. The name, address, and social security number of the [employee] are:
4. It is therefore ordered that:
[Insert award paragraph; see sample language.]
5. A court-certified copy of this order shall be served upon the Deputy General Counsel, Railroad Retirement Board, 844 North Rush Street, Chicago, Illinois 60611.
6. So Ordered this ________ of ______________________, 199_____.
Attorney for employee
[NAME AND ADDRESS OF LAW FIRM]
Attorney for spouse
[NAME AND ADDRESS OF LAW FIRM]
WHEN AN INDIVIDUAL IS ELIGIBLE FOR
A RAILROAD RETIREMENT DIVORCED SPOUSE ANNUITY
A. REQUIREMENTS FOR A DIVORCED SPOUSE ANNUITY - A person is eligible for a divorced spouse annuity under the Railroad Retirement Act (RR Act) when all of the following conditions are met:
1. The railroad employee is at least age 62 and is currently receiving a Railroad Retirement employee annuity; and,
2. The divorced spouse is at least age 62 for a full month if applying for a reduced annuity, or at least age 65 if applying for an unreduced annuity; and,
3. The marriage to the employee ended in a final decree of divorce; and,
4. The divorced spouse was married to the employee for at least 10 years immediately before the date the divorce became final; and,
5. The divorced spouse is not currently married; and,
6. The divorced spouse is not entitled to a social security benefit based on his or her own earnings, the amount of which before any reductions is greater than the maximum amount to which he or she would be entitled as a divorced spouse annuitant; and,
7. The divorced spouse is not entitled to a spouse annuity, remarried widow(er)'s annuity or surviving divorced spouse annuity on a different RRB claim number, the net monthly rate of which is greater than the amount to which he or she would be entitled as a divorced spouse annuitant; and,
8. The divorced spouse has stopped all work for pay for an employer covered by the RR Act and given up all rights to return to such service.
B. WHEN A DIVORCED SPOUSE ANNUITY IS NOT PAYABLE - A divorced spouse annuity is not payable for any month in which:
1. The divorced spouse works for an employer covered by the RR Act; or,
2. The employee annuity on the same RRB claim number is not payable; or
3. The divorced spouse is entitled to an employee annuity on his or her own earnings record that exceeds the divorced spouse annuity.
C. WHEN A DIVORCED SPOUSE ANNUITY ENDS - A divorced spouse annuity ends on the last day of the month before the month in which:
1. The divorced spouse dies; or,
2. The employee dies. (The divorced spouse may qualify for a surviving divorced spouse annuity at this time); or,
3. The divorced spouse marries; or,
4. The divorced spouse becomes entitled to a social security benefit based on his or her own earnings, the amount of which before any reductions is greater than the maximum amount to which he or she was entitled as a divorced spouse; or,
5. The divorced spouse becomes entitled to a spouse annuity, a remarried widow(er)'s annuity or a surviving divorced spouse annuity on a different RRB claim number that is greater than the amount to which he or she was entitled to as a divorced spouse.
APPENDIX C: STATEMENT OR ESTIMATE OF BENEFITS
RRB Form T-25 (1-93)
Statement of Railroad Employee's Actual
or Estimated Railroad Retirement Benefits
(20 CFR Part 295)
Section A - Purpose of Statement
This is a statement of actual or potential benefits under the Railroad Retirement Act with respect to the employee named above. It is furnished pursuant to 20 CFR Part 295 for use in connection with a state court action for divorce, legal separation, or annulment involving this employee. Entries in the sections below provide relevant information about the employee's actual or estimated benefits under the Act. Please see the other side of this statement for additional information about division of railroad retirement benefits.
Section B -- Statement of Current Railroad Retirement Benefit Entitlement
Section C -- Monthly Railroad Retirement Benefit Amounts
Caution: The Tier I benefit component is not subject to division, and the Railroad Retirement Board will not recognize any property division made with respect to it.
Section D -- Railroad Retirement Divorced Spouse Benefit Estimate
Section E -- Certification
Telephone No.______________________________ Date_______________________________________