ACTUARIAL NOTE SOCIAL SECURITY ADMINISTRATION
Number 100 Office of the Chief Actuary
February 1980 Baltimore, Maryland

COMPUTING A SOCIAL SECURITY BENEFIT AFTER THE 1977 AMENDMENTS

by Steven F. McKay

Introduction

The 1977 Amendments to the Social Security Act brought about many changes involving both financing and benefits. In particular, a new "decoupled" or wage-indexed method of computing benefits was added for new beneficiaries beginning in 1979, and two existing methods were changed. This Actuarial Note will explain how to use the wage-indexed method to compute a Primary Insurance Amount (PIA) and Maximum Family Benefit (MFB), as well as when to use that method and when to use one of the methods carried over from the previous law. Other changes brought about by the amendments, though significant, will not be discussed here.

Since 1979, there have been five basic types of benefit computations:

  1. the PIA table method, which has been in the law in substantially the same form since the 1950 Amendments;
  2. the wage-indexed formula method, introduced in the 1977 Amendments;
  3. the transitional guarantee method, also introduced in the 1977 Amendments;
  4. the old-start method, which was first included in the 1939 Amendments and changed by the 1950, 1967, and 1977 Amendments;
  5. the special minimum method, which was introduced in the 1972 Amendments and changed by the 1973 and 1977 Amendments.

A potential beneficiary receives the highest benefit yielded by any of the methods which apply in his case. (For people turning 62 in 1975 and later, and for disability and survivor cases where the worker is under age 62, benefit computations do not depend on the sex of the worker. To simplify the exposition, only the male gender will be used in the following discussion.)

Determining Applicability of Each Method

One or more of the first three methods may apply to a new beneficiary depending on the type of benefit and year of eligibility. For purposes of computing benefits, "year of eligibility" means (1) for retirement benefits, the year of attaining age 62, (2) for disability benefits, the earlier of the year of onset of disability or the year attaining age 62, and (3) for survivor benefits, the earlier of the year of death or the year attaining age 62.

The applicability of each of the first three methods for retirement benefits will be discussed first. Each method's applicability depends on the year of the worker's attainment of age 62. The PIA table method applies to workers attaining age 62 before 1979, the wage-indexed formula applies to workers attaining age 62 in 1979 or later, and the transitional guarantee applies to workers attaining age 62 between the years 1979 and 1983, inclusive.

Next to be discussed is the applicability of each of the first three methods to the computation of disability benefits. The PIA table method applies if the year of eligibility is before 1979, and the wage-indexed formula applies if the year of eligibility is 1979 or later. In no case may the transitional guarantee be used.

Problems arise in certain cases when applying the above rules to determine the year of eligibility and the applicability of the transitional guarantee. Consider first the case where a worker attaining age 62 before 1979 is eligible for both a retirement benefit and a disability benefit. Such a worker would have his benefit calculated under the PIA table method, even if he becomes disabled in 1979 or later, because the year of eligibility (for disability) cannot be after the year of attainment of age 62. Next consider the more involved case of someone attaining age 62 in the years 1979 to 1983, inclusive, and becoming disabled in 1979 or later. Applying the above rules, he may use the wage-indexed formula, and not the transitional guarantee, for calculating his disability benefit. However, he may elect instead to apply for a retirement benefit, if he is eligible, in which case he may also use the transitional guarantee. The disadvantage in such a procedure is that the retirement benefit is subject to a reduction of 5/9 of one percent per month for retirement before age 65. For instance, for disability at age 62, the disability benefit would be 100 percent of the wage-indexed formula PIA, whereas the retirement benefit would be 80 percent of the transitional guarantee PIA (or 80 percent of the wage-indexed formula PIA, if that were greater). Possible advantages in selecting the retirement benefit are that the transitional guarantee PIA may be significantly greater than the wage-indexed formula PIA, and the five-month waiting period which applies in disability cases does not apply in retirement cases.

Next to be considered is the applicability of each of the first three methods to the computation of survivor benefits. The PIA table method and wage-indexed formula method apply in a manner analogous to their application to disability benefits, but the transitional guarantee, which cannot be applied to disability benefits, can be applied to the computation of survivor benefits in some cases. The transitional guarantee applies to the benefit computation of the survivors of workers attaining age 62 between the years 1979 and 1983, inclusive, but only if the worker survived to the month of attaining age 62.

Finally, the applicability of the last two methods will be discussed. The old-start method is not restricted to certain groups of beneficiaries based on year of eligibility alone; however, PIA's based on the old-start method will become rare beginning in the 1990's because the method requires that there be some earnings before 1951. The special minimum method has no restrictions at all as to who may use it, but in actual practice it yields PIA's higher than the other methods only for workers with many years of relatively low earnings.

Method 1- The PIA Table

When using this method, a PIA is linked to its corresponding average monthly wage (AMW) and MFB by way of the PIA table. The table is updated every June if the Consumer Price Index (CPI) has risen at least three percent since the measuring period ended for the last increase. If there is an increase in the earnings base (effective at the beginning of a calendar year), the PIA table is extended to a higher range of AMW's (up to an AMW of one-twelfth of the new base).

To calculate a PIA under this method an AMW is first calculated as the monthly average of the highest "n" years of earnings after 1950, where "n" is determined by the year of birth of the individual (and by sex, for workers born before 1913). For retirees, "n" equals the number of years elapsed after 1955 (or year attaining age 26, if later) and before the year attaining age 62, although a slightly different rule applies for males attaining age 62 before 1975. For instance, a retiree reaching age 63 in 1979 has an "n" of 22 (the number of years between 1955 and 1978, exclusive).

Once the AMW is calculated, the corresponding PIA and MFB may be found in the applicable PIA table. Table 1 presents the January 1979 PIA table, which was effective through May 1979.1 (The PIA table effective from June 1978 to December 1978 is the same as Table 1, except that it ends at an AMW of $1,475. The June-December 1978 PIA table will be effective for a longer time in the transitional guarantee method, as discussed below.) Table 2 shows the PIA table method benefit calculation for an age 63 retiree in the first half of 1979, assuming he has maximum taxable earnings in every year.

Disability and survivor cases are handled similarly to retirement cases when using this method, with the modification that the AMW is based on an "n" calculated as if the worker turned 62 in the year of disablement or death.


1 The amounts in the PIA table can be approximated by formulas for the PIA and the MFB. For a summary of all of the approximate formulas through 1979, see History of the Provisions of Old-Age, Survivors, Disability, and Health Insurance, 1935-1979, January 1980, Social Security Administration, Baltimore, Md.

Method 2 - The Wage-Indexed Formula

This method introduces a number of complexities into the benefit calculation. The same "n" that would have been used under prior law is used here to compute an average monthly wage, but the average is now of indexed earnings rather than actual dollar amounts of earnings. Indexing attempts to make earnings of different years comparable by adjusting earnings of earlier years for changes in average wages. Table 3 gives the set of average annual wages which is currently used for indexing.

For an example of indexing, consider an age 62 retiree in October of 1979, the first year an age 62 retiree could use the wage-indexed formula. Again assume the retiree has maximum earnings in every year. The year to which earnings are indexed (the base year for indexing) is 1977 in this case, since the year to which earnings are indexed is two years before eligibility in all cases. (The two-year lag is necessary to provide time to collect average earnings data.) Therefore, indexed 1976 earnings equal actual 1976 earnings of $15,300 multiplied by average 1977 earnings (15300 x 9779.44, or 149,625,432.0000), divided by average 1976 earnings, (149,625,432.0000/9226.48), or $16,216.96. Earnings after the base year for indexing are not indexed. Therefore, in this example, earnings in 1978 and later are not indexed. Table 4 completes the calculation of the Average Indexed Monthly Earnings (AIME).

After the AIME is calculated, the PIA is determined. Rather than using the PIA table as in prior law, a three-step formula is used to calculate a PIA based on the AIME (the result is called the AIME PIA). The two dollar amounts in the formula depend on the year of eligibility. For persons becoming eligible in 1979, such as the age 62 retiree in October 1979, the formula to compute the AIME PIA is:

90% of the first $180 of AIME, plus
32% of AIME in excess of $180 but less than $1085, plus
15% of AIME in excess of $1085.
The result of the formula is rounded up to a multiple of $.10, giving the AIME PIA.

The AIME MFB is calculated using a four-step formula based on the AIME PIA. Again, the dollar amounts in the formula depend on the year of eligibility, with the formula for persons becoming eligible in 1979 being

150% of the first $230 of PIA, plus
272% of PIA in excess of $230 but less than $332, plus
134% of PIA in excess of $332 but less than $433, plus
175% of PIA in excess of $433.
The PIA and MFB for the month of retirement are calculated from the AIME PIA and AIME MFB (which are determined for January of the year of eligibility) by applying in sequence all the intervening annual general (CPI) benefit increases rounding up to the next multiple of $.10 each time. Table 4 completes the calculation of the PIA and MFB for the example, applying the June 1979 benefit increase of 9.9 percent. Benefit increases occur in June, so that workers retiring in June or later receive the June general benefit increase in the year of retirement in the initial PIA calculation. Thus, everyone born in one particular calendar year becomes eligible for the same benefit increases, regardless of month of retirement, or month of birth, since a worker retiring before June receives the June general benefit increase by virtue of being a beneficiary on the rolls, and a worker retiring in June or later receives the June general benefit increase in the initial PIA calculation.

For persons becoming eligible for benefits in years after 1979, the PIA formula dollar amounts ($180 and $1085 in 1979) and MFB formula dollar amounts ($230, $332, and $433 in 1979) are adjusted by the change in average earnings, with a two-year lag. For instance, the 1980 PIA formula dollar amounts (bend points) equal the $180 and $1085 amounts increased by the growth in average wages from 1977 to 1978 ($10,556.03/9,779.44), resulting in $194.29 and $1,171.16. Those amounts are rounded to the nearest whole dollars, $194 and $1171. Similarly, the 1980 MFB formula bend points are calculated to be $248, $358, and $467.

As a further example, Table 5 shows the PIA calculation for a retiree aged 62 (born in January 1918) and retiring in January of 1980 with maximum earnings in all previous years. The year of eligibility for benefits is 1980; therefore, the 1980 PIA and MFB formula bend points are used. The final result in this case is that the PIA and MFB are $492.80 and $862.50, respectively.

A final test in the wage-indexed method, in whatever year is being considered, is that if the calculated PIA is less than the minimum PIA of $122, the PIA will be that minimum. (The $122 minimum PIA applies only to the decoupled formula method. The PIA table method and transitional guarantee method have different minimums.) General benefit increases do not apply from the year attaining age 62 for the minimum benefit, but only since first receipt of benefits, or from the year attaining age 65 if the worker has not retired by that time.

Method 3 - The Transitional Guarantee

The transitional guarantee method may be used by persons turning 62 in the five-year period beginning in 1979 (born in the years 1917 to 1921, inclusive), regardless of the year of retirement. This method is a mixture of a method 1 and a method 2 calculation, in that the PIA is found from a PIA table after which the MFB is found from the wage-indexed method MFB formula.

When finding a PIA, the PIA table used is "frozen" in two ways. First, no earnings in the year of attainment of age 62 or later may be used to compute an AMW. Second, the June-December 1978 PIA table, with general benefit increases applied to the PIA so determined only for the year attaining age 62 and later, is used. (As noted earlier, the June-December 1978 PIA table is the same as the one for January-May 1979, Table 1, for AMW's up to $1475.) By comparing the decoupled method with the transitional guarantee, one can see that the same benefit increases apply to the initially calculated PIA, whether it is the AIME PIA of the decoupled method or the December 1978 PIA of the transitional guarantee. In both cases, benefit increases apply in the year the worker attains age 62, whether or not he is retired, and regardless of the month of birth or the month of retirement, and in every year thereafter.

Table 6 represents the computation of a transitional guarantee PIA and MFB for the age 62 retiree in October 1979 (the same retiree as in Table 4).

After comparing the resulting PIA in Table 6 to that in Table 4, the age 62 retiree in October 1979 would receive the transitional guarantee PIA of $534.30, since it is greater than the wage-indexed formula PIA of $498.00. To further illustrate the transitional guarantee and wage-indexed formula methods, suppose that this same retiree continued to work in 1979, earned the maximum of $22,900, and retired in January 1980. Then, after substituting $22,900 in the AIME calculation in Table 4 for the lowest year of indexed earnings ($11,180.15 in 1958), his AIME would be increased to $1,138, and his January 1980 wage-indexed formula PIA and MFB would be $505.20 and $884.10, respectively. His transitional guarantee PIA and MFB in Table 6 would not change, since the $22,900 was earned in the year of attaining age 62 and would therefore not be available for a transitional guarantee calculation. As a result, the retiree in January 1980 would still receive the transitional guarantee PIA of $534.30.

Table 7 presents the computation of a transitional guarantee PIA and MFB for the age 62 retiree in January 1980 (the same retiree as in Table 5). Again this retiree gets the transitional guarantee PIA of $503.40, since it is greater than the decoupled formula PIA of $492.80.

One of the three methods discussed above (the PIA table, the wage-indexed formula, and the transitional guarantee) will be the applicable method (giving the largest PIA) for the large majority of future beneficiaries. However, for completeness, the last two methods will now be briefly described.

Method 4 - Old-Starts

The old-start method has evolved from the original 1939 Act formula which related an AMW to a Primary Insurance Benefit (PIB). This method became "old-start" when the 1950 Act introduced the "new-start" formula (the current PIA table method), which involved only earnings after 1950. At that time, the old-start method was allowed as an alternative for people with substantial earnings before 1951, and required the tabulation of year-by-year earnings from 1937-1950.

The 1967 Amendments simplified the procedure by requiring only the sum of an individual's pre-1951 earnings and an assumption as to their yearly distribution. The 1967 old-start formula was to be effective for people becoming eligible before 1978. Therefore, had there been no 1977 Amendments, it would have been necessary, beginning in 1978, to return to the pre-1967 old-start formula.

The 1977 Amendments avoided this complication by introducing a new simplified old-start formula for people becoming eligible in 1978 and later. The formula relates a calculated old-start AMW to a PIB (Primary Insurance Benefit), which in turn is linked via the PIA table to a PIA. For instance, a PIB of $45.60 (the maximum possible) was linked to a PIA of $251.80 and an MFB of $384.90 in the June-December 1978 PIA table.

Since 1979, the old-start method has been similar to the transitional guarantee method in two ways. First, the PIB's are permanently related to corresponding PIA's by the June-December 1978 PIA table, whereas in the past the PIB's and PIA's were related by the latest updated PIA table. Second, for people becoming eligible in 1979 and later, earnings in and after the year of eligibility cannot be used in an old-start calculation. Such earnings can be used only under the wage-indexed formula. Unlike the transitional guarantee, however, there is no five-year limit on use of the old-start method; anyone with earnings prior to 1951, including those disabled, may use it if it results in a higher PIA than other applicable methods.

Method 5 - Special Minimum

This method is useful for workers with long periods of relatively low earnings. The benefit equals the number of years of coverage in excess of ten but not more than thirty (maximum twenty) times a dollar amount. A year of coverage for this purpose is a year in which earnings were at least one quarter of the earnings base, for years up to 1978. Because of the large ad hoc increases in the base in 1979, 1980, and 1981, years of coverage in 1979 and later are years in which earnings are at least one quarter of what the earnings base would have been without the ad hoc increases ($18,900 in 1979 and $20,400 in 1980). The dollar amount in the special minimum was $8.50 in 1973 and $9.00 from 1974 to 1978, but the 1977 Amendments increased the amount to $11.50 effective in January 1979, and provided for automatic increases thereafter. Special minimum PIA's are increased each June by the same general benefit increase as are all other non-frozen PIA's. Because the minimum PIA under the decoupled method is frozen, and because the PIA's under the old-start method are frozen, the special minimum PIA could become the applicable PIA for an increasing proportion of beneficiaries.

When the dollar amount in the special minimum formula increased to $11.50, the MFB's corresponding to the special minimum PIA's were determined by applying the then-current wage-indexed method MFB formula. Since the maximum PIA under the special minimum provision in 1979 was $230, which equaled the first dollar amount in the MFB formula, all special minimum MFB's were $150 percent of the corresponding PIA's, rounded up to the next multiple of $.10, in the first half of 1979.

Calculation of Benefit from PIA

The above illustrations have presented the calculation of PIA's and MFB's. The actual benefit payable to a beneficiary would be related to the PIA or MFB where the relationship could depend on the type of benefit, the age of the beneficiary, and the total number of beneficiaries. For instance, a retiree's benefit would be the PIA reduced by 5/9 percent for each month retirement preceded the month of attaining age 65. For the age 62 retiree in January 1980, whose PIA was calculated in Tables 5 and 7, the reduction would be 36 times 5/9 percent, or 20 percent, of his PIA of $503.40. The reduction would therefore be $100.68, rounded down to $100.60, so the benefit payable wold be $402.80.


Table 1
January 1979 PIA Table
AMW Interval  PIA  MFB 
--- $76 $121.80 $182.70
$77 78 123.70 185.60
79 80 126.60 189.90
81 81 128.90 193.50
82 83 131.20 196.80
84 85 134.00 201.00
86 87 136.50 204.80
88 89 138.60 207.90
90 90 141.40 212.10
91 92 143.80 215.70
93 94 146.20 219.30
95 96 148.50 222.80
97 97 151.30 227.00
98 99 153.70 230.60
100 101 156.70 235.10
102 102 158.90 238.50
103 104 161.60 242.40
105 106 164.60 246.90
107 107 167.30 251.00
108 109 169.80 254.80
110 113 172.50 258.80
114 118 174.90 262.40
119 122 177.60 266.50
123 127 180.40 270.60
128 132 183.00 274.60
133 136 185.50 278.30
137 141 188.00 282.10
142 146 190.80 286.20
147 150 193.60 290.40
151 155 195.90 293.90
156 160 198.70 298.10
161 164 201.30 302.00
165 169 203.90 305.90
170 174 206.70 310.10
175 178 209.10 313.70
179 183 211.90 318.00
184 188 214.40 321.70
189 193 217.20 326.00
194 197 219.90 329.90
198 202 222.40 333.60
203 207 225.30 338.00
208 211 228.00 342.00
212 216 230.10 345.20
217 221 233.00 349.50
222 225 235.60 353.40
226 230 238.50 357.80
231 235 241.10 361.70
236 239 244.00 366.10
240 244 246.30 371.10
245 249 248.70 378.80
250 253 251.80 384.90
254 258 254.30 392.50
259 263 256.50 400.00
264 267 259.60 406.00
268 272 262.10 413.70
273 277 264.90 421.20
278 281 267.40 427.20
282 286 270.00 434.90
287 291 272.90 442.60
292 295 275.10 448.50
296 300 278.10 456.10
301 305 280.70 463.80
306 309 283.10 469.80
310 314 286.00 477.40
315 319 288.30 485.10
320 323 291.00 491.10
324 328 293.80 498.70
329 333 296.20 506.20
334 337 299.30 512.50
338 342 301.40 519.90
343 347 304.20 527.50
348 351 307.10 533.60
352 356 309.40 541.20
357 361 312.40 548.80
362 365 314.90 554.90
366 370 317.30 562.50
371 375 320.20 569.90
376 379 322.90 576.30
380 384 325.60 583.90
385 389 328.00 591.30
390 393 330.50 597.40
394 398 333.40 605.10
399 403 336.00 612.70
404 407 338.90 618.60
408 412 341.10 626.30
413 417 343.50 633.80
418 421 346.00 639.90
422 426 348.70 647.50
427 431 351.10 655.10
432 436 353.20 662.70
437 440 356.20 665.70
441 445 358.40 669.70
446 450 360.80 673.40
451 454 363.50 676.30
455 459 365.90 680.10
460 464 368.30 683.80
465 468 370.60 687.10
469 473 373.50 690.80
474 478 375.60 694.60
479 482 378.00 697.70
483 487 380.70 701.60
488 492 383.10 705.40
493 496 385.50 708.40
497 501 388.20 712.10
502 506 390.50 715.80
507 510 392.90 719.00
511 515 395.30 722.80
516 520 398.00 726.70
521 524 400.30 729.50
525 529 402.70 733.40
530 534 405.60 737.10
535 538 407.70 740.20
539 543 410.20 744.10
544 548 412.80 747.80
549 553 415.30 751.60
554 556 417.60 753.90
557 560 419.60 756.90
561 563 421.90 759.30
564 567 424.10 762.30
568 570 426.50 764.50
571 574 428.50 767.50
575 577 430.70 769.90
578 581 432.70 772.80
582 584 435.00 775.20
585 588 436.90 778.20
589 591 439.50 780.50
592 595 441.60 783.50
596 598 443.80 785.60
599 602 446.00 788.90
603 605 448.10 791.10
606 609 450.30 794.00
610 612 452.60 796.50
AMW Interval  PIA  MFB 
$613 $616 $454.70 $799.50
617 620 456.80 802.50
621 623 459.10 804.80
624 627 461.20 807.90
628 630 463.40 810.70
631 634 465.60 814.70
635 637 467.80 818.50
638 641 470.10 822.40
642 644 472.10 826.10
645 648 474.40 830.10
649 652 476.50 833.70
653 656 477.80 836.10
657 660 479.20 838.40
661 665 480.90 841.50
666 670 482.60 844.50
671 675 484.40 847.40
676 680 486.10 850.50
681 685 487.80 853.50
686 690 489.70 856.40
691 695 491.20 859.60
696 700 492.90 862.60
701 705 494.70 865.60
706 710 496.40 868.60
711 715 498.20 871.50
716 720 500.00 874.60
721 725 501.70 877.60
726 730 503.40 880.70
731 735 505.10 883.80
736 740 506.90 886.70
741 745 508.50 889.90
746 750 510.10 892.70
751 755 511.70 895.40
756 760 513.20 897.80
761 765 514.70 900.40
766 770 516.00 903.00
771 775 517.40 905.40
776 780 518.90 907.90
781 785 520.40 910.40
786 790 521.70 912.90
791 795 523.10 915.40
796 800 524.60 918.00
801 805 526.20 920.50
806 810 527.50 923.00
811 815 529.00 925.60
816 820 530.40 928.00
821 825 531.90 930.60
826 830 533.30 933.10
831 835 534.70 935.70
836 840 536.10 938.10
841 845 537.60 940.80
846 850 538.90 943.00
851 855 540.50 945.70
856 860 541.90 948.10
861 865 543.40 950.70
866 870 544.80 953.20
871 875 546.30 955.70
876 880 547.60 958.20
881 885 549.10 960.80
886 890 550.40 963.20
891 895 551.90 966.00
896 900 553.40 968.30
901 905 554.90 970.90
906 910 556.30 973.50
911 915 557.80 976.00
916 920 559.30 978.30
921 925 560.60 981.00
926 930 561.90 983.40
931 935 563.40 985.90
936 940 564.90 988.50
941 945 566.30 991.00
946 950 567.70 993.50
951 955 569.30 996.10
956 960 570.80 998.60
961 965 572.30 1,001.00
966 970 573.40 1,003.60
971 975 574.90 1,006.20
976 980 576.40 1,008.50
981 985 577.90 1,011.10
986 990 579.20 1,013.60
991 995 580.70 1,016.20
996 1,000 582.20 1,018.60
1,001 1,005 583.50 1,020.70
1,006 1,010 584.60 1,023.20
1,011 1,015 586.00 1,025.30
1,016 1,020 587.40 1,027.80
1,021 1,025 588.60 1,029.90
1,026 1,030 589.80 1,032.20
1,031 1,035 591.20 1,034.50
1,036 1,040 592.40 1,036.70
1,041 1,045 593.80 1,039.10
1,046 1,050 595.20 1,041.30
1,051 1,055 596.20 1,043.40
1,056 1,060 597.60 1,045.90
1,061 1,065 599.00 1,048.00
1,066 1,070 600.30 1,050.50
1,071 1,075 601.60 1,052.60
1,076 1,080 602.80 1,054.90
1,081 1,085 604.20 1,057.10
1,086 1,090 605.40 1,059.40
1,091 1,095 606.80 1,061.70
1,096 1,100 608.20 1,064.00
1,101 1,105 609.20 1,066.10
1,106 1,110 610.60 1,068.50
1,111 1,115 612.00 1,070.70
1,116 1,120 613.20 1,073.10
1,121 1,125 614.60 1,075.30
1,126 1,130 615.80 1,077.60
1,131 1,135 617.10 1,079.70
1,136 1,140 618.40 1,082.20
1,141 1,145 619.80 1,084.40
1,146 1,150 621.10 1,086.70
1,151 1,155 622.20 1,088.80
1,156 1,160 623.60 1,091.10
1,161 1,165 624.90 1,093.40
1,166 1,170 626.20 1,095.80
1,171 1,175 627.50 1,098.00
1,176 1,180 628.70 1,100.20
1,181 1,185 629.90 1,102.20
1,186 1,190 631.20 1,104.30
1,191 1,195 632.30 1,106.50
1,196 1,200 633.50 1,108.60
1,201 1,205 634.70 1,110.60
1,206 1,210 636.00 1,112.90
1,211 1,215 637.10 1,114.90
1,216 1,220 638.30 1,117.00
1,221 1,225 639.50 1,119.00
1,226 1,230 640.80 1,121.20
1,231 1,235 641.90 1,123.20
1,236 1,240 643.10 1,125.40
1,241 1,245 644.40 1,127.50
1,246 1,250 645.50 1,129.60
1,251 1,255 646.70 1,131.60
AMW Interval  PIA  MFB 
$1,256 $1,260 $647.90 $1,133.80
1,261 1,265 649.20 1,135.90
1,266 1,270 650.30 1,138.00
1,271 1,275 651.50 1,140.00
1,276 1,280 652.70 1,142.20
1,281 1,285 653.70 1,144.10
1,286 1,290 654.90 1,146.10
1,291 1,295 656.10 1,148.00
1,296 1,300 657.20 1,150.00
1,301 1,305 658.30 1,152.00
1,306 1,310 659.40 1,154.00
1,311 1,315 660.60 1,155.90
1,316 1,320 661.70 1,157.90
1,321 1,325 662.80 1,159.80
1,326 1,330 664.00 1,161.90
1,331 1,335 665.00 1,163.80
1,336 1,340 666.20 1,165.80
1,341 1,345 667.40 1,167.70
1,346 1,350 668.40 1,169.70
1,351 1,355 669.60 1,171.70
1,356 1,360 670.70 1,173.70
1,361 1,365 671.90 1,175.60
1,366 1,370 672.90 1,177.70
1,371 1,375 674.10 1,179.60
1,376 1,380 675.20 1,181.60
1,381 1,385 676.20 1,183.40
1,386 1,390 677.30 1,185.30
1,391 1,395 678.30 1,187.10
1,396 1,400 679.40 1,189.00
1,401 1,405 680.50 1,190.80
1,406 1,410 681.50 1,192.70
1,411 1,415 682.60 1,194.60
1,416 1,420 683.70 1,196.50
1,421 1,425 684.70 1,198.30
1,426 1,430 685.80 1,200.20
1,431 1,435 686.90 1,202.00
1,436 1,440 687.90 1,203.90
1,441 1,445 689.00 1,205.70
1,446 1,450 690.10 1,207.70
1,451 1,455 691.10 1,209.50
1,456 1,460 692.20 1,211.40
1,461 1,465 693.30 1,213.20
1,466 1,470 694.30 1,215.10
1,471 1,475 695.40 1,216.90
1,476 1,480 696.40 1,218.70
1,481 1,485 697.40 1,220.50
1,486 1,490 698.40 1,222.20
1,491 1,495 699.40 1,224.00
1,496 1,500 700.40 1,225.70
1,501 1,505 701.40 1,227.50
1,506 1,510 702.40 1,229.20
1,511 1,515 703.40 1,231.00
1,516 1,520 704.40 1,232.70
1,521 1,525 705.40 1,234.50
1,526 1,530 706.40 1,236.20
1,531 1,535 707.40 1,238.00
1,536 1,540 708.40 1,239.70
1,541 1,545 709.40 1,241.50
1,546 1,550 710.40 1,243.20
1,551 1,555 711.40 1,245.00
1,556 1,560 712.40 1,246.70
1,561 1,565 713.40 1,248.50
1,566 1,570 714.40 1,250.20
1,571 1,575 715.40 1,252.00
1,576 1,580 716.40 1,253.70
1,581 1,585 717.40 1,255.50
1,586 1,590 718.40 1,257.20
1,591 1,595 719.40 1,259.00
1,596 1,600 720.40 1,260.70
1,601 1,605 721.40 1,262.50
1,606 1,610 722.40 1,264.20
1,611 1,615 723.40 1,266.00
1,616 1,620 724.40 1,267.70
1,621 1,625 725.40 1,269.50
1,626 1,630 726.40 1,271.20
1,631 1,635 727.40 1,273.00
1,636 1,640 728.40 1,274.70
1,641 1,645 729.40 1,276.50
1,646 1,650 730.40 1,278.20
1,651 1,655 731.40 1,280.00
1,656 1,660 732.40 1,281.70
1,661 1,665 733.40 1,283.50
1,666 1,670 734.40 1,285.20
1,671 1,675 735.40 1,287.00
1,676 1,680 736.40 1,288.70
1,681 1,685 737.40 1,290.50
1,686 1,690 738.40 1,292.20
1,691 1,695 739.40 1,294.00
1,696 1,700 740.40 1,295.70
1,701 1,705 741.40 1,297.50
1,706 1,710 742.40 1,299.20
1,711 1,715 743.40 1,301.00
1,716 1,720 744.40 1,302.70
1,721 1,725 745.40 1,304.50
1,726 1,730 746.40 1,306.20
1,731 1,735 747.40 1,308.00
1,736 1,740 748.40 1,309.70
1,741 1,745 749.40 1,311.50
1,746 1,750 750.40 1,313.20
1,751 1,755 751.40 1,315.00
1,756 1,760 752.40 1,316.70
1,761 1,765 753.40 1,318.50
1,766 1,770 754.40 1,320.20
1,771 1,775 755.40 1,322.00
1,776 1,780 756.40 1,323.70
1,781 1,785 757.40 1,325.50
1,786 1,790 758.40 1,327.20
1,791 1,795 759.40 1,329.00
1,796 1,800 760.40 1,330.70
1,801 1,805 761.40 1,332.50
1,806 1,810 762.40 1,334.20
1,811 1,815 763.40 1,336.00
1,816 1,820 764.40 1,337.70
1,821 1,825 765.40 1,339.50
1,826 1,830 766.40 1,341.20
1,831 1,835 767.40 1,343.00
1,836 1,840 768.40 1,344.70
1,841 1,845 769.40 1,346.50
1,846 1,850 770.40 1,348.20
1,851 1,855 771.40 1,350.00
1,856 1,860 772.40 1,351.70
1,861 1,865 773.40 1,353.50
1,866 1,870 774.40 1,355.20
1,871 1,875 775.40 1,357.00
1,876 1,880 776.40 1,358.70
1,881 1,885 777.40 1,360.50
1,886 1,890 778.40 1,362.20
1,891 1,895 779.40 1,364.00
1,896 1,900 780.40 1,365.70
1,901 1,905 781.40 1,367.50
1,906 1,910 782.40 1,369.20

Table 2
PIA Table Example

Age 63 Retiree in 1979.  n = 22.
Year Earnings High n Years
of Earnings
1951 $3,600
1952 3,600
1953 3,600
1954 3,600
1955 4,200
1956 4,200
1957 4,200 $4,200
1958 4,200 4,200
1959 4,800 4,800
1960 4,800 4,800
1961 4,800 4,800
1962 4,800 4,800
1963 4,800 4,800
1964 4,800 4,800
1965 4,800 4,800
1966 6,600 6,600
1967 6,600 6,600
1968 7,800 7,800
1969 7,800 7,800
1970 7,800 7,800
1971 7,800 7,800
1972 9,000 9,000
1973 10,800 10,800
1974 13,200 13,200
1975 14,100 14,100
1976 15,300 15,300
1977 16,500 16,500
1978 17,700 17,700
Total 183,000

AMW = $183,000/(22x12) = $693.18, rounded down to $693

From January 1979 PIA table (Table 1):
January 1979 PIA = $491.20
January 1979 MFB = $859.60


Table 3
Average Annual Wages for Use in Indexing Earnings Records
YearAverage Annual Wages
1951 $2,799.16
1952 2,973.32
1953 3,139.44
1954 3,155.64
1955 3,301.44
1956 3,532.36
1957 3,641.72
1958 3,673.80
1959 3,855.80
1960 4,007.12
1961 4,086.76
1962 4,291.40
1963 4,396.64
1964 4,576.32
1965 4,658.72
1966 4,938.36
1967 5,213.44
1968 5,571.76
1969 5,893.76
1970 6,186.24
1971 6,497.08
1972 7,133.80
1973 7,580.16
1974 8,030.76
1975 8,630.92
1976 9,226.48
1977 9,779.44
1978 10,556.03


Table 4
First Wage-Indexed Formula Example

Age 62 Retiree in October 1979.  n = 23.
Year Earnings Earnings
x $9779.44
Indexed
Earnings
High n Years of
Indexed Earnings
1951 $3,600 $35,205,984.00 $12,577.34 $12,577.34
1952 3,600 35,205,984.00 11,840.63 11,840.63
1953 3,600 35,205,984.00 11,214.10 11,214.10
1954 3,600 35,205,984.00 11,156.53  
1955 4,200 41,073,648.00 12,441.13 12,441.13
1956 4,200 41,073,648.00 11,627.82 11,627.82
1957 4,200 41,073,648.00 11,278.64 11,278.64
1958 4,200 41,073,648.00 11,180.15 11,180.15
1959 4,800 46,941,312.00 12,174.21 12,174.21
1960 4,800 46,941,312.00 11,714.48 11,714.48
1961 4,800 46,941,312.00 11,486.19 11,486.19
1962 4,800 46,941,312.00 10,938.46  
1963 4,800 46,941,312.00 10,676.63  
1964 4,800 46,941,312.00 10,257.44  
1965 4,800 46,941,312.00 10,076.01  
1966 6,600 64,544,304.00 13,069.99 13,069.99
1967 6,600 64,544,304.00 12,380.37 12,380.37
1968 7,800 76,279,632.00 13,690.40 13,690.40
1969 7,800 76,279,632.00 12,942.44 12,942.44
1970 7,800 76,279,632.00 12,330.53 12,330.53
1971 7,800 76,279,632.00 11,740.60 11,740.60
1972 9,000 88,014,960.00 12,337.74 12,337.74
1973 10,800 105,617,952.00 13,933.47 13,933.47
1974 13,200 129,088,608.00 16,074.27 16,074.27
1975 14,100 137,890,104.00 15,976.29 15,976.29
1976 15,300 149,625,432.00 16,216.96 16,216.96
1977 16,500 161,360,760.00 16,500.00 16,500.00
1978 17,700 —       17,700.00 17,700.00
Total       302,427.75

AIME = $302,427.75/(23x12) = $1,095.75, rounded down to $1,095.

AIME PIA = 90% of $180 + 32% of $905 + 15% of ($1,095 - $1,085) = $453.10.

AIME MFB = 150% of $230 + 272% of $102 + 134% of $101 + 175% of ($453.10 - $433) = $792.955, rounded up to $793.00.

Increase (June 1979): PIA = $453.10 x 1.099 = $497.9569, rounded up to $498.00
MFB = $793.00 x 1.099 = $871.5070, rounded up to $871.60

October 1979 PIA = $498.00
October 1979 MFB = $871.60


Table 5
Second Wage-Indexed Formula Example

Age 62 Retiree in January 1980.  n = 24.
Year Earnings Earnings
x $10,556.03
Indexed
Earnings
High n Years of
Indexed Earnings
1951 $3,600 $38,001,708.00 $13,576.11 $13,576.11
1952 3,600 38,001,708.00 12,780.90 12,780.90
1953 3,600 38,001,708.00 12,104.61 12,104.61
1954 3,600 38,001,708.00 12,042.47  
1955 4,200 44,335,326.00 13,429.09 13,429.09
1956 4,200 44,335,326.00 12,551.19 12,551.19
1957 4,200 44,335,326.00 12,174.28 12,174.28
1958 4,200 44,335,326.00 12,067.97 12,067.97
1959 4,800 50,668,944.00 13,140.97 13,140.97
1960 4,800 50,668,944.00 12,644.73 12,644.73
1961 4,800 50,668,944.00 12,398.32 12,398.32
1962 4,800 50,668,944.00 11,807.09  
1963 4,800 50,668,944.00 11,524.47  
1964 4,800 50,668,944.00 11,071.98  
1965 4,800 50,668,944.00 10,876.15  
1966 6,600 69,669,798.00 14,107.88 14,107.88
1967 6,600 69,669,798.00 13,363.50 13,363.50
1968 7,800 82,337,034.00 14,777.56 14,777.56
1969 7,800 82,337,034.00 13,970.20 13,970.20
1970 7,800 82,337,034.00 13,309.71 13,309.71
1971 7,800 82,337,034.00 12,672.93 12,672.93
1972 9,000 95,004,270.00 13,317.48 13,317.48
1973 10,800 114,005,124.00 15,039.94 15,039.94
1974 13,200 139,339,596.00 17,350.74 17,350.74
1975 14,100 148,840,023.00 17,244.98 17,244.98
1976 15,300 161,507,259.00 17,504.75 17,504.75
1977 16,500 174,174,495.00 17,810.27 17,810.27
1978 17,700 186,841,731.00 17,700.00 17,700.00
1979 22,900 —       22,900.00 22,900.00
Total       347,938.11

AIME = $347,938.11/(24x12) = $1,208.12, rounded down to $1,208.

AIME PIA = 90% of $194 + 32% of $977 + 15% of ($1,208 - $1,171) = $492.79, rounded up to $492.80.

AIME MFB = 150% of $248 + 272% of $110 + 134% of $109 + 175% of ($492.80 - $467) = $862.41, rounded up to $862.50.

January 1980 PIA = $492.80
January 1980 MFB = $862.50


Table 6
First Transitional Guarantee Example

Age 62 Retiree in October 1979.  n = 23.
Year Earnings High n Years of
Earnings Before Age 62
1951 $3,600
1952 3,600
1953 3,600
1954 3,600
1955 4,200
1956 4,200 $4,200
1957 4,200 4,200
1958 4,200 4,200
1959 4,800 4,800
1960 4,800 4,800
1961 4,800 4,800
1962 4,800 4,800
1963 4,800 4,800
1964 4,800 4,800
1965 4,800 4,800
1966 6,600 6,600
1967 6,600 6,600
1968 7,800 7,800
1969 7,800 7,800
1970 7,800 7,800
1971 7,800 7,800
1972 9,000 9,000
1973 10,800 10,800
1974 13,200 13,200
1975 14,100 14,100
1976 15,300 15,300
1977 16,500 16,500
1978 17,700 17,700
Total 187,200

AMW = $187,200/(23x12) = $678.26, rounded down to $678.

December 1978 PIA = $486.10 from Table 1.
December 1978 MFB = 150% of $230 + 272% of $102 + 134% of $101 + 175% of ($486.10 - $433) = $850.705, rounded up to $850.80.

Increase (June 1979): PIA = $486.10 x 1.099 = $534.2239, rounded up to $534.30
MFB = $850.80 x 1.099 = $935.0292, rounded up to $935.10

October 1979 PIA = $534.30
October 1979 MFB = $935.10


Table 7
Second Transitional Guarantee Example

Age 62 Retiree in January 1980.  n = 24.
Year Earnings High n Years of
Earnings Before Age 62
1951 $3,600
1952 3,600
1953 3,600
1954 3,600
1955 4,200
1956 4,200 $4,200
1957 4,200 4,200
1958 4,200 4,200
1959 4,800 4,800
1960 4,800 4,800
1961 4,800 4,800
1962 4,800 4,800
1963 4,800 4,800
1964 4,800 4,800
1965 4,800 4,800
1966 6,600 6,600
1967 6,600 6,600
1968 7,800 7,800
1969 7,800 7,800
1970 7,800 7,800
1971 7,800 7,800
1972 9,000 9,000
1973 10,800 10,800
1974 13,200 13,200
1975 14,100 14,100
1976 15,300 15,300
1977 16,500 16,500
1978 17,700 17,700
1979 22,900 22,900
Total 210,100

AMW = $210,100/(24x12) = $729.51, rounded down to $729.

December 1978 PIA = 1980 PIA = $503.40 from Table 1
December 1978 MFB = 150% of $248 + 272% of $110 + 134% of $109 + 175% of ($503.40 - $467) = $880.96, rounded up to $881.00.

January 1980 PIA = $503.40
January 1980 MFB = $881.00


Notes published in the 1980s