FW: Railroad Retirement Taxes for 2007

From: Gil Gore [mailto:thegores1@cox.net]
Sent: Wednesday, January 17, 2007 9:51 AM
To: All Local Chairmen
Subject: Railroad Retirement Taxes for 2007

 

Brothers,

 

Below and attached is some information regarding the responsibilities of both employees and employers to pay railroad retirement taxes for the calendar year 2007.  Please note below the yellow highlighted employer responsibility portion of these taxes below which equals to 18.30% for tier I and II.  This money is contributed to the railroad retirement fund by Union Pacific in addition to the employee responsibility portion identified in the same table.  That means for every $1 you earn, they pay 18.30% into the railroad retirement system up to the maximums in each individual tier.  They also pay railroad unemployment insurance on top of that 18.30%.  This information is many times overlooked when considering our wages and benefits.  While employees are well aware of their contributions because they show up on our pay stubb, we tend to forget about the railroads’ responsibilities to pay into the system on our behalf which is a benefit to all current and future retirees.  I admit, these types of contributions if made into everyone’s 401k would likely yield higher returns, but this system ensures that everyone has a retirement much better than what social security provides.

 

These documents and other pertinent information are available at http://www.rrb.gov/.

 

Hoping you find this information useful, I remain.

Fraternally,

Gil Gore        

 

2007 Maximum Railroad Earnings tax responsibilities

 

Tier I Earnings Limit $97,500 - you pay 6.20 % on all earnings up to the maximum of $97,500
Tier II Earnings Limit  $72,600 – you pay 4.4% on all earnings up to the maximum of $72,600
Medicare 1.45% no limit – you pay 1.45% on all earnings no maximum

Program Letter 2007-03     To: Certification Registration, Retirement and Unemployment Contact Officials Subject: Notice of Annual Rates (2007) Date: December 4, 2006   View this document in PDF Please distribute this notice to all individuals within your organization who may need the information in connection with their work. Prepared by: Quality Reporting Service Center Railroad Retirement Board 844 North Rush Street Chicago, Illinois 60611-2092 Phone: (312) 751-4992 Fax: (312) 751-7190 E-mail: QRSC@rrb.gov Creditable and Taxable Compensation The 2007 railroad retirement tax rates and maximum compensation bases are as follows:     Tax Rate Earnings Base Employee Tier I 6.20% $97,500 Medicare 1.45% No Limit Employer Tier I 6.20% $97,500 Medicare 1.45% No Limit Employee Tier II 3.9% $72,600 Employer Tier II 12.10% $72,600 Railroad Unemployment Insurance Variable $1,230 per month The Tier II tax rates are determined annually from a tax rate schedule based on an average account benefits ratio reflecting railroad retirement fund levels. Employer tax rates can range from 8.2 percent to 22.1 percent. Employee tax rates can range from 0 percent to 4.9 percent. Experience Rating In October 2006, each employer was sent a notice of their 2007 Railroad Unemployment Insurance Act (RUIA) contribution rate. If you have not received your notice, please contact the Quality Reporting Service Center.  Retirement and Survivor Benefits Exempt Amounts for Annual Earnings Test for Less Than Full Retirement Age Annuitants: In 2007, the annual exempt amount for less than full retirement age annuitants is $12,960. The monthly exempt amount for the first year of retirement in 2007 is $1,080. Exempt Amounts for Annual Earnings Test for Full Retirement Age Annuitants: In 2007, the annual exempt amount for full retirement age annuitants is $34,440. The monthly exempt amount for the first year of retirement in 2007 is $2,870. Cost-of-living Increase: Annuitants will receive a cost-of-living increase effective December 2006. Tier I will increase by 3.3% and Tier II will increase by 1.1%. This increase is before adjustment for other benefits. Unemployment and Sickness Benefits Maximum Daily Benefit Rate: Under the Railroad Unemployment Insurance Act (RUIA), the maximum daily benefit rate is equal to 5 percent of the monthly RUIA compensation base, rounded down to the nearest multiple of $1.00. For days of unemployment and sickness in registration periods beginning on and after July 1, 2007, the maximum daily rate is $59.00. The maximum rate for registration periods beginning on or after July 1, 2008, is $61.00. Monthly Compensation Base: The monthly compensation base under the Railroad Unemployment Insurance Act for calendar year 2007 is $1,230. Qualifying Base Year Compensation: The amount of base year compensation required in 2007 to qualify for benefits in the benefit year beginning July 1, 2008, is $3,075.00. Compensation of $3,075 is also the amount of creditable compensation required to end a voluntary leaving of work disqualification period in months in calendar year 2007. In addition, remuneration earned in calendar year 2007 from employment covered under the Act cannot be considered subsidiary remuneration if the employee’s base year earnings are less than $3,075. Maximum Benefits: The monthly amount of base year 2007 compensation that can be counted in determining the maximum amount of normal benefits payable to an employee in the benefit year beginning July 1, 2008, is $1,589. Maximum Monthly Compensation Base and the Earnings Test: For unemployment registration periods beginning July 1, 2007 and later, no benefits are payable for which the total amount of an employee’s earnings and other remuneration from railroad and non-railroad work for days in the period exceeds the monthly compensation amount of $1,195.   Year 2007 Railroad Retirement and Unemployment Insurance Taxes

PR 06-6 December 2006

 

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Prepared by Public Affairs 312-751-4777 The amounts of compensation subject to railroad retirement tier I and tier II payroll taxes will increase in 2007. However, the tier I tax rate on employees and employers remains unchanged. Under the Railroad Retirement and Survivors’ Improvement Act of 2001, tier II tax rates are determined annually by an average account benefits ratio. Based on this ratio, the tier II tax rates on employees and employers will decrease in 2007. Railroad unemployment insurance tax rates paid by employers will continue to include a 1.5 percent surcharge in 2007. Tier I and Medicare Tax.--The railroad retirement tier I payroll tax rate on covered rail employees and employers for the year 2007 remains at 7.65 percent. The railroad retirement tier I tax rate is the same as the social security tax, and for withholding and reporting purposes is divided into 6.20 percent for retirement and 1.45 percent for Medicare hospital insurance. The maximum amount of an employee’s earnings subject to the 6.20 percent rate will increase to $97,500 in 2007 from $94,200 in 2006, but there is no maximum on earnings subject to the 1.45 percent Medicare rate. The increase in the amount of earnings subject to railroad retirement and social security taxes is based on indexing to increases in average national wages. Tier II Tax.--The railroad retirement tier II tax rate on employees will decrease by 0.5 percent, from 4.4 percent to 3.9 percent in 2007, and the rate on employers will also decrease by 0.5 percent, from 12.6 percent to 12.1 percent. The maximum amount of earnings subject to railroad retirement tier II taxes, however, will increase to $72,600 in 2007 from $69,900 in 2006. Tier II tax rates under the 2001 Railroad Retirement and Survivors’ Improvement Act are based on an average account benefits ratio reflecting railroad retirement fund levels. Depending on this ratio, the tier II tax rate for employers can range between 8.2 percent and 22.1 percent, while the tier II rate for employees can be between 0 percent and 4.9 percent. Unemployment Insurance Tax.--Employers, but not employees, also pay railroad unemployment insurance taxes, which are experience-rated by employer. The basic tax rates range from a minimum of 0.65 percent to a maximum of 12 percent on monthly earnings up to $1,230 in 2007, up from $1,195 in 2006. However, the Railroad Unemployment Insurance Act also provides for a surcharge in the event the Railroad Unemployment Insurance Account balance falls below an indexed threshold amount, and such a surcharge of 1.5 percent applied in 2004-2006. Since the accrual balance of the Railroad Unemployment Insurance Account was $114.8 million on June 30, 2006, which was less than the indexed threshold of $120.8 million, a surcharge of 1.5 percent will again be added to the basic tax rates in 2007, but will not increase the maximum 12 percent rate. The unemployment insurance tax rates on railroad employers in 2007 therefore will range from 2.15 percent (the minimum basic rate of 0.65 percent plus the 1.5 percent surcharge) to a maximum of 12 percent on monthly compensation up to $1,230. The 1.5 percent surcharge will not apply to new employers in 2007, and new employers will initially pay a tax rate of 3.75 percent, which represents the average rate paid by all employers in the period 2003-2005. For 78 percent of covered employers, the unemployment insurance rate assessed will be 2.15 percent in 2007. # # #