OASDI Digest - Havard · OASDI DIGEST The Cash Benefit Provisions of the Old-Age, Survivors, and...

OASDI DIGEST

The Cash Benefit Provisionsof the Old-Age, Survivors,and Disability Insurance System

Social Security AdministrationOffice of the Chief ActuaryDecember 2004

TABLE OF CONTENTS

INTRODUCTION ................................................................................................................................. 1COVERED EMPLOYMENT AND ELIGIBILITY REQUIREMENTS ............................................ 3

Covered Employment ................................................................................................................... 3Covered Earnings .......................................................................................................................... 3Wage Credits .................................................................................................................................. 3Quarters of Coverage (Credits).................................................................................................... 4Definition of Disability.................................................................................................................. 5Period of Disability........................................................................................................................ 5Insured Status................................................................................................................................. 5

TYPES OF BENEFITS ........................................................................................................................... 7Old-Age Insurance Benefits ......................................................................................................... 7Disability Insurance Benefits........................................................................................................ 7Spouse or Divorced Spouse Benefits........................................................................................... 8Child Benefits ................................................................................................................................. 9Widow, Widower, or Surviving Divorced Spouse Benefits .................................................... 9Mother/Father or Surviving Divorced Mother/Father Benefits............................................ 10Parent Benefits................................................................................................................................ 11Lump-Sum Death Payment.......................................................................................................... 11Special Age-72 Benefits ................................................................................................................. 11

DETERMINATION OF PIA AND MFB ............................................................................................ 13Wage-Indexed Method ................................................................................................................. 13PIA Table Method.......................................................................................................................... 17Transitional Guarantee Method .................................................................................................. 17Special Minimum Method............................................................................................................ 18Old-Start Method........................................................................................................................... 18Alternate Method for Widow(er)s............................................................................................... 19Benefit Increases After Entitlement............................................................................................. 20

COMPUTATION OF MONTHLY BENEFIT AMOUNTS .............................................................. 21Reduction for the Family Maximum........................................................................................... 21Reduction for Age.......................................................................................................................... 22Adjustment of Reduction for Age ............................................................................................... 23Delayed Retirement Credit........................................................................................................... 24Reduction for Worker’s Compensation Offset .......................................................................... 26Reduction for Government Pension Offset................................................................................ 26Deduction or Suspension on Account of Work......................................................................... 27Deduction for Supplementary Medical Insurance.................................................................... 28Rounding to the Next Lower Multiple of $1.00......................................................................... 28Entitlement to More Than One Benefit....................................................................................... 28Nonresident Alien Withholding Tax .......................................................................................... 29Other Deductions........................................................................................................................... 29Interaction of Reductions and/or Deductions .......................................................................... 29

APPENDIX A.—OASDI PROGRAM AMOUNTS........................................................................... 31Cost-of-Living Increase ................................................................................................................. 31Average Wage ................................................................................................................................ 31Maximum Creditable Amount .................................................................................................... 31Retirement Earnings Test Exempt Amounts ............................................................................. 32Benefit Formula Bend Points........................................................................................................ 33Quarter of Coverage Amount ...................................................................................................... 33Year of Coverage Amount............................................................................................................ 33Special Minimum PIAs and MFBs .............................................................................................. 34Old-Start PIBs and AME PIAS..................................................................................................... 35

APPENDIX B.—REFERENCES........................................................................................................... 37

LIST OF TABLES

1. Full retirement age for old-age benefit ..................................................................................................... 72. Full retirement age for widow(er) benefit................................................................................................ 103. Windfall elimination provision percentage by year of eligibility......................................................... 164. Windfall elimination provision percentage by years of coverage........................................................ 165. Monthly reduction factors for widow(er)’s benefits............................................................................... 236. Delayed retirement credit percentages by year of attainment of age 62 ............................................. 247. Actuarial values for Windfall Elimination Provision or Government Pension Offset ...................... 278. Cost-of-living increase, average amount of total wages, and maximum creditable amounts ......... 319. Retirement earnings test exempt amounts, 1976-1999 ........................................................................... 3210. Retirement earnings test exempt amounts, 2000 and later.................................................................... 3211. Benefit formula bend points....................................................................................................................... 3312. Amounts required for quarter of coverage and year of coverage ........................................................ 3413. Special minimum PIAs and MFBs as of December 2003 ....................................................................... 3414. Old-start PIBs and AME PIAs for eligibility in 1979 or later................................................................. 3515. Cross-reference of selected items in the POMS, regulations, and Social Security law...................... 37

5

LIST OF EXAMPLES

1. Self-employment income under $400 ....................................................................................................... 32. Deemed wage credits for Japanese internees .......................................................................................... 43. Simplified quarters of coverage................................................................................................................. 44. Special disability insured status ................................................................................................................ 65. Child care years used .................................................................................................................................. 146. Child care years not used ........................................................................................................................... 147. Computation of AIME ................................................................................................................................ 148. Computation of AIME PIA......................................................................................................................... 159. Application of cost-of-living increases ..................................................................................................... 1510. Windfall elimination provision, guarantee applies ................................................................................ 1711. Windfall elimination provision, pension entitlement after Social Security entitlement ................... 1712. Life family benefits reduced for maximum ............................................................................................. 2113. Surviving family benefits reduced for maximum................................................................................... 2114. Disability family benefits reduced for maximum ................................................................................... 2115. Surviving divorced spouse not reduced for maximum ......................................................................... 2216. Earliest receipt of old-age benefit for birth on 1st day of month.......................................................... 2217. Earliest receipt of old-age benefit for birth on 2nd day of month ........................................................ 2218. Earliest receipt of old-age benefit for birth on 3rd through last day of month .................................. 2219. Old-age benefit reduced for age ................................................................................................................ 2220. Spouse benefit reduced for age.................................................................................................................. 2221. Widow(er) benefit reduced for age (old-age benefit limitation does not apply) ............................... 2322. Widow(er) benefit reduced for age (old-age benefit limitation applies) ............................................. 2323. Widow(er) benefit reduced for age (old-age benefit limit and 82.5% limit apply) ............................ 2324. Adjustment of age reduction factor for old-age beneficiary ................................................................. 2425. Delayed retirement credit increment months in year of entitlement................................................... 2526. Delayed retirement credit increment months at age 70 ......................................................................... 2527. AIME PIA with delayed retirement credit exceeds special minimum PIA ........................................ 2528. Delayed retirement credit for widow(er) in year of death of worker .................................................. 2529. Delayed retirement credit for widow(er) after year of death of worker ............................................. 2630. Termination grace year in year prior to termination.............................................................................. 2831. Multiple periods of entitlement and grace years .................................................................................... 2832. Reduced old-age benefit after reduced spouse benefit .......................................................................... 2933. Reduced spouse benefit after reduced old-age benefit .......................................................................... 2934. Maximum family benefit and full retirement test applied to survivor family ................................... 3035. Maximum family benefit and partial retirement test applied to survivor family ............................. 30

7

INTRODUCTION

The Social Security Act of 1935 instituted a compul-sory social insurance program providing old-age retire-ment benefits for workers in commerce and industry inthe United States. The law has been amended a numberof times since its enactment and now includes cash ben-efit provisions for dependents, survivors, the disabled,and health insurance coverage for the aged and dis-abled. The embodying legislation is complex. A particu-lar problem in consulting the law and using relatedmaterial arises from the order of its presentation whichoften requires, for definitions and qualifying conditions,reference to sections other than the one delineating thepoint in question.

This digest is a complete rewrite of the last digest,published in 1974. It presents logically the cash benefitprovisions, starting with coverage, and takes each stepof the benefit provisions in order, defining each term asit is used. Although the digest contains some mention ofsuperseded provisions, the emphasis is on the system asit exists at the end of 2004.

The digest is intended for convenient reference anddoes not have the effect of law. The changes in thisdigest were made by Steven F. McKay, who wishes toacknowledge the careful review that this digest receivedby Toni Hoffer.

1

COVERED EMPLOYMENT AND ELIGIBILITY REQUIREMENTS

Covered Employment

Most work in the United States is covered by socialsecurity. Work can be either for an employer, when cov-ered earnings are called wages, or for the worker, whencovered earnings are called self-employment income.

Covered wages

Unless otherwise excluded from coverage as notedbelow, work performed as an employee is coveredunder social security if one of the following situationsapplies:

• The work is performed within the United States(whether or not the employee or employer is a citi-zen or resident of the United States).

• The work is performed outside the United Statesby a citizen or resident of the United States work-ing for an American employer or a foreign affiliateof an American employer that has an agreementcovering such work.

• The work is performed on an American vessel oraircraft (under some circumstances).

• The work is designated as employment or recog-nized as equivalent to employment under a total-ization agreement. (An agreement may exemptwork from coverage as well as extend coverage towork.)

The following kinds of work are excluded from cov-erage:

• Domestic service by a student for a local collegeclub, fraternity, or sorority.

• Family services (under some circumstances).• Foreign agricultural workers.• Work by civilians for the United States Govern-

ment, where the worker entered on duty prior to1984 and chose not to join the Federal Employees’Retirement System.

• Work for State and local governments (under somecircumstances).

• Railroad work.• Certain other minor categories.

Self-employment coverage

An individual must be engaged in a trade or busi-ness to be covered as a self-employed person. Generally,“trade or business” has the same meaning as in theInternal Revenue Code. Net earnings from self-employ-ment generally means gross income as figured underthe Internal Revenue Code, less deductions attributed tothe trade or business. Net earnings from self-employ-ment also includes a distributive share of income (orloss) from a trade or business carried on by a partner-ship of which the individual is a member.

Covered Earnings

Maximum wages and self-employment income

The maximum amount of earnings credited aswages or self-employment income to an individual in acalendar year cannot exceed the contribution and bene-fit base (or “maximum creditable amount”) establishedfor that year. If an individual has wages and self-employment income, only that part of self-employmentincome, which when added to the wages is less than orequal to the base, is counted as income. The base for allyears, and the formulas used since 1975 to increase thebase, are listed in Appendix A.

Minimum self-employment income

Self-employment income does not include net earn-ings from self-employment when the amount of thoseearnings for the taxable year is less than $400. However,if net earnings from self-employment is $400 or moreand those earnings plus the amount of the wages paidduring that year exceed the maximum creditable earn-ings, then creditable self-employment income may beless than $400.

Wage Credits

Military service before 1957

Before 1957, military service was not covered bysocial security. Noncontributory wage credits of $160are given to a veteran for each month of active militaryor naval service with the U.S. Armed Forces during theperiod from September 16, 1940 to December 31, 1956.The wage credits are added to the calendar quarter inwhich the military service occurred, and are treated asregular covered wages for insured status purposes, andfor all benefit computation purposes.

Pre-1957 wage credits, which otherwise would begranted, cannot be granted under certain conditions:

• Credits cannot be added to existing covered orother creditable earnings so as to exceed the maxi-mum creditable amount for a given year.

• Credits cannot be granted if the veteran has beenconvicted of certain Federal offenses.

• Crediting of pre-1957 military service for either eli-gibility or benefit amount purposes by anotherFederal agency precludes social security wagecredits for the same period(s).

Military service after 1956

After 1956, basic pay for most military active duty

Example 1: Self-employment income under $400

Net earnings from self-employment. . . . . . $1,000Wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $17,500Maximum creditable earnings, 1978. . . . . . $17,700Creditable self-employment income (17,700

- 17,500). . . . . . . . . . . . . . . . . . . . . . . . . . . $200

3

and active duty for training became covered by socialsecurity. These wages are reported and posted just asare civilian wages. Because military service basic paydoes not reflect the value of food, shelter, and other ben-efits, noncontributory deemed military wages are addedto the covered earnings.

For years 1957 to 1977, deemed military wages of$300 per quarter are granted if there is any amount ofcovered military pay in that quarter. For years 1978 andlater, deemed military wages of $100 are added for eachfull $300 of posted annual military service pay.

Deemed wage credits for Japanese internees

Persons who were interned during any period oftime from December 7, 1941, through December 31,1946, by the United States Government at a place oper-ated by the Government within the United States for theinternment of United States citizens of Japanese ances-try are deemed to have been paid wages (in addition towages actually paid) during any period after attainingage 18 while interned.

The wage credit per week of internment fromattainment of age 18 is equal to 40 multiplied by eitherthe then prevailing Federal minimum hourly rate or thehighest hourly rate received during employment priorto internment, whichever is larger.

Quarters of Coverage (Credits)

To qualify for social security benefits for themselvesand their dependents, individuals must work in cov-ered employment or self-employment for a certainperiod of time, or have a specific amount of coveredearnings in a year. Credit for this work is measured inquarters of coverage, or credits.

Before 1978, workers had to actually work in eachcalendar quarter, or be deemed to have worked, to earncoverage credit; thus the term quarter of coverage. Asdescribed below, after 1977 coverage is based on totalearnings in the year. Since actual quarterly earnings areno longer measured, the term credit has been adopted toreplace quarter of coverage.

Credits after 1977

Quarters of coverage or credits after 1977 are com-puted based on the number of increments of coveredearnings credited to the calendar year. The incrementamount required for each credit is listed in Appendix A.

A credit (up to a maximum of 4) is given for eachincrement of total earnings credited to the year. The

total earnings credited may consist of nonagriculturalwages (including deemed military wages), railroadcompensation, agricultural wages, and self-employ-ment income, to the maximum creditable for the year.

Assignment of credits

If the individual’s total earnings for the calendaryear equal at least 4 times the quarterly increment ineffect for that year, each calendar quarter is assigned acredit. A credit is acquired on the first day of the quarterin which it is assigned.

If less than 4 credits are credited to a calendar year,they may be assigned to any quarter in the calendaryear, subject to the following limitations:

• No calendar quarter can be assigned more than 1credit.

• No quarter after the quarter in which the individ-ual dies may be assigned a credit.

• Except for the first and last such quarters, anyquarter of which any portion is included in aperiod of disability cannot be assigned a credit.

• A future quarter (a quarter which has not yet com-menced) cannot be assigned a credit. Even if thetotal earnings would allow for credit in a laterquarter, future credits cannot be used until theactual date.

Quarters of coverage before 1978

For years before 1978, a quarter of coverage is anycalendar quarter in which an individual was paid atleast $50 in wages or for which he/she was creditedwith at least $100 of self-employment income.

Simplified quarters of coverage for 1937-50

A simplified method of determining quarters ofcoverage for the 1937-50 period may be used if the num-ber of quarters of coverage derived under this methodplus the number of quarters of coverage credited after1950 equal the number needed. Under this method, anindividual is deemed to have one quarter of coveragefor each $400 of his/her total wages before 1951, includ-ing wages credited to the earnings record, gratuitousmilitary service credits, and creditable railroad compen-sation. (For the period 1937-50, total wages are readilyavailable electronically; annual wages are not.)

Example 2: Deemed wage credits for Japanese internees

Federal hourly minimum wage in 1942 . $0.30Weekly credit (40 * 0.30) . . . . . . . . . . . . . $12.00Quarterly credit (13 * 12) . . . . . . . . . . . . $156.00Annual credit (4 * 156) . . . . . . . . . . . . . . $624.00

Example 3: Simplified quarters of coverage

Date of birth . . . . . . . . . . . . . . . . . . . . . . . . . . 9/8/26Quarters of coverage required for fully

insured status. . . . . . . . . . . . . . . . . . . . . . 37Quarters of coverage earned after 1950 . . . 23Total wages 1937-50. . . . . . . . . . . . . . . . . . . . $5,700Trial quarters of coverage before 1951

(5,700/400) . . . . . . . . . . . . . . . . . . . . . . . . 14Total quarters of coverage earned. . . . . . . . 37Fully insured? . . . . . . . . . . . . . . . . . . . . . . . . yesSimplified method applies? . . . . . . . . . . . . . yes

4

Definition of Disability

(to be added)

Period of Disability

(to be added)

Insured Status

An insured status test of a number of credits isrequired for the entitlement to any benefit or to establishof a period of disability. For retirement and survivorsinsurance, the insured status tests are fully insured andcurrently insured. For disability benefits, the disabilityinsured status test consists of total credits and a recencyof work test.

When a worker meets the insured status test forretirement or disability benefits, his/her spouse and/orchild(ren) are eligible for auxiliary benefits. For certainsurvivor benefits (child, mother/father, or the lump-sum death payment), the worker must meet thecur-rently insured or fully insured test at the time of death.For all other survivor benefits (parent, aged widow(er),or disabled widow(er)), the worker must have beenfully insured at the time of death.

Fully insured status

A fully insured worker has at least one credit(whenever acquired) for each calendar year after 1950or, if later, the year he/she attained age 21, up to theyear in which the worker attains age 62, becomes dis-abled, or dies, whichever occurs earliest. In determiningthe number of years, do not count any year if part or allof that year is included in a period of disability.

For males born before January 2, 1911, the age-62attainment date is changed to age 65. Men born fromJanuary 2, 1911 through January 1, 1913 are fullyinsured if they have one quarter of coverage for eachyear after 1950 up to 1975, or the year of death, if earlier.

At least six credits and no more than 40 credits arerequired for fully insured status.

Currently insured status

Currently insured status is a more liberal test usedto pay survivor benefits to certain auxiliary beneficia-ries. However, the credits must be earned during a spe-cific time period. A worker is currently insured if he/she has earned at least six quarters of coverage duringany one of the following periods:

• The 13-quarter period ending with the quarter ofdeath;

• The 13-quarter period ending with the quarter inwhich he/she became entitled to a retirement ben-efit; or

• The 13-quarter period ending with the quarter inwhich he/she most recently became entitled to adisability benefit.

In determining the 13-quarter period, do not countas part of such 13-quarter period any quarter any part ofwhich was included in a period of disability unless thequarter was a quarter of coverage. An interveningperiod of disability may extend the 13-quarter periodduring which the six quarters of coverage necessary fora currently insured status must be acquired.

Regular disability insured status

A worker may meet either the regular disabilityinsured test, or a special disability insured test foryounger workers.

An individual has disability insured status if he orshe:

• has at least 20 quarters of coverage during a 40-quarter period ending with the quarter the waitingperiod begins, and

• is fully insured in that quarter.If no waiting period is required because a previous

period of disability terminated within the past 5 years,the claimant must have disability insured status in thequarter of the new disability onset.

In determining the 40-quarter period, do not countany quarter all or part of which is in a prior disabilityperiod, except the beginning or ending quarter if theyare quarters of coverage.

An individual disabled because of statutory blind-ness meets the disability insured test if he/she has fullyinsured status only.

Special disability insured status

A special disability insured status test allows analternative to the 20/40 recency of work requirement.An individual has disability insured status if he or she:

• is under a disability which began before the quar-ter in which he or she attained or would attain age31; and

• is fully insured; and• has earned credits in at least one-half of the calen-

dar quarters during the period beginning with thequarter after the quarter in which he or sheattained age 21 and ending with the quarter inwhich the period of disability began (if the numberof elapsed quarters after age 21 is an odd number,subtract one elapsed quarter from the total elapsedquarters); or

• if the period contains less than 12 calendar quar-ters, the individual has earned six credits in the 12-quarter period ending with the quarter in whichthe period of disability began. (When a period ofdisability begins in the quarter of attainment of age24 or earlier, the 6-quarter-of-coverage rule willalways apply.)

5

Example 4: Special disability insured status

Date of birth . . . . . . . . . . . . . . . . . . . . . . . . . . 5/13/58Date of disability onset . . . . . . . . . . . . . . . . . 1/15/88Date of attainment of age 21 . . . . . . . . . . . . 5/12/79Quarters in period of consideration . . . . . . 35Required quarters of coverage (1/2 of 34) . 17

6

TYPES OF BENEFITS

Old-Age Insurance Benefits

To be entitled to old-age benefits, a claimant mustbe fully insured, have attained age 62, and have filed anapplication for benefits. An application is not required ifthe claimant is entitled to disability insurance benefitsfor the month before the month in which he or shereaches full retirement age. (See the previous section fora discussion of insured status.)

Attainment of age

For all program purposes, an individual attains agiven age on the day before the birthday. The possiblebirthdays and corresponding days of attainment can beclassified into three groups:

• birth on the first day of the month (attainment ofan age on the last day of the preceding month);

• birth on the second day of the month (attainmentof an age on the first day of the birthday month);and

• birth on the third or later day of the month (attain-ment of an age on the second or later day of thebirthday month).

A claimant for old-age benefits must have attainedage 62 throughout the month of entitlement. Thus, anindividual born on the first or second day of the month(in the first or second group above) could be entitled tobenefits for the month of his or her 62nd birthday. Birthon any other day of the month would preclude entitle-ment for the month in which the birth occurs since theindividual would not be age 62 for that entire month.

Full retirement age for old-age benefit

The full retirement age for an old-age benefitdepends on the claimant’s date of birth:

Amount of benefit

The old-age benefit is equal to the Primary Insur-

ance Amount (PIA),• subject to reduction because the claimant elects

benefits for one or more months before full retire-ment age; or

• increased due to delayed retirement credit.The old-age benefit is reduced for a worker under

age 70 if his/her earnings exceed those allowed underthe earnings test.

When entitlement ends

Entitlement to an old-age benefit ends with the lastmonth in which the beneficiary is alive for the entiremonth. The month of death is not an entitlement month.

Disability Insurance Benefits

To be entitled to disability insurance benefits, aclaimant must meet the disability insured status tests,have filed an application, and be disabled. Disabilityinsurance benefits are usually payable only after a wait-ing period of 5 full calendar months of disability.

Waiting period

Before entitlement to disability insurance benefitscan begin, the claimant must have served a waitingperiod consisting of 5 full calendar months unless theclaimant does not have to serve a waiting period (seethe next section).

The waiting period begins in the first month, no ear-lier than 17 months prior to the month of filing, inwhich:

• The claimant has been under a disability for theentire month; i.e. the date of onset is on or beforethe first day of the month; and

• The claimant has disability insured status.

Entitlement to the disability insurance benefitbegins with the first full calendar month after the wait-ing period in which all other requirements are met.

When no waiting period is required

If a claimant previously had freeze or disabilityinsurance entitlement which ceased within 5 years (60months) before the month the current disability began,this individual need not serve a waiting period in orderto become entitled to disability insurance benefits.Instead, the individual will be eligible for benefitsbeginning with the first month throughout which he/she is under a disability and has disability insured sta-tus.

Thus where the current disability begins on the firstday of a month, the 60-month period will end with thepreceding month; if it begins on other than the first dayof a month the 60-month period will end with themonth in which the current disability began.

If the individual does not have disability insured

Table 1: Full retirement age for old-age benefit

Date of birth Full retirement age

1/1/1938 or earlier. . . . . . . . . . . . . 65

1/2/1938 - 1/1/1939 . . . . . . . . . . . 65 and 2 months1/2/1939 - 1/1/1940 . . . . . . . . . . . 65 and 4 months1/2/1940 - 1/1/1941 . . . . . . . . . . . 65 and 6 months1/2/1941 - 1/1/1942 . . . . . . . . . . . 65 and 8 months1/2/1942 - 1/1/1943 . . . . . . . . . . . 65 and 10 months

1/2/1943 - 1/1/1955 . . . . . . . . . . . 66


1/2/1960 or later . . . . . . . . . . . . . . 67

7

status in the month the current disability begins, he/shewill not be eligible for a disability insurance benefituntil the first month thereafter in which such insuredstatus exists. (In these situations the first day of the firstmonth of the qualifying quarter will become the estab-lished onset date.)

Amount of benefit

The disability insurance benefit is equal to the PIA,computed as if it were an old-age benefit, assuming theclaimant is 62 years old when the disability began, and:

• subject to reduction because of prior entitlement toold-age benefits (the disability insurance benefit isreduced by the amount the old-age benefit wouldbe reduced if the beneficiary had attained fullretirement age in the first month of entitlement todisability insurance benefits), and

• subject to reduction to offset a periodic workers’compensation benefit received for the same month.


Entitlement to disability insurance benefits endswith the last day of whichever of the following monthsis earliest:

• the second month after the month in which disabil-ity ceases; or

• the termination month where the disabled workeris performing substantial gainful activity; or

• the month before the month the worker attains fullretirement age; or

• the month before the month the worker dies.

Spouse or Divorced Spouse Benefits

Spouse benefits

To be entitled to benefits as the wife or husband ofan insured person who is entitled to old-age or disabil-ity benefits, a claimant must:

• be the spouse of the insured;• have attained age 62, or have in care an eligible

child throughout the month of entitlement (An eli-gible child must be under age 16 or disabled. Thechild need not be receiving benefits, but must beentitled to benefits on the earnings record of theworker.);

• have filed an application;• not be entitled to an old-age or disability benefit

based on a PIA that is equal to or greater than thefull wife’s or husband’s benefit. (See “Entitlementto more than one benefit” for the case where thespouse is entitled to an old-age or disability benefitbased on a PIA that is less than the full spouse’sbenefit.)

In addition to the requirements above, there is aduration of marriage requirement. A claimant musteither:

• have been married to the worker at least one year;or

• be the natural parent, along with the worker, of achild; or

• have been entitled or potentially entitled, in themonth before marriage, to certain dependent’s orsurvivor’s benefits.

Divorced spouse benefits

To be entitled to benefits as the divorced wife orhusband of an insured person who is entitled to old-ageor disability benefits, a claimant must:

• be the divorced spouse of the insured;• have been married to the insured for at least 10

years immediately before the divorce became final;• have attained age 62;• have filed an application; and• not be entitled to an old-age or disability benefit

based on a PIA that is equal to or greater than thefull wife’s or husband’s benefit. (See “Entitlementto more than one benefit” for the case where thespouse is entitled to an old-age or disability benefitbased on a PIA that is less than the full spouse’sbenefit.)

A divorced spouse’s benefit may be paid to theformer spouse of an insured worker (i.e. the worker isnot yet entitled) if the claimant meets the requirementsabove and has been divorced from the insured personfor at least two years.

Full retirement age for spouse benefit

The full retirement age for a spouse benefit is thesame as for an old-age benefit (see table 1).

Amount of benefit

The spouse’s benefit is equal to one-half the PIA ofthe worker,

• adjusted for the family maximum; and/or• reduced because the claimant elects benefits for

one or more months before the month in which heor she attains full retirement age, and there is noentitled child of the worker in care.

The benefit is reduced for a spouse under age 70 ifher/his earnings exceed those allowed under the earn-ings test. The spouse’s benefit may be reduced on thebasis of the worker’s earnings. The benefit is alsoreduced if it is affected by the government pension off-set. (See “Reduction for Government Pension Offset”.)

A divorced spouse’s benefit is not subject to thefamily maximum. If she/he has a child under age 16 incare in the first month of entitlement, the divorcedspouse benefit remains unreduced even for later monthsbefore full retirement age in which no child is in care.

A divorced spouse’s benefit may be reduced on thebasis of the divorced worker’s earnings if the couple hasnot been divorced for two continuous years. (The two-year waiting period is waived if the worker was entitledto old-age benefits in the month prior to the month ofdivorce.)

8

Spouse and old-age benefits

A claimant cannot file for an old-age benefitreduced for age or a spouse benefit reduced for agewithout filing for the other benefit if eligibility for bothbenefits exists in the first month of entitlement. This ruleapplies to:

• all new spouse benefits reduced for age, includingdivorced spouse benefits,

• conversions from entitlement based on having achild in care to a spouse benefit reduced for age atage 62 or later, and

• conversions from a disability insurance benefit to aspouse benefit reduced for age when the disabilitybenefit terminates before age 65.


Entitlement to a spouse’s benefit ends with themonth before the month in which:

• the marriage ends in divorce, unless the spousecan be entitled to divorced spouse’s benefits;

• the marriage to the worker is annulled;• the spouse becomes entitled to an old-age or dis-

ability benefit based on a PIA which equals orexceeds one-half of the worker’s PIA;

• she/he dies;• the worker’s entitlement to old-age or disability

benefits terminates (except that, if the worker’sdisability benefit ends because of conversion toold-age benefits, the spouse’s entitlement contin-ues); or

• No child of the worker under age 16 or disabled isentitled to a child’s benefit and the spouse has notattained age 62.

Entitlement to a divorced spouse’s benefit endswith the month before the month in which:

• she/he marries someone other than the formerspouse, unless the new spouse is entitled towidow(er)’s, mother’s, father’s, disabled child’s,divorced spouse’s, or parents benefits;

• the worker dies;• she/he becomes entitled to an old-age or disability

benefit based on a PIA which equals or exceedsone-half of the worker’s PIA;

• the worker’s entitlement to disability benefits ter-minates and he/she does not become entitled toold-age benefits, unless the couple was divorcedfor at least two consecutive years and the workerhas attained age 62; or

Child BenefitsTo be entitled to child’s benefits, an individual must

have filed an application for child’s benefits and mustbe:

• the child of an old-age or disability beneficiary, orof a worker who died fully or currently insured;

• dependent upon that beneficiary or worker; and• unmarried.

In addition, the individual must meet an age, dis-ability, or student requirement:

• under age 18;• attained age 18, and under a disability which

began before age 22;• attained age 18, and a full-time elementary or sec-

ondary school student under age 19, or hasattained age 19 in a month he/she is in full-timeattendance and has not completed the currentquarter or semester.

A child entitled to surviving child’s benefits will beentitled to a monthly benefit effective with the firstmonth in which all of the above requirements are metduring any part of that month.

A child entitled to child’s benefits on the record of aliving worker will be entitled to a monthly benefit effec-tive with the first month in which all of the aboverequirements are met throughout the entire month.

Amount of benefit

The benefit for a child of an old-age or disabilitybeneficiary is one-half of the worker’s PIA, subject tothe family maximum provision. The benefit for a surviv-ing child is three-fourths of the deceased worker’s PIA,subject to the family maximum provision. (See “Reduc-tion for the Maximum Family Benefit”.)


A child’s entitlement ends with the month beforethe month in which any of the following occurs:

• the child dies;• the child attains age 18 and is neither under a dis-

ability nor a full-time student;• the child marries (with some exceptions); or• the worker is no longer entitled to a disability ben-

efit, unless his/her entitlement ended because ofhis/her death or entitlement to an old-age benefit.

In the case of a disabled child (age 18 or over), theentitlement of the child ends with the second month fol-lowing the month in which he/she ceases to be under adisability, unless in such month he/she is under age 19and is a full-time student.

In the case of a student child (age 18), entitlementends with whichever of the following first occurs,unless at such time he/she is entitled to benefits as adisabled child:

• the month before the month in which he/sheattains age 19; or

• the first month during no part of which he/she is afull-time student.

Widow, Widower, or Surviving Divorced Spouse Benefits

Widow or widower benefits

To be entitled to benefits as the widow or widowerof a person who died fully insured, a claimant must:

9

• be the widow or widower of the insured;• have attained age 60, or attained age 50 but not age

60 and be disabled;• be unmarried, unless the marriage occurs after age

60 for widow(er)s, or after age 50 and in or afterthe month the widow(er) became disabled;

• have been married to the insured for not less than 9months immediately prior to the day the insureddied, unless death was accidental or certain otherexceptions;

• have filed an application, or be entitled to spouseor mother or father benefits in the month beforeentitlement to a widow or widower benefit;

• not be entitled to an old-age benefit which exceedsthe full widow(er)’s benefit. (See “Entitlement tomore than one benefit” for the case where thewidow(er) is entitled to an old-age or disabilitybenefit based on a PIA that is less than the fullwidow(er)’s benefit.)

Surviving divorced spouse benefits

To be entitled to benefits as the surviving divorcedspouse, a claimant must meet the above conditions, and:

• be finally divorced from the deceased, and• have been married to the deceased for 10 years

immediately before the date the final divorcebecame effective.

Full retirement age for widow(er) benefit

The full retirement age for a widow(er) benefitdepends on the claimant’s date of birth:

Amount of benefit

When the first month of entitlement to a widow(er)or surviving divorced spouse benefit is the month ofattainment of full retirement age or later, the benefit isequal to the deceased person’s PIA, unless the deceasedworker was entitled to an old-age benefit before full

retirement age, or was eligible for the delayed retire-ment credit. For certain workers, an alternative PIAcomputation applies. (See “Alternate Method forWidow(er)s”.) Where the first month of entitlement isthe month of attainment of age 60 or later, and beforethe attainment of full retirement age for a widow(er)’sbenefit, the widow(er)’s benefit is reduced by the num-ber of months of entitlement prior to the attainment offull retirement age and may be further reduced if thedeceased person was ever entitled to a reduced old-agebenefit.

The benefit amount at age 60 is reduced by 28.5 per-cent regardless of the full retirement age. As the fullretirement age changes, the amount of the reduction foreach month is established by linear interpolationbetween 28.5 percent at the month of attainment of earlyretirement age and 0 percent at the month of full retire-ment age.

Benefits to a disabled widow(er) are not furtherreduced for months of entitlement prior to age 60. Thus,benefits to a disabled widow(er) are reduced by 28.5percent for entitlement in any month before age 60.


A widow(er)’s entitlement ends with:• the month before the month the widow(er)

becomes entitled to an old-age benefit whichequals or exceeds the deceased’s PIA; or

• the month before the month the widow(er) dies; or• the second month following the month in which

the widow(er)’s disability ceases if he or shebecame entitled to disabled widow(er)’s benefitsbefore age 60, or the termination month if thewidow(er) performed substantial gainful activity.If the disabled claimant attains full retirement ageby the end of disabled widow(er) entitlement, ben-efits continue without an application. The claimantthen becomes subject to the rules applicable to anaged widow(er); e.g. the retirement test. However,if the disabled claimant has not attained full retire-ment age by that time, benefits will terminate. Anew application is required to establish entitle-ment to aged widow(er) benefits.

Mother/Father or Surviving Divorced Mother/Father Benefits

Mother or father benefits

To be entitled to mother or father benefits, a claim-ant must:

• be the widow(er) of a worker who died fully orcurrently insured;

• not be married;• have filed an application for mother’s or father’s

insurance benefits (no application is required if theclaimant was entitled to spouse’s benefits for themonth before the month the worker died);

• not be entitled to widow(er)’s insurance benefits;

Table 2: Full retirement age for widow(er) benefit

Date of birth Full retirement age

1/1/1940 or earlier. . . . . . . . . . . . . 65


1/2/1945 - 1/1/1957 . . . . . . . . . . . 66


1/2/1962 or later . . . . . . . . . . . . . . 67

10

• not be entitled to an old-age benefit equal to orexceeding the amount of the unadjusted mother’s/father’s benefit; and

• have in care a child of the deceased worker entitledto a child’s insurance benefit. The child must beunder age 16 or be entitled as a disabled child.

Surviving divorced mother or father benefits

To be entitled to surviving divorced mother orfather benefits, a claimant must meet the above require-ments and be finally divorced from the worker.

Amount of benefit

The mother’s/father’s benefit is 75 percent of theworker’s PIA, adjusted for the family maximum. Sur-viving divorced mother’s/father’s benefits, which arelimited by the family maximum provisions, differ fromdivorced spouse’s and surviving divorced spouse’s ben-efits which are not reduced for the family maximum.


Benefits end with the month before the month whenany of the following occur:

• no child of the deceased worker under age 16 ordisabled is entitled to a child’s insurance benefit;

• the claimant remarries;• the claimant becomes entitled to widow(er)’s bene-

fits;• the claimant becomes entitled to an old-age benefit

equal to or exceeding the amount of his/her unad-justed mother’s/father’s benefit;

• the claimant dies.

Parent BenefitsTo be entitled as a parent, a claimant must:

• be the parent of a worker who died fully insured;• have attained age 62;• have filed an application for parent’s benefits;• not be entitled to an old-age benefit equal to or

exceeding the amount of the parent’s original ben-efit;

• not have married after the worker’s death; and• have been receiving at least one-half support from

the worker at certain points in time.

Amount of benefit

If one parent is entitled, the parent’s benefit is 82 1/2percent of the worker’s PIA. If two parents are entitled,the parent’s benefit is 75 percent of the worker’s PIA foreach month for which both are entitled, beginning withthe month of the later application. If entitlement to oneparent’s benefit terminates, the remaining parent’s ben-efit is increased to 82 1/2 percent of the worker’s PIAeffective with the month the terminating event occurs.The parent’s benefit is subject to reduction for the familymaximum.


Entitlement ends with the month before the monthin which the parent:

• dies;• marries; or• becomes entitled to an old-age benefit equal to or

exceeding the amount of the parent’s original ben-efit.

Lump-Sum Death Payment

A lump-sum death payment is payable on the deathof a fully or currently insured worker. An application isrequired; however, a widow(er) or child application formonthly benefits is considered a lump-sum paymentapplication.

Who can be paid

The lump-sum death payment is paid in the follow-ing order of priority:

• The surviving spouse of the deceased who was liv-ing in the same household as the deceased at thetime of death;

• A person who is entitled to (or was eligible for)benefits as a widow(er), or mother or father, on thedeceased’s earnings record for the month theworker died;

• A child of the worker who is entitled to (or was eli-gible for) benefits on the deceased’s earningsrecord for the month the worker died.

Amount of lump-sum death payment

The lump-sum death payment is $255 for workersinsured using domestic covered earnings. (Early in theprogram the payment equaled three times the PIA, lim-ited to $255.) If the worker is insured by using foreignwork and totalization, the payment may be less than$255.

Special Age-72 BenefitsTo be entitled to special age-72 benefits, an individ-

ual must:• have attained age 72 before 1972;• have at least 3 quarters of coverage, whenever

acquired, for each calendar year after 1966 andbefore the year in which he/she attained age 72, ifage 72 was attained in 1968 or later;

• reside in one of the 50 states, the District of Colum-bia, or the Northern Mariana Islands;

• be a U.S.citizen or a lawfully admitted alien whohas resided in the U.S. for 5 years; and

• have filed an application.

Amount of benefit

The monthly benefit as of December 1998 is $205.70.It is increased by the same cost-of-living increaseapplied to regular old-age, survivor, and disabilityinsurance benefits.

11


Entitlement to special age-72 benefits ends in themonth of death.

12

DETERMINATION OF PIA AND MFB

The PIA established for a record is the highest PIAcomputed considering all applicable PIA computationmethods.

The applicability of a particular method usuallydepends on the year of eligibility of the worker. The eli-gibility year for an old-age benefit is the year of attain-ment of age 62. (See the previous section for adiscussion of “attainment” of an age.) The eligibilityyear for a disabled worker benefit is the earlier of theyear of actual age 62 attainment or the year of disabilityonset, for the usual freeze computation. The eligibilityyear for survivor’s benefits is the earlier of the year ofage 62 attainment or the year of death.

Wage-Indexed Method

The wage-indexed method is based upon averag-ing earnings over a fixed number of years after 1950.Earnings before 1951 are not considered. The PrimaryInsurance Amount (PIA) is determined in the wage-indexed method in five steps:

• Determine the computation factors--elapsed years,base years, computation years, and divisormonths;

• Index the earnings record to derive the dividend;• Determine the Average Indexed Monthly Earnings

(AIME);• Calculate the basic AIME PIA by applying the PIA

formula to the AIME; and• Convert the basic AIME PIA to the PIA in the

month of entitlement.

Applicability

This method applies to PIA determinations wherethe worker attains age 62, becomes disabled, or diesafter 1978 (i.e. the year of eligibility is after 1978).

Elapsed Years

The number of computation years to be used indetermining the AIME is equal to the number of elapsedyears minus the number of dropout years. The numberof elapsed years equals the number of years

• after the later of 1950 or the year of attainment ofage 21, and

• before the year of attainment of age 62 (for retire-ment benefits), the earlier of the year of attainmentof age 62 or the year the waiting period begins (fordisability benefits), or the year of death (for survi-vor benefits).

Years wholly or partially within a period of disabil-ity are excluded, for the usual freeze computation.

Base Years and Computation Years

Base years are the available earnings years fromwhich the years to be used in computing a PIA areselected. For the initial computation of a retirement ordisability benefit, all years after 1950 and before the year

of entitlement are base years. The year of entitlementand later years may be included as base years in recom-putations. For a survivor computation, base years are allyears after 1950 through the year of death.

Years wholly within a period of disability may notbe used for the usual freeze computation.

Computation years are the base years having thehighest indexed or unindexed earnings and equal innumber to the elapsed years less drop out years. Wherethe result is less than 2, it must be raised to 2.

Drop Out Years and Divisor Months

In all retirement and survivors computations notinvolving prior disability entitlements, and for disabil-ity entitlements prior to July 1980, the number of drop-out years equals 5. For disability entitlements in July1980 or later, the number of dropout years is determinedunder the 1-for-5 rule. In retirement cases with a priordisability, where the prior disability entitlement wasJuly 1980 or later and 1-for- 5 dropout applied to the dis-ability benefit, the 1-for-5 rule is used for the retirementcomputation as well. In addition, the computation yearsmay be further reduced by deducting child care dropoutyears. In survivor computations with a prior disability,the full 5-year dropout applies, including situationswhere the deceased worker was entitled to disabilitybenefits based on the 1-for-5 rule.

To calculate a 1-for-5 dropout, divide the number ofelapsed years by five, dropping any remainder. Selectthe smaller of that result or 5.

The number of divisor months equals the number ofmonths in the computation years.

Additional Dropout Years Based on Child Care

Any individual whose benefit is computed underthe 1- for-5 rule to determine dropout years, and whoreceives less than 3 dropout years under that rule, maybe eligible for additional dropout years based on childcare. The sum of the dropout years computed under the1-for-5 rule and the child care dropout years cannotexceed 3. The minimum number of computation years,after subtracting regular dropout years and child caredropout years from the number of elapsed years, is still2. Thus, the individual must have more than 2 andfewer than 15 elapsed years for child care provision eli-gibility.

A child care year is a year which has been selectedas a computation year (after application of the 1-for-5rule) in which 1) the worker had no earnings (eithercovered or noncovered), 2) the worker was living witha child substantially throughout that year, and 3) thechild was under age 3 during at least part of the year.The child must be the child of the worker or of theworker’s spouse.

If the individual is eligible for the child care provi-sion, a benefit is first computed using only the regular

13

(1-for-5) dropout years. If each of the selected computa-tion years contains earnings, regardless of the amount,then the child care dropout provision does not apply. Ifat least one of the selected computation years would bea year of no earnings, then a year of no earnings whichmeets the criteria for a child care year will be selected asone of the computation years. Where one or more yearsqualify as a child care year, the number of computationyears is reduced by the number of selected child careyears.

Average Indexed Monthly Earnings

The PIA is determined on the basis of the earningsrecord after the earnings up to the maximum creditableamounts listed in Appendix A have been adjusted or“indexed” to reflect earlier earnings in terms of the cur-rent dollar value in the “indexing year.” The indexingyear is the second year before the earliest of the year ofattainment of age 62, or year of disability onset or deathbefore age 62. Years after the indexing year are notindexed.

Earnings in or after the indexing year will be usedas is and are subject to limitation by the maximum cred-itable amounts listed in Appendix A.

Earnings are indexed by multiplying the earningsfor each year after 1950 up through the indexing year bythe average wages of all workers for the indexing yearand dividing the result by the average wages of allworkers for the year being indexed, rounded to thenearest cent. The series of average wages of all workersis listed in Appendix A.

Once the earnings record has been indexed, theyears of highest earnings in the computation years areselected from the base years on the indexed earningsrecord and totalled. This total can include both indexedand unindexed earnings. That is, an unindexed year(one which occurs after the indexing year) can be a highyear and therefore a computation year. This total isdivided by the number of months in the computationyears to obtain the AIME. The AIME is rounded downto a whole dollar amount.

Example 5: Child care years used

An individual born on August 4, 1954 became entitled to dis-ability benefits in July 1981, based on an onset date of January 15, 1981.

Elapsed years . . . . . . . . . . . . . . . . . . . . . . . 1976-80Number of elapsed years . . . . . . . . . . . . . 5Number of regular dropout years (5/5) . 1Number of computation years (5-1) . . . . 4Base years . . . . . . . . . . . . . . . . . . . . . . . . . . 1951-80Maximum number of child care years ( (3

- 1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2The indexed earnings record shows the following:1977 and earlier. . . . . . . . . . . . . . . . . . . . . . No earnings1978. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $9,0001979. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,0001980. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $12,0001981. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . No earningsBefore application of the child care provision:Computation years selected . . . . . . . . . . . 1977, 1978, 1979,

1980Dividend . . . . . . . . . . . . . . . . . . . . . . . . . . . $31,000Divisor months . . . . . . . . . . . . . . . . . . . . . . 48AIME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $645Since one year of no earnings was used in the computation

years, only one child care year may actually be credited. The individual had no earnings in 1974 and 1975, and lived with her child, who was born in 1973, during all of those two years. Either year may be selected as the child care year. The number of computation years is reduced by 1 child care year to 3 computation years.

After application of the child care provision:Computation years selected . . . . . . . . . . . 1978, 1979, 1980Dividend . . . . . . . . . . . . . . . . . . . . . . . . . . . $31,000Divisor months . . . . . . . . . . . . . . . . . . . . . . 36AIME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $861

Example 6: Child care years not used

Same facts as above, except the indexed earnings record shows:

1976 and earlier. . . . . . . . . . . . . . . . . . . . . . No earnings1977. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4111978. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $9,0001979. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,0001980. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $12,0001981. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . No earningsComputation years selected . . . . . . . . . . . 1977, 1978, 1979,

1980Each year selected contains earnings, therefore the child care

dropout provision does not apply.

Example 7: Computation of AIME

An individual born on March 18, 1917 became entitled to old-age benefits in March 1979.

Elapsed years . . . . . . . . . . . . . . . . . . . . . . . . . . 1951-78Number of elapsed years . . . . . . . . . . . . . . . . 28Number of regular dropout years . . . . . . . . . 5Number of computation years (28-5) . . . . . . 23Divisor months (12*23) . . . . . . . . . . . . . . . . . . 276Indexed earnings in 23 highest base years . . $160,000AIME ($160,000/276) . . . . . . . . . . . . . . . . . . . . 579.71AIME after rounding down . . . . . . . . . . . . . . $579.00

14

PIA Formula

To compute a PIA, the AIME is split into portionsand each portion is multiplied by a constant percentage.The size of the portions is adjusted yearly as averagewages rise or decline, but the percentages by which eachportion is multiplied are specified in the law. (The firstpercentage may be lowered for workers receiving pen-sions from their own employment not covered by SocialSecurity; see the section entitled Windfall EliminationProvision.) The dollar amounts at which the AIME isdivided are called “bend points”.

For benefits where the earliest of the year of attain-ment of age 62, or year of disability onset or deathbefore age 62, is 1979, the bend points are $180 and$1085; see Table 11, “Benefit formula bend points,” onpage 33 for the bend points for later years. A PIA iscomputed from an AIME by taking the sum of:

• 90 percent of the AIME through the first bendpoint;

• 32 percent of the AIME in excess of the first bendpoint through the second bend point; and

• 15 percent of the AIME in excess of the secondbend point.

The result is rounded to the next lower multiple of$0.10, if attainment of age 62, or death or disabilitybefore age 62, occurred before 1983. It is rounded to thenext higher multiple of $0.10 if attainment of age 62, orearlier death or disability, occurred in 1983 or later.

Cost-of-Living Increases

Cost-of-living increases are applied to the basicAIME PIA (as determined in the preceding section)beginning with the year of the applicable PIA formula.The result is rounded to the next lower multiple of $0.10for benefit increases in June 1982 or later. It is roundedto the next higher multiple of $0.10 for earlier benefitincreases. See Appendix A for the series of cost-of-livingincreases.

Windfall Elimination Provision

The windfall elimination provision applies toretired and disabled workers receiving pensions fromtheir own employment not covered by Social Security, toremove the unintended advantage that the heavyweighting in the Social Security PIA formula providedfor persons who have substantial pensions from non-covered employment. Specifically, the 90-percent factorapplied to a worker’s average earnings in the first bandof the benefit formula is replaced by a factor as low as 40percent.

The modified benefit formula applies to workerswho are first eligible after 1985 for both (1) a pensionbased on noncovered employment and (2) a Social Secu-rity retirement or disability benefit. It applies only inmonths of concurrent entitlement to the pension andSocial Security benefit. Once benefits are computedunder the windfall elimination provision, the PIA willcontinue to be based on the revised formula until enti-tlement to the pension ceases, the worker dies, or theworker becomes eligible for the windfall eliminationexemption by earning 30 years of Social Security cover-age (see below). The windfall elimination provisiondoes not apply in computing survivor benefits.

If the worker becomes entitled to an applicable pen-sion after the month of entitlement for a Social Securityretirement or disability benefit, the PIA is recomputedto apply the windfall elimination provision in the firstmonth of the pension entitlement. However, the wind-fall elimination provision is not recomputed due tochanges, such as yearly increases, in the money amountof the pension.

Windfall Elimination Provision Exceptions

The lower percentage in the first band of the benefitformula is phased in gradually for workers who reachage 62 or become disabled in the years 1986 through1989, becoming 40 percent effective in 1990 and later.

Example 8: Computation of AIME PIA

An individual born on March 18, 1925 became entitled to old-age benefits in March 1987, with an AIME of $351. The PIA formula for eligibility in 1987 is used.

First bend point (from Appendix A) . . . . . . . . $310AIME in excess of first bend point (351 -310). 41First part of AIME PIA (90 percent of 310) . . . $279.00Second part of AIME PIA (32 percent of 41) . $13.12Total AIME PIA (279.00+13.12). . . . . . . . . . . . . $292.12AIME PIA after rounding down . . . . . . . . . . . $292.10

Example 9: Application of cost-of-living increases

An individual born on March 18, 1925 became entitled to old-age benefits in March 1989, with an AIME of $351. The PIA formula for eligibility in 1987 is used.

AIME PIA (from preceding example) . . . . $292.10Increase for December 1987 (4.2 percent) . $304.3682PIA after rounding down . . . . . . . . . . . . . . $304.30Increase for December 1988 (4.0 percent) . $316.472PIA after rounding down . . . . . . . . . . . . . . $316.40

15

The phase-in applies as follows:

There are special rules for workers who, thoughreceiving pensions based on noncovered employment,also have a substantial number of years of employmentcovered under Social Security. Workers having 30 yearsof Social Security coverage are fully exempt from thewindfall elimination provision. Years of coverage aredetermined in the same way as for the special minimumbenefit (see Special Minimum Method), except for yearsafter 1990, earnings must be at least 25 percent of themaximum creditable amounts that would have beencomputed for those years if the 1977 amendments hadnot prescribed maximum creditable amounts. (SeeAppendix A for the series of required amounts.)

For workers with fewer than 30 years of coverage,the percentage is based on the number of years of cover-age and on the month for which the benefit is paid, asshown in the following table.

When the worker qualifies for both the phase-inbased on age or disability eligibility year and the excep-tion based on years of coverage, the one yielding thegreater percentage is applied.

As of January 1995, the windfall elimination provi-sion no longer applies to the benefits of retired or dis-abled workers receiving military pensions based, in

part, on inactive duty (including weekend drills) from1957 to 1987. The windfall elimination provision maystill apply because of the receipt of another non-coveredpension.

As of January 1995, the windfall elimination provi-sion does not apply in computing U.S. totalization bene-fits or in computing regular U.S. benefits where theworker receives a foreign totalization benefit based onU.S. work, and no other non-covered pension.

Windfall Elimination Provision Pension Amount

The monthly pension amount used to determine theapplicability of the windfall elimination provision guar-antee includes the amount payable before any reductionfor health insurance, survivor annuities, allotments, etc.This amount also includes monies payable prior to thereduction imposed on the pension when the workerwithdraws his/her own contributions resulting in thelowering of the monthly pension amount.

When the entire pension is paid in a lump sum, theamount may represent a payment for a specific periodof time or a “lifetime”. Generally, the pension-payingagency will prorate the lump sum to determine amonthly amount for windfall elimination provisionpurposes. If that information is unavailable, the lumpsum is prorated. If the lump sum represents a specifiedperiod of time, divide the lump sum by the number ofmonths in the period specified. If the lump sum repre-sents a lifetime, divide the pension lump sum amountby the actuarial value in the table entitled “Actuarialvalues for Windfall Elimination Provision or Govern-ment Pension Offset”.

Windfall Elimination Provision Guarantee

There is a guarantee providing that the reduction inthe Social Security benefit cannot be greater than one-half of that part of the pension attributable to post-1956noncovered earnings.

To determine if the guarantee applies:• Determine the amount of the AIME PIA at age 62

or disability onset. The AIME PIA is the PIA at age62 or onset without cost-of-living increasesapplied.

• Subtract from the AIME PIA one-half of the appli-cable monthly pension amount payable in the firstmonth of concurrent entitlement.

• Increase the resulting PIA by applicable cost-of-liv-ing increases up to the month of concurrent entitle-ment.

This is the windfall elimination provision guaranteePIA. If this PIA is higher than the PIA based on the for-mula method for the windfall elimination provision, it

Table 3: Windfall elimination provision percentage by year of eligibility

Individual reaches age 62 or becomes disabled in the year:

The first factor in the benefit formula is:

1986. . . . . . . . . . . . . . . . . . . . . . . . . . 80 percent1987. . . . . . . . . . . . . . . . . . . . . . . . . . 70 percent1988. . . . . . . . . . . . . . . . . . . . . . . . . . 60 percent1989. . . . . . . . . . . . . . . . . . . . . . . . . . 50 percent1990 or later . . . . . . . . . . . . . . . . . . . 40 percent

Table 4: Windfall elimination provision percentage by years of coverage

Years of coverage Percentage

For benefits payable for months prior to January 1989:29. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8028. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7027. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6026. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5025 or less . . . . . . . . . . . . . . . . . . . . . 40

For benefits payable for months after December 1988:29. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8528. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8027. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7526. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7025. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6524. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6023. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5522. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5021. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4520 or less . . . . . . . . . . . . . . . . . . . . . 40

16

is the PIA that is used.

Calculation of the MFB

Once the PIA is calculated, the Maximum FamilyBenefit (MFB) is determined by this method in twosteps:

• Calculate the basic MFB by applying the MFB for-mula to the AIME PIA; and

• Convert the basic MFB to the MFB in the month ofentitlement.

The basic MFB is calculated from the AIME PIA bydividing the AIME PIA into four parts. The 3 divisionsbetween these parts are bend points, similar to those inthe PIA formula. See Table 11, “Benefit formula bendpoints,” on page 33 for the bend points for the MFB for-mula. Determine the basic MFB by taking the sum of:

• 150 percent of the AIME PIA through the first bendpoint, plus

• 272 percent of the AIME PIA over the first bendpoint through the second bend point, plus

• 134 percent of the AIME PIA over the second bendpoint through the third bend point, plus

• 175 percent of the AIME PIA over the third bendpoint.

Do not round at intermediate steps, but round thesum of the four parts to the next lower multiple of $0.10(next higher multiple if eligibility is in 1982 or earlier).

The same cost-of-living increases applied to the PIAare then applied to the MFB obtained from the formula.As in the case of a PIA, this can include increases effec-tive before the month of entitlement.

PIA Table Method

(to be added)

MFB table

The old MFB table applies where the worker attainsage 62, becomes disabled, or dies before 1979. The MFBis the amount shown in the PIA table at the time thebenefit is paid.

Transitional Guarantee Method

Like the methods already discussed, the transi-tional guarantee method is based upon averaging earn-ings over a fixed number of years after 1950. The PIA inthe transitional guarantee method is determined in foursteps:

• Determine the computation factors--elapsed years,base years, computation years, and divisormonths;

• Determine the AME;• Calculate the basic PIA using the December 1978

PIA table; and• Convert the basic PIA to the PIA in the month of

entitlement.

Applicability

This method applies to PIA determinations wherethe worker attains age 62, becomes disabled, or diesafter 1978. The following restrictions also apply:

• An old-age or survivor’s computation must beinvolved—the transitional guarantee cannot beused to compute a disability benefit;

• The worker must attain age 62 from January 1979through December 1983—in a survivor’s claim the

Example 10: Windfall elimination provision, guarantee applies

A worker born on January 15, 1926 became entitled to old-age benefits in January 1989. His noncovered pension amount at that time was $100 per month.

Years of coverage . . . . . . . . . . . . . . . . . . . . . 22AIME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $500PIA from 1988 formula (.90 x 319 plus .32 x 181) $345.00Adjusted percentage based on year of eligibility 60 percentAdjusted percentage based on years of coverage 50 percentAdjusted percentage (greater of 60 and 50) 60 percentPIA from 1988 formula, after WEP adjust-

ment (.60 x 319 + .32 x 181) . . . . . . . . . . $249.30December 1988 cost-of-living adjustment 4 %Adjusted PIA as of January 1989 (249.30 x 1.04) $259.20Guarantee PIA as of January 1988 (345.00 -

100/2). . . . . . . . . . . . . . . . . . . . . . . . . . . . $295.00Guarantee PIA as of January 1989 (295.00 x 1.04) $306.80Since the PIA from the adjusted PIA formula, $259.20, is less

than $306.80, the guarantee PIA applies.

Example 11: Windfall elimination provision, pension entitlement after Social Security

entitlement

A worker born on January 15, 1926 became entitled to old-age benefits in January 1989.

AIME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $500PIA from 1988 formula (.90 x 319 plus .32 x

181) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $345.00December 1988 cost-of-living adjustment. 4.0 %PIA as of January 1989 (345.00 * 1.04) . . . . $358.80December 1989 cost-of-living adjustment. 4.7 %PIA as of December 1989 (358.80 * 1.047) . $375.60He became entitled to a noncovered pension of $300 per

month as of January 1990.Years of coverage . . . . . . . . . . . . . . . . . . . . . 22PIA from 1988 formula, after WEP adjust-

ment (see prior example) . . . . . . . . . . . $249.30Apply December 1988 cost-of-living adjust-

ment (249.30 * 1.04) . . . . . . . . . . . . . . . . $259.20Apply December 1989 cost-of-living adjust-

ment (259.20 * 1.047) . . . . . . . . . . . . . . . $271.30Adjusted PIA as of January 1990 . . . . . . . . $271.30Guarantee PIA as of January 1988 (345.00 -

300/2). . . . . . . . . . . . . . . . . . . . . . . . . . . . $195.00Guarantee PIA as of December 1988 (195.00

* 1.04) . . . . . . . . . . . . . . . . . . . . . . . . . . . . $202.80Guarantee PIA as of December 1989 (202.80

* 1.047) . . . . . . . . . . . . . . . . . . . . . . . . . . . $212.30Since the PIA from the adjusted PIA formula, $271.30, is

greater than $212.30, the guarantee PIA does not apply.

17

worker must attain age 62 in this period and die inor after the month of attainment of age 62; and

• The worker must have some earnings in any yearbefore 1979.

Calculation of the Basic PIA

Determine the number of elapsed years, computa-tion years, and divisor months using the rules for thePIA table method. The base years are the years after1950 and up to, but not including, the year of eligibility(even in death claims). Compute the dividend by total-ling the earnings in the high computation years selectedfrom the base years, using unindexed earnings. Divideby the number of divisor months to obtain an AME. Usethe December 1978 PIA table to look up the basic PIA.

Special Minimum Method

The special minimum PIA is an alternative to regu-lar PIA methods. It is intended to help persons with lowearnings over a working lifetime. It is computed using ayears of coverage test.

Applicability

This method applies to all benefits payable January1973 or later.

Years of Coverage

Years of coverage are years after 1936 up to the yearof entitlement or through the year of death in which aspecific amount of earnings are credited. The number ofyears of coverage cannot exceed 30. Years wholly in aperiod of disability cannot be used in the usual freezecomputation, but can be used in the non-freeze compu-tation. Since the non-freeze computation is always avail-able and will always produce a PIA at least as great asthe freeze computation,, the special minimum freezecomputation can be disregarded.

Years of coverage are determined as follows:• Prior to 1951, credit one year of coverage for each

$900 of aggregate earnings, not to exceed 14.• From 1951 through 1978, credit one year of cover-

age for any year with earnings equal to at least 25percent of the maximum creditable amount.

• From 1979 through 1990, credit one year of cover-age for any year with earnings equal to at least 25percent of the “old-law” maximum creditableamount.

• For years after 1990, credit one year of coverage forany year with earnings equal to at least 15 percentof the “old-law” maximum creditable amount.

See Appendix A for the required amounts.

Calculation of the PIA

For 1979 and later, subtract ten from the number ofyears of coverage and multiply by $11.50. Apply allcost-of-living increases beginning with June 1979through the date of entitlement.


For 1979 and later, the MFB before application ofany cost-of-living increases equals 150 percent of thePIA, rounded up to a multiple of a dime. Apply thesame cost-of-living increases as were applied to the PIA,but ensure that at each step the MFB is at least 150 per-cent of the PIA. See Appendix A for a table of currentspecial minimum PIAs and MFBs.

Old-Start Method

The old-start PIA is an alternative method availableto workers with relatively large earnings prior to 1951.The eligibility requirements and details of the computa-tion depend on the year of eligibility and the date ofbirth of the worker, and the number of quarters of cov-erage earned before 1951 and after 1950.

Applicability

For workers with an eligibility year of 1979 or later,the following requirements must be met for the usualold-start computation:

• If the worker attains age 62 after 1990, he/she musthave less than six quarters of coverage after 1950.

• There is no period of disability that began before1951 unless it is entirely disregarded.

• The worker has at least one quarter of coveragebefore 1951.

• The worker has no period of disability beginningbefore 1979 unless no entitlement to disability ben-efitrs exists in any of the 12 months immediatelypreceding the new eligibility or death, or theperiod of disability is entirely disregarded.

Elapsed Years and Other Factors

The number of elapsed years, computation years,drop out years, and divisor months is determined fol-lowing the same procedure as used for the wage-indexed method, except that 1950 is replaced with 1936in each occurrence. For instance, the number of elapsedyears equals the number of years

• after the later of 1936 or the year of attainment ofage 21, and

• before the year of attainment of age 62 (for retire-ment benefits), the earlier of the year of attainmentof age 62 or the year the waiting period begins (fordisability benefits), or the year of death (for survi-vor benefits).

All years after 1936 and before the year of eligibilityare base years. (Earnings in the year of eligibility andlater cannot be used in this method, when eligibility isin 1979 or later.)

Allocation of Pre-1951 Earnings

For the usual old-start method, actual annual earn-ings prior to 1951 are not used. Instead, total pre-1951earnings are allocated to specific years as follows, forworkers who attain age 21 prior to 1950:

18

• Divide the total pre-1951 earnings by the numberof years after age 20 and prior to 1951. Allocate theearnings equally. Remainders are added to eachyear in $.01 increments up to a maximum of $3,000in a given year.

• If the remainder is more than $3,000, credit it in$3,000 increments to the age 20 year and each con-secutive preceding year until the remainingamount is less than $3,000. Credit this amount tothe next preceding year. The total of all years can-not exceed $42,000.

If the worker attains age 21 after 1949, credit earn-ings in $3,000 increments to 1950 and each consecutivepreceding year as far as necessary. Credit any remainderto the year preceding the earliest year to which $3,000 iscredited.

Increment Years

Determine the number of increment years by divid-ing the worker’s total pre-1951 earnings by $,1650 anddropping any remainder. If less than 4, use 4. If morethan 14, use 14. This result will be used to increase thePrimary Insurance Benefit (PIB).

Calculation of the PIA

After pre-1951 earnings have been allocated, theyears of highest earnings in the computation years areselected from the base years and totalled. This total isdivided by the number of months in the computationyears to obtain the Average Monthly Earnings (AME).The AME is rounded down to a whole dollar amount.

Determine the PIB (before the application of incre-ment years) from the AME by taking the sum of:

• 40 percent of the AME up to $50, and• 10 percent of the AME in excess of $50.

Increase the PIB by 1 percent for each incrementyear and round to the nearest $.01. Use the table inAp-pendix A to find the PIA corresponding to the incre-mented PIB. This is the AME PIA.

Cost-of-Living Increases

The same cost-of-living increases are applied asunder the wage-indexed method. Thus, benefitincreases begin with the year of eligibility and continuethrough the month of entitlement.

Windfall Elimination Provision

The windfall elimination provision applies toretired and disabled workers receiving pensions fromtheir own employment not covered by Social Security,as explained under the wage-indexed method.

If the windfall elimination provision applies, theAME PIA after application of the windfall eliminationprovision is the larger of the following amounts:

• the AME PIA reduced by 50 percent and roundedto the lower dime.

• the AME PIA reduced by 50 percent of the applica-

ble monthly pension amount payable in the firstmonth of concurrent entitlement.

The same cost-of-living increases are applied as inthe case of no windfall elimination provision.


The MFB is computed using the same formula asunder the wage-indexed method, applied to the AMEPIA (modified by the windfall elimination provision, ifapplicable). The same cost-of-living increases that wereapplied to the PIA are then applied to the MFB obtainedfrom the formula.

Alternate Method for Widow(er)s

The alternative widow(er)’s benefit computation isa modification of the wage-indexed method. If the PIAcomputed by this method is higher than the PIA com-puted under one of the regular methods, then it is usedto compute the benefit for the widow(er) only; othersurvivors must use the PIA resulting from one of theregular methods.

Applicability

This method applies in survivor cases to which theregular wage-indexed method applies, if the followingconditions are also met:

• there is a widow(er) who is first eligible after 1984,and

• the worker died prior to age 62.A widow(er) is “eligible” at:

• age 60, for aged widow(er)s, or• the later of age 50 or the date of disability onset, for

disabled widow(er)s.

Average Indexed Monthly Earnings

The earnings on the earnings record are indexed asin the wage-indexed method, except that the indexingyear may be later. If the widow(er) was eligible prior tothe death of the worker, then the indexing year is thesame as in the wage- indexed method; as a result, thismethod provides the same benefit. In cases where thewidow(er) is eligible after the death of the worker, theindexing year is the second year before the earlier of 1)the year of eligibility of the widow(er), and 2) the yearthe deceased worker would have attained age 62.

The year of death is used to determine elapsedyears, computation years, divisor months, and baseyears as in the wage-indexed method.

PIA Formula

The bend points that apply for the second year afterthe indexing year are chosen for the PIA formula. Cost-of- living increases are applied beginning with the yearof the applicable PIA formula.

Maximum Family Benefit

The PIA computed under one of the regular meth-

19

ods is used to determine benefits paid to other survivorson the record. This includes determining the familymaximum.

Benefit Increases After Entitlement

Cost-of-living increases continue to be applied afterentitlement to a PIA and MFB computed under one ofthe methods described above. (Special rules apply inadding the cost-of-living increase to a small number ofbenefits computed using the frozen minimum AIMEPIA.)

20

COMPUTATION OF MONTHLY BENEFIT AMOUNTS

Reduction for the Family Maximum

The amount of monthly benefits which can be paidon any one record is limited to the Maximum FamilyBenefit (MFB). If the total of all benefits, before applyingthe MFB, exceeds the MFB, the benefits must beadjusted. However, the following benefits are notreduced for the MFB:

• worker’s retirement benefit;• worker’s disability benefit;• divorced spouse’s benefit; and• surviving divorced spouse’s benefit.

Regular MFB formula

A regular MFB formula applies to each PIA calcula-tion method; see the previous section for a descriptionof each method’s MFB calculation. To determine if bene-fits exceed the family maximum, add all the originalbenefits applicable to each beneficiary. If a beneficiary isentitled to reduced for age benefits or is subject to offset,use the unreduced amount. If total monthly originalbenefits exceed the family maximum, the benefits mustbe adjusted downward proportionately. The proportion-ate ratio is determined by:

• determining the family maximum;• in a life case, deducting the PIA from the maxi-

mum;• adding all the unreduced benefits (excluding the

worker’s benefit in a life case and any divorced orsurviving divorced spouse’s benefit); and

• taking the ratio of the family maximum (less PIA,in a life case) to the total of the unreduced bene-fits).

Disability MFB

The disability MFB applies in disability claimswhere the worker’s disability occurs in 1979 or later, theinitial entitlement to disability benefits begins after June1980, and the worker does not attain age 62 before 1979.

The disability maximum is the smaller of• 85 percent of the AIME, but not less than the basic

AIME PIA or the old-start guarantee PIA beforecost-of-living increases, or

• 150 percent of the worker’s basic AIME PIA or old-start guarantee PIA without cost-of-livingincreases.

Cost-of-living increases are applied to the basicMFB beginning with the year of the applicable PIA for-mula. See Appendix A for the series of cost-of-livingincreases.

Divorced spouse or surviving divorced spouse

A divorced spouse, surviving divorced spouse, ordisabled surviving divorced spouse is never reduced forthe maximum. The benefits of other auxiliaries and sur-vivors are reduced for the maximum, not taking into

Example 12: Life family benefits reduced for maximum

Family of old-age beneficiary, wife aged 59, 2 children aged 11 and 13.

PIA of old-age beneficiary $203.90Child’s full benefit (50% of 203.90) $101.90Wife’s full benefit (50% of 203.90) $101.90Total benefits other than old-age benefit $305.70MFB of old-age beneficiary $305.90MFB minus PIA $102.00Proportionate ratio (102.00 / 305.90) 0.33344Child’s reduced benefit $33.90Wife’s reduced benefit $33.90Total benefit (3 x 33.90 + 203.90) $305.60

Example 13: Surviving family benefits reduced for maximum

Surviving family of 2 children and divorced surviving mother, aged 59.

Deceased worker’s PIA $203.90Child’s full benefit (75% of 203.90) $152.90Divorced mother’s full benefit (75% of 203.90) $152.90Total benefits (mother and 2 children) $458.70Deceased worker’s MFB $305.90Proportionate ratio (305.90 / 458.70) 0.66688Divorced mother’s reduced benefit $101.90Child’s reduced benefit $101.90Total benefit (3 x 101.90) $305.70

Example 14: Disability family benefits reduced for maximum

Family of disability beneficiary, wife aged 59, 2 children aged 11 and 13.

Date of onset of disability 6/15/1998Disabled worker’s AIME $1,000Disabled worker’s AIME PIA in 1998 $596.60Child’s full benefit (50% of 596.60) $298.30Wife’s full benefit (50% of 596.60) $298.30Total benefits other than disability benefit $894.90Disabled worker’s regular MFB in 1998 $894.90MFB based on AIME (85% of 1000) $850.00MFB based on PIA (150% of 596.60) $894.90Applicable MFB $850.00MFB minus PIA $253.40Proportionate ratio (253.40 / 894.90) 0.28316Child’s reduced benefit $84.40Wife’s reduced benefit $84.40Total benefit in 1998 (3 x 84.40 + 596.60) $849.80

21

account the divorced beneficiary.

Reduction for AgeAn individual’s old-age insurance benefit, wife’s or

husband’s benefit, or widow’s or widower’s benefit isreduced if it begins before the beneficiary reaches fullretirement age. A beneficiary entitled to reduced old-age, spouse’s, or widow(er)’s benefits can subsequentlybecome entitled to disability insurance benefits. Thesubsequent disability benefit is reduced for age.

Old-age insurance benefit

An old-age monthly benefit amount is the PIAreduced by 5/9 of 1 percent multiplied by the numberof months of entitlement prior to the full retirement age,for up to 36 months of reduction. This reduction equalsa maximum of 20 percent for 36 months.

If there are more than 36 months, the PIA is reducedby 20 percent (for 36 months) plus 5/12 of 1 percent forthe number of months in excess of 36. This reductionequals a maximum of 25 percent for 48 months, and 30percent for 60 months (the maximum reduction possi-ble).

Wife or husband benefit

The unreduced spouse’s benefit of one-half of theunreduced PIA (subject to reduction for the family max-imum) is reduced by 25/36 of 1 percent for the numberof months prior to the spouse’s full retirement age, forup to 36 months of reduction. This reduction equals amaximum of 25 percent for 36 months.

If there are more than 36 months, the unreducedspouse’s benefit is reduced by 25 percent (for 36months) plus 5/12 of 1 percent for the number ofmonths in excess of 36. This reduction equals a maxi-mum of 30 percent for 48 months, and 35 percent for 60months (the maximum reduction possible).

Widow or widower benefit

The maximum reduction of a widow(er)’s benefit is28.5 percent of the widow(er)’s original benefit. For per-sons born January 1, 1940 or earlier, the widow(er)’sbenefit is reduced by 19/40 of 1 percent per month formonths between age 60 and age 65. There is no addi-tional reduction for months before age 60. The followingtable shows the monthly reduction factor for later datesof birth:

Example 15: Surviving divorced spouse not reduced for maximum

Same facts as example 13.When divorced mother turns 60, she becomes entitled as a

surviving divorced spouse and is paid outside the maxi-mum

Surviving divorced spouse full benefit $203.90Number of months reduction 60Spouse reduced benefit (71.5% of 203.90) $145.70Child’s benefit $152.90Total benefit under the maximum (2 x 152.90) $305.80

Example 16: Earliest receipt of old-age benefit for birth on 1st day of month

Worker’s date of birth 6/1/1950Date of attainment of age 62 5/31/2012First month at least age 62 entire month 6/2012Full retirement age 66 yearsMonth of attainment of full retirement age 5/2016Reduction months for 6/2012 entitlement 47

Example 17: Earliest receipt of old-age benefit for birth on 2nd day of month


Example 18: Earliest receipt of old-age benefit for birth on 3rd through last day of month


Example 19: Old-age benefit reduced for age

Worker’s date of birth 6/15/1950Date of entitlement 7/2012Full retirement age 66 yearsMonth of attainment of full retirement age 6/2016PIA at entitlement $690.00Reduction months 47Reduction for first 36 months 20%Excess months (47 - 36) 11Monthly percentage for excess months 5/12 of 1%Total reduction (20 + 5/12 x 11) 24 7/12 %MBA at entitlement $520.30

Example 20: Spouse benefit reduced for age

Same facts as in example 19.Spouse’s date of birth 9/15/1950Date of entitlement 10/2012Unreduced spouse benefit (690.00 / 2) $345.00Reduction months 47Reduction for first 36 months 25%Excess months (47 - 36) 11Monthly percentage for excess months 5/12 of 1%Total reduction (25 + 5/12 x 11) 29 7/12 %MBA at entitlement $242.90

22

If the deceased worker had been entitled to an old-age benefit reduced for age, then the widow(er)’s bene-fit is limited to the larger of:

• 82 1/2 percent of the worker’s PIA, or• the old-age benefit to which the worker would

have been entitled if he/she had lived.

Disability benefit

If entitlement to a disability benefit is subsequent toentitlement to old-age benefits, the disability benefit isreduced by the amount the old-age benefit would bereduced if the beneficiary had attained full retirementage (currently age 65) in the first month of entitlementto disability benefits.

If entitlement to a disability benefit is subsequent toentitlement to widow(er)’s benefits, the disability bene-fit is reduced only for months that the widow(er) isreduced during the period from age 60 to the earlier ofage 62 or the first month of entitlement to disability ben-efits. Any reduction that applies on the widow(er)’sbenefit for months after age 62 will not affect the disabil-ity benefit amount.

Adjustment of Reduction for AgeAn adjustment of the age reduction factor elimi-

nates certain deduction and non-entitlement monthsfrom the original reduction factor.

Effective dates

The age reduction factor is adjusted as of the follow-ing dates:

• for old-age benefits, at attainment of full retire-ment age,

• for spouse benefits, at attainment of full retirementage,

• for widow or widower benefits, at attainment ofage 62 and again at full retirement age, and

• for disability benefits, the first month of entitle-ment or reentitlement to disability benefits.

Crediting months

The following months are not counted as reductionmonths when the reduction for age is adjusted:

• for old-age benefits, months where the benefit wasfully or partially reduced because of deduction forwork, or there was simultaneous entitlement toold-age and disability benefits,

• for spouse benefits, months where the benefit wasfully or partially reduced because of deduction for

Table 5: Monthly reduction factors for widow(er)’s benefits

Year of attainment of age 60 Monthly percent

Before 2000 19/40 of 1 percent

2000 57/124 of 1 percent2001 57/128 of 1 percent2002 19/44 of 1 percent2003 57/136 of 1 percent2004 57/140 of 1 percent2005-2016 19/48 of 1 percent

2017 57/148 of 1 percent2018 57/152 of 1 percent2019 19/52 of 1 percent2020 57/160 of 1 percent2021 57/164 of 1 percentAfter 2021 19/56 of 1 percent

Example 21: Widow(er) benefit reduced for age (old-age benefit limitation does not apply)

Worker’s date of birth 6/15/1950Worker date of death 8/2010Widow(er)’s date of birth 9/15/1950Date of entitlement 8/2012Unreduced widow(er) benefit $690.00Reduction months 49Monthly percentage 19/48 of 1%Total reduction 19 19/48 %MBA at entitlement $556.10

Example 22: Widow(er) benefit reduced for age (old-age benefit limitation applies)

Worker date of birth 6/15/1950Date of entitlement to old-age benefit 6/2014PIA at entitlement $690.00Old-age benefit $598.00Worker date of death 8/2014Widow(er)’s date of birth 9/15/1950Date of entitlement 8/2014Unreduced widow(er) benefit $690.00Reduction months 25Monthly percentage 19/48 of 1%Total reduction 9 43/48 %MBA before old-age benefit limitation $621.7082.5 percent of PIA $569.20MBA at entitlement $598.00

Example 23: Widow(er) benefit reduced for age (old-age benefit limit and 82.5% limit apply)

Same facts as in example 19Worker date of death 8/2012Widow(er)’s date of birth 9/15/1950Date of entitlement 8/2012Unreduced widow(er) benefit $690.00Reduction months 49Monthly percentage 19/48 of 1%Total reduction 19 19/48 %MBA before old-age benefit limitation $556.10Old-age benefit that would be payable $520.3082.5 percent of PIA $569.20MBA at entitlement $556.10

23

the spouse’s work or the work of the insured per-son on whose record the benefit is based, or thespouse was not entitled, or the spouse had a childin care,

• for widow or widower benefits, months where thebenefit was fully or partially reduced because ofdeduction for work, or the widow or widower wasnot entitled, or the benefit was raised to themother/father rate, and

• for disability benefits, months for which the benefi-ciary was entitled to a reduced old-age, widow, orwidower benefit and for which an adjustment ofthe reduction factor of the other benefit would oth-erwise be appropriate.

Computing the benefit

If there is entitlement to only one benefit, then thebenefit is adjusted as follows:

• determine the crediting months,• subtract the number of crediting months from the

original number of months of reduction,• recalculate the reduction factor, and• apply the new reduction factor to the PIA (for an

old-age benefit) or unreduced spouse, widow, orwidower benefit.

If there is entitlement to more than one benefit, thenthe steps to follow are more involved (to be added).

Delayed Retirement Credit

Applicability

An old-age benefit is increased under the delayedretirement credit provision if the worker was eligiblefor, but was not paid, an old-age benefit for monthsfrom full retirement age to age 70. The benefits of awidow(er) may be increased by the delayed retirementcredits earned by the deceased worker.

If a worker receives an old-age benefit reduced forage, the benefit may be later increased for the delayedretirement credit.

Amount of credit

The amount of the delayed retirement credit equalsthe product of:

• a monthly percentage, and• the number of increment months, and• a basic old-age benefit which is either (1) the

worker’s PIA, if the old-age benefit is not perma-nently reduced for age because of entitlement priorto full retirement age, or (2) the reduced old-agebenefit, if it is so reduced.

The following table gives the monthly percentagesto be used in computing the delayed retirement credit,based on the year the worker attains age 62.

Increment months

An increment month is any month, starting January1971, in which the worker:

• has attained full retirement age, and• is fully insured, and• does not receive an old-age benefit, either because

(1) he/she is not entitled to an old-age benefit, or(2) he/she is entitled to an old-age benefit but issubject to a full work deduction for the month, or(3) he/she elected to have his/her benefit volun-tarily suspended in order to earn delayed retire-

Example 24: Adjustment of age reduction factor for old-age beneficiary

Same facts as in example 11. Worker goes back to work in November 2012. Benefits are fully withheld for Novem-ber and December 2012. Benefits are fully withheld for January through March 2013, and are partially withheld for April 2013. The earnings are not sufficient to change the PIA.

Original number of reduction months 47PIA as of 7/2012 $690.00MBA as of 7/2012 (75 5/12 percent of 690.00) $520.30December 2012 benefit increase 3 percentPIA as of 12/2012 $710.70MBA as of 12/2012 (75 5/12 percent of 710.70) $535.90December 2013 benefit increase 3 percentPIA as of 12/2013 $732.00MBA as of 12/2013 (75 5/12 percent of 732.00) $552.00December 2014 benefit increase 3 percentPIA as of 12/2014 $753.90MBA as of 12/2014 (75 5/12 percent of 753.90) $568.50December 2015 benefit increase 3 percentPIA as of 12/2015 $776.50MBA as of 12/2015 (75 5/12 percent of 776.50) $585.60Adjustment of the reduction factor date 6/2016Number of crediting months 6Adjusted number of reduction months 41Reduction for first 36 months 20%Excess months (41 - 36) 5Total reduction (20 + 5/12 x 5) 22 1/12 %MBA as of 6/2016 (77 11/12 percent of 776.50) $605.00

Table 6: Delayed retirement credit percentages by year of attainment of age 62

Year of attainment of age 62

Monthly percentage

Yearly percentage

Prior to 1979 1/12 of 1 percent 1 percent1979-86 1/4 of 1 percent 3 percent1987-88 7/24 of 1 percent 3.5 percent1989-90 1/3 of 1 percent 4 percent

1991-92 3/8 of 1 percent 4.5 percent1993-94 5/12 of 1 percent 5 percent1995-96 11/24 of 1 percent 5.5 percent1997-98 1/2 of 1 percent 6 percent1999-2000 13/24 of 1 percent 6.5 percent2001-02 7/12 of 1 percent 7 percent2003-04 5/8 of 1 percent 7.5 percent2005 or later 2/3 of 1 percent 8 percent

24

ment credits.Months of partial work deductions do not qualify as

increment months.An increment month is not counted for the month

the worker attains age 70 or any later month.The total number of increment months (if any) is

determined after the end of each calendar year, up to theyear the worker attains age 70. Any increase in theworker’s old-age benefit is effective with January of theyear following the last calendar year for which thedetermination is being made. If the worker attains age70 during the last calendar year and increment monthswere earned in that year, the increase is effective withthe month in which he/she attains age 70.

Special minimum PIA involvement

The delayed retirement credit provision does notapply to an old-age benefit based on the special mini-mum PIA. However, it is possible for the delayed retire-ment credit to increase the old-age benefit based on theregular AME/AIME PIA to an amount larger than thespecial minimum PIA old-age benefit. The old-age ben-efit will then be based on the AME/AIME PIA. To applythe delayed retirement credit in this situation, redeter-mine the old-age benefit based on the AME/AIME PIA;however, the family maximum and auxiliary benefitswill still be based on the previously established special

minimum PIA.

Applicability to widow(er)’s benefits

If a deceased worker was entitled (or would havebeen entitled, if he/she had applied) to an old-age bene-fit which was increased (or would have been increased)by the additon of a delayed retirement credit, thewidow(er) is entitled to that delayed retirement credit.Widow(er)’s benefits are payable under this provisioneffective June 1978 or the month of death, whichever islater. The widow(er) is not required to be age 65 to beeligible for an increase in the widow(er) benefit basedon the deceased worker’s delayed retirement credit.

The PIA upon which the widow(er)’s benefitamount is based is deemed equal to the deceasedworker’s old-age benefit plus the delayed retirementcredit, if it is higher than the regular death PIA. This“deemed” PIA may include delayed retirement creditincrement months due up to the month of death, butearnings in the year of death cannot be used until Janu-ary following the year of death.

Example 25: Delayed retirement credit increment months in year of entitlement

Worker’s date of birth 6/15/1924Date of entitlement 12/1989PIA at entitlement $290.00MBA at entitlement (no increment months) $290.00PIA as of 1/1990 (including 1989 earnings) $300.00Increment months (June to November 1989,

assuming no work in December) 6Monthly percentage 1/4 of 1%MBA as of 1/1990 $304.50

Example 26: Delayed retirement credit increment months at age 70

Worker’s date of birth 6/15/1919Date of entitlement (age 70) 6/1989PIA at entitlement $400.00Increment months (all months from age 65

to age 70) 60Monthly percentage 1/4 of 1%MBA at entitlement (all increment months) $460.00

Example 27: AIME PIA with delayed retirement credit exceeds special minimum PIA

Worker’s date of birth 6/15/1924Date of entitlement 1/1990Special minimum PIA at entitlement $302.00AIME PIA at entitlement $300.00Increment months (June to December 1989) 7Monthly percentage 1/4 of 1%MBA at entitlement (based on AIME PIA) $305.20

Example 28: Delayed retirement credit for widow(er) in year of death of worker

Worker’s date of birth 12/15/1923Worker’s date of death (without ever filing

for benefits) 6/12/1989Widow’s date of birth 6/10/1927Widow’s date of entitlement 6/1989Life PIA (excluding 1989 earnings) $350.00Death PIA (including 1989 earnings) $360.00Increment months (December 1988 to May

1989) 6Monthly percentage 1/4 of 1%Deemed PIA ($350.00 x 6 increment months) $355.20Widow’s PIA (higher of death PIA and

deemed PIA) $360.00Widow’s reduction months 36Widow’s benefit at entitlement

25

Reduction for Worker’s Compensation Offset

A disability insurance benefit for a month isreduced if the individual entitled to the benefit is also,for that month, concurrently entitled to a periodic bene-fit (including workers’ compensation or any other pay-ments based on a work relationship) on account of atotal or partial disability (whether or not permanent)under a law or plan of the United States, a State, a polit-ical subdivision, or an instrumentality of two or more ofthese entities.

Amount of reduction

The total of benefits paid to the disabled workerand his/her family is reduced monthly (but not belowzero) by the amount by which the sum of the monthlydisability insurance benefits payable on the disabledindividual’s earnngs record and the other public disabil-ity benefits payable for that month exceeds the higherof:

• 80 percent of his/her “average current earnings”(as defined below); or

• The total of such individual’s disability insurancebenefit for such month and all other benefits pay-able for such month based on such individual’searnings record, prior to reduction for workers’compensation.

Average current earnings

An individual’s “average current earnings” is thelargest of:

• The average monthly wage used in the PIA tablemethod of computing the individual’s disabilityinsurance benefit; or

• One-sixtieth of the total of the individual’s earn-ings, without regard to the maximum creditableamount, for the 5 consecutive calendar years after1950 for which the earnings were highest; or

• One-twelfth of the total of the individual’s earn-ings, without regard for the maximum creditableamount, for the calendar year in which the individ-ual had the highest earnings during the periodconsisting of the calendar year in which the indi-vidual became disabled and the 5 years immedi-ately preceding it.

The amount computed above is reduced to the next

lower multiple of $1 if not already a multiple of $1.

Reduction for Government Pension Offset

The Government Pension Offset (GPO) applies to aspouse’s Social Security benefit if the spouse receives apension based upon his/her own government employ-ment not covered under Social Security. Governmentemployment means employment by the United StatesGovernment, a State government (including the Districtof Columbia and U.S. possessions), or a local politicalsubdivision. A spouse is any wife, widow, husband,widower, divorced wife or husband, surviving divorcedwife or husband, mother, father, or surviving divorcedmother or father.

Amount of reduction

The GPO amount is two-thirds the amount of themonthly pension rounded up to the nearest dime. Apension is any periodic or lump sum benefit which isbased upon the person’s own noncovered earningswhile in the service of a State, local, or Federal govern-ment and is payable because of retirement or permanentdisability.

Exemption due to prior eligibility

GPO does not apply to the following spouses:• The spouse’s application for Social Security bene-

fits was filed and the first month of entitlementwas before December 1, 1977.

• The spouse is entitled to or eligible for the pensionbefore December 1, 1982, and at the time of filingthe application for spouse’s benefits, he/she meetsthe requirements of a 20-year duration of marriagefor women and the one-half support test for men.

• The spouse is entitled to or eligible for a govern-ment pension before July 1, 1983, and (male orfemale) meets the one-half support requirement.

Exemption due to later covered employment

GPO does not apply to the following spouses:• On the spouse’s last day of State/local employ-

ment or military service, he/she is in a positionwhich was covered under Social Security and thelast day is in a position covered by the pensionplan.

• A Federal employee elected coverage under SocialSecurity, or was covered mandatorily.

• A Federal employee worked in Federal employ-ment which is covered under Social Security for 60months or more ending with the first month ofentitlement to spouse’s benefits. The months neednot be consecutive.

Determining a pension amount

GPO applies to all pension payments whether thepayments are made periodically, in a lump sum, or both.If the pension is paid other than monthly, or in a lump

Example 29: Delayed retirement credit for widow(er) after year of death of worker

Same facts as in previous exampleLife PIA as of 1/1990 (including 1989 earn-

ings) $360.00Widow’s PIA ($360.00 x 6 increment

months) $365.40Widow’s reduction months 36Widow’s benefit as of 1/1990

26

sum, convert the amount as though it was paid monthlyand use the results to calculate the GPO. If the spousereceives a lump sum payment, the agency paying thepension may provide the monthly amount that wouldhave been paid if the lump sum had not been paid. Ifthat figure cannot be obtained, prorate the lump sum. Ifthe lump sum represents a specified period of time,divide the lump sum by the number of months in theperiod specified. If the lump sum represents a lifetime,divide the pension lump sum amount by the actuarialvalue in the following table that corresponds to thespouse’s age at the time the lump sum is paid.

Deduction or Suspension on Account of Work

The amount of social security benefits which a ben-eficiary under full retirement age may receive each yeardepends on whether the beneficiary is fully or partiallyretired. An earnings test, also referred to as the retire-ment test, is used to measure the extent of a benefi-ciary’s retirement and thus the amount of benefitspayable for the year. It is also used to measure the workactivity and thus the amount of benefits payable to aux-iliary and survivor beneficiaries because of their ownearnings.

The earnings test does not apply to work performedby a beneficiary receiving a disability insurance benefit,disabled widow(er) benefit, or childhood disability ben-efit, but it does apply to auxiliary beneficiaries of a ben-eficiary receiving a disability insurance benefit. Theearnings test applies to all work performed in theUnited States and to covered work outside the UnitedStates. A separate earnings test, called the foreign worktest, applies to noncovered work outside the UnitedStates.

Definition of earnings test

The earnings test consists of three basic parts:• A beneficiary under full retirement age whose total

yearly earnings do not exceed the annual exemptamount will receive full benefits for the year withno deductions because of earnings.

• For a beneficiary under full retirement age, $1 isdeducted from benefits for each $2 earned over theannual exempt amount. For the year the benefi-ciary attains full retirement age, consider only theamounts earned in the months prior to full retire-ment age. Deduct $1 from benefits for each $3earned over the annual exempt amount in themonths prior to full retirement age. See AppendixA for the series of annual exempt amounts.

• Regardless of total annual earnings, benefits arepayable in full for any month in a grace year inwhich the beneficiary does not earn wages of morethan the monthly exempt amount and does notperform substantial services in self-employment.

Annual and monthly exempt amounts

The monthly exempt amount is equal to 1/12 of theannual exempt amount. Beneficiaries attaining fullretirement age any time in the year are subject to the fullretirement age exempt amount.

In the year of death, the full annual exempt amountis used regardless of the month of death. The full retire-ment age exempt amount applies if the beneficiarywould have attained full retirement age during the year,but died before doing so.

Monthly earnings test

The monthly earnings test applies in a grace year,which can be:

Table 7: Actuarial values for Windfall Elimination Provision or Government Pension Offset

Age (years) Actuarial value

40 or under 172.741 171.742 169.343 167.644 165.745 163.8

46 161.847 159.748 157.649 155.450 153.251 150.852 148.453 146.054 143.555 140.956 138.357 135.658 132.859 130.060 127.2

61 124.262 121.363 118.264 115.265 112.166 109.167 106.068 102.969 99.870 96.771 93.572 90.473 87.274 84.075 80.9

76 77.777 74.678 71.679 68.680 65.6

27

• the first year of entitlement in which the benefi-ciary does not earn wages over the monthlyexempt amount and does not perform substantialservices in self-employment (a non-service month).

• the first year in a later period of entitlement, subse-quent to the first period of entitlement, in whichthe beneficiary has a non-service month. Theremust be a break between the two periods of entitle-ment.

• the year in which entitlement ends for certainyoung beneficiaries, i.e. those entitled to child’sbenefits, wife’s or husband’s benefits where enti-tlement was by reason of having a child in care,and mother’s, and mother’s or father’s benefits.Entitlement ends with the month preceding themonht of the terminating event. The terminationgrace year is, thus, the year which contains themonth before the month the terminating eventoccurs. A termination grace year does not applywhen entitlement ends by reason of death orbecause the beneficiary became entitled to anothertype of social security benefit without a break inentitlement.

In that one year during the period of entitlement,the monthly test is applied and benefits could be paidfor any month of entitlement which was a non-servicemonth.

Deduction for Supplementary Medical Insurance

(to be added)

Rounding to the Next Lower Multiple of $1.00

When a benefit calculation or adjustment is initiallyeffective after May 1982, and the benefit is not a multi-ple of $1.00, the monthly benefit is rounded to the nextlower multiple of $1.00. An adjustment is any action

that affects the benefit amount. The final monthly benefit to be rounded is the ben-

efit amount after considering all of the following:• Reduction for the family maximum;• Reduction for age;• Reduction for worker’s compensation offset;• Reduction for Government Pension Offset;• Deduction or suspension on account of work; and• Deduction for supplementary medical insurance

(SMI) premium.Lower dollar rounding does not apply if the benfit

amount after considering reduction and/or deduction isless than $1.00 (the amount is not rounded to $0.00). Italso does not apply to Special Age 72 Payments or Tran-sitionally Insured Benefits. Where the beneficiary isentitled to more than one monthly benefit (dual or tripleentitlement), each benefit is rounded to the next lowermultiple of a dollar.

The following deductions or adjustments are madeafter lower dollar rounding:

• Recovery of a prior overpayment;• Attorney fee withholding;• Garnishment;• Unpaid maritime tax withholding;• Alien taxes;• Installment payments;• Excess SMI premium arrearages and refunds of

excess SMI premiums;• Penalty deductions and repayments; and• Death underpayments.

Entitlement to More Than One Benefit

A person may be entitled to more than one benefitat the same time. For example, a person may be entitledas a retired worker on his/her own record and as aspouse on another record. However, a person’s benefitamount can never exceed the highest single benefit towhich that person is entitled. Some benefits are calcu-lated independently with either the larger benefit beingpaid or the smaller benefit being paid plus the excessamount of the larger one. Other types of benefits are cal-culated with a carry-over reduction amount from thefirst benefit to the second.

Old-age and Spouse Benefits

If a worker becomes entitled to an old-age benefitwhile entitled to a reduced spouse benefit, the old-agebenefit is figured independently of any past or presentspouse’s benefit reduction. The amount of the spouse’sbenefit is not affected by the subsequent old-age benefitentitlement. The amount payable as a spouse will be thedifference between the spouse’s benefit and the old-agebenefit. (Note that, if the worker is insured when apply-ing for the reduced spouse benefit, he/she must simul-taneously apply for the old-age benefit. See “Spouse

Example 30: Termination grace year in year prior to termination

Child beneficiary, not disabled or a full time studentDate of birth January 20, 1966Attainment of age 18 January 1984Entitlement ending month December 1983Termination grace year 1983

Example 31: Multiple periods of entitlement and grace years

Child beneficiary, not disabled or a full time studentDate of birth July 15, 1965Attainment of age 18 July, 1983Termination grace year 1983Entitlement to disabled child benefits September 1983Termination of disabled child benefits April 1984Second termination grace year 1984Second entitlement in 1983 does not eliminate 1983 as a ter-

mination grace year

28

and old-age benefits” on page 9.)

If an old-age beneficiary becomes entitled to areduced spouse benefit at or after entitlement to the old-age benefit, the reduction to the spouse benefit isapplied to the excess full spouse benefit. The total bene-fit equals the reduced excess spouse benefit plus thereduced old-age benefit.

Old-age and Widow(er) Benefits

Where an individual is entitled to a widow(er) ben-efit and old-age benefit either simultaneously or old-agebenefit first, determine each benefit independently.

An old-age benefit elected before full retirement ageis always reduced. Where the old-age benefit follows awidow(er) benefit, the old-age benefit may be reducedunder the normal age reduction provisions or becauseof prior widow(er) benefits. Prior widow(er) benefitentitlement can cause a reduction in an old-age benefit,even if elected at full retirement age or later. This occursif the beneficiary was entitled to a reduced widow(er)benefit which began before age 62 and which wasreduced for age in the month of attainment of age 62.

Nonresident Alien Withholding Tax

(to be added)

Other Deductions

Recovery of a prior overpayment

(to be added)

Attorney fee withholding

(to be added)

Garnishment

(to be added)

Maritime tax deduction

(to be added)

Installment payments

(to be added)

Interaction of Reductions and/or Deductions

Adjustment for earnings test involvement

Excess earnings under the earnings test are chargedto auxiliary or survivor benefits after such benefits havebeen adjusted, if necessary, for the maximum. Wheretwo or more auxiliaries or survivors have excess earn-ings, each of their benefits is adjusted as if it were theonly benefit on the earnings record subject to suchcharging.

Once an individual’s benefit for a month has beencharged in full with excess earnings (his/her own or theretired beneficiary’s), there cannot be any further adjust-ment of that individual’s benefit for the maximum forthat month. Where an auxiliary or survivor’s excessearnings are charged to a month in an amount equal tohis/her full adjusted benefit, he/she is treated as notbeing on the benefit rolls in applying the maximum pro-visions to other auxiliaries or survivors (on the sameearnings record) who are not subject to any deductionfor that month.

If the amount of excess earnings charged to amonth is less than the auxiliary’s or survivor’s fulladjusted benefit for that month, that beneficiary is con-sidered entitled to the partial benefit resulting from thecharging. The maximum applicable to the other benefi-ciaries is reduced by the amount of the partial benefit

Example 32: Reduced old-age benefit after reduced spouse benefit

Spouse A date of birth February 2, 1936Spouse B date of birth February 2, 1936Entitlement of A to old-age benefits February 1998PIA of A $1,000.00Insured status of B, February 1998 Not fully insuredEntitlement of B to spouse benefits February 1998Full spouse benefit for B (.5 x 1000) $500.00Reduced spouse benefit for B (.75 x 500) $375.00Date B becomes fully insured October 1998PIA of B, October 1998 $200.00Reduction months for B old-age benefit 28Reduction factor for B old-age benefit 15 5/9 %B old-age benefit, October 1998 $168.80B spouse benefit, October 1998 $206.20

Example 33: Reduced spouse benefit after reduced old-age benefit

Spouse A date of birth May 2, 1936Spouse B date of birth February 2, 1936Entitlement of B to old-age benefits February 1998PIA of B $200.00Reduced old-age benefit for B $160.00Entitlement of A to old-age benefits May 1998PIA of A $1,000.00Full spouse benefit for B (.5 x 1000) $500.00Excess full spouse benefit for B (500 - 200) $300.00Reduction months for B spouse benefit 33Reduction factor for B spouse benefit 22 11/12 %B spouse benefit, May 1998 $231.20B old-age benefit, May 1998 $160.00

29

due the beneficiary.

Example 34: Maximum family benefit and full retirement test applied to survivor family

Assume that a worker dies, leaving as survivors his wife and two children.

PIA at entitlement $1,064.60MFB at entitlement $1,862.20MBA for each survivor, before reduction for

earnings or maximum (.75 * 1064.60) $798.40MBA for each survivor, after applying MFB

(1862.20 / 3) $620.70If there are no excess earnings, each survivor would get

$620.70. If the mother has excess earnings, resulting in full offset of her benefit, each child would get $798.40.

Example 35: Maximum family benefit and partial retirement test applied to survivor family

Same facts as in previous example, except assume that the mother has $400.00 of earnings in excess of the exempt amount.

Mother’s excess earnings (400.00 / 2) $200.00Mother’s partial benefit (620.70 - 200.00) $420.70Maximum for two children (1862.20 -

420.70) $1,441.50MBA for each child (1441.50 / 2) $720.70

30

APPENDIX A.—OASDI PROGRAM AMOUNTS

Cost-of-Living IncreaseThe law specifies a formula for determining the

cost-of-living increase. In general, the cost-of-livingincrease for a year is equal to the percentage increase inthe Consumer Price Index for Urban Wage Earners andClerical Workers (CPI-W) from the third quarter of theprior year to the third quarter of that year, and is effec-tive in December of that year. (The increase was effec-tive in months other than December prior to 1983.) Thecost-of-living increase applies to benefits based on ayear of eligibility in the year of the benefit increase orearlier. It also is used to adjust the special minimumPIAs and MFBs.

The cost-of-living increase for December 1999 wasoriginally determined to be 2.4 percent. Because of aredetermination of the CPI-W, however, the cost-of-liv-ing increase was changed to 2.5 percent, effective withbenefits for months after July 2001.

Average WageThe average wages of all workers are determined

annually, based on earnings records kept by the SocialSecurity Administration. The series of average wages isused to index an individual’s earnings record. It is alsoused to determine numerous program amounts, asdescribed below.

Maximum Creditable Amount

Present law

The maximum creditable amount (or contributionand benefit base) limits the amount of earnings creditedas wages to an individual’s earnings record. The for-mula for determining the contribution and benefit baseis set by law. The formula states that the base for anyyear Y after 1994 is equal to the 1994 base of $60,600multiplied by the ratio of the average wage for year (Y-2) to that for 1992, with the result rounded to the nearestmultiple of $300. If the result is less than the currentbase, the base is not reduced. If there was no automaticcost-of-living increase in old-age, survivors, and disabil-ity insurance benefits in year (Y-1), then the formula isnot applied, and the base for year Y is equal to the basefor year (Y-1).

Other procedures were used to determine the basefor years prior to 1995.

Old law

The “old-law” contribution and benefit base is thebase that would have been effective without the enact-ment of the 1977 amendments to the Social Security Act.It is used by:

• the Railroad Retirement program to determine cer-tain tax liabilities and benefits payable under thatprogram,

• the Pension Benefit Guaranty Corporation todetermine the maximum amount of pension guar-

anteed under the Employee Retirement IncomeSecurity Act,

• Social Security to determine a year of coverage incomputing the special minimum benefit, and

• Social Security to determine a year of coverage incomputing benefits for persons who are also eligi-ble to receive pensions based on non-coveredemployment.

The formula for determining the old-law contribu-tion and benefit base is set by law. The formula is thesame as that for the regular base, except that the old-lawbase amount for 1994 of $45,000 is used in place of theregular base.

Table 8: Cost-of-living increase, average amount of total wages, and maximum creditable amounts

Calendar year

Cost-of-living

increase (percent)

Average wage

Maximum creditable amount

Present law Old law

1937-50 -- -- $3,000 $3,0001951 -- $2,799.16 3,600 3,6001952 12.5 2,973.32 3,600 3,6001953 -- 3,139.44 3,600 3,6001954 13.0 3,155.64 3,600 3,6001955 -- 3,301.44 4,200 4,200

1956 -- 3,532.36 4,200 4,2001957 -- 3,641.72 4,200 4,2001958 -- 3,673.80 4,200 4,2001959 7.0 3,855.80 4,800 4,8001960 -- 4,007.12 4,800 4,8001961 -- 4,086.76 4,800 4,8001962 -- 4,291.40 4,800 4,8001963 -- 4,396.64 4,800 4,8001964 -- 4,576.32 4,800 4,8001965 7.0 4,658.72 4,800 4,8001966 -- 4,938.36 6,600 6,6001967 -- 5,213.44 6,600 6,6001968 13.0 5,571.76 7,800 7,8001969 -- 5,893.76 7,800 7,8001970 15.0 6,186.24 7,800 7,800

1971 10.0 6,497.08 7,800 7,8001972 20.0 7,133.80 9,000 9,0001973 -- 7,580.16 10,800 10,8001974 11.0 8,030.76 13,200 13,2001975 8.0 8,630.92 14,100 14,1001976 6.4 9,226.48 15,300 15,3001977 5.9 9,779.44 16,500 16,5001978 6.5 10,556.03 17,700 17,7001979 9.9 11,479.46 22,900 18,9001980 14.3 12,513.46 25,900 20,4001981 11.2 13,773.10 29,700 22,2001982 7.4 14,531.34 32,400 24,3001983 3.5 15,239.24 35,700 26,7001984 3.5 16,135.07 37,800 28,2001985 3.1 16,822.51 39,600 29,700

31

Retirement Earnings Test Exempt AmountsPrior to 2000, the retirement earnings test applied to

people below age 70. For 2000 and later, the retirementearnings test applies only to people below the full retire-ment age. Social Security benefits are withheld if a per-son’s earnings exceed the exempt amount, if that personis under the applicable maximum age. For 2000 andlater, the lower amount applies for years before the yearof attainment of full retirement age, while the higheramount applies in the year of attainment of full retire-ment age.

The lower monthly exempt amount is determinedfor year Y as the 1994 monthly exempt amount multi-plied by the ratio of the average wage for year (Y-2) tothat for 1992, rounded to the nearest multiple of $10.However, the exempt amount cannot be less than theamount for year (Y-1).

The higher monthly exempt amount for 2002 wasset by law. For years after 2002, the higher monthlyexempt amount is determined for year Y as the 2002monthly exempt amount multiplied by the ratio of theaverage wage for year (Y-2) to that for 2000, rounded tothe nearest multiple of $10. However, the exemptamount cannot be less than the amount for year (Y-1).

1986 1.3 17,321.82 42,000 31,5001987 4.2 18,426.51 43,800 32,7001988 4.0 19,334.04 45,000 33,6001989 4.7 20,099.55 48,000 35,7001990 5.4 21,027.98 51,300 38,1001991 3.7 21,811.60 53,400 39,6001992 3.0 22,935.42 55,500 41,4001993 2.6 23,132.67 57,600 42,9001994 2.8 23,753.53 60,600 45,0001995 2.6 24,705.66 61.200 45,300

1996 2.9 25,913.90 62,700 46,5001997 2.1 27,426.00 65,400 48,6001998 1.3 28,861.44 68,400 50,7001999 2.4/2.5 30,469.84 72,600 53,7002000 3.5 32,154.82 76,200 56,7002001 2.6 32,921.92 80,400 59,7002002 1.4 33,252.09 84,900 63,0002003 2.1 34,064.95 87,000 64,5002004 2.7 87,900 65,1002005 90,000 66,900

Table 8: Cost-of-living increase, average amount of total wages, and maximum creditable amounts

Calendar year

Cost-of-living

increase (percent)

Average wage

Maximum creditable amount

Present law Old law

Table 9: Retirement earnings test exempt amounts, 1976-1999

Calendar year

Retirement earnings test exempt amountsUnder age 65 Age 65-69

Monthly Annual Monthly Annual

1976 $230.00 $2,760 $230.00 $2,7601977 250.00 3,000 250.00 3,0001978 270.00 3,240 333.33 1/3 4,0001979 290.00 3,480 375.00 4,5001980 310.00 3,720 416.66 2/3 5,000

1981 340.00 4,080 458.33 1/3 5,5001982 370.00 4,440 500.00 6,0001983 410.00 4,920 550.00 6,6001984 430.00 5,160 580.00 6,9601985 450.00 5,400 610.00 7,3201986 480.00 5,760 650.00 7,8001987 500.00 6,000 680.00 8,1601988 510.00 6,120 700.00 8,4001989 540.00 6,480 740.00 8,8801990 570.00 6,840 780.00 9,3601991 590.00 7,080 810.00 9,7201992 620.00 7,440 850.00 10,2001993 640.00 7,680 880.00 10,5601994 670.00 8,040 930.00 11,1601995 680.00 8,160 940.00 11,280

1996 690.00 8,280 1,041.66 2/3 12,5001997 720.00 8,640 1,125.00 13,5001998 760.00 9,120 1,208.33 1/3 14,5001999 800.00 9,600 1,291.66 2/3 15,500

Table 10: Retirement earnings test exempt amounts, 2000 and later

Calendar year

Retirement earnings test exempt amountsLower amount Higher amount

Monthly Annual Monthly Annual

2000 840.00 10,080 1,416.66 2/3 17,0002001 890.00 10,680 2,083.33 1/3 25,0002002 940.00 11,280 2,500.00 30,0002003 960.00 11,520 2,560.00 30,7202004 970.00 11,640 2,590.00 31,0802005 1,000.00 12,000 2,650.00 31,000

32

Benefit Formula Bend PointsThe Primary Insurance Amount (PIA) under the

wage-indexed method is the sum of three separate per-centages of portions of the average indexed monthlyearnings. The portions, often referred to as “bendpoints”, depend on the year of eligibility of the worker.The Maximum Family Benefit (MFB) under the wage-indexed method is determined by a similar formulainvolving bend points. The portions for the PIA andMFB formulas were set by law for 1979. For years after1979, a PIA or MFB formula bend point is determinedfor year Y as the 1979 bend point multiplied by the ratioof the average wage for year (Y-2) to that for 1977,rounded to the nearest $1.

Quarter of Coverage AmountFor years before 1978, a quarter of coverage is any

calendar quarter in which an individual was paid atleast $50 in wages or for which he/she was creditedwith at least $100 of self-employment income.

Quarters of coverage or credits after 1977 are com-puted based on the number of increments of coveredearnings credited to the calendar year. For 1978, theamount of the increment was specifically set at $250 bylaw. The law specifies that the increment for any yearafter 1978 is equal to the 1978 amount of $250 multipliedby the ratio of the average wage for the second yearprior to the year for which the increment is being deter-mined to that for 1976. However, the increment cannotdecrease from the amount for the prior year. If theamount so determined is not a multiple of $10, it isrounded to the nearest multiple of $10.

Year of Coverage AmountThe amount of earnings required to be credited with

a year of coverage in computing the special minimumbenefit equals 25 percent of the old-law base through1990, and 15 percent of the old-law base thereafter.

The amount of earnings required to be credited witha year of coverage in determining the year-of-coverageguarantee in the windfall elimination provision equals25 percent of the old-law base for all years.

Table 11: Benefit formula bend points

Calendar year

Bend points in PIA formula

Bend points in maximum family benefit formula

First Second First Second Third

1979 $180 $1,085 $230 $332 $4331980 194 1,171 248 358 467

1981 211 1,274 270 390 5081982 230 1,388 294 425 5541983 254 1,528 324 468 6101984 267 1,612 342 493 6431985 280 1,691 358 517 6751986 297 1,790 379 548 7141987 310 1,866 396 571 7451988 319 1,922 407 588 7671989 339 2,044 433 626 8161990 356 2,145 455 656 8561991 370 2,230 473 682 8901992 387 2,333 495 714 9311993 401 2,420 513 740 9661994 422 2,545 539 779 1,0161995 426 2,567 544 785 1,024

1996 437 2,635 559 806 1,0521997 455 2,741 581 839 1,0941998 477 2,875 609 880 1,1471999 505 3,043 645 931 1,2142000 531 3,202 679 980 1,2782001 561 3,381 717 1,034 1,3492002 592 3,567 756 1,092 1,4242003 606 3,653 774 1,118 1,4582004 612 3,689 782 1,129 1,4722005 627 3,779 801 1,156 1,508

33

Special Minimum PIAs and MFBsThere are 20 different special minimum PIA and

MFB amounts, corresponding to 11 through 30 years ofcoverage. Those amounts were set by law for January1979. Thereafter, the amounts are increased by the cost-of-living increase, following the usual rounding ruleswhen applying such an increase. In addition, if afterrounding, the MFB would be less than 150 percent of thePIA, it is increased in multiples of $.10 until it is at least150 percent of the PIA.

Table 12: Amounts required for quarter of coverage and year of coverage

Calendar year

Amount for quarter of coverage

Amount for year of coverage

Special minimum PIA

Windfall elimination provision

1951-54 $50 $900 $9001955-58 50 1,050 1,0501959-65 50 1,200 1,2001966-67 50 1,650 1,6501968-71 50 1,950 1,950

1972 50 2,250 2,2501973 50 2,700 2,7001974 50 3,300 3,3001975 50 3,525 3,5251976 50 3,825 3,8251977 50 4,125 4,1251978 250 4,425 4,4251979 260 4,725 4,7251980 290 5,100 5,1001981 310 5,550 5,5501982 340 6,075 6,0751983 370 6,675 6,6751984 390 7,050 7,0501985 410 7,425 7,425

1986 440 7,875 7,8751987 460 8,175 8,1751988 470 8,400 8,4001989 500 8,925 8,9251990 520 9,525 9,5251991 540 5,940 9,9001992 570 6,210 10,3501993 590 6,435 10,7251994 620 6,750 11,2501995 630 6,795 11,3251996 640 6,975 11,6251997 670 7,290 12,0501998 700 7,605 12,6751999 740 8,055 13,4252000 780 8,505 14,175

2001 830 8,955 14,9252002 870 9,450 15,7502003 890 9,675 16,1252004 900 9,765 16,2752005 920 10,035 16,725

Table 13: Special minimum PIAs and MFBs as of December 2004

Years of coverage PIA MFB

11 $31.90 $48.5012 64.70 97.8013 97.70 147.1014 130.40 196.1015 163.00 245.2016 195.90 294.8017 228.90 344.2018 261.70 393.3019 294.40 442.6020 327.30 491.7021 360.30 541.4022 392.80 590.4023 426.20 640.4024 458.90 689.3025 491.70 738.00

26 525.00 788.2027 557.40 837.2028 590.30 886.3029 623.00 935.9030 655.90 984.60

34

Old-Start PIBs and AME PIASThe old-start method involves the computation of a

Primary Insurance Benefit (PIB). The PIB is converted toa Primary Insurance Amount (PIA) via a conversiontable. The table is the one that was in effect in January1979, at the time the 1977 amendments became effective.

Table 14: Old-start PIBs and AME PIAs for eligibility in 1979 or later

PIB is—

AME PIAAt least—But not more

than—

16.20 121.8016.21 16.84 123.7016.85 17.60 126.6017.61 18.40 128.9018.41 19.24 131.2019.25 20.00 134.0020.01 20.64 136.5020.65 21.28 138.6021.29 21.88 141.4021.89 22.28 143.8022.29 22.68 146.2022.69 23.08 148.5023.09 23.44 151.3023.45 23.76 153.7023.77 24.20 156.70

24.21 24.60 158.9024.61 25.00 161.6025.01 25.48 164.6025.49 25.92 167.3025.93 26.40 169.8026.41 26.94 172.5026.95 27.46 174.9027.47 28.00 177.6028.01 28.68 180.4028.69 29.25 183.0029.26 29.68 185.5029.69 30.36 188.0030.37 30.92 190.8030.93 31.36 193.6031.37 32.00 195.90

32.01 32.60 198.7032.61 33.20 201.3033.21 33.88 203.9033.89 34.50 206.7034.51 35.00 209.1035.01 35.80 211.9035.81 36.40 214.4036.41 37.08 217.2037.09 37.60 219.9037.61 38.20 222.4038.21 39.12 225.3039.13 39.68 228.0039.69 40.33 230.1040.34 41.12 233.0041.13 41.76 235.60

41.77 42.44 238.5042.45 43.20 241.1043.21 43.76 244.0043.77 44.44 246.3044.45 44.88 248.7044.89 45.60 251.80

35

APPENDIX B.—REFERENCES

Table 14 cross-references the information in this Digest with three authoritative sources:• The Program Operations Manual System (POMS) contains the Social Security Administration’s operating instruc-

tions.• Regulations relating to old-age, survivors, and disability benefits are published in the Federal Register and Code

of Federal Regulations, under Title 20—Employees’ Benefits, Chapter III—Social Security Administration,Department of Health and Human Services.

• The original Social Security Act is P.L. 74-271, approved August 14, 1935. The Act has been amended in part, anumber of times. It is listed in the U.S. Code, Title 42. To find a section of the Social Security Act in the U.S. Code,add 200 to the section number. For example, section 209(a)(1) of the Social Security Act is at 42 USC 409(a)(1)

Table 15: Cross-reference of selected items in the POMS, regulations, and Social Security law

Item POMS Regulations Social Security Act

COVERED EMPLOYMENT AND ELIGIBILITY REQUIREMENTS

Covered employment 404.1001Covered wages 404.1003- 404.1046 --Self-employment coverage RS 01803.050,

RS 01803.100404.1065- 404.1095 --

Covered earningsMaximum wages and self-employment income RS 01401.015 404.1047, 404.1048,

404.1096(a)-(b)209(a)(1), 211(b)(1)

Minimum self-employment income RS 01804.001A 404.1096(c) 211(b)(2)Wage credits

Military service before 1957 RS 01701.030,RS 01701.040

404.1312, 404.1322,404.1340, 404.1342

217(a), 217(e)

Military service after 1956 RS 01701.120 404.1330, 404.1341 229(a)Deemed wages for Japanese internees RS 01404.235 404.1059 231(a)-(b)

Quarters of coverage RS 00301.200Credits after 1977 RS 00301.210Assignment of quarters of coverage RS 00301.220Quarters of coverage before 1978 RS 00301.301Simplified quarters of coverage for 1937-50 RS 00301.315

Definition of disabilityPeriod of disabilityInsured status RS 00301.101

Fully insured status RS 00301.105Currently insured status RS 00301.110Regular disability insured status RS 00301.120Special disability insured status RS 00301.140

TYPES OF BENEFITS

Old-age insurance benefits RS 00201.001A 404.310 202(a)Attainment of age RS 00201.001B.2 -- --Full retirement age for old-age benefit RS 00615.003 404.313(a)(2) 216(l)Amount of benefit RS 00201.002A 404.312 202(a), 202(q)(1)When entitlement ends RS 00201.002C 404.311(c) 202(a)

Disability insurance benefits DI 10105.005A 404.315 223(a)(1)Waiting period DI 10105.070AWhen no waiting period is required DI 10105.075Amount of benefit RS 00615.401-410 404.317 202(q)(2), 223(a)(2)When entitlement ends DI 10105.010 404.316 223(a)(1)

Spouse or divorced spouse benefitsSpouse benefits RS 00202.001 404.330 202(b)(1),

202(c)(1)

37

Divorced spouse benefits RS 00202.005 404.331 202(b)(1),202(b)(5),202(c)(1),202(c)(5)

Full retirement age for spouse benefit RS 00615.003 -- 216(l)Amount of benefit RS 00202.020,

RS 00202.035404.333 202(b)(2),

202(c)(3)Spouse and old-age benefits GN 00204.020F 404.623When entitlement ends RS 00202.040-045 404.332(b) 202(b)(1),

202(c)(1)Child Benefits RS 00203.001,

RS 00203.005,RS 00203.010,RS 00205.001,RS 00205.325

404.350

Amount of benefit RS 00203.025 404.353When entitlement ends RS 00203.035 404.352(b)

Widow(er) or surviving divorced spouse benefitsWidow(er) benefits RS 00207.001 404.335 202(e)(1),

202(e)(3),202(f)(1),202(f)(4)

Surviving divorced spouse benefits RS 00207.001 404.336 202(e)(1),202(e)(3),202(f)(1),202(f)(4)

Full retirement age for widow(er) benefit RS 00615.003 -- 216(l)Amount of benefit RS 00207.002A,

RS 00615.301C404.338 202(e)(2),

202(f)(3)When entitlement ends RS 00207.002D 404.337(b) 202(e)(1),

202(f)(1)Mother/father or surviving divorced mother/fatherbenefits

Mother or Father Benefits RS 00208.001 404.339Surviving divorced mother or father benefits RS 00208.010 404.340Amount of benefit RS 00208.015 404.342When entitlement ends RS 00208.030 404.341(b)

Parent benefits RS 00209.001 404.370Amount of benefit RS 00209.015 404.373When entitlement ends RS 00209.020 404.371(b)

Lump-sum death payment RS 00210.001A.1 404.390 202(i)Who can be paid RS 00210.001A.2 404.391-392 202(i)Amount of lump-sum death payment RS 00210.015A 404.390 202(i)

Special age-72 benefits RS 00211.001 404.381 228(a)Amount of benefit RS 00211.200 404.383 228(b)When entitlement ends RS 00211.100 404.382 228(a)

DETERMINATION OF PRIMARY INSURANCE AMOUNT AND MAXIMUM FAMILY BENEFIT

RS 00605.001-005

Wage-indexed method RS 00605.015B 404.210(b)Applicability RS 00605.015A 404.210(a)Elapsed years RS 00605.016 404.211(e)(1)Base years and computation years RS 00605.017.1-2,

RS 00605.230404.211(b)(2) 404.211(e)(2)-(3)

Drop out years and divisor months RS 00605.017.3-4Additional dropout years based on child care RS 00605.235 404.211(e)(4)Average indexed monthly earnings RS 00605.018 ,

RS 00605.021B.1404.211(f)



38

PIA formula RS 00605.021B.2 404.212(a)-(c)Cost-of-living increases RS 00605.021B.2 404.212(d)Windfall elimination provision RS 00605.360Windfall elimination exceptions RS 00605.360,

RS 00605.362,RS 00605.383,RS 00605.386

Windfall elimination pension amount RS 00605.364Windfall elimination guarantee RS 00605.370Calculation of the MFB RS 00615.736 404.403(c)-(d) 203(a)(2)

PIA table method RS 00605.040Old MFB table RS 00615.732

Transitional guarantee method -- 404.231Applicability RS 00605.025A 404.230(b)Calculation of the basic PIA RS 00605.025B 404.232(b)

Special minimum method RS 00605.070A 404.260Applicability RS 00605.070A --Years of coverage RS 00605.070B 404.261(a)Calculation of the PIA RS 00605.070C 404.261(b)Calculation of the MFB RS 00605.070F --

Old-start method RS 00605.030A.1 404.240Applicability RS 00605.030A.2 404.241(a)Elapsed years and other factors RS 00605.030B 404.241(d)Allocation of pre-1951 earnings RS 00605.033 404.241(c)Increment years RS 00605.030B 404.241(e)(2)Calculation of the PIA RS 00605.030B 404.241(e)-(f)(1)Cost-of-living increases RS 00605.030B 404.241(f)(2)Windfall elimination provision RS 00605.362A.2 404.243Calculation of the MFB RS 00615.736 404.403(c)-(d)

Alternate method for widow(er)s RS 00615.302A 404.212(b) 202(e)(2)(B)Applicability RS 00615.302B 404.211(d) 202(e)(2)(B),

P.L. 98-21, 134(c)Average indexed monthly earnings RS 00615.302C 404.211(d) 202(e)(2)(B)(i)(II)PIA formula RS 00615.302C 404.212(b) 202(e)(2)(B)(i)Maximum family benefit RS 00615.302C 404.212(b) --

Benefit increases after entitlement RS 00601.120 404.270 215(i)(2)(A)-(B)

COMPUTATION OF MONTHLY BENEFIT AMOUNTS

Reduction for the family maximum RS 00615.730 404.403(a) 203(a)(1)Regular MFB formula RS 00615.732 404.403(d) 203(a)(2)Disability MFB RS 00615.740-742 404.403(d-1) 203(a)(6)Divorced spouse or surviving divorced spouse RS 00615.682 404.403(a)(3) 203(a)(3)(C)

Reduction for age 404.410 202(q)Old-age insurance benefit RS 00615.005B.1,

RS 00615.101404.410(a) 202(q)(1),

202(q)(9)(A)Wife or husband benefit RS 00615.005B.2,

RS 00615.201404.410(b) 202(q)(1),

202(q)(9)(A)Widow or widower benefit RS 00615.005B.3,

RS 00615.301,RS 00615.320

404.338,404.410(c)(1)

202(q)(1), 202(q)(9)(B)

Disability benefit RS 00615.401-420 404.411(b) 202(q)(2), 202(q)(3)(C)

Adjustment of reduction for age RS 00615.480 404.410(d)Effective dates RS 00615.480 404.412(b) 202(q)(1)(B)(ii)Crediting months RS 00615.482 404.412(a) 202(q)(7)Computing the benefit RS 00615.490-598 404.412 202(q)(1)

Delayed retirement credit



39

Applicability RS 00615.690 404.313(a) 202(w)(1)Amount of credit RS 00615.692 404.313(b)-(c) 202(w)(1),

202(w)(4), 202(w)(6)

Increment months RS 00615.690 404.313(b) 202(w)(2)-(3)Special minimum PIA involvement RS 00605.075,

RS 00615.700404.313(d) 202(w)(5)

Applicability to widow(er)’s benefits RS 00615.702-706 404.313(e) 202(e)(2)(c)Reduction for workers’ compensation offset 404.408(a) 224(a)(1)-(2)

Amount of reduction 404.408(c)(1) 224(a)(3)-(8)Average current earnings 404.408(c)(3) 224(a)

Reduction for Government Pension Offset GN 02608.100 404.408a(a) 202(b)(4)(A),202(c)(2)(A),202(e)(7)(A),202(f)(2)(A)

Amount of reduction GN 02608.100 404.408a(d) 202(e)(7)(A)Exemption due to prior eligibility GN 02608.101,

GN 02608.104,GN 20608.105

404.408a(b), 404.408a(c), 404.408a(e)

--

Exemption due to later covered employment GN 02608.102,GN 02608.103

404.408a(a) 202(e)(7)(B)

Determining a pension amount GN 02608.400 404.408a(a) 202(e)(7)(C)Deduction or suspension on account of work RS 02501.021

Definition of earnings test RS 02501.021Annual and monthly exempt amounts RS 02501.025Monthly earnings test RS 02501.030

Deduction for Supplementary Medical InsuranceRounding to the next lower multiple of $1.00 RS 00601.020D 404.304(f)Entitlement to more than one benefit RS 00615.020A

Old-age and spouse benefits RS 00615.140,RS 00615.240,RS 00615.250

Old-age and widow(er) benefits RS 00615.150,RS 00615.160

Nonresident alien withholding taxOther deductions

Recovery of a prior overpaymentAttorney fee withholdingGarnishmentMaritime tax deductionInstallment payments

Interaction of reductions and/or deductionsAdjustment for earnings test involvement RS 02501.275

APPENDIX A

Cost-of-living increases RS 00601.120C 404, Subpart C, Appendix VI

215(i)(2)

Maximum creditable amounts RS 01404.300 404.1047,404, Subpart C,Appendix VII

215(e)(1),230(b)-(c)

Average wages of all workers RS 00605.018D 404, Subpart C, Appendix I

209(k)

Retirement earnings test exempt amounts RS 02501.025DPIA formula bend points RS 00605.900(1) 404, Subpart C,

Appendix II215(a)(1)(B)

MFB formula bend points RS 00605.900(2) -- 203(a)(1)Amounts for quarter of coverage RS 00301.250



40

Amounts for year of coverage RS 00605.070B.2,RS 00640.075C,RS 00605.362A.1

404, Subpart C, Appendix IV

Special minimum PIAs and MFBs RS 00640.075C 404, Subpart C,Appendix V

Old-start PIBs and AME PIAs RS 00605.950 404, Subpart C,Appendix III



41

OASDI Digest - Havard · OASDI DIGEST The Cash Benefit Provisions of the Old-Age, Survivors, and...

Documents

Transcript of OASDI Digest - Havard · OASDI DIGEST The Cash Benefit Provisions of the Old-Age, Survivors, and...