[Federal Register Volume 69, Number 206 (Tuesday, October 26, 2004)]
[Notices]
[Pages 62497-62502]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-23915]


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SOCIAL SECURITY ADMINISTRATION


Office of the Commissioner; Cost-of-Living Increase and Other 
Determinations for 2005

AGENCY: Social Security Administration.

ACTION: Notice.

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SUMMARY: The Commissioner has determined--
    (1) A 2.7 percent cost-of-living increase in Social Security 
benefits under title II of the Social Security Act (the Act), effective 
for December 2004;
    (2) An increase in the Federal Supplemental Security Income (SSI) 
monthly benefit amounts under title XVI of the Act for 2005 to $579 for 
an eligible individual, $869 for an eligible individual with an 
eligible spouse, and $290 for an essential person;
    (3) The student earned income exclusion to be $1,410 per month in 
2005 but not more than $5,670 in all of 2005;
    (4) The dollar fee limit for services performed as a representative 
payee to be $32 per month ($61 per month in the case of a beneficiary 
who is disabled and has an alcoholism or drug addiction condition that 
leaves him or her incapable of managing benefits) in 2005;
    (5) The national average wage index for 2003 to be $34,064.95;
    (6) The Old-Age, Survivors, and Disability Insurance (OASDI) 
contribution and benefit base to be $90,000 for remuneration paid in 
2005 and self-employment income earned in taxable years beginning in 
2005;
    (7) The monthly exempt amounts under the Social Security retirement 
earnings test for taxable years ending in calendar year 2005 to be 
$1,000 and $2,650;
    (8) The dollar amounts (``bend points'') used in the primary 
insurance amount benefit formula for workers who become eligible for 
benefits, or who die before becoming eligible, in 2005 to be $627 and 
$3,779;
    (9) The dollar amounts (``bend points'') used in the formula for 
computing maximum family benefits for workers who become eligible for 
benefits, or who die before becoming eligible, in 2005 to be $801, 
$1,156, and $1,508;
    (10) The amount of taxable earnings a person must have to be 
credited with a quarter of coverage in 2005 to be $920;
    (11) The ``old-law'' contribution and benefit base to be $66,900 
for 2005;
    (12) The monthly amount deemed to constitute substantial gainful 
activity for statutorily blind individuals in 2005 to be $1,380, and 
the corresponding amount for non-blind disabled persons to be $830;
    (13) The earnings threshold establishing a month as a part of a 
trial work period to be $590 for 2005; and
    (14) Coverage thresholds for 2005 to be $1,400 for domestic workers 
and $1,200 for election workers.

FOR FURTHER INFORMATION CONTACT: Jeffrey L. Kunkel, Office of the Chief 
Actuary, Social Security Administration, 6401 Security Boulevard, 
Baltimore, MD 21235, (410) 965-3013. Information relating to this 
announcement is available on our Internet site at http://www.socialsecurity.gov/OACT/COLA/index.html. For information on 
eligibility or claiming benefits, call 1-800-772-1213 or TTY 1-800-325-
0778, or visit our Internet site, Social Security Online, at http://www.socialsecurity.gov.

SUPPLEMENTARY INFORMATION: In accordance with the Act, the Commissioner 
must publish within 45 days after the close of the third calendar 
quarter of 2004 the benefit increase percentage and the revised table 
of ``special minimum'' benefits (section 215(i)(2)(D)). Also, the 
Commissioner must publish on or before November 1 the national average 
wage index for 2003 (section 215(a)(1)(D)), the OASDI fund ratio for 
2004 (section 215(i)(2)(C)(ii)), the OASDI contribution and benefit 
base for 2005 (section 230(a)), the amount of earnings required to be 
credited with a quarter of coverage in 2005 (section 213(d)(2)), the 
monthly exempt amounts under the Social Security retirement earnings 
test for 2005 (section 203(f)(8)(A)), the formula for computing a 
primary insurance amount for workers who first become eligible for 
benefits or die in 2005 (section 215(a)(1)(D)), and the formula for 
computing the maximum amount of benefits payable to the family of a 
worker who first becomes eligible for old-age benefits or dies in 2005 
(section 203(a)(2)(C)).

Cost-of-Living Increases

General

    The next cost-of-living increase, or automatic benefit increase, is 
2.7 percent for benefits under titles II and XVI of the Act. Under 
title II, OASDI benefits will increase by 2.7 percent for individuals 
eligible for December 2004 benefits, payable in January 2005. This 
increase is based on the authority contained in section 215(i) of the 
Act (42 U.S.C. 415(i)).
    Under title XVI, Federal SSI payment levels will also increase by 
2.7 percent effective for payments made for the month of January 2005 
but paid on December 30, 2004. This is based on the authority contained 
in section 1617 of the Act (42 U.S.C. 1382f).

Automatic Benefit Increase Computation

    Under section 215(i) of the Act, the third calendar quarter of 2004 
is a cost-of-living computation quarter for all the purposes of the 
Act. The Commissioner is, therefore, required to increase benefits, 
effective for December 2004, for individuals entitled under section 227 
or 228 of the Act, to increase primary insurance amounts of all other 
individuals entitled under title II of the Act, and to increase maximum 
benefits payable to a family. For December 2004, the benefit increase 
is the percentage increase in the Consumer Price Index for Urban Wage 
Earners and Clerical Workers from the third quarter of 2003 to the 
third quarter of 2004.
    Section 215(i)(1) of the Act provides that the Consumer Price Index 
for a cost-of-living computation quarter shall be the arithmetic mean 
of this index for the 3 months in that quarter. We round

[[Page 62498]]

the arithmetic mean, if necessary, to the nearest 0.1. The Department 
of Labor's Consumer Price Index for Urban Wage Earners and Clerical 
Workers for each month in the quarter ending September 30, 2003, is: 
for July 2003, 179.6; for August 2003, 180.3; and for September 2003, 
181.0. The arithmetic mean for this calendar quarter is 180.3. The 
corresponding Consumer Price Index for each month in the quarter ending 
September 30, 2004, is: for July 2004, 184.9; for August 2004, 185.0; 
and for September 2004, 185.4. The arithmetic mean for this calendar 
quarter is 185.1. Thus, because the Consumer Price Index for the 
calendar quarter ending September 30, 2004, exceeds that for the 
calendar quarter ending September 30, 2003 by 2.7 percent (rounded to 
the nearest 0.1), a cost-of-living benefit increase of 2.7 percent is 
effective for benefits under title II of the Act beginning December 
2004.
    Section 215(i) also specifies that an automatic benefit increase 
under title II, effective for December of any year, will be limited to 
the increase in the national average wage index for the prior year if 
the ``OASDI fund ratio'' for that year is below 20.0 percent. The OASDI 
fund ratio for a year is the ratio of the combined assets of the Old-
Age and Survivors Insurance and Disability Insurance Trust Funds at the 
beginning of that year to the combined expenditures of these funds 
during that year. (The expenditures in the ratio's denominator exclude 
transfer payments between the two trust funds, and reduce any transfers 
to the Railroad Retirement Account by any transfers from that account 
into either trust fund.) For 2004, the OASDI fund ratio is assets of 
$1,530,764 million divided by estimated expenditures of $500,958 
million, or 305.6 percent. Because the 305.6-percent OASDI fund ratio 
exceeds 20.0 percent, the automatic benefit increase for December 2004 
is not limited.

Title II Benefit Amounts

    In accordance with section 215(i) of the Act, in the case of 
workers and family members for whom eligibility for benefits (i.e., the 
worker's attainment of age 62, or disability or death before age 62) 
occurred before 2005, benefits will increase by 2.7 percent beginning 
with benefits for December 2004 which are payable in January 2005. In 
the case of first eligibility after 2004, the 2.7 percent increase will 
not apply.
    For eligibility after 1978, benefits are generally determined using 
a benefit formula provided by the Social Security Amendments of 1977 
(Pub. L. 95-216), as described later in this notice.
    For eligibility before 1979, we determine benefits by means of a 
benefit table. You may obtain a copy of this table by writing to: 
Social Security Administration, Office of Public Inquiries, Windsor 
Park Building, 6401 Security Boulevard, Baltimore, MD 21235. The table 
is also available on the Internet at http://www.socialsecurity.gov/OACT/ProgData/tableForm.html.
    Section 215(i)(2)(D) of the Act requires that, when the 
Commissioner determines an automatic increase in Social Security 
benefits, the Commissioner will publish in the Federal Register a 
revision of the range of the primary insurance amounts and 
corresponding maximum family benefits based on the dollar amount and 
other provisions described in section 215(a)(1)(C)(i). We refer to 
these benefits as ``special minimum'' benefits. These benefits are 
payable to certain individuals with long periods of relatively low 
earnings. To qualify for such benefits, an individual must have at 
least 11 ``years of coverage.'' To earn a year of coverage for purposes 
of the special minimum benefit, a person must earn at least a certain 
proportion of the ``old-law'' contribution and benefit base (described 
later in this notice). For years before 1991, the proportion is 25 
percent; for years after 1990, it is 15 percent. In accordance with 
section 215(a)(1)(C)(i), the table below shows the revised range of 
primary insurance amounts and corresponding maximum family benefit 
amounts after the 2.7 percent automatic benefit increase.

  Special Minimum Primary Insurance Amounts and Maximum Family Benefits
                        Payable for December 2004
------------------------------------------------------------------------
                                                  Primary      Maximum
          Number of years of coverage            insurance      family
                                                   amount     benefit 11
------------------------------------------------------------------------
11............................................       $31.90       $48.50
12............................................        64.70        97.80
13............................................        97.70       147.10
14............................................       130.40       196.10
15............................................       163.00       245.20
16............................................       195.90       294.80
17............................................       228.90       344.20
18............................................       261.70       393.30
19............................................       294.40       442.60
20............................................       327.30       491.70
21............................................       360.30       541.40
22............................................       392.80       590.40
23............................................       426.20       640.40
24............................................       458.90       689.30
25............................................       491.70       738.00
26............................................       525.00       788.20
27............................................       557.40       837.20
28............................................       590.30       886.30
29............................................       623.00       935.90
30............................................       655.90       984.60
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Title XVI Benefit Amounts

    In accordance with section 1617 of the Act, maximum SSI Federal 
benefit amounts for the aged, blind, and disabled will increase by 2.7 
percent effective January 2005. For 2004, we derived the monthly 
benefit amounts for an eligible individual, an eligible individual with 
an eligible spouse, and for an essential person--$564, $846, and $282, 
respectively--from corresponding yearly unrounded Federal SSI benefit 
amounts of $6,772.53, $10,157.65, and $3,394.03. For 2005, these yearly 
unrounded amounts increase by 2.7 percent to $6,955.39, $10,431.91, and 
$3,485.67, respectively. Each of these resulting amounts must be 
rounded, when not a multiple of $12, to the next lower multiple of $12. 
Accordingly, the corresponding annual amounts, effective for 2005, are 
$6,948, $10,428, and $3,480. Dividing the yearly amounts by 12 gives 
the corresponding monthly amounts for 2005--$579, $869, and $290, 
respectively. In the case of an eligible individual with an eligible 
spouse, we equally divide the amount payable between the two spouses.
    Title VIII of the Act provides for special benefits to certain 
World War II veterans residing outside the United States. Section 805 
provides that ``[t]he benefit under this title payable to a qualified 
individual for any month shall be in an amount equal to 75 percent of 
the Federal benefit rate [the maximum amount for an eligible 
individual] under title XVI for the month, reduced by the amount of the 
qualified individual's benefit income for the month.'' Thus the monthly 
benefit for 2005 under this provision is 75 percent of $579, or 
$434.25.

Student Earned Income Exclusion

    A blind or disabled child, who is a student regularly attending 
school, college, or university, or a course of vocational or technical 
training, can have limited earnings that are not counted against his or 
her SSI benefits. The maximum amount of such income that may be 
excluded in 2004 is $1,370 per month but not more than $5,520 in all of 
2004. These amounts increase based on a formula set forth in regulation 
20 CFR 416.1112.

[[Page 62499]]

    To compute each of the monthly and yearly maximum amounts for 2005, 
we increase the corresponding unrounded amount for 2004 by the latest 
cost-of-living increase. If the amount so calculated is not a multiple 
of $10, we round it to the nearest multiple of $10. The unrounded 
monthly amount for 2004 is $1,370.25. We increase this amount by 2.7 
percent to $1,407.25, which we then round to $1,410. Similarly, we 
increase the unrounded yearly amount for 2004, $5,523.50, by 2.7 
percent to $5,672.63 and round this to $5,670. Thus the maximum amount 
of the income exclusion applicable to a student in 2005 is $1,410 per 
month but not more than $5,670 in all of 2005.

Fee for Services Performed as a Representative Payee

    Sections 205(j)(4)(A)(i) and 1631(a)(2)(D)(i) of the Act permit a 
qualified organization to collect from an individual a monthly fee for 
expenses incurred in providing services performed as such individual's 
representative payee. Currently the fee is limited to the lesser of: 
(1) 10 percent of the monthly benefit involved; or (2) $31 per month 
($59 per month in any case in which the individual is entitled to 
disability benefits and the Commissioner has determined that payment to 
the representative payee would serve the interest of the individual 
because the individual has an alcoholism or drug addiction condition 
and is incapable of managing such benefits). The dollar fee limits are 
subject to increase by the automatic cost-of-living increase, with the 
resulting amounts rounded to the nearest whole dollar amount. Thus we 
increase the current amounts by 2.7 percent to $32 and $61 for 2005.

National Average Wage Index for 2003

General

    Under various provisions of the Act, several amounts increase 
automatically with annual increases in the national average wage index. 
The amounts are: (1) The OASDI contribution and benefit base; (2) the 
exempt amounts under the retirement earnings test; (3) the dollar 
amounts, or ``bend points,'' in the primary insurance amount and 
maximum family benefit formulas; (4) the amount of earnings required 
for a worker to be credited with a quarter of coverage; (5) the ``old-
law'' contribution and benefit base (as determined under section 230 of 
the Act as in effect before the 1977 amendments); (6) the substantial 
gainful activity amount applicable to statutorily blind individuals; 
and (7) the coverage threshold for election officials and election 
workers. Also, section 3121(x) of the Internal Revenue Code requires 
that the domestic employee coverage threshold be based on changes in 
the national average wage index.
    In addition to the amounts required by statute, two amounts 
increase automatically under regulatory requirements. The amounts are 
(1) the substantial gainful activity amount applicable to non-blind 
disabled persons, and (2) the monthly earnings threshold that 
establishes a month as part of a trial work period for disabled 
beneficiaries.

Computation

    The determination of the national average wage index for calendar 
year 2003 is based on the 2002 national average wage index of 
$33,252.09 announced in the Federal Register on October 22, 2003 (68 FR 
60437), along with the percentage increase in average wages from 2002 
to 2003 measured by annual wage data tabulated by the Social Security 
Administration (SSA). The wage data tabulated by SSA include 
contributions to deferred compensation plans, as required by section 
209(k) of the Act. The average amounts of wages calculated directly 
from these data were $31,898.70 and $32,678.48 for 2002 and 2003, 
respectively. To determine the national average wage index for 2003 at 
a level that is consistent with the national average wage indexing 
series for 1951 through 1977 (published December 29, 1978, at 43 FR 
61016), we multiply the 2002 national average wage index of $33,252.09 
by the percentage increase in average wages from 2002 to 2003 (based on 
SSA-tabulated wage data) as follows, with the result rounded to the 
nearest cent.

Amount

    Multiplying the national average wage index for 2002 ($33,252.09) 
by the ratio of the average wage for 2003 ($32,678.48) to that for 2002 
($31,898.70) produces the 2003 index, $34,064.95. The national average 
wage index for calendar year 2003 is about 2.44 percent greater than 
the 2002 index.

OASDI Contribution and Benefit Base

General

    The OASDI contribution and benefit base is $90,000 for remuneration 
paid in 2005 and self-employment income earned in taxable years 
beginning in 2005.
    The OASDI contribution and benefit base serves two purposes:
    (a) It is the maximum annual amount of earnings on which OASDI 
taxes are paid. The OASDI tax rate for remuneration paid in 2005 is 6.2 
percent for employees and employers, each. The OASDI tax rate for self-
employment income earned in taxable years beginning in 2005 is 12.4 
percent. (The Hospital Insurance tax is due on remuneration, without 
limitation, paid in 2005, at the rate of 1.45 percent for employees and 
employers, each, and on self-employment income earned in taxable years 
beginning in 2005, at the rate of 2.9 percent.)
    (b) It is the maximum annual amount of earnings used in determining 
a person's OASDI benefits.

Computation

    Section 230(b) of the Act provides the formula used to determine 
the OASDI contribution and benefit base. Under the formula, the base 
for 2005 shall be the larger of: (1) The 1994 base of $60,600 
multiplied by the ratio of the national average wage index for 2003 to 
that for 1992; or (2) the current base ($87,900). If the resulting 
amount is not a multiple of $300, it shall be rounded to the nearest 
multiple of $300.

Amount

    Multiplying the 1994 OASDI contribution and benefit base amount 
($60,600) by the ratio of the national average wage index for 2003 
($34,064.95 as determined above) to that for 1992 ($22,935.42) produces 
the amount of $90,006.46. We round this amount to $90,000. Because 
$90,000 exceeds the current base amount of $87,900, the OASDI 
contribution and benefit base is $90,000 for 2005.

Retirement Earnings Test Exempt Amounts

General

    We withhold Social Security benefits when a beneficiary under the 
normal retirement age (NRA) has earnings in excess of the applicable 
retirement earnings test exempt amount. (NRA is the age of initial 
benefit entitlement for which the benefit, before rounding, is equal to 
the worker's primary insurance amount. The NRA is age 65 for those born 
before 1938, and it gradually increases to age 67.) A higher exempt 
amount applies in the year in which a person attains his/her NRA, but 
only with respect to earnings in months prior to such attainment, and a 
lower exempt amount applies at all other ages below NRA. Section 
203(f)(8)(B) of the Act, as amended by section 102 of Pub. L. 104-121, 
provides formulas for determining the monthly exempt amounts. The 
corresponding annual exempt amounts

[[Page 62500]]

are exactly 12 times the monthly amounts.
    For beneficiaries attaining NRA in the year, we withhold $1 in 
benefits for every $3 of earnings in excess of the annual exempt amount 
for months prior to such attainment. For all other beneficiaries under 
NRA, we withhold $1 in benefits for every $2 of earnings in excess of 
the annual exempt amount.

Computation

    Under the formula applicable to beneficiaries who are under NRA and 
who will not attain NRA in 2005, the lower monthly exempt amount for 
2005 shall be the larger of: (1) the 1994 monthly exempt amount 
multiplied by the ratio of the national average wage index for 2003 to 
that for 1992; or (2) the 2004 monthly exempt amount ($970). If the 
resulting amount is not a multiple of $10, it shall be rounded to the 
nearest multiple of $10.
    Under the formula applicable to beneficiaries attaining NRA in 
2005, the higher monthly exempt amount for 2005 shall be the larger of: 
(1) the 2002 monthly exempt amount multiplied by the ratio of the 
national average wage index for 2003 to that for 2000; or (2) the 2004 
monthly exempt amount ($2,590). If the resulting amount is not a 
multiple of $10, it shall be rounded to the nearest multiple of $10.

Lower Exempt Amount

    Multiplying the 1994 retirement earnings test monthly exempt amount 
of $670 by the ratio of the national average wage index for 2003 
($34,064.95) to that for 1992 ($22,935.42) produces the amount of 
$995.12. We round this to $1,000. Because $1,000 is larger than the 
corresponding current exempt amount of $970, the lower retirement 
earnings test monthly exempt amount is $1,000 for 2005. The 
corresponding lower annual exempt amount is $12,000 under the 
retirement earnings test.

Higher Exempt Amount

    Multiplying the 2002 retirement earnings test monthly exempt amount 
of $2,500 by the ratio of the national average wage index for 2003 
($34,064.95) to that for 2000 ($32,154.82) produces the amount of 
$2,648.51. We round this to $2,650. Because $2,650 is larger than the 
corresponding current exempt amount of $2,590, the higher retirement 
earnings test monthly exempt amount is $2,650 for 2005. The 
corresponding higher annual exempt amount is $31,800 under the 
retirement earnings test.

Computing Benefits After 1978

General

    The Social Security Amendments of 1977 provided a method for 
computing benefits which generally applies when a worker first becomes 
eligible for benefits after 1978. This method uses the worker's 
``average indexed monthly earnings'' to compute the primary insurance 
amount. We adjust the computation formula each year to reflect changes 
in general wage levels, as measured by the national average wage index.
    We also adjust, or ``index,'' a worker's earnings to reflect the 
change in general wage levels that occurred during the worker's years 
of employment. Such indexation ensures that a worker's future benefit 
level will reflect the general rise in the standard of living that will 
occur during his or her working lifetime. To compute the average 
indexed monthly earnings, we first determine the required number of 
years of earnings. Then we select that number of years with the highest 
indexed earnings, add the indexed earnings, and divide the total amount 
by the total number of months in those years. We then round the 
resulting average amount down to the next lower dollar amount. The 
result is the average indexed monthly earnings.
    For example, to compute the average indexed monthly earnings for a 
worker attaining age 62, becoming disabled before age 62, or dying 
before attaining age 62, in 2005, we divide the national average wage 
index for 2003, $34,064.95, by the national average wage index for each 
year prior to 2003 in which the worker had earnings. Then we multiply 
the actual wages and self-employment income, as defined in section 
211(b) of the Act and credited for each year, by the corresponding 
ratio to obtain the worker's indexed earnings for each year before 
2003. We consider any earnings in 2003 or later at face value, without 
indexing. We then compute the average indexed monthly earnings for 
determining the worker's primary insurance amount for 2005.

Computing the Primary Insurance Amount

    The primary insurance amount is the sum of three separate 
percentages of portions of the average indexed monthly earnings. In 
1979 (the first year the formula was in effect), these portions were 
the first $180, the amount between $180 and $1,085, and the amount over 
$1,085. We call the dollar amounts in the formula governing the 
portions of the average indexed monthly earnings the ``bend points'' of 
the formula. Thus, the bend points for 1979 were $180 and $1,085.
    To obtain the bend points for 2005, we multiply each of the 1979 
bend-point amounts by the ratio of the national average wage index for 
2003 to that average for 1977. We then round these results to the 
nearest dollar. Multiplying the 1979 amounts of $180 and $1,085 by the 
ratio of the national average wage index for 2003 ($34,064.95) to that 
for 1977 ($9,779.44) produces the amounts of $627.00 and $3,779.41. We 
round these to $627 and $3,779. Accordingly, the portions of the 
average indexed monthly earnings to be used in 2005 are the first $627, 
the amount between $627 and $3,779, and the amount over $3,779.
    Consequently, for individuals who first become eligible for old-age 
insurance benefits or disability insurance benefits in 2005, or who die 
in 2005 before becoming eligible for benefits, their primary insurance 
amount will be the sum of
    (a) 90 percent of the first $627 of their average indexed monthly 
earnings, plus
    (b) 32 percent of their average indexed monthly earnings over $627 
and through $3,779, plus
    (c) 15 percent of their average indexed monthly earnings over 
$3,779.
    We round this amount to the next lower multiple of $0.10 if it is 
not already a multiple of $0.10. This formula and the rounding 
adjustment described above are contained in section 215(a) of the Act 
(42 U.S.C. 415(a)).

Maximum Benefits Payable to a Family

General

    The 1977 amendments continued the long established policy of 
limiting the total monthly benefits that a worker's family may receive 
based on his or her primary insurance amount. Those amendments also 
continued the then existing relationship between maximum family 
benefits and primary insurance amounts but did change the method of 
computing the maximum amount of benefits that may be paid to a worker's 
family. The Social Security Disability Amendments of 1980 (Pub. L. 96-
265) established a formula for computing the maximum benefits payable 
to the family of a disabled worker. This formula applies to the family 
benefits of workers who first become entitled to disability insurance 
benefits after June 30, 1980, and who first become eligible for these 
benefits after 1978. For disabled workers initially entitled to 
disability benefits before July 1980, or whose disability began before 
1979, we compute the family maximum payable the same as

[[Page 62501]]

the old-age and survivor family maximum.

Computing the Old-Age and Survivor Family Maximum

    The formula used to compute the family maximum is similar to that 
used to compute the primary insurance amount. It involves computing the 
sum of four separate percentages of portions of the worker's primary 
insurance amount. In 1979, these portions were the first $230, the 
amount between $230 and $332, the amount between $332 and $433, and the 
amount over $433. We refer to such dollar amounts in the formula as the 
``bend points'' of the family-maximum formula.
    To obtain the bend points for 2005, we multiply each of the 1979 
bend-point amounts by the ratio of the national average wage index for 
2003 to that average for 1977. Then we round this amount to the nearest 
dollar. Multiplying the amounts of $230, $332, and $433 by the ratio of 
the national average wage index for 2003 ($34,064.95) to that for 1977 
($9,779.44) produces the amounts of $801.16, $1,156.46, and $1,508.28. 
We round these amounts to $801, $1,156, and $1,508. Accordingly, the 
portions of the primary insurance amounts to be used in 2005 are the 
first $801, the amount between $801 and $1,156, the amount between 
$1,156 and $1,508, and the amount over $1,508.
    Consequently, for the family of a worker who becomes age 62 or dies 
in 2005 before age 62, we will compute the total amount of benefits 
payable to them so that it does not exceed
    (a) 150 percent of the first $801 of the worker's primary insurance 
amount, plus
    (b) 272 percent of the worker's primary insurance amount over $801 
through $1,156, plus
    (c) 134 percent of the worker's primary insurance amount over 
$1,156 through $1,508, plus
    (d) 175 percent of the worker's primary insurance amount over 
$1,508.
    We then round this amount to the next lower multiple of $0.10 if it 
is not already a multiple of $0.10. This formula and the rounding 
adjustment described above are contained in section 203(a) of the Act 
(42 U.S.C. 403(a)).

Quarter of Coverage Amount

General

    The amount of earnings required for a quarter of coverage in 2005 
is $920. A quarter of coverage is the basic unit for determining 
whether a worker is insured under the Social Security program. For 
years before 1978, we generally credited an individual with a quarter 
of coverage for each quarter in which wages of $50 or more were paid, 
or with 4 quarters of coverage for every taxable year in which $400 or 
more of self-employment income was earned. Beginning in 1978, employers 
generally report wages on an annual basis instead of a quarterly basis. 
With the change to annual reporting, section 352(b) of the Social 
Security Amendments of 1977 amended section 213(d) of the Act to 
provide that a quarter of coverage would be credited for each $250 of 
an individual's total wages and self-employment income for calendar 
year 1978, up to a maximum of 4 quarters of coverage for the year.

Computation

    Under the prescribed formula, the quarter of coverage amount for 
2005 shall be the larger of: (1) the 1978 amount of $250 multiplied by 
the ratio of the national average wage index for 2003 to that for 1976; 
or (2) the current amount of $900. Section 213(d) further provides that 
if the resulting amount is not a multiple of $10, it shall be rounded 
to the nearest multiple of $10.

Quarter of Coverage Amount

    Multiplying the 1978 quarter of coverage amount ($250) by the ratio 
of the national average wage index for 2003 ($34,064.95) to that for 
1976 ($9,226.48) produces the amount of $923.02. We then round this 
amount to $920. Because $920 exceeds the current amount of $900, the 
quarter of coverage amount is $920 for 2005.

``Old-Law'' Contribution and Benefit Base

General

    The ``old-law'' contribution and benefit base for 2005 is $66,900. 
This is the base that would have been effective under the Act without 
the enactment of the 1977 amendments. We compute the base under section 
230(b) of the Act as it read prior to the 1977 amendments.
    The ``old-law'' contribution and benefit base is used by:
    (a) the Railroad Retirement program to determine certain tax 
liabilities and tier II benefits payable under that program to 
supplement the tier I payments which correspond to basic Social 
Security benefits,
    (b) the Pension Benefit Guaranty Corporation to determine the 
maximum amount of pension guaranteed under the Employee Retirement 
Income Security Act (as stated in section 230(d) of the Social Security 
Act),
    (c) Social Security to determine a year of coverage in computing 
the special minimum benefit, as described earlier, and
    (d) Social Security to determine a year of coverage (acquired 
whenever earnings equal or exceed 25 percent of the ``old-law'' base 
for this purpose only) in computing benefits for persons who are also 
eligible to receive pensions based on employment not covered under 
section 210 of the Act.

Computation

    The ``old-law'' contribution and benefit base shall be the larger 
of: (1) the 1994 ``old-law'' base ($45,000) multiplied by the ratio of 
the national average wage index for 2003 to that for 1992; or (2) the 
current ``old-law'' base ($65,100). If the resulting amount is not a 
multiple of $300, it shall be rounded to the nearest multiple of $300.

Amount

    Multiplying the 1994 ``old-law'' contribution and benefit base 
amount ($45,000) by the ratio of the national average wage index for 
2003 ($34,064.95) to that for 1992 ($22,935.42) produces the amount of 
$66,836.48. We round this amount to $66,900. Because $66,900 exceeds 
the current amount of $65,100, the ``old-law'' contribution and benefit 
base is $66,900 for 2005.

Substantial Gainful Activity Amounts

General

    A finding of disability under titles II and XVI of the Act requires 
that a person, except for a title XVI disabled child, be unable to 
engage in substantial gainful activity (SGA). A person who is earning 
more than a certain monthly amount (net of impairment-related work 
expenses) is ordinarily considered to be engaging in SGA. The amount of 
monthly earnings considered as SGA depends on the nature of a person's 
disability. Section 223(d)(4)(A) of the Act specifies a higher SGA 
amount for statutorily blind individuals under title II while Federal 
regulations (20 CFR 404.1574 and 416.974) specify a lower SGA amount 
for non-blind individuals. Both SGA amounts increase in accordance with 
increases in the national average wage index.

Computation

    The monthly SGA amount for statutorily blind individuals under 
title II for 2005 shall be the larger of: (1) such amount for 1994 
multiplied by the ratio of the national average wage index for 2003 to 
that for 1992; or (2) such amount for 2004. The monthly SGA amount for 
non-blind disabled individuals for 2005 shall be the larger of: (1) 
such amount for 2000 multiplied

[[Page 62502]]

by the ratio of the national average wage index for 2003 to that for 
1998; or (2) such amount for 2004. In either case, if the resulting 
amount is not a multiple of $10, it shall be rounded to the nearest 
multiple of $10.

SGA Amount for Statutorily Blind Individuals

    Multiplying the 1994 monthly SGA amount for statutorily blind 
individuals ($930) by the ratio of the national average wage index for 
2003 ($34,064.95) to that for 1992 ($22,935.42) produces the amount of 
$1,381.29. We then round this amount to $1,380. Because $1,380 is 
larger than the current amount of $1,350, the monthly SGA amount for 
statutorily blind individuals is $1,380 for 2005.

SGA Amount for Non-Blind Disabled Individuals

    Multiplying the 2000 monthly SGA amount for non-blind individuals 
($700) by the ratio of the national average wage index for 2003 
($34,064.95) to that for 1998 ($28,861.44) produces the amount of 
$826.20. We then round this amount to $830. Because $830 is larger than 
the current amount of $810, the monthly SGA amount for non-blind 
disabled individuals is $830 for 2005.

Trial Work Period Earnings Threshold

General

    During a trial work period, a beneficiary receiving Social Security 
disability benefits may test his or her ability to work and still be 
considered disabled. We do not consider services performed during the 
trial work period as showing that the disability has ended until 
services have been performed in at least 9 months (not necessarily 
consecutive) in a rolling 60-month period. In 2004, any month in which 
earnings exceed $580 is considered a month of services for an 
individual's trial work period. In 2005, this monthly amount increases 
to $590.

Computation

    The method used to determine the new amount is set forth in our 
regulations at 20 CFR 404.1592(b). Monthly earnings in 2005, used to 
determine whether a month is part of a trial work period, is such 
amount for 2001 ($530) multiplied by the ratio of the national average 
wage index for 2003 to that for 1999, or, if larger, such amount for 
2004. If the amount so calculated is not a multiple of $10, we round it 
to the nearest multiple of $10.

Amount

    Multiplying the 2001 monthly earnings threshold ($530) by the ratio 
of the national average wage index for 2003 ($34,064.95) to that for 
1999 ($30,469.84) produces the amount of $592.53. We then round this 
amount to $590. Because $590 is larger than the current amount of $580, 
the monthly earnings threshold is $590 for 2005.

Domestic Employee Coverage Threshold

General

    The minimum amount a domestic worker must earn so that such 
earnings are covered under Social Security or Medicare is the domestic 
employee coverage threshold. For 2005, this threshold is $1,400. 
Section 3121(x) of the Internal Revenue Code provides the formula for 
increasing the threshold.

Computation

    Under the formula, the domestic employee coverage threshold amount 
for 2005 shall be equal to the 1995 amount of $1,000 multiplied by the 
ratio of the national average wage index for 2003 to that for 1993. If 
the resulting amount is not a multiple of $100, it shall be rounded to 
the next lower multiple of $100.

Domestic Employee Coverage Threshold Amount

    Multiplying the 1995 domestic employee coverage threshold amount 
($1,000) by the ratio of the national average wage index for 2003 
($34,064.95) to that for 1993 ($23,132.67) produces the amount of 
$1,472.59. We then round this amount to $1,400. Accordingly, the 
domestic employee coverage threshold amount is $1,400 for 2005.

Election Worker Coverage Threshold

General

    The minimum amount an election worker must earn so that such 
earnings are covered under Social Security or Medicare is the election 
worker coverage threshold. For 2005, this threshold is $1,200. Section 
218(c)(8)(B) of the Act provides the formula for increasing the 
threshold.

Computation

    Under the formula, the election worker coverage threshold amount 
for 2005 shall be equal to the 1999 amount of $1,000 multiplied by the 
ratio of the national average wage index for 2003 to that for 1997. If 
the amount so determined is not a multiple of $100, it shall be rounded 
to the nearest multiple of $100.

Election Worker Coverage Threshold Amount

    Multiplying the 1999 election worker coverage threshold amount 
($1,000) by the ratio of the national average wage index for 2003 
($34,064.95) to that for 1997 ($27,426.00) produces the amount of 
$1,242.07. We then round this amount to $1,200. Accordingly, the 
election worker coverage threshold amount is $1,200 for 2005.

(Catalog of Federal Domestic Assistance: Program Nos. 96.001 Social 
Security-Disability Insurance; 96.002 Social Security-Retirement 
Insurance; 96.004 Social Security-Survivors Insurance; 96.006 
Supplemental Security Income)


    Dated: October 20, 2004.
Jo Anne B. Barnhart,
Commissioner, Social Security Administration.
[FR Doc. 04-23915 Filed 10-25-04; 8:45 am]
BILLING CODE 4191-02-P