Source: https://www.federalregister.gov/articles/2005/05/19/05-9994/amendments-to-annual-earnings-test-for-retirement-beneficiaries
Timestamp: 2015-03-01 19:22:02
Document Index: 129149647

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

Federal Register | Amendments to Annual Earnings Test for Retirement Beneficiaries
-28815 (7 pages)
Document Number: 05-9994
Shorter URL: https://federalregister.gov/a/05-9994 Action
These final rules amend our regulations to conform to the “Senior Citizens' Freedom to Work Act of 2000.” This legislation was enacted on April 7, 2000, and became retroactively effective on January 1, 2000. It eliminates the Social Security annual earnings test for retirement beneficiaries, starting from the month in which they reach full retirement age. Before the passage of this legislation, persons reaching full retirement age were subject to an earnings test until the month in which they attained age 70.
Amendments to Annual Earnings Test Regulations (866F) 3 actions from August 25th, 2003 to August 2004
Comment on Notice of Proposed Rulemaking
Effective Date: These rules are effective June 20, 2005.
Electronic Version: The electronic file of this document is available on the date of publication in the Federal Register on the Internet site for the Government Printing Office, http://www.gpoaccess.gov/fr/index.html. It is also available on the Internet site for SSA (i.e., Social Security Online) at http://www.socialsecurity.gov/regulations/final-rules.htm.
In addition to the revisions required by the “Senior Citizens' Freedom to Work Act of 2000,” which eliminated the annual earnings test for persons reaching full retirement age, we have made changes necessitated by the “Social Security Amendments of 1983,” 98. This legislation increases the full retirement age for persons born in 1938 or later in incremental amounts, with a full 2-year increase in full retirement age for persons born in 1960 or later. We have also revised the existing regulatory sections to present them in plain language and to update the examples.
The following is a brief summary of the sections we have revised and the changes to each of them.
Section 404.338 Widow's and widower's benefits amounts. This section describes the benefit amount a widow or widower may expect to receive relative to the benefit amount of the deceased insured spouse. The benefit amount for the widow or widower may include increased benefits based on delayed retirement credit of the deceased insured spouse, or reduced benefits based on the deceased insured spouse retiring before reaching full retirement age. This section also discusses widow or widower benefits based on a special primary insurance amount when the insured died before reaching age 62.
We have revised this section to reflect the change in full retirement age.
Sections 404.415 and 404.416 Deductions because of excess earnings; annual earnings test. Amount of deduction because of excess earnings. We have combined §§ 404.415 and 404.416 into a new § 404.415, “Deductions because of excess earnings,” because the topics are closely related and overlapping.
New § 404.415 explains the effect of excess earnings on the benefits of:
1. An insured person caused by his/her excess earnings;
2. An auxiliary beneficiary because of the excess earnings of the insured person on whose record he/she draws benefits;
The new § 404.415 also reflects the legislated changes in full retirement age and annual earnings test.
Section 404.428Earnings in a taxable year. This section clarifies the method for calculating a beneficiary's or prospective beneficiary's annual earnings with respect to the annual earnings test. It also clarifies when the claimant may use a taxable year other than a calendar year, and the number of months in a taxable year used in the earnings test calculation for the year of death. This section also defines which reporting year wage earners and self-employed individuals must use relative to the year in which the earnings were earned.
This section is revised to reflect changes in the annual earnings test and full retirement age. Section 404.429Earnings; defined. This section defines wages and net earnings from self-employment for earnings test purposes. It also lists the self-employment occupations that are included in “net earnings from self-employment” for earnings test purposes. This section also defines the allowable level of a claimant's involvement and performance in an ongoing business in determining whether the claimant's retirement actually has taken place.
The section is revised to reflect the new annual earnings test and full retirement age legislation.
Section 404.430Excess earnings defined for taxable years ending after December 1972; monthly exempt amount defined. This section defines the maximum monthly and annual amounts of earnings that can be earned by retirement and survivor beneficiaries without the earnings causing a reduction in their benefits. It then delineates the reduction if these earning limits are exceeded, as a proportion of the amount of earnings that are above those limits.
We have revised this section by changing the section heading to “Monthly and annual exempt amounts defined; excess earnings defined,” and deleting obsolete material. This section also reflects the changes in the annual earnings test and full retirement age, and displays annual earnings test exempt amounts for 2000 through 2005.
Section 404.434Excess earnings; method of charging. This section describes the method of charging estimated excess earnings of an insured person and also the excess earnings of a beneficiary. Although the excess earnings may not completely eliminate the benefits to be paid on the insured's record, all the estimated earnings of the calendar (or fiscal) year are charged to the earlier months of the year. This may eliminate benefits for those earlier months, and may allow full benefits in the later months of the year. This section also states that if both the insured and other(s) receiving benefits on an insured's record have excess earnings, the excess earnings of the insured are first charged to the total family benefits payable (or deemed payable), and then the excess earnings of the secondary beneficiary are charged against that secondary beneficiary's remaining benefits. This section also clarifies that the excess earnings of a person receiving benefits on another's record only diminish or eliminate the benefits of that beneficiary; they do not affect the benefits of the insured or those of others receiving benefits on the insured's record.
We revised this section to be consistent with the rule in § 404.415(b) regarding divorced spouses by adding a cross-reference to that section. We have rewritten this section in plain language.
Section 404.435Excess earnings; months to which excess earnings cannot be charged. This section lists the situations in which a person's excess earnings in a month are not counted to cause reductions in benefits. The section defines the grace year and the termination grace year, and delineates the circumstances where a person can have more than one grace year. The section cites examples to clarify these concepts.
This section also states the presumption that an individual was engaged in self-employment and/or performing services for wages each month in a taxable year in which such earnings are reported until the individual provides evidence to the Social Security Administration about non-earning months in that year.
We have rewritten this section in plain language, updated outdated examples, deleted obsolete material, and changed the heading to “Excess earnings; months to which excess earnings can or cannot be charged; grace year defined,” to reflect the change in the full retirement age.
Section 404.437Excess earnings; benefit rate subject to deductions because of excess earnings.
This section delineates the various benefit reduction factors to which a beneficiary may be subjected.
We have rewritten the section by using simpler, clearer language. We also revised the section heading to “Excess earnings; benefits subject to deductions because of excess earnings.”
Section 404.452Reports to Social Security Administration of earnings; wages; net earnings from self-employment. This section contains the reporting requirements and conditions under which Social Security survivor and retirement beneficiaries, who have not yet reached full retirement age, are required to report earnings to the Social Security Administration. The purposes of these reports are: (1) To enable the Social Security Administration to adjust the monthly benefit amounts that may have been affected by the earnings test and (2) to establish whether a grace year has occurred because the earnings of a beneficiary fell below the earnings test amount. This section also conveys what reporting formats are acceptable, the filing deadlines and possible extensions, and the reporting requirements of persons receiving benefits on behalf of others (representative payees).
We have rewritten this section to reflect changes in the full retirement age and to reflect section 309(c) of 103, the Social Security Independence and Program Improvements Act of 1994, which eliminates an exception to the requirement to file an annual report for beneficiaries under age 70 receiving auxiliary or survivor's benefits when there are auxiliary or survivor beneficiaries living in a separate household, and deleted obsolete material.
Comment on Notice of Proposed Rulemaking Back to Top
On August 25, 2003, we published a notice of proposed rulemaking in the Federal Register at 68 FR 50985 and provided a 60-day period for interested individuals and organizations to comment. We received one comment from an individual concerning this action. Following is a summary of the comment and our response.
Comment: This commenter states that the original premise of social security was only to pay benefits to replace income that was reduced or lost because of retirement, death or disability. The commenter believes that the original basic rules and premise to receive benefits has been broken, as a result of eliminating the earnings test at age 65.
Response: The elimination of the earnings test at full retirement age is in accordance with Public Law 106-182 and our regulations must reflect the terms of the statute.
For the reason discussed above, we have not changed the language of the regulatory text from what was published in the notice of proposed rulemaking as a result of the public comment. However, we have changed the language from what we published in the notice of proposed rulemaking by making non-substantive wording and formatting changes and punctuation corrections. Specifically, we:
1. Revised § 404.338 by removing the phrase “widow's and widower's” and the word “the” when referring to benefits and replacing them with the word “your”.
2. Revised §§ 404.338, 404.415, 404.428, 404.429, 404.430, 404.434, 404.435, 404.437, and 404.452 by making the cross reference to the “full retirement age” rule more specifically 404.409(a).
3. Clarified § 404.430(a)(2) to explain that when we determine the earnings test exempt amounts each year, the exempt amount so determined must be greater than or equal to the corresponding exempt amount in effect for months in the taxable year in which the exempt amount determination is being made.
4. Updated the chart in § 404.430(a)(2)(iii) to add the exempt amounts for 2004 and 2005.
5. Clarified § 404.434(b) by adding a cross-reference to § 404.415(b) for the effect on divorced wife's and divorced husband's benefits.
6. Clarified § 404.435(b)(4) Example 2 by revising the reason for a child's benefit termination.
We have consulted with the Office of Management and Budget (OMB) and determined that these final regulations meet the requirements for a significant regulatory action under Executive Order 12866, as amended by Executive Order 13258. Thus, they were subject to OMB review.
We certify that these final regulations will not have a significant economic impact on a substantial number of small entities because they affect only individuals. Therefore, a regulatory flexibility analysis, as provided in the Regulatory Flexibility Act, as amended, is not required.
The Paperwork Reduction Act (PRA) of 1995 says that no persons are required to respond to a collection of information unless it displays a valid OMB control number. In accordance with the PRA, SSA is providing notice that the OMB has approved the information collection requirements contained in sections 404.428(b), 404.429(d), 404.435(d)-(e) and 404.452(a)-(e) of these final rules. The OMB Control Number for these collections is 0960-0676, expiring October 31, 2006.
For the reasons set out in the preamble, we amend subparts D and E of part 404 of Chapter III of Title 20 of the Code of Federal Regulations as follows:
1.The authority citation for subpart D of part 404 continues to read as follows: Authority:
2.Section 404.338 is revised to read as follows: § 404.338 Widow's and widower's benefits amounts.
(c) Your monthly benefit will be reduced if the insured person chooses to receive old-age benefits before reaching full retirement age. If so, your benefit will be reduced to the amount the insured person would be receiving if alive, or 821/2percent of his or her primary insurance amount, whichever is larger.
3.The authority citation for subpart E of part 404 is revised to read as follows: Authority:
4.Section 404.415 is revised to read as follows: § 404.415 Deductions because of excess earnings.
§ 404.416 [Removed]
5.Section 404.416 is removed. 6.Section 404.428 is revised to read as follows: § 404.428 Earnings in a taxable year.
(1) The date a claim for Social Security benefits is filed; (2) Attainment of any particular age;
7.Section 404.429 is revised to read as follows: § 404.429 Earnings; defined.
(2) Wages of less than the amount stipulated in section § 404.1057 that you receive in a calendar year for domestic service in the private home of your employer, or service not in the course of your employer's trade or business;
8.Section 404.430 is revised to read as follows: § 404.430 Monthly and annual exempt amounts defined; excess earnings defined.
(a) Monthly and annual exempt amounts. (1) The earnings test monthly and annual exempt amounts are the amounts of wages and self-employment income which you, as a Social Security beneficiary, may earn in any month or year without part or all of your monthly benefit being deducted because of excess earnings. The monthly exempt amount, (which is1/12of the annual exempt amount), applies only in a beneficiary's grace year or years. (See § 404.435(a) and (b)). The annual exempt amount applies to the earnings of each non-grace taxable year prior to the year of full retirement age, as defined in § 404.409(a). A larger “annual” exempt amount applies to the total earnings of the months in the taxable year that precedes the month in which you attain full retirement age. The full annual exempt amount applies to the earnings of these pre-full retirement age months, even though they are earned in less than a year. For beneficiaries using a fiscal year as a taxable year, the exempt amounts applicable at the end of the fiscal year apply.
(b) Method of determining excess earnings for years after December 1999. If you have not yet reached your year of full retirement age, your excess earnings for a taxable year are 50 percent of your earnings (as described in § 404.429) that are above the exempt amount. After December 31, 1999, in the taxable year in which you will reach full retirement age (as defined in § 404.409(a)), the annual (and monthly, if applicable) earnings limit applies to the earnings of the months prior to the month in which you reach full retirement age. Excess earnings are 33 1/3 percent of the earnings above the annual exempt amount. Your earnings after reaching the month of full retirement age are not subject to the earnings test.
9.Section 404.434 is revised to read as follows: § 404.434 Excess earnings; method of charging.
(b) Amount of excess earnings charged. (1) Insured individual's excess earnings. For each $1 of your excess earnings we will decrease by $1 the benefits to which you and all others are entitled (or deemed entitled—see § 404.420) on your earnings record. (See§ 404.439 where the excess earnings for a month are less than the total benefits payable for that month.) (See 404.415(b) for the effect on divorced wife's and divorced husband's benefits.)
10.Section 404.435 is revised to read as follows: § 404.435 Excess earnings; months to which excess earnings can or cannot be charged; grace year defined.
(4) Were entitled to payment of a disability insurance benefit as defined in § 404.315; (see § 404.1592 and § 404.1592a(b) which describes the work test if you are entitled to disability benefits);
11.Section 404.437 is revised to read as follows: § 404.437 Excess earnings; benefit rate subject to deductions because of excess earnings.
12.Section 404.452 is revised to read as follows: § 404.452 Reports to Social Security Administration of earnings; wages; net earnings from self-employment.
(e) Extension of time for filing report. (1) Request for extension to file report. Your request for an extension of time, or the request of your authorized agent, must be in writing and must be filed at a Social Security Administration office before your report is due. Your request must include the date, your name, the Social Security number of the beneficiary, the name and Social Security number of the person filing the request if other than the beneficiary, the year for which your report is due, the amount of additional time requested, the reason why you require this extension (see § 404.454), and your signature.
[FR Doc. 05-9994 Filed 5-18-05; 8:45 am]