[Federal Register Volume 62, Number 17 (Monday, January 27, 1997)]
[Rules and Regulations]
[Pages 3789-3790]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-1906]


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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]
BILLING CODE 7905-01-P