The Railroad Retirement Board calculates retirement annuity benefits for workers based on a two-tier system. A railroad worker may receive Tier I benefits, designed to replace Social Security, as long as he is vested in the program. He must have at least 10 years of service covered by the railroad retirement program if he started working for the railroad before 1995. A worker who started after 1995 needs only five years of service for Tier I benefits. If he is not vested when he stops working for the railroad, his Tier 1 benefit account is transferred into his Social Security account instead. A railroad worker may also receive Tier II benefits. The Tier II system is designed to function similar to a private company pension. Tier II benefits are calculated by how long the worker has worked in a railroad position.
A court may give a spouse part of the railroad spouse's retirement even if he doesn't receive retirement benefits yet. Under the railroad retirement system, the divorcing spouse may receive half of the railroad spouse's Tier II benefit. The railroad spouse must have worked at the railroad long enough to be vested. The divorce decree must specify a railroad pension is being divided and direct the Railroad Retirement Board to pay the receiving spouse. The award must be part of the property settlement and not part of alimony.
Railroad Spouse Benefits
A railroad worker's spouse is entitled to spouse retirement annuities of her own. A spouse's Tier I and Tier II benefits are calculated as percentages of the railroad worker's Tier I and Tier II benefit amounts. A Tier I railroad spouse annuity is 50 percent of the railroad worker's gross Tier I benefit amount, while a Tier II spouse benefit is 45 percent of the worker's gross Tier II benefit.
Divorced Spouse Benefit
A divorced spouse may be entitled to a reduced Tier I spouse benefit if the marriage lasted ten consecutive years, both spouses have been 62 for at least a month and the divorced spouse is unmarried. If the spouse working at the railroad hasn't retired yet, the former spouse may get a spouse annuity two years after the divorce if both spouses are 62 and the railroad spouse is fully insured through Social Security based on his earnings. Since the award is calculated based on what Social Security would pay, the divorced spouse's annuity payments are less than what she'd receive if the couple had remained married.
A court can't award a divorcing spouse part of a Tier I railroad benefit as part of a property settlement. If both spouses work for the railroad and started after 1975, any spousal annuity due is reduced by the amount of retirement annuities the spouse is entitled to as an employee. The reduction does not apply to spouses who started with the railroad before 1975.