SSR 86-17a: SECTION 202(j) OF THE SOCIAL SECURITY ACT (42 U.S.C. 402(j)) OLD-AGE INSURANCE BENEFITS -- RESTRICTIONS ON THE RETROACTIVITY OF AN APPLICATION -- REDUCED BENEFITS INVOLVED
20 CFR 404.621(a)
SSR 86-17a
- The claimant, who was born on December 21, applied for old-age insurance benefits (OAIB) in December 1983, electing reduced benefits as of the earliest possible month that was most advantageous to him. The evidence of record showed that the claimant earned $16,825 in 1983 and that September 1983 through December 1983 were "nonservice months." On the basis of these facts, the Social Security Administration (SSA) determined that the claimant's first month of entitlement to reduced OAIB was August 1983, the sixteenth month before the month in which the claimant reached age 65, and began paying him monthly benefits beginning with September 1983, his first nonservice month. On appeal, the claimant contended that the amount of his benefit had been incorrectly determined. An administrative law judge (ALJ) found that the claimant's first month of entitlement to reduced OAIB was September 1983, the fifteenth month before the month in which the claimant reached age 65. Therefore, the ALJ directed SSA to recompute the claimant's benefit amount using 15 rather than 16 as the number of reduction months. Under section 202(j)(4)(A) of the Social Security Act (the Act), the retroactivity of an application for OAIB is restricted to the month of filing if the benefit that might otherwise be payable for an earlier month would be subject to reduction for age, unless one of the exceptions in 202(j)(4)(B) of the Act applies. Section 202(j)(4)(B)(iv) provides that, if a person applying for reduced benefits has excess earnings in the year of filing and the excess earnings could be charged to months prior to the month of application, the restriction on retroactivity in 202(j)(4)(A) does not apply to the number of months prior to the month of application which are required to charge the excess earnings to the maximum extent possible.[1] In its review, the Appeals Council (AC) held that the ALJ's finding that September 1983 was the claimant's first month of entitlement to reduced OAIB was precluded by section 202(j)(4)(A) of the Act. The AC further held, under section 202(j)(4)(B)(iv), that August 1983 was the claimant's first month of entitlement to reduced OAIB inasmuch as excess earnings were chargeable against his benefit for that month and entitlement beginning with August 1983 allowed the claimant to be paid benefits for other months (September 1983 through November 1983) prior to the month of filing.[2] Moreover, the AC noted that as of December 1984, when the claimant reached age 65, the amount of his benefit would be recomputed under section 202(q)(7)(A) of the Act, using 15 rather than 16 as the number of reduction months to take into account the work deduction that was imposed against the claimant's benefit for August 1983.
The issue to be decided by the Appeals Council (AC) was whether the claimant was entitled to reduced old-age insurance benefits (OAIB) as of August 1983 or whether he was entitled to those benefits as of September 1983.
The claimant, who was born on December 21, 1919, filed an application for reduced OAIB in December 1983. He worked and earned $16,825 in 1983, and September 1983 through December 1983 were "nonservice months." The claimant elected reduced OAIB as of the earliest possible month that was most advantageous to him. The Social Security Administration (SSA) determined that the claimant's first month of entitlement to reduced OAIB was August 1983, the sixteenth month before the month in which the claimant reached age 65, and began paying him $598.80 a month beginning with September 1983, his first nonservice month. On appeal, the claimant contended that the amount of his benefit had been incorrectly determined. An administrative law judge (ALJ) found that the claimant's first month of entitlement to reduced OAIB was September 1983, the fifteenth month before the month in which the claimant reached age 65. Therefore, the ALJ directed SSA to recompute the claimant's benefit amount using 15 rather than 16 as the number of reduction months.
Section 202(a) of the Social Security Act (the Act) provides the requirements that an individual must meet to become entitled to OAIB.
Section 202(j)(1)(B) of the Act provides, in pertinent part, that --
"Subject to the limitations contained in paragraph (4), an individual who would have been entitled to a benefit under subsection (a) . . . for any month after August 1950 had he filed application therefor prior to the end of such month shall be entitled to such benefit for such month if he files application therefor prior to the end of the sixth month immediately succeeding such month. . . ."
Section 202(j)(4)(A) of the Act provides, that --
"Except as provided in subparagraph (B), no individual shall be entitled to a monthly benefit under subsection (a). . . . for any month prior to the month in which he or she files an application for benefits under that subsection if the effect of entitlement to such benefit would be to reduce, pursuant to subsection (q), the amount of the monthly benefit to which such individual would otherwise be entitled for the month in which such application is filed."
Section 202(j)(4)(B)(iv) of the Act provides that --
"If the individual applying for retroactive benefits has excess earnings (as defined in section 203(f) in the year in which he or she files an application for such benefits which could, except for subparagraph (A), be charged to months in such year prior to the month of application, then subparagraph (A) shall not apply to so many of such months immediately preceding the month of application as are required to charge such excess earnings to the maximum extent possible."
Sections 202(q)(1)(A) and 202(q)(6)(A) of the Act provide that an individual's OAIB shall be reduced by 5/9 of 1 percent for each month beginning with the first month of the individual's entitlement to OAIB and ending with the last day of the month before the month the individual reaches retirement age (age 65).
Section 202(q)(7)(A) of the Act provides for adjustment of the reduction period at age 65 to exclude months in which deductions were imposed against an individual's OAIB.
Section 404.435(b) of Regulations No. 4 provides that a nonservice month is any month in which an individual does not work in self-employment and does not perform services for wages greater than the monthly exempt amount set for that month.
The AC reversed the ALJ's decision. The maximum retroactivity of an application for OAIB is six months (see section 202(j)(1)(B) of the Act). Retroactivity which would result in reduced benefits is precluded by section 202(j)(4)(A). However, an exception is provided if the individual has excess earnings which could be charged to months in the year of application (see section 202(j)(4)(B)(iv) of the Act). The exception provides that retroactivity is not precluded "to so many of such months immediately preceding the month of application as are required to charge such excess earnings to the maximum extent possible."[3] Thus, in this case, excess earnings were not chargeable to November 1983, October 1983, and September 1983, which were nonservice months, but were chargeable to August 1983. Thus, contrary to the ALJ's finding that September 1983 was the claimant's first month of entitlement to reduced OAIB, entitlement beginning with that month was precluded by section 202(j)(4)(A). Based on the claimant's indication that he wanted benefits to begin with the earliest possible month that was most advantageous to him, August 1983 was the claimant's first month of entitlement to reduced OAIB inasmuch as excess earnings were chargeable against his benefit for that month and entitlement beginning with August 1983 allowed the claimant to be paid for other months (September 1983 through November 1983) prior to the month of filing.[4] In addition, the AC noted that as of December 1984, when the claimant reached age 65, the amount of his benefit would be recomputed under section 202(q)(7)(A) of the Act, using 15 rather than 16 as the number of reduction months to take into account the work deduction that was imposed against the claimant's benefit for August 1983.
[1] Under GN 00204.475 of the Program Operations Manual System (POMS), a claimant is not required to elect the maximum retroactivity available nor is it necessary to charge all the excess earnings to the retroactive period. This is particularly pertinent in those cases where a later month of entitlement would be more advantageous.
[2] Under sections 202(j)(1)(B) and 202(j)(4)(B)(iv) of the Act, the month of entitlement in this case could not have been earlier than June 1983. Because of the amount of his excess earnings, no benefits would have been payable to the claimant for months prior to September 1983, even if it had been determined that June or July 1983, rather than August 1983, was his first month of entitlement to reduced OAIB. In addition, a June 1983 (or July 1983) month of election would have resulted in the claimant receiving a smaller monthly benefit than the one based on a August 1983 month of election, since there would have been an increase in the number of reduction months. Consequently, August 1983, rather than June or July 1983, was the claimant's most advantageous month of election, which was what the claimant had request.
[3] See footnote 1.
[4] See footnote 2.