Finality of Records of Compensation

RAILROAD RETIREMENT BOARD

20 CFR Part 211

RIN 3220-AB10

Finality of Records of Compensation

AGENCY: Railroad Retirement Board.

ACTION: Final rule.

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SUMMARY: The Railroad Retirement Board (Board) hereby adopts

regulations pertaining to the finality of reports of compensation. The

regulations relate to corrections to records of compensation more than

four years after the date on which the compensation was required to be

reported to the Board.

EFFECTIVE DATE: January 27, 1997.

ADDRESSES: Secretary to the Board, Railroad Retirement Board, 844 North

Rush Street, Chicago, Illinois 60611.

FOR FURTHER INFORMATION CONTACT: Thomas W. Sadler, Senior Attorney,

Railroad Retirement Board, 844 North Rush Street, Chicago, Illinois

60611, telephone (312) 751-4513, TTD (312) 751-4701.

SUPPLEMENTARY INFORMATION: This rule amends part 211 of the Board's

regulations (Creditable Railroad Compensation) by adding a new

Sec. 211.16 to that part. Under section 9 of the Railroad Retirement

Act, the Board will not change an employee's record of reported

compensation if the change is requested more than four years after the

report of compensation is required to be filed under Sec. 209.6 of the

Board's regulations. Section 211.16 explains when the Board will change

a record of compensation beyond the four year period; for example,

where the record is incorrect because of clerical error or fraud, where

the compensation was posted to the wrong period or person, or where the

compensation was originally reported to the Social Security

Administration but the Board or a court has determined that it should

have been reported to the Board.

On December 26, 1995, the Board published this rule as a proposed

rule (60 FR 66770). The Labor Member of the Board dissented from

publication of the proposed rule. His reasons for doing so were set

forth in the Supplementary Information section of the proposed rule (60

FR 66770). Comments on the proposed rule were invited on or before

February 26, 1996. Three comments were received with respect to the

proposed rule. Two commentors indicated agreement with the views of the

Labor Member and urged the Board to adopt those views. One of these

commentors also suggested that it is inequitable to put on the employee

the burden of the consequences of erroneous reporting by employers or

erroneous action by a Government agency. A third commentor (the joint

comments of the Association of American Railroads and representatives

of rail labor) submitted comments and suggested certain changes to the

proposed rule. The Board has considered these comments and has made

changes as explained below.

The rule, which is now being adopted as a final rule, protects the

interests of employees, but also protects the integrity of the trust

funds which fund the benefits paid by the agency. Employees have the

right to request the Board to credit service and compensation under the

Railroad Retirement Act. Accordingly, an employee who believes that he

should receive credit, either because he believes that he has been

misclassified as an independent contractor or because he believes that

his employer should be a covered employer under the Railroad Retirement

Act, can notify the Board so the Board can investigate the situation.

The final regulation gives recognition to this right but protects the

integrity of the trust funds by requiring employees to come forward in

a timely manner to contest the correctness of their service and

compensation records. By requiring timely protests the regulation puts

the Government in a better position to collect any employment taxes

associated with the service and compensation correction. It should also

be noted that an employee who does not receive full retroactive service

credit because he did not timely protest his employment record would

still receive social security credit for the service in question, which

social security covered credit would be used in computing any tier I

benefit under the Railroad Retirement Act.

As noted above, the Board has revised the proposed rule in

accordance with comments received. In response to a concern of the

Labor Member, which was repeated by the commentors, to the effect that

an employee may not receive credit in certain circumstances under

either the Railroad Retirement Act or the Social Security Act, the

Board has added language to Sec. 211.16(c) to clarify that this will

not happen. The comment concerned a situation where a company has been

ruled an employer but taxes have not been paid for service more than 4

years in the past. Under the final rule service more than four years in

the past would not be creditable under the RRA. There was concern that

in this situation the service might not be creditable under the SSA.

First of all, the Board does not believe that the service would be

removed under the Social Security Act; however, if this were to occur,

the Railroad Retirement Board would use this service and wages in

computing the tier I component of the employee's railroad retirement

annuity pursuant to section 1(h)(8) of the Railroad Retirement Act (45

U.S.C. 231(h)(8)). Under section 1(h)(8) of the Railroad Retirement Act

remuneration that has been subject to tier I railroad retirement taxes,

which is how the Board would view wage credits removed under the Social

Security Act, is considered to be creditable compensation for the

computation of railroad retirement tier I benefits. As noted above,

language has been added to section 211.16(c) to clarify this result. If

the employee does not accrue the minimum 120 months of railroad

retirement service prior to retirement or death so as to be qualified

for benefits under the Railroad Retirement Act, his railroad service

and compensation will be transferred to the Social Security

Administration and used in computing any benefits payable under the

Social Security Act.

The other change that has been made in the final rule is the

addition of an exception to the general bar against crediting

compensation retroactive more than four years without the payment of

taxes. The exception would apply in the case of an employee's record

that is erroneous as a result of fraudulent reporting by the employee's

employer.

The Office of Management and Budget determined that this is a

significant regulatory action under Executive Order 12866 and has

approved its publication as a final rule. There are no information

collections associated with this rule.

[[Page 3790]]

List of Subjects in 20 CFR Part 211

Pensions, Railroad employees, Railroad retirement.

For the reasons set out in the preamble, chapter II of title 20 of

the Code of Federal Regulations is amended as follows:

PART 211--[AMENDED]

1. The authority citation for part 211 continues to read as

follows:

Authority: 45 U.S.C. 231(f).

2. Part 211 is amended by adding a new Sec. 211.16 to read as

follows:

Sec. 211.16 Finality of records of compensation.

(a) Time limit for corrections to records of compensation. The

Board's record of the compensation reported as paid to an employee for

a given period shall be conclusive as to amount, or if no compensation

was reported for such period, then as to the employee's having received

no compensation for such period, unless the error in the amount of

compensation or the failure to make return of the compensation is

called to the attention of the Board within four years after the date

on which the compensation was required to be reported to the Board as

provided for in Sec. 209.6 of this chapter.

(b) Correction after 4 years. (1) The Board may correct a report of

compensation after the time limit set forth in paragraph (a) of this

section where the compensation was posted or not posted as the result

of fraud on the part of the employer.

(2) Subject to paragraph (c) of this section, the Board may correct

a report of compensation after the time limit set forth in paragraph

(a) of this section for one of the following reasons:

(i) Where the compensation was posted for the wrong person or the

wrong period;

(ii) Where the earnings were erroneously reported to the Social

Security Administration in the good faith belief by the employer or

employee that such earnings were not covered under the Railroad

Retirement Act and there is a final decision of the Board under part

259 of this chapter that such employer or employee was covered under

the Railroad Retirement Act during the period in which the earnings

were paid;

(iii) Where a determination pertaining to the coverage under the

Railroad Retirement Act of an individual, partnership, or company as an

employer, is retroactive; or

(iv) Where a record of compensation could not otherwise be

corrected under this part and where in the judgment of the three-member

Board that heads the Railroad Retirement Board failure to make a

correction would be inequitable.

(c) Limitation on Crediting Service. (1) Except as provided in

paragraph (b)(1) of this section, no employee may be credited with

service months or tier II compensation beyond the four year period

referred to in paragraph (a) of this section unless the employee

establishes to the satisfaction of the Board that all employment taxes

imposed by sections 3201, 3211, and 3221 of title 26 of the Internal

Revenue Code have been paid with respect to the compensation and

service.

(2) The limitation on the creditability of service months and tier

II compensation in paragraph (c)(1) of this section shall not affect

the creditability, for purposes of computing the tier I component of a

railroad retirement annuity, of compensation payments with respect to

which taxes have been paid under either the Railroad Retirement Tax Act

or the Federal Insurance Contributions Act.

Dated: January 15, 1997.

By Authority of the Board.

Beatrice Ezerski,

Secretary to the Board.

[FR Doc. 97-1906 Filed 1-24-97; 8:45 am]

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