This is the sixth and final installment of a six-part blog series focused on the Railroad Retirement Act (RRA). You can read the full series here.
 
ERISA does not apply to RRA annuities. Thus, the railroad Retirement Board (RRB)will accept a Qualified Domestic Relations Order (QDRO) only if it provides for an annuity partition that is valid under the RRB’s regulations.  However, a QDRO is not required to effect an annuity partition if appropriate language is incorporated into the divorce decree or court-approved property settlement agreement.

If you or your spouse have been railroad employees and thus may be eligible for a RRA annuity, it is strongly recommended that you speak to a legal professional to ensure that these unique benefits are properly accounted for and distributed incident to a divorce.

This is the fifth installment of a six-part blog series focused on the Railroad Retirement Act (RRA). You can read the full series here.
 
Although Tier I benefits are not divisible, an eligible divorced spouse can receive an annuity similar to the non-divisible Tier I annuity under the RRA.  This is in addition to any divisible portion of the employee’s Tier II annuity awarded by way of equitable distribution by Court Order.  Unlike an equitable distribution award, which provides the former spouse a share of the employee’s Tier II annuity, the payment of a Tier I type annuity to an eligible divorced spouse does not reduce the amount of the employee’s annuity.  This is similar to SSA benefits available to a former spouse where the parties had been married for 10 years or more.

If you or your spouse have been railroad employees and thus may be eligible for a RRA annuity, it is strongly recommended that you speak to a legal professional to ensure that these unique benefits are properly accounted for and distributed incident to a divorce.

This is the fourth installment of a six-part blog series focused on the Railroad Retirement Act (RRA). You can read the full series here.

Below is a list of several other components related to the Railroad Retirement Act:

  1. Supplemental Annuity:  Railroad employees who complete twenty five (25) years of service and commenced services before 1981 may receive a supplemental annuity under section 2(b) fo the RRA, which ranges between $23 to $43 per month.  This component is divisible upon divorce.
  2. Vested Dual Benefit:  Railroad employees who meet certain vesting requirements and are fully insured under the RRA and SSA prior to 1975 are eligible for an additional benefit amount.  This component is divisible upon divorce.
  3. Overall Minimum Increase:   If an employee’s annuity under the RRA is less than the amount that would be received under the SSA, the employee’s annuity may be increased so that the employee receives at least as much as would be received under SSA.  The amount of this increase is divisible.

If you or your spouse have been railroad employees and thus may be eligible for a RRA annuity, it is strongly recommended that you speak to a legal professional to ensure that these unique benefits are properly accounted for and distributed incident to a divorce.

This is the third installment of a six-part blog series focused on the Railroad Retirement Act (RRA). You can read the full series here.

Tier II benefits are based solely upon railroad industry service and earnings (i.e. it does not take years/earnings outside of industry employment into account, unlike Tier I benefits).  Tier II benefits are calculated under section 3(B) of the RRA.  Tier II annuity benefits are divisible as property.  Moreover, of all RRA annuity components, Tier II benefits are the only benefits that may continue to be paid to a former spouse after the death of the employee.

If you or your spouse have been railroad employees and thus may be eligible for a RRA annuity, it is strongly recommended that you speak to a legal professional to ensure that these unique benefits are properly accounted for and distributed incident to a divorce.

This is the second installment of a six-part blog series focused on the Railroad Retirement Act (RRA). You can read the full series here.

 

Tier I annuity benefits are determined according to earnings and career service.  To qualify for Tier I benefits, an employee must have worked a minimum of ten (10) years in the railroad industry.  Tier I benefits become payable when the employee reaches the retirement age as established by the Social Security Act (SSA), or reaches the age of sixty (60) and has thirty (30) years of service.  Tier I annuity benefits are non-divisible and thus not subject to equitable distribution upon divorce.

 

Tier I annuity benefits represent the same benefit amount that the SSA would provide the employee upon retirement.  The Tier I component of an employee’s RRA annuity is calculated by applying the benefit formula of the SSA to the employee’s earnings record.  An employee’s earning record includes both rail industry earnings and any earnings from employment covered by the SSA.

 

If you or your spouse have been railroad employees and thus may be eligible for a RRA annuity, it is strongly recommended that you speak to a legal professional to ensure that these unique benefits are properly accounted for and distributed incident to a divorce.

This is the first installment of a six-part blog series focused on the Railroad Retirement Act (RRA). You can read the full series here.

 

The Railroad Retirement Act (RRA) is a federal statute that provides unique benefits for railroad workers.  The 1974 Amendment to the RRA resulted in an annuity benefit system that is comprised of two main benefit components, generally referred to as Tier I and Tier II benefits.  In addition, railroad employees may qualify for additional annuity components (which are described below).  Under the RRA, railroad employees and employers pay taxes under the Railroad Retirement Tax Act (RRTA), which are in lieu of, but similar to FICA contributions.

 

A railroad employee’s monthly annuity rate is computed  based upon length of service and earnings during their employment.  As a result, an RRA annuity cannot be segregated, nor can a separate account be established, as property to a former spouse.  (Note: an order dividing an employee’s “account” instead of “retirement annuity” is not valid under the RRA).  Moreover, the RRB cannot furnish the present value of future benefits although an estimate can be computed based upon an employee’s service and earnings.   However, the RRB does issue annual statements (BA-6 Forms) that reflect the employee’s creditable railroad service and compensation.

 

If you or your spouse have been railroad employees and thus may be eligible for a RRA annuity, it is strongly recommended that you speak to a legal professional to ensure that these unique benefits are properly accounted for and distributed incident to a divorce.

Yesterday evening, the SBA posted an Interim Final Rule for the Paycheck Protection Program (“PPP”). This is not the final rule, but it provides changes to the Paycheck Protection Program and guidance for applicants and lenders.

Some of the notable updates include:

Continue Reading SBA Issues Interim Rule and Guidance to CARES Act Paycheck Protection Program

As of Friday March 27th, the US Congress has voted to advance the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act), that will create an estimated $2 trillion emergency relief package to aid millions of individuals, the public health sector, hard-hit industries, and small businesses effected by COVID-19.

The CARES Act will allocate $350 billion to provide relief to certain businesses through 100% guaranteed Small Business Administration (SBA) loans, a portion of which the SBA would forgive based on the employer meeting certain criteria.

Below you will find a summary of provisions in the proposed legislation applicable to businesses.

Continue Reading What to Know About the CARES Act

In order to determine child support in any divorce case, we are compelled to use the Child Support Guidelines promulgated by the Rules Governing the Courts of the State of New Jersey.  Under these Guidelines, we must determine the income of both parents in order to calculate the appropriate amount of child support.

    Income is not just earned income.  For purposes of using the Guidelines, gross income also includes tips, commissions, interest, dividends, bonuses, royalties, gains derived from dealings in property, rents, annuities, distributions from government and private retirement plans, including Social Security, Veterans Administration, Railroad Retirement Board, deferred compensation, Keoughs and IRAs.

    The list goes on and on and it is easy to see that any type of income will be included in the calculation.  From this income, certain deductions are taken such as federal, state and Social Security taxes.  But, how do we handle the other deductions from income such as retirement contributions?

    In a recent case, the question became whether contributions to the father’s voluntary 401(k) plan, as well as any income generated by that plan should be considered as income for purposes of child support.  The Court broke down the contributions into those made by the employer for the benefit of the Defendant/Father and those made by the Defendant/Father voluntarily to his own plan.  Arguably, an employer’s contribution to a 401(k) plan could be considered income for child support purposes because the contribution is compensation for services.  In addition, the increase in the plan corpus could constitute both “an interest in a trust” and “gains derived from dealings in property,” two categories of income defined by the Child Support Guidelines.

    Yet, the Guidelines limit gross income to “all earned and unearned income that is recurring or will increase the income available to the recipient over an extended period of time.  When determining whether an income source should be included in the Child Support Guidelines’ calculation, the Court should consider if it would have been available to pay expenses related to the child if the family would have remained in tact.”

    It was noted by the Court that once money was deposited into a 401(k) plan, those funds may not be removed without substantial penalties and taxes.  In addition to the tax required to be paid, an early distribution is subject to an additional tax of 10% of the amount distributed.  Therefore, the Court determined that it should not consider either the employer’s contribution to the 401(k) plan or the increase of the Plan corpus’ income, explaining that “requiring the income that is generated through the sheltered program to become part of a child support award would punish the father for investing wisely to secure a stable retirement . . . .”

    It was noted that assets in a 401(k) plan only become available, even to an intact family, in the event of extreme financial distress.  Therefore, income from that asset would not have been available within the meaning of the Guidelines.  Because of the heavy tax burden imposed on early withdrawal, a withdraw would be an unlikely occurrence.  Therefore, it is not income available to the Defendant over an extended period of time for the payment of child support.

    The Court also noted that the philosophy of the Child Support Guidelines is to allow the children “to share in the current income of both parents” and to prevent them from becoming “the economic victims of divorce.”  Children of divorce should be afforded the same opportunities available to children of intact families with parents of similar financial means.  Since the Guidelines were never intended to allow children of divorced parents a greater share of combined parental income than would have been available for them had there been no divorce, it was held that neither the contributions made by an employer to a 401(k), nor the increase in value of the plan due to employer contributions, should be looked at as income for purposes of child support. 

    However, any monies voluntarily contributed to an employee’s 401(k) plan by the employee will be considered income for child support purposes since it is a voluntary contribution made by a parent.  The choice to place money into a retirement fund does not absolve a parent of his obligation to utilize that income for his children.