Employee end-of-year adjustment.

(a) General. After the end of a year, an employee whose annuity was withheld for earnings over the monthly allowable earnings amount in a month receives a form on which to report his or her earnings for the year. (b) Earnings are less than or equal to the annual allowable earnings amount. If the employee's total earnings for the year are less than or equal to the annual allowable earnings amount, all annuity payments withheld during the year because of earnings in a month over the monthly allowable earnings amount, and all deductions imposed for failing to report excess monthly earnings, are paid to the employee after the end of the year. (c) Earnings are more than the annual allowable earnings amount. (1) If the employee's total earnings for a year exceed the annual allowable earnings amount, the Board will calculate the number of annuity payments to be deducted by dividing the amount of the employee's annual earnings above the annual allowable amount by the monthly allowable earnings amount. If the computation results in a remainder greater than or equal to one-half, the number of months for which an annuity is not payable shall be increased by one. The resulting number is the number of months for that year for which the annuity is not payable and must be deducted. If the Board withheld monthly annuity payments during the year based on § 220.161, then the employee will be deducted the difference between the amount calculated under this paragraph and the annuities that were already withheld based on § 220.161. If the annuity payments withheld based on § 220.161 are greater than those calculated under this paragraph, then the employee will be repaid the difference. If the annuity rate changes during the year, any annuities due at the end of the year are paid first for months in which the annuity rate is higher. Penalty deductions may also apply as described in paragraph (c)(2) of this section. However, no deductions for excess earnings or penalty deductions for failing to report are made if the employee exceeds the annual allowable earnings amount by less than half of the monthly allowable earnings limit for that year. (2) If the employee's total earnings for a year exceed the annual allowable earnings amount by more than one-half the monthly allowable earnings amount and the employee failed to report monthly earnings over the monthly allowable earnings amount within the time limit described in § 220.162(b), penalty deductions will also apply. If it is the employee's first failure to report, the penalty deduction is equal to one month's annuity. If it is the employee's second or later failure to report, the penalty deduction equals the annuity amount for each month in which the employee earned over the monthly allowable earnings amount and failed to report it on time. Example 1 to paragraph (c): An employee is awarded a disability annuity based upon his inability to engage in his regular railroad occupation effective January 1, 2025. During the year, he works in non-railroad employment from April to September and earns $2,100 per month for these six months. The employee properly reports his excess earnings and returns the annuity payments for these months. At the end of the year, his total annual earnings are $12,600 ($2,100 times 6 months), which does not exceed the annual allowable earnings limit of $15,120 ($1,260 times 12 months) for 2025. Therefore, at the end-of-year adjustment, the Board will repay the returned annuity payments for April through September to the employee. (This occurs even if the employee failed to report the earnings to the Board within two months, because no penalty deduction is made when the employee's total annual earnings are less than the annual allowable earnings amount.) Example 2 to paragraph (c): An employee is awarded a disability annuity based upon his inability to engage in his regular railroad occupation effective January 1, 2025. During that year, he works in non-railroad employment from April to September and earns $2,550 per month for those six months. He does not report these earnings to the Board until the following January. At the end of the year, his total annual earnings are $15,300 ($2,550 times 6 months), which exceeds the annual allowable earnings limit of $15,120 (12 times $1,260) for 2025. The employee's excess earnings for 2025 total $180 ($15,300 minus $15,120), which is less than one-half of the monthly allowable earnings amount (one-half of $1,260 equals $630.) Therefore, at the end-of-year adjustment, no deductions for excess earnings and no penalty deductions for failing to report will be applied. Example 3 to paragraph (c): An employee is awarded a disability annuity based upon his inability to engage in his regular railroad occupation effective January 1, 2025. During that year, he works in non-railroad employment from April to September and earns $3,000 per month for those six months. He does not report these earnings to the Board until the following January. At the end of the year, his total annual earnings are $18,000 ($3,000 times 6 months), which exceeds the annual allowable earnings limit of $15,120 (12 times $1,260) for 2025. The employee's excess earnings for 2025 total $2,880 ($18,000 minus $15,120). The employee's total excess earnings divided by the monthly allowable earnings limit equals 2.286, which rounds to two ($2,880 divided by $1,260). At the end of the year, the employee has two months of annuity payments deducted for earnings. Additionally, the employee incurs a penalty deduction of one month's annuity payment because he failed to report his excess earnings for April through September 2025 and it is the first time a penalty deduction is ever applied. Therefore, a total of three annuity payments are deducted. Example 4 to paragraph (c): The same employee from example 3 works again in 2026 in non-railroad employment from April to September, earning $3,100 per month for those six months. This time, he reports his earnings on September 30. At the end of the year, his total annual earnings are $18,600 ($3,100 times 6 months), which exceeds the annual allowable earnings limit of $15,840 (12 times $1,320) for 2026. The employee's excess earnings for 2026 total $2,760 ($18,600 minus $15,840). The employee's total excess earnings divided by the monthly allowable earnings limit equals 2.091, which rounds to two ($2,760 divided by $1,320). At the end of the year, the employee has two months of annuity payments deducted for earnings. Additionally, the employee incurs penalty deductions of three months' annuity payments for April, May, and June 2026 because he failed to report his monthly excess earnings during the year for those months before accepting the annuity for the second month following those months, and it is not his first penalty deduction for failing to report. Therefore, a total of five months of annuity payments are deducted. (d) Annual allowable earnings amount —(1) Calendar years 2006 and earlier. The annual allowable earnings amount for calendar years 2006 and earlier is $4,800. (2) Calendar year 2007 and later. The annual allowable earnings amount for calendar year 2007 and later is 12 times the monthly allowable earnings amount for that year. (3) Annual notice. The Board will publish an annual notice of the annual allowable earnings amount for calendar years after 2026 on its website and provide notice directly to disability annuitants of the amount.