A woman worker, born June 19, 1896, was awarded reduced old-age insurance benefits of $85.60 beginning January 1961, based on her primary insurance amount of $88. Her total earnings for 1961 were $1,895 and she had earnings of more than $100 in each month January through September 1961. Held, her benefits for the months January through June 1961 are subject to deductions because of excess earnings chargeable to these months; and held further that beginning June 1961, the month she attained age 65, the amount of her old-age insurance benefits in increased to $88, the primary insurance amount, because of deductions applicable for previous months.

B, a woman worker born June 19, 1896, filed application for old-age insurance benefits in January 1962, at an office of the Bureau of Old-Age and Survivors Insurance. She had stopped working in September 1961, and had earned wages of over $100 per month in all months January through September 1961. B estimated that her earnings in 1961 were about $1,800. She had never been self-employed and computed her income tax on a calendar-year basis.

Under section 202(j)(1) of the Act, the application filed in January 1962 could entitle B to benefits beginning January 1961, 12 months before the month of filing, assuming (as was later verified) that in January 1961 she was fully insured and was age 62 or over. However, 6 had the right to restrict the retroactivity of her application; that is, she could elect to have her entitlement begin with January 1962 (the month in which application was filed) or any of the 12 months preceding. During an interview this matter was discussed, together with other effects upon her benefits of having entitlement begin before June 1961, the month in which she attained age 65. B asked that her application not be adjudicated until she should ascertain which first month of entitlement would yield her the highest amount of benefit payments. She was informed that under the facts given, this would depend upon the exact amount of her 1961 earnings and her primary insurance amount, which latter amount could be determined only after information was obtained from her social security earnings record.

Ten days later B returned to the office with a statement signed by her employer showing that her earnings for 1961 were $1,895. On the basis of her entire earnings record, it appeared that her primary insurance amount would be $88. Under sections 202(a) and (q) of the Social Security Act, a worker's old-age insurance benefit is equal to his primary insurance amount if the first month for which he is entitled to such benefits is no earlier than the month he attains age 65. However, if he is entitled to such a benefit for months before that month, the amount of his benefit is equal to the primary insurance amount reduced by 4/9 of one percent multiplied by the number of months in his reduction period. The reduction period begins with the first month for which the worker is entitled to old-age insurance benefits, and ends with the month before the month he attains age 65. If the amount of a reduction is not a multiple of 10 cents, it must be changed to the next lower multiple of 10 cents.

Thus, if B elected entitlement beginning June 1961, the month she attained age 65, her benefit would be $88 beginning with that month. If, instead, she claimed benefits beginning January 1961 (5 months earlier), her benefit amount would be $88 reduced by 2.78 percent (5 times 5/9 percent), which reduction (after decrease to the next lower multiple of 10 cents) would result in a benefit of $85.60, beginning January 1961.

Section 202(q) further requires computation of an old-age insurance benefit effective with the month the worker attains age 65, if for any previous month his benefit has been subject to a work deduction (that is, a deduction required by section 203 because of his work and earnings). The recomputation is made by excluding from the reduction period any month of that period for which the benefit was subject to a work deduction. Since B had already attained age 65, it became pertinent to determine what deductions were required for months in 1961, and what would be the effect of such deductions upon the amount of her benefit.

Under section 203, as pertinent to this case, a deduction is required from benefits for any month to which a worker's excess earnings are charged. A worker's "excess earnings" in a 12-month taxable year ending after June 30, 1961, are determined by the extent to which his total earnings in that year exceed $1,200. Only $1 is chargeable for each $2 of the first $500 by which his earnings in the year exceed $1,200; and $1 is charged for each $1 of earnings over and above this first $500. Thus, if his total earnings are $1,700 or more in such a year ending after June 30, 1961, the amount of his excess earnings is figured by subtracting $1,450 from his total earnings. Excess earnings during a year may be charged only to months in that year for which the worker is entitled to benefits, is under age 72, and has either rendered substantial services in self-employment or has rendered services for wages of over $100. The excess earnings must be charged beginning with the first such month in that taxable year, in an amount equal to the benefits for such month; any remaining excess earnings are then charged to the second such month, in an amount equal to the benefits for such month; and then to the third such month, etc. If any excess earnings are charged to a month, the benefits for that month are subject to deduction. The amount of the deduction is the full amount of the benefits for that month, except (in some cases) for the last month charged with excess earnings. In such last month, the amount of the excess earnings charged may be less than the amount of the benefits, in which event the deduction will be equal to the excess charged.

Since B's taxable year was the calendar year 1961, and her total earnings in that year were $1,895, her excess earnings for that year were $445 ($1,895 minus $1,450). If she elected to claim benefits beginning June 1961, her benefits would be $88 per month, but her excess earnings would require deductions in the full amount of her benefits for June through September 1961 (the months of 1961 for which she was entitled to benefits, was under age 72, and had rendered services for wages of over $100 per month). Thus she would receive payment of $88 per month for the last 3 months of 1961, a total of $264 for the year, and $88 per month thereafter (assuming there is no change in her status and she is not subject to further work deductions).

On the other hand, if B elected to claim benefits beginning January 1961, her old-age insurance benefit beginning with that month would be $85.60, as shown above. Her excess earnings of $445 for 1961 would require deductions of all her benefits for 5 months, January through May 1961, with a deduction of $17 against her benefit for June 1961. ($445 divided by $85.60 equals 5, with a balance of $17.) In addition, because deductions would be required for all months of entitlement before June 1961, the month B attained age 65, her benefit must be recomputed effective June 1961 by excluding from her reduction period all months in that period for which deductions were required. This would reduce to zero the number of months in the reduction period, and therefore reduce to zero the amount of the reduction (zero times 5/9 percent). Accordingly, B would be entitled effective June 1961 to a benefit of $88, the full primary insurance amount. For June she would receive $71 ($88 minus a deduction of $17), and for all subsequent months of 1961 she would receive benefit payments of $88 per month thereafter (assuming no change in her status and no further work deductions).

On the basis of this information, B elected to claim old-age insurance benefits beginning January 1961. It was held that she was entitled to such benefits in the amount of $85.60 per month for the months January 1961 through May 1961, and in the amount of $88 per month thereafter; and that, because of work deductions, no benefits were payable for the months January 1961 through May 1961 and $71 was payable for June 1961, and $88 was payable for months after June 1961, no deductions being applicable for July 1961 or subsequent months.

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