20 CFR 404.401(c) and 404.415
R, who has taken a vow of poverty as a member of a religious order, became entitled to retirement insurance benefits in November 1966. Section 123 of the Social Security Amendments of 1972 (P.L. 92-603), enacted October 30, 1972, provides that services performed by a member of a religious order who has taken a vow of poverty which are in the exercise of the duties required by the order will be covered under social security as employment for the order if the order irrevocably elects coverage for its entire active membership and lay employees. Further, section 123 permits an order to elect up to five years of retroactive coverage for those persons who were active members when the work was performed and who are alive on the first day of the quarter in which the order files a certificate of election of coverage.
On March 6, 1972, the religious order of which R was a member filed a certificate of election of coverage in accordance with the above cited amendment provision. As a result of this action, R may be credited with "wages" for the years 1968-1972 for services performed in the exercise of duties required by the order. Under section 3121(i)(4) of the Internal Revenue Code and section 209 of the Social Security Act, last paragraph, as amended by section 123 of the 1972 Amendments, where an individual is a member of a religious order and subject to a vow of poverty, "wages" shall include the fair market value of any board, lodging, clothing and other perquisites furnished to him by the order, except that the amount shall not be less than $100 a month.) The crediting of wages retroactively to R as a result of her order's election of coverage would enable R to receive increases in her retirement benefits on the basis of recomputations for each year from 1969. Since the reporting of retroactively covered wages will also result in earnings being credited to R which exceed the permissible limit under the retirement test, the question presented is whether work deductions under section 203(b) of the Act must be imposed because of such "retroactive" excess earnings.
Section 123 of Public Law 92-603, while (1) extending coverage and (2) providing retroactive coverage in certain circumstances, makes no reference to whether, as a result of the retroactive wage credits, deductions are to be imposed retroactively under section 203 of the Act. The House and Senate Reports, in discussing section 123, make the following statements:
When section 218, providing for voluntary agreements for coverage of State and local employees was added to the Social Security Act by the 1950 Amendments, the Social Security Administration determined that deductions should not be imposed for months within the retroactive period. This conclusion was based primarily on the facts that (1) benefit payments during the retroactive period were correct when made, and (2) the subsequent legislative action, purporting to have retroactive effect only with respect to coverage, would not render the previous payments erroneous. In other words, if later legislation is to deprive an individual of all or part of a benefit he previously received (and to which he was clearly entitled under prior law), there must, as a minimum, be a clear expression of the legislative intent sanctioning such retroactive diminution of the prior right. Even when such legislative intent is clear, the Due Process Clause of the Constitution arguably would preclude the defeasance of such prior right. Cf. Flemming v. Nestor, 363 U.S. 603, 611 (1960) rehearing denied 364 U.S. 854 (1960).
As in the case of the 1950 Amendments which permitted a State to elect to have coverage apply for limited retroactive periods for employees included in the agreement, the 1972 Amendments extending retroactive coverage on an elective basis to members of certain religious orders, provides no indication that Congress intended that where an agreement providing coverage was made retroactive, deductions should likewise be imposed retroactively. With respect to the 1950 Amendments, any retrospective deductions, as opposed to coverage, would have to be supplied by implication, and in view of the long-standing and universally recognized precedents in law that a statute will be construed as prospective only unless the intent to make it retrospective clearly appears, we concluded that the Amendments conferred no authority on the Administration to impose retroactive deductions. Statutes are not to be applied retroactively "unless the words used are so clear, strong and imperative that no other meaning can be annexed to them, or unless the intention of the legislature cannot be otherwise satisfied." United States F & G Co. v. United States for the Use and Benefit of Struthers Wells Co., 209 U.S. 306, 314 (1908). See also deRodufla v. United States, 461 F.2d 1240, 1247 (D. C. Cir. 1972).
The same conclusion is valid with respect to section 123 of the 1972 Amendments, which provides social security coverage for members of certain religious orders for the first time. The express language of the section provides only an extension of coverage and the option to receive retroactive coverage in certain instances, and the accompanying committee reports state that coverage may be retroactive so that the adverse effects of late entry into the social security system may be reduced. In the absence of any legislative indications to the contrary, it would be inconsistent with the purpose of the amendment to extend coverage and then, without express statutory authority, reduce or deny any resulting benefits by imposing deductions.
The foregoing rationale is applicable not only to the situation where a beneficiary became entitled to and received retirement insurance benefits prior to receiving any retroactive wage credits, but also to those situations where an individual, on the basis of the retroactive wage credits, acquires insured status and concomitant entitlement to retirement insurance benefits during the retroactive period. Where entitlement occurs during the retroactive period, there will have been no correctly made benefit payments, and retroactive deductions because of excess earnings, therefore, would not constitute taking away or diminishing something the beneficiary previously had been entitled to and received. But because such an individual could not have known prior to the election of coverage that the fair market value of any board, lodging, clothing and other perquisites furnished by the order would be considered "wages and possible excess earnings for social security purposes, the imposition of retroactive deductions would be unnecessarily restrictive in the absence of any language in the governing amendment directing such action.
Inherent in the above interpretation is the fact that a religious order whose members are required to take a vow of poverty must file a certificate electing coverage and until such an election is made there are neither "wages" nor "excess earnings." Until such election, individual members of the order have no way of knowing that services performed for the order may be covered under social security as employment or that the annual earnings test would be applied where an order designates a retroactive effective date for such coverage.
Accordingly, it is held that when an order elects to receive coverage retroactively, it would be inconsistent with the extension of coverage to impose deductions because of excess earnings accrued during the retroactive period.
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