# SSR 62-2. OLD-AGE INSURANCE BENEFIT -- COMPUTATION -- REDUCTION WHERE ENTITLEMENT BEGINS BEFORE AGE 65

The following case illustrates the computation of an old-age insurance benefit where a woman becomes entitled to benefits in the month in which she attains 62.

C became entitled to old-age insurance benefits beginning January 1961, the month in which she attained age 62. Her social security earnings record showed the following entries of earnings: 1952 \$1,090; 1953 \$1,300; 1954 \$1,325; 1955 \$1,300; 1956 \$1,160; 1057 \$775; 1958 \$1,100; 1959 \$1,200; 1960 \$1,200. In addition she had been paid \$150 wages in 1961. In the years before 1952 C was a housewife and had no earnings or quarters of coverage.

It remains to determine the amount of C's monthly old-age insurance benefit.

Section 202(a) of the Social Security Act provides that the amount of an individual's monthly old-age insurance benefit shall, except as provided in section 202(q), be equal to such individual's "primary insurance amount." Under section 202(q), where a woman becomes entitled to old-age insurance benefits for months before the month in which she attains age 65, her benefit amount must be reduced by 5/9 of 1 percent multiplied by the number of months she is under age 65 in the first month for which she is entitled to benefits. In this case, the first month for which C was entitled to benefits was 36 months before the month in which she will attain age 65. Accordingly, C's benefit must be reduced by 20 percent (36 times 5/9 percent) and her monthly benefit is therefore 80 percent of her primary insurance amount.

A person's primary insurance amount depends on his or her average monthly wage. The average monthly wage may be computed on the basis of the worker's earnings after 1950; or, in certain cases where the worker has at least one quarter of coverage before 1951 and such computation would result in a higher primary insurance amount, on the basis of his or her earnings after 1936. Since, in the present case, C has no quarters of coverage before 1951, consideration must be limited to the computation of her average monthly wage on the basis of her earnings after 1950. When the average monthly wage is so computed, the primary insurance amount is determined from the average monthly wage by reference to a table in section 215(a) of the Act.

In the case of a worker like C who first becomes eligible for old-age insurance benefits after December 1960, section 215 of the Act provides, with certain exceptions not pertinent here, that her average monthly wage must be computed on the basis of earnings in her "benefit computation years," in determining the amount of her old-age insurance benefits.

The "benefit computation years" are those years in which the worker's earnings were highest, selected from the years after 1950 up to or including the year in which she becomes entitled to old-age insurance benefits (i.e., the year in which she has filed application and met all other requirements). However, a year which is wholly within a period of disability may not be used, and the year of entitlement is used only if it is determined that the use of such year would result in a higher primary insurance amount.

The number of a worker's "benefit computation years" is determined as follows:

(1) Count the number of years elapsing after 1950 up to, but no including, whichever is later: 1961, or the first year in which he was both fully insured and had attained age 62 (if a woman), or age 65 (if a man). However, is counting do not include any year in which the person was age 21 or younger, and do not count any year any part of which is within a period of disability;
(2) Subtract five from the number obtained in (1), above.

The result is the number of "benefit computation years" (i.e., years of highest earnings, selected as shown above) which must be used in computing the average monthly wage, except that if the number is less than two, two computation years must be used.

The average monthly wage is then determined by dividing the worker's total earnings (i.e., the sum of his wages and self-employment income) in his benefit computation years by the number of months in such years. If the average monthly wage is not a multiple of \$1, it must be reduced to the next lower multiple of \$1.

In the present case, the first year in which C was fully insured and had attained age 62 is 1961. C had never established a period of disability; and she attained age 21 before 1951. Accordingly, the number of benefit computation years for her is 5 (i.e., 10, the number of years elapsing after 1950 and before 1961, minus 5).

Therefore, 5 benefit computation years must be selected from the period beginning with 1951 and ending with 1961 (the year in which she became entitled to benefits). The 5 years of highest earnings are 1953, 1954, 1955, 1959, and 1960. C's total earnings for these 5 years are \$6,325; this must be divided by 60 (the number of months in 5 years). The quotient thus obtained is \$105.42, which must be reduced to \$105, giving C an average monthly wage of \$105.

The table in section 215(a) shows that for an average monthly wage of \$105, the primary insurance amount if \$62. Because C's entitlement to old-age insurance benefits begins 36 months before the month in which she attains age 65, her benefit, as explained above, is 80 percent of the primary insurance amount, or \$49.60 per month.

Accordingly, it is held that C is entitled to an old-age insurance benefit of \$49.60 per month, beginning January 1961.