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 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 --

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.

duced 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)

tent

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.

mposed 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.