Tax Withholding and Railroad Retirement Payments Explained by a Railroad Retirement Board Disability Lawyer
Railroad Retirement is similar in form to the Social Security system, although the two entities are separate. Both programs are closely coordinated with each other regarding earnings credits, payment of benefits, and taxes. If you have difficulty with your benefits, a railroad retirement board disability attorney may be able to help you.
What Are Tier I and Tier II Taxes, and How Is Tax Withheld?
As your railroad disability attorney will tell you, retirement benefits for railroad workers are based on months of service, as well as earnings credit. Credit is given for every month an employee was compensated for service, even if only one day of work was performed. In order to be vested in the annuity program, regular employees must have ten years of creditable service, unless they began work after 1995, in which case they need 5 years. Tier I tax withholding is equivalent to what would be paid into Social Security. Tier II tax withholding, however, is for annuity payments that are in excess of what would normally be paid under Social Security. This is generally a lower figure. There is also a Tier III payment for individuals who are retired. This is tax on Medicare benefits. For 2014, the tax withholding for employees is as follows:
- Tier I: 6.2%
- Tier II: 4.4%
- Tier III: 1.45%
It is important to note that there is a maximum withholding on earnings for Tier I and Tier II. For Tier I, this maximum is $117,000, while for Tier II it is $87,000. All the benefits provided through Medicare are taxed. Beginning in 2013, an additional tax on earnings over $200,000 of 0.9% will be withheld.
Railroad Retirement vs. Social Security Benefits
Generally speaking, railroad retirement benefits are much greater than what one would have received under Social Security. Currently the maximum monthly payment through railroad retirement is $2,700, whereas with Social Security that same individual would collect $1,400.
Work with a Railroad Retirement Board Disability Lawyer
Railroad retirement benefits can be very complicated, and it is possible that an error in your benefits can be made. If you need assistance with your retirement pension, a railroad retirement board disability attorney may be able to help. Call Hermann Law Group, PLLC today to arrange a meeting at (914) 286-3030.