Myths Vs. Facts
Misperceptions of Union Pacific’s Retirement Benefits create an incomplete and misleading picture for employees as they plan for retirement. Here are the facts surrounding some common myths related to UP’s Retirement Benefits.
Myth – UP provides both a UP Pension and a Railroad Retirement Benefit to all employees.
Fact – Only those who have worked in a nonagreement position may be entitled to both a UP Pension and a Railroad Retirement benefit. When you retire from UP, if you have worked in a nonagreement position at some time in your UP career, you may be entitled to receive a UP Pension from the Company. This benefit is funded entirely by UP. In addition, whether you have nonagreement or agreement employment, you also may be entitled to a Railroad Retirement Benefit provided by the Railroad Retirement Board. This is a governmental system/payroll tax that both UP and employees pay into over the course of their careers and is analogous to Social Security for non-railroad industries.
Myth – When I retire from UP, I will receive a "Harriman Pension."
Fact – When you retire from UP, if you have worked in a nonagreement position, you may be entitled to receive a UP Pension from the Company. In addition, all railroad employees may be entitled to a Railroad Retirement Benefit from the Railroad Retirement Board. There is not a separate "Harriman Pension." Over the years, the term "Harriman Pension" has become the common slang for the UP Pension. The term “Harriman Pension” should not be used because of the confusion its use creates among employees.
Myth – UP has eliminated the Pension or Retirement Benefits for new employees.
Fact – When you retire from UP, if you have worked in a nonagreement position, you may be entitled to receive a UP Pension from the Company. In addition, if you were an employee as of December 31, 2003, and retire from a nonagreement position at a future date, you may be entitled to participate in the Retiree Medical Plan. For new employees hired on or after January 1, 2004, the Retiree Medical Plan benefit has been eliminated, but the UP Pension plan is still available.
Myth - When you retire from UP, if you are entitled to a UP Pension benefit, you can take this benefit in a lump sum.
Fact – No lump sum benefits are available under UP’s Pension Plan. When you retire from UP, if you are entitled to a UP Pension benefit, you may select from various optional forms of payment that will provide you an annuity over your lifetime and possibly over the lifetime of a beneficiary if you have selected this option. An annuity is a benefit that is paid to you in installments over your lifetime or the lives of you and your beneficiary. The size of the annuity payment is determined by a number of factors, including the value of your retirement benefit, your age and the age of your beneficiary (if you elect an option that continues after your death). The Benefits Department will provide information regarding the monthly payments under each option that is available to you when you are ready to retire.
Myth – To be vested in the UP Pension, you have to be in a nonagreement position for five years.
Fact – To become vested in your UP Pension benefit after five years of service, some part of your service must be in a nonagreement position. So, both agreement service and nonagreement service will count toward vesting service.
Myth – If you move back to an agreement position, you will lose your UP Pension.
Fact – The formula to determine benefits under the UP pension plan generally consists of:
- Service as a nonagreement employee (you may also have earned service credit for agreement employment that occurred prior to your nonagreement employment),
- Compensation as a nonagreement employee and,
- A portion of the Railroad Retirement/Social Security benefit that you could draw at age 65.
The service and compensation determine the amount of the “Gross Benefit” and the Railroad Retirement/Social Security benefit is an “Offset” (reduction) to the Gross Benefit. The Gross Benefit minus the Offset equals the Net Pension benefit.
- When you return to an agreement position at Union Pacific, you no longer earn increases in service and compensation. Therefore, the Gross Benefit portion of the formula does not increase.
- However, because you continue to be employed at Union Pacific and continue to earn a larger Railroad Retirement/Social Security benefit, the Offset portion of the formula continues to grow.
What this means is that as you continue to work in an agreement position and the Offset portion of the formula continues to grow, the Net Pension benefit decreases and may even be eliminated. It is difficult to determine the extent of the reduction over time since that depends on the length of time you remain in an agreement position and how much the Railroad Retirement/Social Security benefit increases.
Myth – A spouse can draw 50% of the employee's UP Pension benefit when the spouse turns 60 or 62.
Fact – The Union Pacific Pension Plan provides only “Survivor” benefits to your spouse or other named beneficiary upon your death. No benefits are payable to your spouse or other beneficiary while you are receiving payments. However, Railroad Retirement/ Social Security generally does provide a “Spousal Annuity” that is payable once the spouse reaches a certain age.
Myth – When you retire from UP, your UP Pension and Railroad Retirement Benefits will start automatically.
Fact – When you retire from UP, in order to start your UP pension and Railroad Retirement annuities you must apply for these separately.
To apply for the UP pension benefit, you must contact the HR Service Center at (877) 275-8747, Option 1, or Company line 8-544-4000, Option 1, and report your retirement and the date you wish your benefit to begin. If possible, please contact the HR Service Center about 90 days prior to the date you would like your pension to begin.
To apply for Railroad Retirement benefits, you must contact the nearest Railroad Retirement Board field office listed in your local telephone directory or visit their website at www.rrb.gov.
Myth – You have to start your UP Pension and your Railroad Retirement Benefit at the same time.
Fact – Different rules apply to when a person can start their UP Pension and when one can start their Railroad Retirement benefit. The earliest that anyone can begin to receive their UP Pension is age 55. The full benefit earned at termination of employment is payable at age 65. Anytime you choose to begin your benefit prior to age 65, the monthly benefit will be reduced for early retirement.
The earliest that Railroad Retirement benefits may begin is either age 60 (must have 360 months of qualifying Railroad Service) or 62. If you have 360 months of Railroad Service, you are eligible to draw an unreduced Railroad Retirement benefit at age 60. Otherwise Railroad Retirement benefits are reduced if you choose to begin them prior to your full retirement age (ranges from age 65 to 67 depending on your year of birth). When you choose to begin your UP pension and Railroad Retirement benefits is a personal decision and depends upon many factors. You may wish to contact a financial advisor to help you make the best decisions.
Note: Union Pacific will strive to continue to provide competitive benefits, but reserves the right to modify or eliminate a benefit plan at any time. This document is intended to summarize certain plan features. However, in the event of any conflict between this document and the formal plan documents, the formal plan documents will govern.
For more information about your UP Retirement Benefits, contact the Human Resources Service Center at (877) 275-8747, Option 1.