Would an extended stock market decline affect the ability of Railroad Retirement to pay benefits?
Railroad Retirement benefits are a federal entitlement protected by statute. In addition, the Act relies upon a combination of features to ensure that the Railroad Retirement Board would be able to meet its obligation to fund benefits to railroad retirees and their families: • Fund Reserves: The Act is designed to maintain four to six years’ worth of benefits in reserve to ensure a significant safety margin. (Over most of the 40 years prior to the Act, the reserve in the RRA had been less than four years.) • Automatic Tax Adjustment: The tier 2 tax rate on employers and employees is adjusted automatically pursuant to a statutory schedule that is designed to maintain a fund balance sufficient to pay between four and six years of benefits. If any tax increases are necessary, they would be borne entirely by rail employers. The rate for employees would never rise above the current 4.9 percent. Because the tax rate is adjusted by formula rather than requiring congressional action, timely an
