SSR 76-3c: SECTIONS 210(a)(6)(A), 216(i)(3), and 223(c)(1) (42 U.S.C. 410(a)(6)(A), 416(i)(3), and 423(c)(1)) -- DISABILITY INSURANCE BENEFITS -- INSURED STATUS -- FEDERAL CIVILIAN EMPLOYMENT -- COVERAGE OF OVERTIME PAYMENTS

20 CFR 404.116 and 404.1013

SSR 76-3c

Kaplan v. Richardson, 1A Unempl. Ins. Rep. Par. 14,303 (E.D. N.Y. 7/19/73), affirmed 489 F.2d 752 (2d Cir. 1974).

Where a retired civil service employee alleges insured status under the Social Security Act for purpose of entitlement to Disability Insurance Benefits claiming that the overtime wages he received as a Federal employee should be considered covered employment held, the overtime wages received by a civil service employee who is covered by the Civil Service Retirement Act may not be counted as wages under the Social Security Act merely because they are not included under the Civil Service Retirement Act to compute benefits, as such overtime wages may not be viewed separately from basic wages where both are paid by the same Federal agency for the same type of service.

NEAHER, District Judge:

Plaintiff commenced this action seeking review under § 205(g) of the Social Security Act, 42 U.S.C. § 405(g), of a final decision of the defendant Secretary of Health, Education and Welfare ("the Secretary") denying his application for establishment of a period of disability under § 216, 42 U.S.C. § 416, and for disability insurance benefits under § 223, 42 U.S.C. § 423. Defendant has moved for judgment on the pleadings, pursuant to Rule 12(c), F.R.Civ.P.

Plaintiff, George E. Kaplan, a retired federal civil service employee, filed an application for disability insurance benefits on May 24, 1971. The application was denied on June 24, 1971; the denial was affirmed upon reconsideration by the Bureau of Disability Insurance of the Social Security Administration on September 1, 1971. Pursuant to Kaplan's request a de novo hearing was held before a hearing examiner on April 18, 1972, where his application was again denied. The Appeals Council of the Social Security Administration denied review on July 28, 1972. Thus, the hearing examiner's decision became the final decision of the Secretary, 42 U.S.C. § 405(g).

Plaintiff alleged that the onset date of his disability was August 15, 1970 (Exhibit 1). He previously worked for the Social Security Administration as a claims authorizer for nearly 10 years ending in 1968. The hearing examiner found that plaintiff was not under a disability as defined in the Act for any period through September 30, 1963, when he last met the earnings requirement of the Act. The examiner also found that plaintiff did not receive quarters of coverage from overtime wages earned by him as a Civil Service employee in the Social Security Administration because those wages were excluded from covered wages under § 210(a)(6)(A) of the Social Security Act, 42 U.S.C. § 410(a)(6)(A).

The basic issue that plaintiff has raised throughout the administrative process and the sole issue raised here is the contention that overtime wages of federal employees should be used in calculating quarters of coverage.

Section 210(a)(6)(A) clearly excludes from the coverage of the Social Security Act those in the employ of the United States or its instrumentalities who are covered by a federal retirement system. Quarters of coverage are derived from wages earned through employment or self-employment income covered by the Social Security Act. The term wages, as defined in § 209, 42 U.S.C. § 409, means remuneration for employment, "including the cash value of all remuneration paid in any medium other than cash." The term employment, as defined in § 210(a), 42 U.S.C. § 410(a), specifically does not include service performed in the employ of the United States or one of its instrumentalities, if the service is "covered by a retirement system established by a law of the United States. . . . A retirement system for employees of the Social Security Administration is established under the Civil Service Retirement Act, 5 U.S.C. § 8301, et. seq. ("Retirement Act"). Thus, under the Act Kaplan is not entitled to quarters of coverage on the basis of wages received from the Social Security Administration, since he is covered and presently receives benefits under the Retirement Act.

Nevertheless Kaplan argues that the overtime wages received from the Social Security Administration should be counted as wages under the Social Security Act, because overtime wages are excluded under the Retirement Act for purposes of computing benefits under the latter Act. This contention is clearly frivolous.

Overtime wages cannot be viewed separately from basic wages, at least where both are paid by the same agency for the same type of services. Wages, as already noted, include "the cash value of all remuneration" received. As to whether an employment is included within the Social Security Act's coverage, the crucial question is not whether the form of remuneration is covered by a retirement system, but whether the service is covered by a retirement system. Plaintiff was clearly performing the same service at all times. Cf. Thaxton v. Finch, 301 F.Supp. 1155 (D. Tex. 1971).

Moreover, § 210(b) of the Social Security Act, 42 U.S.C. § 410(b), and implementing regulations provide that if services performed during more than one-half of any pay period do not constitute employment under the Act then none of the services during that pay period shall be considered employment. Plaintiff has never alleged that his overtime work constituted more than one-half of his services or time spent in any pay period (Hearing Examiner's Decision, at 6). Therefore, assuming that his overtime work is a separable service constituting employment, since all services by him are to be treated alike either as all included or excluded, all of his services must be held to be excluded.

Plaintiff further alleges that if overtime wages are not covered under the Social Security Act, the Act unconstitutionally discriminates against federal employees.

The provision of the Social Security Act excluding earnings received by federal employees covered by the Retirement Act is not arbitrary. Cf. Steward Machine Co. v. Davis 301 U.S. 548 (1937). The Retirement Act became law on May 22, 1920, fifteen years before the advent of social security. The drafters of the Social Security Act felt that federal employees already had adequate retirement provisions. Congress also felt that the purposes of the two systems were somewhat different and that it would not be advantageous to disturb the existing viable federal retirement system.

Similarly, the exclusion of overtime pay for purposes of computing benefits under the Retirement Act is also not arbitrary. Congress felt that

[i]t would be unrealistic to require the paymaster to compute thousands of biweekly paychecks with salary rates that consistently vary because of overtime pay. Some employees might work overtime at a given point in their Federal career but have their high-five average based on a period which included little or no overtime. (1966 U.S. Code Cong. & Admin. News, at 3810.)

Thus, it can be seen that this classification serves the reasonable purpose of standardizing payroll deductions and computations, by excluding sporadic and irregular overtime pay.

In sum, while the interplay of the two statutes may result in a difference in treatment between federal employees and those who are not, this difference is not discrimination; it is at most an anomaly. The provisions in controversy are rationally based and free from invidious discrimination. Cf. Florio v. Richardson, 469 F.2d 803, 808 (2 Cir. 1972).

Accordingly, defendant's motion for judgment on the pleadings is granted.

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