SSR 92-2a: SECTIONS 210(a)(7), 218(b), (c)(4), AND 224 OF THE SOCIAL SECURITY ACT (42 U.S.C. 410(a)(7), 418(b), (c)(4), AND 424a) DISABILITY INSURANCE BENEFITS -- REDUCTION TO ZERO DUE TO RECEIPT OF STATE DISABILITY PAYMENTS

SSR 92-2a

EFFECTIVE/PUBLICATION DATE: 03/03/92

20 CFR 404.211(b), 404.221(b), 404.408, 404.1020 and 404.1214

The sole issue here is whether Social Security disability benefits were

properly reduced or offset.

On August 31, 1984, the claimant applied for disability insurance

benefits. On October 17, 1984, the claimant was found "disabled" with an

onset date or August 21, 1984. The claimant's Social Security award letter

stated that after a 5-month waiting period his monthly benefit was

$568.60. His total family benefit amount was $852.90. Effective October

1984, the claimant began receiving $873.63 in disability payments from the

State of Colorado because he had worked as a tax auditor for the State

from March 1977 to August 21, 1984.

A hearing was held on August 20, 1985. The claimant testified that he was

employed as a public employee in a political subdivision of the State of

Colorado until August 20, 1984, and had stopped paying into Social

Security around 1976-1977. He believed that 42 U.S.C. 424a(d) prohibited

the Social Security Administration from making an offset from any benefits

received from the State of Colorado. The claimant also argued that his

"average current monthly earnings" were improperly calculated because his

1983 earnings from the State of Colorado should have been the basis on

which to calculate his "average current earnings."

The 1981 Omnibus Budget Reconciliation Act, as incorporated in section

224 of the Social Security Act, provided for the reduction, but not below

zero, of Social Security disability benefits payable after August 1981 to

individuals who are also receiving disability benefits provided by

Federal, State, or local governments (with certain exceptions)

calculate his "average current earnings."

The 1981 Omnibus Budget Reconciliation Act, as incorporated in section

224 of the Social Security Act, provided for the reduction, but not below

zero, of Social Security disability benefits payable after August 1981 to

individuals who are also receiving disability benefits provided by

Federal, State, or local governments (with certain exceptions). The

reduction or offset is made in the Social Security disability benefit in

the event the total benefits paid under the two disability programs exceed

80 percent of the worker's average monthly earnings (called "average

current earnings") prior to the onset of disability. The purpose of this

legislative change was to eliminate duplicate benefits that overcompensate

some disabled workers, thereby discouraging them from attempting after-tax

income as the result of public disability programs than they earned when

they were working.

The claimant's average monthly earnings were calculated using the

claimant's monthly earnings in his highest consecutive 5 years of earnings

covered by Social Security (years 1972 through 1976). The result of this

calculation, with the 80 percent limit imposed, was $852.00.

The claimant asserted that the calculation of his average monthly

earnings was incorrect. He argued that his State of Colorado employment

prior to his determination of disability should have been used. 20 CFR

404.408)c)(3) defines "average current earnings" and directs how the same

will be derived for purposes of applying a reduction in

benefits. [1] More specifically,

20 CFR 404.211(b) provide that the methods to either determine average

indexed monthly earnings or average monthly wages for purposes of

computing a Social Security disability benefit will use earnings creditable to the claimant for Social Security purposes after 1950

rnings" and directs how the same

will be derived for purposes of applying a reduction in

benefits. [1] More specifically,

20 CFR 404.211(b) provide that the methods to either determine average

indexed monthly earnings or average monthly wages for purposes of

computing a Social Security disability benefit will use earnings creditable to the claimant for Social Security purposes after 1950.

Since the claimant's earnings while he was employed with the State of

Colorado were not creditable to his Social Security earnings

record, his earnings from his State employment could not be used.

Service in the employ of a State, or any political subdivision thereof,

or any instrumentality that is wholly owned by one or more States or

political subdivisions, is excluded from Social Security coverage.

However, Section 218(a) of the Social Security Act (the Act) provides for

voluntary agreements for coverage of most employees of State and a local

governments. [2] All the States

have entered into agreements, some having provided coverage for most

employees and some having provided coverage for most employees and some

having provided coverage for only a few employees. The claimant's specific

employment for the State of Colorado was not a part of a "coverage group"

as provided in Sections 218(b) and (c)(4) of the Act.

In his second argument, the claimant cited 42 U.S.C. 424a(d) as authority

that no offset would apply to the disability payments provided by the

State of Colorado. That section provides that an offset shall not apply if

a State law or plan provided on February 18, 1981, for a reduction in the

amount of the State disability payment if the claimant also receives a

Social Security disability benefit (called a "reverse offset" law or

plan). Colorado does not have such a "reverse offset" law or plan applying

to State disability payments. Therefore, the exception in 42 U.S.C.

424a(d) does not apply in this case

State law or plan provided on February 18, 1981, for a reduction in the

amount of the State disability payment if the claimant also receives a

Social Security disability benefit (called a "reverse offset" law or

plan). Colorado does not have such a "reverse offset" law or plan applying

to State disability payments. Therefore, the exception in 42 U.S.C.

424a(d) does not apply in this case. And, finally, since the State

disability payment received by the claimant is paid pursuant to the laws

of the State of Colorado, it is a public, not private, disability payment

subject to offset.

In applying applicable law to the claimant's case, the maximum monthly

limit for his combined Social Security disability benefit and State

disability payment, for purposes of computing the reduction in his Social

Security benefit, is 80 percent of his average monthly earnings under

covered employment, or $852.00. Since the total of his State disability

payment ($873.63) and unreduced Social Security disability benefit

($852.90) equals $1,726.53, his family Social Security disability benefit

must be reduced by $852.90 to a benefit amount of zero. That leave the

claimant with the receipt of $873.63 in State disability payments per

month. The application of an offset or reduction fulfills the intent of

the new law that the claimant not be overcompensated.

However, should the claimant's State disability payments ever stop, his

Social Security disability benefit would resume. Moreover, if and when the

claimant reached age 65, the calculation of his Social Security retirement

benefit will take into account his period of disability granted since

August 21, 1984, even though benefits actually received were reduced to

zero. At that time, his retirement benefit will be substantially higher

than if had not been found disabled and was able to continue in his noncovered employment with the State of Colorado.

ed age 65, the calculation of his Social Security retirement

benefit will take into account his period of disability granted since

August 21, 1984, even though benefits actually received were reduced to

zero. At that time, his retirement benefit will be substantially higher

than if had not been found disabled and was able to continue in his noncovered employment with the State of Colorado.

Accordingly, the reduction or offset of benefits in this case is found to

have been justified and

correct. [3]

[1] Section 224(a) of the Act,

which 20 CFR 404.408(c)(3) implements, provides that "average current

earnings" are computed by reference to average monthly wage under section

215(b) of the Act or to wage and self-employment income totals referencing

sections 209(a)(1) and 211(b)(1) of the Act. These statutory provisions

are concerned strictly with wages and self-employment income derived from

employment and self-employment covered by Social Security.

[2] Effective for services

performed after July 1, 1991, with a few exceptions, service in the employ

of a State, any political subdivision thereof, or any instrumentality of

the State or political subdivision wholly owned thereby, by an individual

who is not a member of a retirement system of such State, political

subdivision, or instrumentality is mandatorily covered for Social Security

purposes under section 210(a)(7)(F) of the Act.

[3] The claimant subsequently

sought review of the Secretary's final decision in the United States

District Court for the District of Colorado,. On October 8, 1`986, that

court upheld the Secretary's decision. The claimant appealed the district

court's decision to the United States Court of Appeals for the Tenth

Circuit which, on November 4, 1987, affirmed the district court's decision

in favor of the Secretary.