SSR 69-47: SECTION 229(a). -- DEDUCTIONS -- MILITARY SERVICE WAGE CREDITS -- STATUS OF DEEMED WAGES FOR DEDUCTION PURPOSES

SSR 69-47

C, a child insurance beneficiary, entered on active duty with the United

State Marine Corps in December 1967. Notice was received by the Social

Security Administration that C's total earnings for 1968 would be

approximately $2,300, and his benefits were suspended pursuant to the

deduction provisions in section 203 of the Social Security Act. That

section provides in effect that deductions shall be made from the benefits

to which an individual is entitled if his annual earnings exceed $1,680 a

year. For purposes of this section, earnings consist of all wages received

for services rendered in the year, plus any net earnings and minus any net

loss from self-employment for the same year. C's base pay for 1968 from

the Marine Corps was less than $1,680; however, he was granted credit for

certain "deemed wages" in addition to the amount of his base pay, as

provided by section 229(a) of the Social Security Act, which brought his

total earnings for 1968 above the statutory limit. C protested the

suspension of his benefits, on the ground that only his base pay for 1968

should count as earnings for purposes of making deductions under section

203 of the Act.

Section 229(a) of the Social Security Act provides, as pertinent here,

that servicemen on active duty in the uniformed services of the United

States (including active duty for training) will receive social security

credit not only for their base pay in each quarter, but also for certain

"deemed wages" beginning with the March 1968 calendar quarter. The amount

of "deemed wages" which may be credited for a quarter is $100 if the basic

pay in the quarter is $100 or less; $200 if over $100 but not more than

$200; and $300 if more than $200, subject to the maximum wage limitations

contained in the law. These "deemed wages" may be used in determining

entitlement to, and the amount of, monthly benefits payable for months

after December 1967.

mount

of "deemed wages" which may be credited for a quarter is $100 if the basic

pay in the quarter is $100 or less; $200 if over $100 but not more than

$200; and $300 if more than $200, subject to the maximum wage limitations

contained in the law. These "deemed wages" may be used in determining

entitlement to, and the amount of, monthly benefits payable for months

after December 1967.

In considering wages for deduction purposes under section 203 of the Act,

the definition of wages contained in section 209 is generally controlling.

Whether or not C's benefits are subject to deductions for 1968 depends on

whether the "deemed wages" granted him under the above section constitute

"wages" under section 209 of the Act. The language of the statute,

supplemented by its congressional history, makes clear that the above

amounts are to be "deemed wages" for a specific, limited purpose only,

i.e., to provide additional social security protection for those serving

in the uniformed services. H.R. Report No. 544, 90th Cong., 1st Session,

page 34 and Senate Report No. 744, 90th Cong., 1st Session, page 60,

indicate that this provision was prompted by the fact that wages in kind

and certain cash increments referable to military service are not credited

as "wages" under the Act though they are an important part of total

military compensation (particularly in the case of the lowest ranking

enlisted personnel). Therefore, a serviceman's social security protection

could be impaired during his period of military service because only his

basic military pay may be used to determine his (and his family's) benefit

rights.

ice are not credited

as "wages" under the Act though they are an important part of total

military compensation (particularly in the case of the lowest ranking

enlisted personnel). Therefore, a serviceman's social security protection

could be impaired during his period of military service because only his

basic military pay may be used to determine his (and his family's) benefit

rights.

In enacting section 229 of the Social Security Act as a separate section

and not amending that part of section 209 of the Act which limits "wages"

of a member of a uniformed service to his basic pay only, and stating only

that these "deemed wages" are "for purposes of determining entitlement to

and the amount of" benefits and entitlement to a period of disability,

Congress made clear its limited purpose. On the other hand, section 209 of

the Social Security Act, which defines "wages" for a member of the

uniformed services generally, clearly makes that definition applicable for

all purposes of title II, i.e., for both entitlement and deductions. Thus,

it states in section 209

It seems clear, therefore, that section 229(a) does not expand the

definition of "wages" for members of the uniformed services contained in

section 209 of the Act, which definition is cognizable for all purposes of title II. Nor does section 229(a) in any way expend the scope

of section 203(f)(5)(C), which defines and individual's wages for work

deduction purposes. The latter section, when construed in conjunction with

the definition of "wages" for members of the uniformed services contained

in section 209, makes plain that the only "wages" of a serviceman

cognizable for deduction purposes are his "basic pay."

r does section 229(a) in any way expend the scope

of section 203(f)(5)(C), which defines and individual's wages for work

deduction purposes. The latter section, when construed in conjunction with

the definition of "wages" for members of the uniformed services contained

in section 209, makes plain that the only "wages" of a serviceman

cognizable for deduction purposes are his "basic pay."

In addition, it would be an anomaly for the "deemed wages" which Congress

provided in section 229(a) to increase benefit protection for

servicemen and their families at no expense to them, to be used also to reduce their benefits. While it has generally been true that

earnings amounts used for purposes of entitlement to and computation of

benefits have also been used for deduction purposes, different amounts of

earnings can be used for entitlement than for deduction purposes. Thus,

earnings in excess of the maximum that may be credited to any earnings

account under the Act for a particular period may nevertheless be used for

deduction purposes. Further, military service wage credits allowed under

section 217 of the Act (which, like those involved here, are "deemed

wages" and gratuitously provided) are used for entitlement, but not for

deduction purposes.

Accordingly, it is held that "deemed wages" provided in the case

of members of the uniformed services by section 229(a) of the Social

Security Act may not be used for purposes of deductions under section 203

of the Act.