D, an employee of the X Manufacturing Company, became entitled to old-age insurance benefits beginning September 1959 on attainment of age 65. D worked for the X Company throughout 1960 and received wages of $75 per week except during July, throughout which month the X Company's plant was closed for vacations. According to company policy D received $150 for this vacation period. D reported to the Social Security Administration in April 1961 that he had earnings in excess of $2,080 for 1960, but that he did not work during July as he was on vacation during that month.
Section 203 of the Social Security Act provides, as pertinent here, that an old-age insurance beneficiary may earn as much as $1,200 in a 12-month taxable year and still receive all his benefits for that year. If his earnings exceed $1,200 for the taxable year, a deduction of one full month's benefit may be required for each $80 (or fraction of $80) in excess of $1,200. (For full taxable years ending after June 30, 1961, a deduction of $1 may be required from benefits for each $2 of earnings over $1,200 up to and including $1,700 and for each $1 of earnings over $1,700.) However, no deduction may be made under this provision for any month in which the beneficiary is age 72 or over, or in which he neither renders services for wages of more than $100 nor renders substantial services in self-employment.
In the present case, since D's earnings for 1960 were in excess of $2,080, his benefits would be subject to deductions for every month in which he rendered service for wages of more than $100. D clearly rendered services for wages of more than $100 in the months January through June and August through December; therefore, his benefits would be subject to deductions in all such months. Whether his benefits for July 1960 is subject to deduction depends upon whether in that month he "rendered services for wages of more than $100" within the meaning of Section 203.
Section 209 of the Social Security Act provides that the term "wages" means remuneration for employment with certain exceptions. Section 209(i), which excludes from wages payments made to an employee after the month in which he attains retirement age if he did not work for the employer in the period for which the payment is mead, specifically excepts vacation pay from this exclusion. Regulations No. 4, § 404.1026(b)(1) provides:
The $150 vacation pay received by D constitutes wages under the above provisions of the law and regulations. Further, the phrase "rendered services for wages" which appears in section 203 of the Act, above, does not require the actual performance of work, but encompasses the entire employment relationship for which remuneration is paid. This is in accord with the decision of the Supreme Court of the United States in the case of Social Security Board v. Nierotko, 327 U.S. 358 (1946). That case involved an employee who had been awarded back pay for a period between his improper discharge and reinstatement; the court held that the employment relationship continued throughout this period and that the employee must be considered to have performed services in employment for this pay, even though he did no actual work. Thus, where the evidence shows only that the employee was given a period of vacation for which he was paid, and that he returned to work immediately after the vacation, the vacation pay is wages for services rendered in the vacation period.
Accordingly, it is held that D rendered services for wages of more than $100 in the month of July 1960, and his old-age insurance benefit is subject to deduction for that month.
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