Martin on Social Security
Part 2 – Topics
Benefit Calculation and Payment
§ B 100. Primary Insurance Amount
All monthly Social Security benefits are calculated in relation to a primary insurance amount (PIA). Disability benefits and old-age benefits that are first claimed at the Act’s “full retirement age” (which is between 65 and 67 depending on year of birth) are equal to the primary insurance amount. Family benefits are various percentages of the PIA, ranging from 100% for a surviving spouse to 50% for a spouse or child of an old-age or disability benefit recipient.
The current method for calculating a worker’s primary insurance amount is based upon the worker’s covered earnings over an extended period. Those earnings are indexed against the movement in general wage levels. In addition, in determining the PIA a limited number of low earnings years are dropped from the calculation.
[Supporting and Elaborating References] [Related Sections: Part 1 - Part 2]
Throughout most of the Social Security program’s history its benchmark retirement age was 65. Increasingly age-based benefits were available prior to that age, but only those waiting to start benefits until 65 or later received benefits based on a full percentage of the PIA. In 1983, as part of a comprehensive program revision, Congress enacted a long-term progressive adjustment of what has come to be called the “full retirement age” (previously the “normal retirement age”). A schedule of incremental increases beginning with the cohort of individuals who reached 62 in the year 2000 move the “full retirement age” from 65 to 67. For an individual turning 62 after 2000 but before 2022 (at which time the “full retirement age” will be 67, the benchmark age lies between 65 and 67. As the age moves back according to the statutory schedule, the total reduction for beginning benefits at the earliest possible age, e.g., 62 for old-age benefits, increases. By the time 67 becomes the “full retirement age” in 2022, the total reduction for an individual beginning old-age benefits at 62 will have risen from the 2000 maximum of 20 percent to 30 percent.
Those claiming age-based benefits who wait until after the “full retirement age” have their monthly benefits increased by a “delayed retirement credit.”
In addition, the “full retirement age” marks the point beyond which high levels of continuing earnings no longer have an impact on benefits; and for those receiving disability insurance, it is the point at which disability benefits cease and old-age benefits begin.
Rev. 12/03
[Supporting and Elaborating References] [Related Sections: Part 1 - Part 2]
§ B 200. Cost of Living Adjustment
Each December monthly benefits are adjusted to take account of rises in the cost of living. Unless the Social Security Trust Fund reserves are below a specified level, this adjustment is based on the percentage increase in the Consumer Price Index over the prior measurement year. If reserves are low, the increase is based on the percentage increase in wage levels over the measurement year if that is lower.
Pursuant to this adjustment, benefits rose 2.3% at the beginning of 2008. They rose 3.3% from 2006 to 2007.
Rev. 11/07
[Supporting and Elaborating References] [Related Sections: Part 1 - Part 2]
§ B 300. Excess Earnings Reduction – In General
With the exception of disability-based benefits where the receipt of continuing earnings is treated as potential proof of a lack of disability, benefits can be received by people continuing to earn income so long as the income does not exceed a set level known as the excess earnings or retirement test. That level is readjusted each year as general wage levels change. Those who have reached the Act’s “full retirement age” (which is between 65 and 67 depending on year of birth) receive full benefits no matter how high their continuing earnings. For younger beneficiaries there is a threshold beyond which earnings reduce benefits. The annual amount is $13,560 for 2008. (Prior to a 2000 amendment, excess earnings, measured by a more generous threshold, reduced payments to beneficiaries between the “full retirement age” and 70. That formula still applies to months in the year of the individual’s “full retirement age” prior to his or her birthday.)
Earnings above the threshold amount do not block benefits altogether but reduce benefits by a ratio of 2:1
The earnings of an old-age benefit recipient affect the benefits of all family members who receive those benefits on the worker’s account (other than a former spouse, divorced some time ago). The Act requires that a divorced spouse have been divorced for at least 2 years before he or she becomes exempt from benefit reduction due to the worker’s excess earnings. A 1990 amendment removed that 2 year requirement in cases where the divorce follows the worker’s entitlement to old-age insurance (retirement) benefits.
The earnings of those receiving family benefits on the account of another affect only their own benefits.
Rev. 11/07
[Supporting and Elaborating References] [Related Sections: Part 1 - Part 2]
§ B 310. Excess Earnings Reduction – Reclassification of Income
Only earned income received by the beneficiary produces a reduction in benefits under the excess earnings test. Ordinarily, investment returns including dividends paid on stock have no effect on benefits. And, ordinarily, earnings received by other family members are not counted as earnings of the beneficiary.
In determining a beneficiary’s earnings, however, the Agency does not always accept the individual’s own characterization or formal legal structures or income tax treatment of the situation. When it appears that a business has been restructured to convert income that would otherwise be earnings for a beneficiary into investment income or earnings of a close family member, the Agency may apply that income against the excess earnings test.
[Supporting and Elaborating References] [Related Sections: Part 1 - Part 2]
§ B 320. Excess Earnings Reduction – Self-Employment Income
Net income from self-employment is also held against the excess earnings test. Because of the need to distinguish self-employment income from passive investment income the characterization of income from a business in which the individual no longer provides substantial services raises special difficulties.
[Supporting and Elaborating References] [Related Sections: Part 1 - Part 2]
§ B 330. Excess Earnings Reduction – Business Expenses
Business expenses of a self-employed person are deducted before the excess earnings test is applied since it is net income from self-employment that counts. On the other hand, wages from employment are counted without any provision for offsetting the worker’s expenses.
The treatment of expenses of life insurance agents is the subject of Social Security Ruling, SSR No. 71-22, which provides illustrative examples.
[Supporting and Elaborating References] [Related Sections: Part 1 - Part 2]
§ B 350. SSI – Benefit Level – In General
While Title II Social Security benefits can be viewed as an insurance plan aimed at maintaining income levels bearing some relation to a worker’s past earnings (in the event of retirement, death or disability), SSI was created to insure a minimum income “floor” for aged, blind or disabled persons. Thus, while Title II benefits vary based upon each recipient’s prior earnings record, Title XVI benefits vary depending upon how far under the program’s income floor individuals are located. After analyzing countable income, SSI pays what is necessary to bring an individual to the statutory income floor. Countable income is calculated using a practice called Retrospective Monthly Accounting (RMA). Under RMA it is not a projection of current income but amounts of income received in the second month prior to the current month that determine benefits.
The base level of the SSI income floor is referred to as the Federal Benefit Rate (FBR) and is constant across the country. Many states choose to supplement the FBR. In those that do the resulting income floor is equal to the FBR plus the state supplementation. The FBR is indexed to the consumer price index in the same manner as Title II benefits. For 2008, it is $637 per month, $7,644 per year for an eligible individual.
Rev. 11/07
[Supporting and Elaborating References] [Related Sections: Part 1 - Part 2]
§ B 355. SSI – Benefit Level – Eligible Couples
SSI has a separate benefit level (with associated income and resource limits) for couples. Two elderly siblings living in the same household are treated as two eligible individuals. A husband and wife are treated as a couple, an eligible individual plus an eligible spouse. As a consequence, they receive lower total benefits and are rendered ineligible by smaller amounts of income or resources. The combined benefits ($956 per month, $11,472 per year for 2008) are divided evenly between the two.
Associated with this distinct treatment of couples are a series of SSI family relationship rules. Two individuals are treated as a couple under SSI, even though not married under state law, if they qualify under the Social Security marital status rules or even if they are simply holding themselves out as husband and wife. Couples who are living apart are treated as individuals, but only in the first full month after they have separated. Prior to October 1990, the Act required separation for six months, treating spouses still as a couple during those six months even though they had ceased to function as an economic or household unit.
Rev. 11/07
[Supporting and Elaborating References] [Related Sections: Part 1 - Part 2]
§ B 360. SSI – Benefit Level – Reduction for Countable Income
As a general rule, when an individual’s countable income increases by one dollar, the SSI benefit amount decreases by one dollar. However, since some of what SSI defines as income is excluded from countable income, the existence of other income generally does improve the SSI recipient’s net revenue; the true effect is less than a dollar for dollar offset. This is especially the case with earned income. Moreover, some sources of revenue or equivalent benefits are not treated as income at all by SSI. Thus, some in-kind assistance, such as fuel, shelter or food, which are based solely on need and received from utilities, municipalities or private non-profit organizations will not reduce SSI benefits at all. The same is true of free medical services.
With benefits or revenue defined as income by SSI, the program excludes an initial $20 a month. The rule applies to unearned or earned income. Because of this exclusion, for example, an individual receiving both Social Security and SSI (and having no other income) will have combined benefits $20 a month greater an individual receiving only SSI. Earned income is covered by a more generous exclusion equal to the first $65 earned in a month plus one-half of additional amounts. Money set aside in an approved plan for self-support is totally excluded.
If an individual lives in the household of another for a full month and receives both food and shelter within that household, the actual value of that in-kind support and maintenance is not calculated. Instead of treating this as a case of countable income, the Act calls for a benefit reduction in a fixed amount equal to one third of the Federal Benefit Rate.
Rev. 9/95
[Supporting and Elaborating References] [Related Sections: Part 1 - Part 2]
§ B 370. SSI – Benefit Level – Reduction During Stay in Public Institution
Residents of public institutions for one full month are ineligible for SSI benefits, unless one of several exceptions applies. The most important exception concerns stays in public institutions where Medicaid is paying more than 50 percent of the cost of the stay. In such instances, the SSI benefit is reduced to a $30 personal needs allowance. However, if a doctor certifies that the individual will not be in the institution for more than three months and the individual needs benefits to continue paying for housing which will be used upon release, benefits can be continued for up to three months.
Rev. 9/95
[Supporting and Elaborating References] [Related Sections: Part 1 - Part 2]
§ B 400. Overpayment and Underpayment
When an individual has received a larger sum of benefits than provided for by the Social Security Act, the law calls for recovery of the overpayment. Overpayments can result from a failure to impose an appropriate benefit reduction or suspension. They can also result from a failure to terminate benefits when that is called for and from paying benefits to someone who it turns out was not entitled to receive them from the start.
In Sullivan v. Everhart, 494 U.S. 83 (1990), the Supreme Court upheld the Agency’s regulations providing for the netting of overpayments against underpayments. Under these regulations the waiver of overpayment procedure applies only to the resulting balance.
In recovering overpayments from someone who is no longer a beneficiary the Agency has quite broad debt collection authority.
When an individual who has been underpaid dies before full payment of the amount due, the Act lays out a pattern of disposing of the remaining sum rather than having it go automatically to the individual’s estate.
Rev. 3/95
[Supporting and Elaborating References] [Related Sections: Part 1 - Part 2]
§ B 450. SSI – Overpayment and Underpayment
The Supplemental Security Income (SSI) provisions dealing with overpayments and underpayments are similar to those governing Title II. The most significant difference concerns certain payments which the Agency does not consider to be overpayments. For instance, SSI does not view as an overpayment up to three months of benefits received by an individual based upon presumptive disability, even if the Agency later determines that the individual was not actually disabled.
Additionally, the waiver provisions for SSI overpayments differ slightly from those for Social Security overpayments. SSI repayments can be waived if the claimant is not at fault and recovery of the overpayment would interfere with the effectiveness of the SSI program due to the small amount of the repayment. This provision means that if the administrative cost of recovering an overpayment exceeds the amount of the overpayment, it can be waived. Repayments can also be waived if the overpayment is due solely to the ownership of countable resources in excess of the statutory limit by $50 or less. These grounds for waiver are unique to SSI.
Rev. 9/95
[Supporting and Elaborating References] [Related Sections: Part 1 - Part 2]
§ B 500. Recoupment of Overpayment – In General
The Agency will recover overpayments out of future benefits. Where the overpaid individual did not cause the overpayment by an intentionally false statement and benefits are necessary to cover the individual’s basic living expenses, the Agency can spread out the overpayment recovery by taking a portion of every monthly payment.
In Sullivan v. Everhart, 494 U.S. 83 (1990), the Supreme Court upheld the Agency’s regulations providing for the netting of overpayments against underpayments. Under these regulations the waiver of overpayment procedure applies only to the resulting balance.
Under a 1990 amendment, the Agency is authorized to recover overpayments from Federal tax refunds due the individual when he or she is no longer entitled to benefits from which overpayments might be recouped. Provisions added to the Act in 2004 expand the authority of the Agency to recover overpayments made in one program from amounts due in another. They limit such recoupment by reduction in ongoing monthly payments to 10 percent of benefits in the case of Title II (OASDI), the lesser of: (1) the amount of the benefit for that month; or (2) an amount equal to 10 percent of the countable income for that month in the case of Title XVI (SSI).
The procedural protections that must be afforded an individual prior to recoupment are the subject of Social Security Ruling SSR No. 94-4p. And in October 1996, they were addressed in new and revised regulations.
Rev. 12/04
[Supporting and Elaborating References] [Related Sections: Part 1 - Part 2]
§ B 510. Recoupment of Overpayment – Claimant’s Fault
Recovery of overpayments can be waived by the Agency altogether when the individual was not at fault in causing them and when recovery would defeat the “purpose of the Act” or be “against equity and good conscience.”
The issue is not whether the Agency was also at fault but whether the overpaid individual was without fault considering all the surrounding circumstances. Fault can lie in making an incorrect statement, in failing to furnish information, or even in accepting a payment that the individual should have known was incorrect.
[Supporting and Elaborating References] [Related Sections: Part 1 - Part 2]
§ B 520. Recoupment of Overpayment – Against Equity or Defeat Act’s Purpose
Even a claimant who was not at fault in causing an overpayment will be subject to recovery unless that would defeat the purpose of the Act or be “against equity and good conscience.”
Recovery is considered as defeating the purpose of the Act if the individual is dependent on Social Security benefits for basic needs. Recovery is considered to be against equity and good conscience in cases where the individual has changed position in reliance on the payments or received no benefit from the overpayment.
[Supporting and Elaborating References] [Related Sections: Part 1 - Part 2]
§ B 530. Recoupment of Overpayment – What Can Be Recouped
Future benefits to the overpaid individual or family benefits paid on that person’s account are subject to recovery. If the overpaid individual dies before full recovery, the individual’s estate and any resulting Social Security survivors benefits are subject to recovery.
Under a 1990 amendment, the Agency is authorized to recover overpayments from Federal tax refunds due the individual when he or she is no longer entitled to benefits from which overpayments might be recouped. Provisions added to the Act in 2004 expand the authority of the Agency to recover overpayments made in one program from amounts due in another. They limit such recoupment by reduction in ongoing monthly payments to 10 percent of benefits in the case of Title II (OASDI), the lesser of: (1) the amount of the benefit for that month; or (2) an amount equal to 10 percent of the countable income for that month in the case of Title XVI (SSI).
Rev. 12/04
[Supporting and Elaborating References] [Related Sections: Part 1 - Part 2]
§ B 610. Title II-SSI Relationship
In addition to benefits established by Title II, the Act provides Supplemental Security Income (SSI) for individuals with low incomes who are 65 or over, blind, or disabled. Since Title II benefits are counted as income under SSI, only individuals with relatively low Title II benefits can qualify for SSI. Savings or other assets above the SSI cutoff can also prevent overlapping eligibility. For those who are not blind or disabled, SSI has an age threshold of 65, while Title II benefits can be claimed at an earlier age.
Since Title II and SSI employ the same definition of disability, potential overlap is always a possibility in disability cases. However, the individual’s other income or assets can block SSI, leaving Title II benefits as the sole possibility. A disabled claimant may be limited to SSI if he or she has insufficient covered work for the relevant Title II insured status at the time of the apparent onset of disability.
Where an individual qualifies for both, the SSI payment may be a relatively small supplement. The individual’s Title II benefit is unaffected by SSI, but the SSI payment will be reduced by the amount of Social Security except for a monthly amount of $20.
Because of the potential overlap between Title II and SSI occasions will arise where one type of benefit is paid for a period and then, subsequently, entitlement for the same period is established in the other program. The “windfall offset” provisions of the Act apply in such cases.
[Supporting and Elaborating References] [Related Sections: Part 1 - Part 2]
When either Social Security benefits or SSI are paid an individual for a period and then subsequently entitlement for the same period is established in the other program, the “windfall offset” provisions of the Act apply. The aim of the “windfall offset” is to put the individual in the same situation as if both benefits had been paid simultaneously. Had the benefits been paid simultaneously the level of Title II payments would have reduced the SSI payment. Under the “windfall offset” if the Title II benefits have been paid first, the SSI retroactive payment is calculated as if the Title II benefits had been paid, when due, through the period for which the SSI benefits are being paid. If the SSI benefits have been paid first, the retroactive Title II payment is reduced by the amount that the SSI benefits would have been less had the Title II benefits been paid when due.
Since prior to 2005 the Act’s provision for withholding attorneys fees out of past benefits recovered with the assistance of an attorney applied to Title II but not SSI, the interplay of the “windfall offset” with the attorneys fees provisions of the Act has generated litigation. Under a 1990 amendment, the Title II attorneys fee calculation occurs prior to operation of the SSI offset.
In DE, NJ, PA, and VI an acquiescence ruling (AR 92-1) implements the Third Circuit’s decision in Mazza v. Secretary, 903 F.2d 953 (3d Cir. 1990), which interpreted the offset provision as requiring that SSI payment be determined first in retroactive concurrent payment cases with the Title II benefits determined second, subject to the offset. The Agency’s view is that Act allows application of the offset to whichever benefit is paid second. Because of the linkage between SSI eligibility and Medicaid this view can have serious adverse consequences for the claimant, as the facts in Mazza illustrate.
Rev. 11/05
[Supporting and Elaborating References] [Related Sections: Part 1 - Part 2]
§ B 630. Title II-Railroad Retirement Act Relationship
Benefits paid under Social Security and the Railroad Retirement Act have been integrated. For short-term railroad workers integration is achieved by bringing work covered by the Railroad Retirement Act under Social Security. Long-term railroad workers are integrated under the Railroad Retirement Act. A period of 10 years of railroad work is the dividing line. A short-term railroad worker will have the railroad work counted toward insured status and benefit amount. A long-term railroad worker will have railroad work counted in determining entitlement to a period of disability.
[Supporting and Elaborating References] [Related Sections: Part 1 - Part 2]
§ B 640. Windfall Elimination Provision
The Windfall Elimination Provision (“WEP”) modifies the standard formula for calculating an individual’s primary insurance amount (PIA). The provision applies where a wage earner with earnings covered by the social security system also has “noncovered” earnings, typically from federal and state civil service employment. The provision applies only to individuals who first become “eligible” for a pension based on noncovered employment after 1985.
[Supporting and Elaborating References] [Related Sections: Part 1 - Part 2]
§ B 650. SSI – Relationship to Other Benefit Programs – In General
Since Supplemental Security Income (SSI) is set up as a program of last resort, recipients must file for any other benefits for which they may be eligible. The type of benefits covered by this requirement includes annuities, pensions, retirement and disability benefits. Significant examples are veterans’ pension benefits, workers’ compensation, Social Security, and unemployment insurance. Upon being notified by the Agency of potential eligibility for such other benefits, an applicant must, within 30 days, take appropriate steps to apply and obtain them. Failure to do so or to take necessary follow-up steps leads to ineligibility for SSI.
SSI recipients are not required to apply for other federal, state, local, or private programs providing benefits based on need. Only benefits that count as income under SSI must be applied for.
The requirement does not extend to individuals whose income is deemed available to the claimant.
Rev. 5/00
[Supporting and Elaborating References] [Related Sections: Part 1 - Part 2]
§ B 660. SSI – Relationship to Medicaid Eligibility
The Medicaid program is operated by the States with financial support from the Federal government. Individual states can approach Medicaid eligibility in three distinct ways. Under the first option, which is employed by a majority of states, an individual who is eligible for SSI is automatically eligible for Medicaid. Under this option the SSI application also serves as the Medicaid application. The second option resembles the first, in that eligibility standards for Medicaid are the same as those for SSI. However, under this second option applicants are required to file a separate application with the state agency that administers the Medicaid program.
A third option, referred to as the “209(b) option” allows states to use their own criteria to determine Medicaid eligibility. A state’s 209(b) criteria cannot be more restrictive than the standards in effect for the state SSI predecessor program in January 1972. The criteria used by the states are generally applicable to both initial and continuing eligibility determinations for Medicaid. However, there are exceptions. For instance, once a disabled person becomes eligible for Medicaid, there are circumstances under which that individual may return to work and have high enough earnings that SSI cash benefits stop, yet Medicaid coverage will remain in place.
Rev. 9/95
[Supporting and Elaborating References] [Related Sections: Part 1 - Part 2]
§ B 670. SSI – State Supplementary Benefits
When the Supplemental Security Income program (SSI) was established in 1974, its benefits fell below those being paid under the predecessor grant-in-aid programs in a fair number of states. States in which that was true were required to agree to supplement SSI for their former assistance recipients up to the prior standard, as a condition to continued receipt of federal payments for Medicaid.
All states were encouraged to supplement SSI through a variety of provisions still in effect. Critically, the Act provides that state supplementary benefits are not to be viewed as income under SSI. If they were treated as income states would have no incentive to supplement. As a further encouragement the Act provides that the Social Security Administration will assume the administrative costs of any supplementary benefits by administering them for the state. To qualify for federal administration, however, state supplements must meet certain federal criteria. These allow state residency requirements and different supplementation levels for different categories of recipients (aged, blind, disabled), for different living arrangements, and for different parts of the state. But in other respects they require tight coordination of the supplements with SSI.
Rev. 9/95
[Supporting and Elaborating References] [Related Sections: Part 1 - Part 2]