-4-
return of employee contributions.3
Benefits received from railroad retirement programs
generally have two components, identified as Tier 1 and Tier 2
benefits. Absent disability, no railroad retirement benefits are
paid until the employee reaches age 62 or is at least 60 years
old and has completed 30 years of service. Railroad Retirement
Act of 1974, Pub. L. 93-445, 87 Stat. 162, currently codified at
45 U.S.C. sec. 231a(a)(1)(v). Tier 1 benefits are essentially
the equivalent of Social Security benefits and are taxed under
the provisions of section 86. Sec. 86(d)(1)(B); see Ernzen v.
United States, 875 F.2d 228, 229 (9th Cir. 1989). Petitioner’s
disability annuity payments are not essentially the equivalent of
a Social Security benefit and thus are not Tier 1 benefits taxed
under section 86.4
Tier 2 benefits consist of all benefits under the Railroad
Retirement Act of 1974 other than Tier 1 benefits and are taxed
3 Petitioners do not contend that the annuity
distribution is exempt under either sec. 104, compensation for
illness, or sec. 105, amounts received under health plans. We
have examined both sections and do not find that either applies.
4 Petitioner applied to the RRB for a Social Security
equivalent benefit designation for her disability annuity. Her
request was denied because she did not meet the requirement of
having worked 20 out of the 40 quarters preceding the date of the
onset of the disability under the Social Security Act, ch. 531,
49 Stat. 620 (1933), currently codified at 42 U.S.C. sec. 416(i)
(2000). Petitioner left work 7 years before the date of the
onset of the disability of Jan. 31, 1998, therefore, the
disability annuity was not eligible for a Social Security
equivalent benefit designation.
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