Last Updated on November 14, 2023 by Ben
Union Pacific Retirement
Union Pacific has one of the best retirement plans for employees. The health and dental package includes all medical premiums, so you don’t need to worry about that expense cutting into your monthly income; plus, children may join in on this benefit too! You’ll also get a monthly pension plus an annual bonus based on your years of service.
Union Pacific Employee Pension Guide
Union Pacific offers a defined pension benefit plan, a 401(k) plan, and a profit-sharing plan. The pension guide plan is a defined benefit plan that provides a monthly retirement income for a retiree and a survivor annuity for a retiree’s spouse or former spouse. The 401(k) plan requires employees to make both employer and employee contributions. The profit-sharing program requires employees to contribute a portion of their pay to the plan where the employer manages the money.
Eligibility and Enrollment
☑ Who is Eligible
Anyone who is an eligible employee as of the date they join the plan is eligible to receive benefits under the pension plan. Eligible employees have completed one year of continuous service with the railroad or its subsidiaries.
☑ Who Pays for the Plan
Union Pacific pays for the pension plan Participation Only a relatively small percentage of eligible employees participate in the pension plan. About 11 percent of eligible employees participate in the pension plan. To participate in the pension plan, you must satisfy the vesting requirements for your benefits.
Your Benefits at Retirement
◈ Normal Retirement Benefits
When you retire at normal retirement, you will receive a monthly pension. The monthly pension will equal one-half of your regular pay or $1,804 per month. (This amount will be indexed to the consumer price index.) If you were to retire before reaching the normal retirement age of 65, you would receive a lump-sum payment instead of the monthly pension. The pension would be paid to you until the month of your death unless you remarry or are widowed.
◈ Early Retirement Benefits
If you are eligible to accept early retirement, you may take a monthly pension payment as soon as you turn 57. You can take a lump-sum payment after you turn 55, and the payment amount is the same as the normal retirement benefit amount stated above.
Note: The monthly pension payment amount can be less if you have a spouse on Social Security benefits. We will discuss this in more information in the section on Surviving Spouse Benefits.
◈ Postponed Retirement Benefits
You are still employed by the railroad after you reach the normal retirement age of 65 or any later age. You may choose to delay your retirement benefits. If you choose to postpone retirement, you will still receive your monthly pension but continue to accrue your retirement account.
◈ Vested Benefits
Your pension will be vested on the first day of the month following your turn 70. The railroad will send you a statement each year showing the number of benefits you have accrued on that date. (This amount does not necessarily represent the value of your account at that time.) Your vested benefits will continue to accumulate until you choose to retire or you reach age 75.
◈ Continued Employment
You can continue to accrue your pension as long as you are an employee of the railroad on your “anniversary date” (the date you became an employee). Your pension will be based on your anniversary date, no matter the calendar date.
You can be re-employed so long as you are not drawing retirement benefits. You do not need to be at the maximum retirement age (70) to be re-employed.
Your Payment Options
☑ Forms of Payment for Early, Normal, or Postponed Retirement –
The railroad will send you a statement showing your benefits as a check, paper, or direct deposit. You can cash this check or give it to someone else to cash for you. You can send the railroad your check to make your payments. You may also pay using a major visa credit card, or you can write a check that the railroad will send back to you for payment.
☑ Forms of Payment for Vested Benefits
This is a defined benefit plan; there are no forms of payment available for the vested portion of your pension. You will get a check or direct deposit once a year.
Pre-Retirement Survivor Benefits
☑ Survivor Benefit for Active Employees
If you are an active employee at least age 55 when you retire, you may be eligible for a “Survivor Benefit” from your pension plan. You can elect to make a monthly payment equal to 50 percent of your monthly pension with this benefit. This is the case even if you are drawing retirement benefits. Whether you are drawing a monthly pension or a single payment at retirement, you can get this benefit. (Some employees are not eligible for the survivor benefit if they draw a monthly pension.)
☑ Survivor Benefit for Terminated Employees
If you were an active employee at least age 55 when you were laid off, you might be eligible to receive a “Survivor Benefit” from your pension plan. This benefit is only available if you were laid off or terminated for reasons other than retirement. If you are receiving a monthly pension, you will not be eligible to receive a Survivor Benefit. If you receive a single payment at retirement, you may elect to receive a reduced payment.
Using the Plan
How to Apply for Benefits
There are several options for applying for benefits under the plan. You can use the online tool, phone the railroad’s representatives, write to the railroad, or attend a local railroad office.
How Taxes Affect your Benefits
Federal, state, and railroad taxes impact each benefit calculation. Railroad retirement benefits are calculated as a percentage of your highest average compensation over your final five years of employment. Medicare Part B premiums are based to your income, as are most.
Social Security benefits.
State taxes also affect your benefit amounts. Railroad retirement benefits are subject to a “mitigation fee” in the state of Pennsylvania of up to 1.3 percent of your benefits. The mitigation fee is based on an estimate of your income in the state. Social
Security and Railroad Retirement Benefits
Your benefits will be based on your highest average compensation (HAC) for five years. The Railroad Retirement Act defines HAC as the highest average earnings in any five consecutive years of your work and earnings history. If the highest HAC is for a work and earnings period that did not result in at least one year of service, your benefit will be based on the highest HAC during a 10-year period that did result in at least one year of service.
Loss, Reduction, or Suspension of Benefits
If you miss a filing deadline, do not report income, or withhold too much money from your paycheck, your benefits may be reduced or suspended. Some railroad plans also reduce or suspend benefits if you commit a felony, become insolvent, go bankrupt, or are married.
The Future of the Plan
The Pension Benefit Guaranty Corporation (PBG) insures pension plans of about 1,100 U.S.-based commercial enterprises and multi-employer plans. These plans have nearly $200 billion in assets and over $60 billion in liabilities. The PBG’s mission is to protect the pension plans of American workers and their beneficiaries if a pension plan fails. Most railroad workers in the United States are already fully insured for their retirement, and the PBG only ensures the plans of workers who have not yet reached the age of fifty or who have less than ten years of service with a railroad.
Coverage If the plan becomes insolvent, the PBG will pay a portion of your benefits to the extent of the plan’s assets. If the plan has no assets, the PBG will not pay any benefits. Your plan is fully insured if it has over $50 million in assets. The PBG does not determine an individual’s eligibility for or amount of benefits under a plan. This is the responsibility of the plan’s sponsor, such as the railroad that you worked for.
Final Thought – Union Pacific Retirement
If you are eligible and qualified for railroad retirement benefits, you can choose to receive your pension as a single payment at retirement or in monthly payments. You do not need to take the full monthly benefit at any one time. Your pension is reduced for taxes, and you may be entitled to a “Survivor Benefit” if you are laid off or terminated for reasons other than retirement.