SSR 73-20: SECTIONS 202(a) and 213(a) (42 U.S.C. 402(a) and 413(a)). -- WAGES -- CONSTRUCTIVE PAYMENT -- INSURED STATUS
20 CFR 404.103(e) and 404.1026(b)
- Where worker is employed at specified daily rate but receives payment of wages only on regular pay day, except in emergency situation, and then only upon specific approval of employer, held, in determining quarters of coverage for social security insured status purposes, payment under such circumstances is not constructive payment of wages under § 404.1026(b)(2) of Social Security Administration Regulations No. 4, and such wages are creditable for calendar quarter in which paid, rather than quarter in which they may have been earned.
R, a claimant for retirement insurance benefits, filed application in April, 1971 and established her date of birth as June 1903. Therefore, she needed 14 quarters of coverage to be fully insured. R indicated that she had been employed as a substitute public school teacher. The school payroll coordinator confirmed the fact of R's employment for two days in September 1969 at the rate of $20 per day. However, payment was not made for these two days until October and the $40 was included in the fourth quarterly report for 1969. Wages of $40 for two additional days were reported for her in the third quarter of that year, although she actually earned $80 during such quarter. The payroll office further stated that employees were not paid upon request but only on the regular pay date except in case of a real emergency, and then approval of the business manager was required.
R worked on September 23 and September 28, 1970, but was not paid until October; therefore, her wages of $40 were reported in the fourth quarter. Only $10 were reported for her in the third quarter of 1970, although she had earned $50 in the quarter.
During the pay period ending September 24, 1971, R did no work but in the second pay period ending October 22, 1971, she earned $84.00 ($10.50 in September 1971 and $73.50 in October 1971).
The issue is whether the Social Security Administration correctly determined October 1971 as R's date of entitlement to benefits. This depends on whether she qualifies for a quarter of coverage in September 1969 and September 1970, as alleged. It was her contention that benefits should have started with the month of January 1971 because she believed she completed her 14th quarter in March 1971.
Section 214 of the Social Security Act applicable at the time R filed her application, defined the term "fully insured individual" as any individual who had not less than one quarter of coverage for each calendar year elapsing after 1950 and before, in the case of a woman, the year in which she attained age 62. It further provided that when a calendar quarter is credited as a quarter of coverage, the quarter of coverage is acquired as of the first day of such calendar quarter.
Section 404.1026 of Social Security Administration Regulations No. 4, provides in pertinent part, with respect to payment and receipt of wages:
- Wages are constructively paid when they are credited to the account of or set apart for an employee so that they may be drawn upon by him at any time although not then actually reduced to possession. To constitute payment in such a case (i) the wages must be credited to or set apart for the employee without any substantial limitation or restriction as to the time or manner of payment or condition upon which payment is to be made, and must be made available to him so that they may be drawn upon at any time, and their payment brought within his own control and disposition, or (ii) there is an intention by the employer to pay or to set apart or credit, and ability to pay wages when due, and failure of the employer to credit or set apart the wages is due to clerical error or inadvertence in the mechanics of payment, and because of such clerical error or inadvertence the wages are not actually available at that time.
Under the Act and Regulations, wages earned in one quarter may be credited to the quarter in which earned if the requirements for "constructive payment" are net. This means the worker may collect such wages although he does not actually take possession of them. In other words, the wages must be credited to or set apart for the worker without any substantial limitation or restriction on the time or amount of the payment. There would be a substantial limitation if approval by the employer or an officer of the business is required before the wages can be paid. Moreover, there would be a substantial limitation within the meaning of the Act and Regulations if the employer had a regular payday and would make payment before that day only in case of emergency.
The facts here presented do not warrant a finding of constructive payment of R's questioned wages in the months of September 1969 and September 1970. The wages were actually paid in October of each year. Moreover, there was a substantial imitation because there was no provision for the payment of such wages on other than the regular payday unless there was an emergency and the payment was approved by the business manager. Under these circumstances, R cannot be credited with quarters of coverage for September 1969 and 1970. It is also clear that R obtained her 14th quarter of coverage in the fourth quarter of 1971.
Accordingly, it is held that R is entitled to retirement insurance benefits no earlier than October 1971, the first month of the quarter in which she became fully insured.