How is the railroad retirement system funded?
Payroll taxes paid by railroad employers and their employees are the primary source of funding for the railroad retirement system. Coordinated with social security taxes, tier I railroad retirement payroll taxes are at the same rate as social security taxes, while tier II taxes are set at rates considered necessary to finance railroad retirement benefit payments over and above social security levels. Other sources of income include a financial interchange with the social security trust funds, revenues from Federal income taxes on railroad retirement benefits, appropriations from general treasury revenues provided after 1974 as part of a phase-out of certain vested dual benefits, and earnings on investments.
