SSR 67-41a: SECTION 209(g)(1). -- WAGES -- NONCASH PAYMENTS -- DOMESTIC EMPLOYMENT WHEN CHURCH IS THE EMPLOYER
20 CFR 404.1026(a)(2), 404.1026(a)(5), and 404.1027(h)(2)
SSR 67-41a
- Where a claimant, who performs domestic service in a church rectory, is paid cash wages and furnished room and board by the church which is her employer; held, (1) the noncash remuneration exclusion from "wages" of section 209(g)(1) of the Social Security Act does not apply as the employer is not a person and therefore the domestic service was not performed in the private home of the employer; and (2) the value of room and board must be included in computing the claimant's earnings for benefit and deduction purposes.
This case is before the Appeals Council on its own motion to review the hearing examiner's decision of June 30, 1964. The claimant was duly notified of this action by the Appeals Council and of her rights with respect thereto.
In his decision, the hearing examiner held that the services of the claimant for a Catholic Church in 1962 and 1963 constituted domestic services performed in or about the private home of the employer, that the value of room and board received by the claimant in those years was not wages either for purposes of benefit computation or deductions, that the claimant did not have earnings for deduction purposes in 1962 and 1963 in excess of $1,200 a year and was not overpaid by virtue of the benefits she received for those years, and that her benefit rate should be recalculated to exclude the value of payment in kind.
* * * * * * *
The issues[1] before the Appeals Council are whether the claimant's old-age insurance benefits are subject to deductions during any months of 1962 or 1963 because of earnings in excess of the statutory limitation, and, * * *.
The claimant, who was born on December 12, 1894, filed an application for old-age insurance benefits on January 7, 1960. She was awarded a monthly benefit in the amount of $64 effective December 1959. A work deduction was imposed against the claimant's benefit for December 1959, and she received benefit payments for January 1960 through October 1963. It was determined by the payment center of the Social Security Administration that the claimant had total earnings for deduction purposes in 1962 and 1963 of $1,740 in each year, including the value of room and board. It was further determined that she had earnings in excess of the statutory limitation in the amount of $290 in each of those years and that she was thereby overpaid $290 in 1962 and $162 in 1963, with a total overpayment of $452.
The record indicates that the claimant is employed as a domestic at a rectory is owned by the church. The church pays the claimant's wages and is conceded to be her employer. In 1960 and 1961, the total earnings of the claimant did not exceed $1,200, apparently because she limited her hours of work. For her services in 1962 and 1963, the claimant received cash wages of $70 a month plus room and board valued at $75 a month. The claimant was on vacation for two weeks in 1962 and for a month in 1963 and for these periods she did not receive room and board.
Since 1954, when the claimant's employment began, the church has always included the value of room and board in its wage records for the claimant. The record contains a certification of Form W-2, Withholding Statement, for the year 1962, which shows the employer as the church and the total FICA wages as $1,740. Also included in the record is a corrected Form W-2, Withholding Statement, for the year 1963, which likewise shows the employer as the church and the total FICA wages as $1,665.[2] A letter, dated February 21, 1964, from the person who prepared the payroll records for the church, explains that the original Withholding Statement for 1963 showed FICA wages $1,740, and was corrected to eliminate the value of room and board amounting to $75 for the month that the claimant was on vacation during that year.
Section 203(f) of the Social Security Act, as amended in 1961, provides that an individual's earnings for deduction purposes shall include the sum of his wages for services rendered in such year and his net earnings from self-employment minus any net loss from self-employment during the year. This section further provides, as pertinent herein, that deductions against benefits shall be made on the basis of an individual's yearly earnings in excess of $1,200, except that of the first $500 of such excess, an amount equal to one-half thereof will not be included. A deduction may not be made under this section of the Act for any month in which an individual did not earn wages of over $100 and did not render substantial services in self-employment.[3]
Section 404.408 of Social Security Regulations No. 4 (40 CFR 404.408) provides, in pertinent part, that deductions shall be applicable on the basis of services for wages as defined in sections 404.1026 to 404.1027 of Social Security Regulations No. 4.
Section 404.1026(a)(2) of Social Security Regulations No. 4 provides that wages include all remuneration for employment unless specifically excepted under section 209 of the Social Security Act.
Section 209(g)(1) of the Social Security Act provides, as pertinent herein, that wages shall not include remuneration in any medium other than cash paid to an employee for domestic service in a private home of the employer.
Section 404.1026(a)(5) of Social Security Administration Regulations No. 4 provides that the medium in which remuneration is paid, i.e., whether in cash or kind, is immaterial, with certain exceptions, among which is domestic service in a private home of the employer.
Section 404.1027(h)(2) of Social Security Regulations No. 4 provides, in pertinent part, as follows:
- Services of a household nature performed by an employee in or about a private home of the person by whom he is employed constitute domestic service in a private home of the employer. A private home is a fixed place of abode of an individual or family. * * *
It is the contention of the claimant that she was engaged in domestic service in the private home of her employer and therefore that the value of room and board should not be included in considering her earnings for deduction purposes.
It is clear and undisputed that the services of the claimant are domestic in nature. However, in order for the noncash payment exclusion to be applicable, it must also be shown under section 209(g)(1) of the Social Security Act that the services were performed in a private home of the employer. In the opinion of the Appeals Council, section 404.1027(h)(2) of Social Security Administration Regulations No. 4 requires that the employer must be an individual (or several individuals) as distinguished from an entity, such as a religious institution, for payment in kind to be excluded from wages. This section of the regulations clearly specifies that the home in which the services are rendered must be "a private home of the person by whom he is employed." The definition of private home as "a fixed place of abode of an individual or family" further emphasizes that the employer must be an individual in order that this section of the regulations may be applicable. The Appeals Council, therefore, finds that domestic service in the employ of a church cannot be performed in the private home of the employer since a church, as a religious institution, has no "private" home or place of abode. It follows, and the Appeals Council further finds, that the value of room and board must be included in computing the claimant's earnings for deduction purposes.
The claimant has submitted a number of references to court cases which emphasize that all doubts of interpretation should be resolved "in favor of coverage rather than exemption." The Appeals Council notes that the exclusion in regard to the treatment of room and board as wages is an "exemption" from coverage rather than the reverse. The claimant has received a substantial advantage in her benefit rate by virtue of that part of the wages reported by her employer as constituting the value of payment in kind, and thus, the cases cited on her behalf do not, in the opinion of the Appeals Council , support her present contention but rather tend to support the opposite view.
The Appeals Council notes, however, that the claimant was on vacation and therefore did not receive room and board for two weeks in 1962 and for one month in 1963. Since room and board are valued by the employer at $75 a month, the Appeals Council finds that the correct total earnings of the claimant for deduction purposes amounted to $1,702.50 in 1962 and $1,665 in 1963. On the basis of these earnings, the Appeals Council further finds that the claimant had excess earnings for deduction purposes of $252 in 1962 and $243 in 1963, and accordingly was overpaid $252 for 1962 and $104 for 1963 for a total overpayment of $356.
* * * The decision of the hearing examiner is reversed.
[1] The case before the Appeals Council concerned other issues not pertinent to this ruling. [Ed.]
[2] The church has arranged to have coverage for its employees by filing a waiver certificate (Form SS-15) and a list of concurring employees (Form SS-15a). [Ed.]
[3] Section 203(f), as amended in 1965, provides that for taxable years ending after 1965, deductions against benefits are made on the basis of an individual's yearly earnings in excess of 1,500, except that of the first $1,200 of such excess, an amount equal to one-half thereof will not be included. Nor will a deduction be made under this section for any month in which an individual did not earn wages of over $125 and did not render substantial services in self-employment. [Ed.]