Source: https://www.law.cornell.edu/cfr/text/20/404.211
Timestamp: 2017-01-21 06:33:53
Document Index: 126999118

Matched Legal Cases: ['art 404', '§ 404', '§ 404', '§ 404', '§ 404', '§ 404', '§ 404', '§ 404']

20 CFR 404.211 - Computing your average indexed monthly earnings. | US Law | LII / Legal Information Institute
CFR › Title 20 › Chapter III › Part 404 › Subpart C › Section 404.211 20 CFR 404.211 - Computing your average indexed monthly earnings.
§ 404.211 Computing your average indexed monthly earnings.
(a)General. In this method, your social security earnings after 1950 are indexed, as described in paragraph (d) of this section, then averaged over the period of time you can reasonably have been expected to have worked in employment or self-employment covered by social security. (Your earnings before 1951 are not used in finding your average indexed monthly earnings.)
(b)Which earnings may be used in computing your average indexed monthly earnings - (1)Earnings. In computing your average indexed monthly earnings, we use wages, compensation, self-employment income, and deemed military wage credits (see §§ 404.1340 through 404.1343) that are creditable to you for social security purposes for years after 1950.
(2)Computation base years. We use your earnings in your computation base years in finding your average indexed monthly earnings. All years after 1950 up to (but not including) the year you become entitled to old-age or disability insurance benefits, and through the year you die if you had not been entitled to old-age or disability benefits, are computation base years for you. The year you become entitled to benefits and following years may be used as computation base years in a recomputation if their use would result in a higher primary insurance amount. (See §§ 404.280 through 404.287.) However, years after the year you die may not be used as computation base years even if you have earnings credited to you in those years. Computation base years do not include years wholly within a period of disability unless your primary insurance amount would be higher by using the disability years. In such situations, we count all the years during the period of disability, even if you had no earnings in some of them.
(c)Average of the total wages. Before we compute your average indexed monthly earnings, we must first know the “average of the total wages” of all workers for each year from 1951 until the second year before you become eligible. The average of the total wages for years after 1950 are shown in appendix I. Corresponding figures for more recent years which have not yet been incorporated into this appendix are published in the Federal Register on or before November 1 of the succeeding year. “Average of the total wages” (or “average wage”) means:
(d)Indexing your earnings.
(1) The first step in indexing your social security earnings is to find the relationship (under paragraph (d)(2) of this section) between - (i) The average wage of all workers in your computation base years; and
(3) The second step in indexing your social security earnings is to multiply the actual year-by-year dollar amounts of your earnings (up to the maximum amounts creditable, as explained in §§ 404.1047 and 404.1096 of this part) by the quotients found in paragraph (d)(2) of this section for each of those years. We round the results to the nearer penny. (The quotient for your indexing year is 1.0; this means that your earnings in that year are used in their actual dollar amount; any earnings after your indexing year that may be used in computing your average indexed monthly earnings are also used in their actual dollar amount.)
Ms. A reaches age 62 in July 1979. Her year-by-year social security earnings since 1950 are as follows:
Step 2. After we have found these indexing quotients, we multiply Ms. A's actual year-by-year earnings by them to find her indexed earnings, as shown below:
(4) We calculate your indexing year under this paragraph if you, the insured worker, die before reaching age 62, your surviving spouse or surviving divorced spouse is first eligible after 1984, and the indexing year calculated under this paragraph results in a higher widow(er)'s benefit than results from the indexing year calculated under the general rule explained in paragraph (d)(1)(ii). For purposes of this paragraph, the indexing year is never earlier than the second year before the year of your death. Except for this limitation, the indexing year is the earlier of - (i) The year in which you, the insured worker, attained age 60, or would have attained age 60 if you had lived, and
(e)Number of years to be considered in finding your average indexed monthly earnings. To find the number of years to be used in computing your average indexed monthly earnings - (1) We count the years beginning with 1951, or (if later) the year you reach age 22, and ending with the earliest of the year before you reach age 62, become disabled, or die. Years wholly or partially within a period of disability (as defined in § 404.1501(b) of subpart P of this part) are not counted unless your primary insurance amount would be higher. In that case, we count all the years during the period of disability, even though you had no earnings in some of those years. These are your elapsed years. From your elapsed years, we then subtract up to 5 years, the exact number depending on the kind of benefits to which you are entitled. You cannot, under this procedure, have fewer than 2 benefit computation years.
(4) For benefits payable after June 1981, the disability dropout might be increased by the child care dropout. If the number of disability dropout years is fewer than 3, we will drop out a benefit computation year for each benefit computation year that the worker meets the child care requirement and had no earnings, until the total of all dropout years is 3. The child care requirement for any year is that the worker must have been living with his or her child (or his or her spouse's child) substantially throughout any part of any calendar year that the child was alive and under age 3. In actual practice, no more than 2 child care years may be dropped, because of the combined effect of the number of elapsed years, 1-for-5 dropout years (if any), and the computation years required for the computation.
Ms. M., born August 4, 1953, became entitled to disability insurance benefits (DIB) beginning in July 1980 based on a disability which began January 15, 1980. In computing the DIB, we determined that the elapsed years are 1975 through 1979, the number of dropout years is 1 (5 elapsed years divided by 5), and the number of computation years is 4. Since Ms. M. had no earnings in 1975 and 1976, we drop out 1975 and use her earnings for the years 1977 through 1979.
(i)Living with means that you and the child ordinarily live in the same home and you exercise, or have the right to exercise, parental control. See § 404.366(c) for a further explanation.
(ii)Substantially throughout any part of any calendar year means that any period you were not living with the child during a calendar year did not exceed 3 months. If the child was either born or attained age 3 during the calendar year, the period of absence in the year cannot have exceeded the smaller period of 3 months, or one-half the time after the child's birth or before the child attained age 3.
(iii)Earnings means wages for services rendered and net earnings from self-employment minus any net loss for a taxable year. See § 404.429 for a further explanation.
(f)Your average indexed monthly earnings. After we have indexed your earnings and found your benefit computation years, we compute your average indexed monthly earnings by - (1) Totalling your indexed earnings in your benefit computation years;
(3) Rounding the quotient to the next lower whole dollar. if not already a multiple of $1.
From the example in paragraph (d) of this section, we see that Ms. A reaches age 62 in 1979. Her elapsed years are 1951-1978 (28 years). We subtract 5 from her 28 elapsed years to find that we must use 23 benefit computation years. This means that we will use her 23 highest computation base years to find her average indexed monthly earnings. We exclude the 5 years 1961-1965 and total her indexed earnings for the remaining years, i.e., the benefit computation years (including her unindexed earnings in 1977 and 1978) and get $249,381.41. We then divide that amount by the 276 months in her 23 benefit computation years and find her average indexed monthly earnings to be $903.56, which is rounded down to $903.
20 CFR 404.1918 — How Benefits Are Computed.
20 CFR 404.272 — Indexes We Use to Measure the Rise in the Cost-Of-Living.
20 CFR 404.210 — Average-Indexed-Monthly-Earnings Method.