[Code of Federal Regulations]
[Title 20, Volume 1]
[Revised as of April 1, 2005]
From the U.S. Government Printing Office via GPO Access
[CITE: 20CFR226.10]

[Page 436-437]
 
                      TITLE 20--EMPLOYEES' BENEFITS
 
                  CHAPTER II--RAILROAD RETIREMENT BOARD
 
PART 226_COMPUTING EMPLOYEE, SPOUSE, AND DIVORCED SPOUSE ANNUITIES
--Table of Contents
 
                 Subpart B_Computing an Employee Annuity
 
Sec. 226.10  Employee tier I.


    Tier I of an employee annuity is an amount similar to the social 
security benefit the employee would receive based on combined railroad 
and social security earnings. The tier I benefit is computed as follows:
    (a) A tier I PIA is computed based on combined railroad and social 
security earnings, as shown in Sec. 225.11 of this chapter. This PIA is 
adjusted for any delayed retirement credits or cost-of-living increases, 
as shown in subparts D and E of part 225 of this chapter, and is reduced 
for receipt of a pension

[[Page 437]]

based upon non-covered service in accordance with section 215(a)(7) of 
the Social Security Act. The tier I of a disability annuity may also be 
adjusted for other benefits based on disability, as shown in Sec. Sec. 
226.70-226.74 of this part. Except in the case of an employee who 
retires at age 60 with 30 years of service, if the result is not a 
multiple of $1, it is rounded to the next lower multiple of $1. In the 
case of an employee who retires with an age reduced annuity based upon 
30 years of service (see Sec. 216.31 of this chapter) the tier I is not 
rounded until all reductions have been made.
    (b) If the employee is entitled to a reduced age annuity (see Sec. 
216.31 of this chapter), the rate from paragraph (a) of this section is 
multiplied by a fraction for each month the employee is under retirement 
age on the annuity beginning date. The result is subtracted from the 
rate in paragraph (a) of this section. At present the fraction is \5/9\ 
of 1% (or \1/180\). If the employee retires before age 62 with at least 
30 years of service, the employee is deemed age 62 for age reduction 
purposes and a 20% reduction is applied. This reduction remains in 
effect until the first full month throughout which the employee is age 
62, at which time the tier I is recomputed to reflect interim increases 
in the national wage levels and the age reduction factor is recomputed, 
if necessary, in accordance with this paragraph.
    (c) The amount from paragraph (a) or (b) of this section is reduced 
by the amount of any monthly benefit payable to the employee under title 
II of the Social Security Act, including any social security benefit 
payable under a totalization agreement between the Social Security 
Administration and another country. The social security benefit used to 
reduce the tier I may be an age or disability benefit on the employee's 
own earnings record, a benefit based on the earnings record of another 
person, or the total of two types of benefits. The amount of the social 
security benefit used to reduce tier I is before any deduction for 
excess earnings. It is after any reduction for other benefits based on 
disability. The result cannot be less than zero.
    (d) The tier I is subject to automatic annual increases as provided 
for in subpart E of part 225 of this chapter.

    Example: An employee born on November 3, 1919, becomes entitled to 
an age annuity effective October 1, 1982. Retirement age for individuals 
born in 1919 is age 65. He has less than 30 years of service. His tier I 
PIA Is $712.60, which is rounded down to $712. Since the employee is 25 
months under age 65 when his annuity begins, $712 is multiplied by \25/
180\ (\1/180\ for each month under age 65), to produce an age reduction 
of $98.89, and a tier I rate after age reduction of $613.11. The 
employee is also entitled to a social security benefit of $190 a month. 
The employee's final tier I rate is $423.11.