Page images
PDF
EPUB

31, 1998. 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 1998 is a cost-ofliving computation quarter for all the purposes of the Act. The Commissioner is, therefore, required to increase benefits, effective with December 1998, 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 1998, the benefit increase is the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers from the third quarter of 1997 through the third quarter of 1998.

Section 215(X1) of the Act provides that the Consumer Price Index for a cost-ofliving computation quarter shall be the arithmetic mean of this index for the 3 months in that quarter. The arithmetic mean is rounded, 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, 1997, is: for July 1997, 157.5; for August 1997, 157.8; and for September 1997, 158.3. The arithmetic mean for this calendar quarter is 157.9. The corresponding Consumer Price Index for each month in the quarter ending September 30, 1998, is: for July 1998, 159.8; for August 1998, 160.0; and for September 1998, 160.2. The arithmetic mean for this calendar quarter is 160.0. Thus, because the Consumer Price Index for the calendar quarter ending September 30, 1998, exceeds that for the calendar quarter ending September 30, 1997 by 1.3 percent, a cost-of-living benefit increase of 1.3 percent is effective for benefits under title II of the Act beginning December 1998. Title II Benefit Amounts

In accordance with section 215(i) of the Act, in the case of insured 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 1999, benefits will increase by 1.3 percent beginning with benefits for December 1998 which are payable in January 1999. In the case of first eligibility after 1998, the 1.3 percent increase will not apply.

For eligibility after 1978, benefits are generally determined by 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, benefits are determined by means of a benefit table. A copy of this table may be obtained by writing to: Social Security Administration, Office of Public Inquiries, 4100 Annex, Baltimore, MD 21235. The table is also avail. able on the Internet at address http://www.ssa.gov/OACT/ProgData/tableForm.htmi.

Section 215(i)(2)(D) of the Act requires that, when the Commissioner determines an automatic increase in Social Security benefits, the Commissioner shall 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)(CXi). These benefits are referred to as "special minimum" benefits and 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, a person must earn at least a certain proportion (25 percent for years before 1991, and 15 percent for years after 1990) of the "old-law contribution and benefit base. 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 1.3 percent benefit increase.

SPECIAL MINIMUM PRIMARY INSURANCE AMOUNTS AND MAXIMUM FAMILY BENEFITS PAYABLE FOR DECEMBER 1998

[blocks in formation]

SPECIAL MINIMUM PRIMARY INSURANCE AMOUNTS AND

MAXIMUM FAMILY BENEFITS PAYABLE FOR DECEMBER 1998

[blocks in formation]

Section 227 of the Act provides flat-rate benefits to a worker who became age 72 before 1969 and was not insured under the usual requirements, and to his or her spouse or surviving spouse. Section 228 of the Act provides similar benefits at age 72 for certain uninsured persons. The current monthly benefit amount of $203.10 for an individual under sections 227 and 228 of the Act is increased by 1.3 percent to obtain the new amount of $205.70. The current monthly benefit amount of $101.50 for a spouse under section 227 is increased by 1.3 percent to $102.80. Title XVI Benefit Amounts

In accordance with section 1617 of the Act, Federal SSI benefit amounts for the aged, blind, and disabled are increased by 1.3 percent effective January 1999. For 1998, the monthly benefit amounts for an eligible individual, an eligible individual with an eligible spouse, and for an essential person-$494, $741, and $247, respectively—were derived from corresponding yearly unrounded Federal SSI benefit amounts of $5,932.89, $8,898.33, and $2,973.24. For 1999, these yearly unrounded amounts are increased by 1.3 percent to $6,010.02, $9,014.01, and $3,011.89, 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 1999, are $6,000, $9,012, and $3,000. The corresponding monthly amounts for 1999 are determined by dividing the yearly amounts by 12, giving $500, $751, and $250, respectively. The monthly amount is reduced by subtracting monthly countable income. In the case of an eligible individual with an eligible spouse, the amount payable is further divided equally between the two spouses. Fee for Services Performed as a Representative Payee

Sections 205(1)(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 individuals representative payee. Currently the fee is limited to the lesser of (1) 10 percent of the monthly benefit involved, or (2) $27 per month ($52 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. Due to the rounding provision, the current $27 amount remains the same for 1999, while the current $52 amount is increased by 1.3 percent to $53 for 1999.

National Average Wage Index for 1997
General

Under various provisions of the Act, several amounts are scheduled to increase automatically for 1999 based on the annual increase in the national average wage index. The amounts are (1) the OASDI contribution and benefit base, (2) the retirement test exempt amount for beneficiaries under age 65, (3) the dollar amounts, or "bend points," in the primary insurance amount and maximum family benefit for. mulas, (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), and (6) the substantial gainful activity amount applicable to statutorily blind individuals. 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. Computation

The determination the national average wage index for calendar year 1997 is based on the 1996 national average wage index of $25,913.90 announced in the Federal Register on October 30, 1997 (62 FR 58762), along with the percentage increase in average wages from 1996 to 1997 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 $24,859.17 and $26,309.73 for 1996 and 1997, respectively. To determine the national average wage index for 1997 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), the 1996 national average wage index of $25,913.90 is multiplied by the percentage increase in average wages from 1996 to 1997 (based on SSA-tabulated wage data) as follows (with the result rounded to the nearest cent): Amount

The national average wage index for 1997 is $25,913.90 times $26,309.73 divided by $24,859.17, which equals $27,426.00. Therefore, the national average wage index for calendar year 1997 is determined to be $27,426.00. OASDI Contribution and Benefit Base General

The OASDI contribution and benefit base is $72,600 for remuneration paid in 1999 and self-employment income earned in taxable years beginning in 1999.

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 1999 is set by statute at 6.2 percent for employees and employers, each. The OASDI tax rate for self-employment income earned in taxable years beginning in 1999 is 12.4 percent. (The Hospital Insurance tax is due on remuneration, without limitation, paid in 1999, at the rate of 1.45 percent for employees and employers, each, and on self-employment income earned in taxable years beginning in 1999, at the rate of 2.9 percent.)

(b) It is the maximum annual amount 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 1999 shall be equal to the larger of (1) the 1994 base of $60,600 multiplied by the ratio of the national average wage index for 1997 to that for 1992, or (2) the current base ($68,400). If the amount so determined is not a multiple of $300, it shall be rounded to the nearest multiple of $300. Amount

The ratio of the national average wage index for 1997, $27,426.00 as determined above, compared to that for 1992, $22,935.42, is 1.1957924. Multiplying the 1994 OASDI contribution and benefit base amount of $60,600 by the ratio of 1.1957924 produces the amount of $72,465.02 which must then be rounded to $72,600. Because $72,600 exceeds the current base amount of $68,400, the OASDI contribution and benefit base is determined to be $72,600 for 1999. Retirement Earnings Test Exempt Amounts General

Social Security benefits are withheld when a beneficiary under age 70 has earnings in excess of the retirement earnings test exempt amount. Since 1978, higher exempt amounts have applied to beneficiaries aged 65 through 69 compared to those under age 65. Formulas for determining the monthly exempt amounts are provided in section 203(f/(8)(B) of the Act, as amended by section 102 of the “Senior Citizens' Right to Work Act of 1996,” title I of Pub. L. 104-121. This amendment set the annual exempt amount for beneficiaries aged 65 through 69 to $12,500 for 1996, $13,500 for 1997, $14,500 for 1998, $15,500 for 1999, $17,000 for 2000, $25,000 for 2001, and $30,000 for 2002. The corresponding monthly exempt amounts are exactly one-twelfth of the annual amounts. After 2002, the monthly exempt amount for this group of beneficiaries will increase under the applicable formula.

For beneficiaries aged 65 through 69, $1 in benefits is withheld for every $3 of earnings in excess of the annual exempt amount. For beneficiaries under age 65, $1 in benefits is withheld for every $2 of earnings in excess of the annual exempt amount. Computation

Under the formula applicable to beneficiaries under age 65, the monthly exempt amount for 1999 shall be the larger of (1) the 1994 monthly exempt amount multiplied by the ratio of the national average wage index for 1997 to that for 1992, or (2) the 1998 monthly exempt amount ($760). If the amount so determined is not a multiple of $10, it shall be rounded to the nearest multiple of $10. Exempt Amount for Beneficiaries Under Age 65

The ratio of the national average wage index for 1997, $27,426.00, compared to that for 1992, $22,935.42, is 1.1957924. Multiplying the 1994 retirement earnings test monthly exempt amount of $670 by the ratio 1.1957924 produces the amount of $801.18. This must then be rounded to $800. Because $800 is larger than the corresponding current exempt amount of $760, the retirement earnings test monthly exempt amount for beneficiaries under age 65 is thus determined to be $800 for 1999. The corresponding retirement earnings test annual exempt amount for these beneficiaries is $9,600. 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. The computation formula is adjusted automatically each year to reflect changes in general wage levels, as measured by the national average wage index.

A worker's earnings are adjusted, or "indexed,” 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 benefits reflect the general rise in the standard of living that occurs during his or her working lifetime. A certain number of years of earnings are needed to compute the average indexed monthly earnings. After the number of years is determined, those years with the highest indexed earnings are chosen, the indexed earnings are summed, and the total amount is divided by the total number of months in those years. The resulting average amount is then rounded 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 1999, the national average wage index for 1997, $27,426.00, is divided by the national average wage index for each year prior to 1997 in which the worker had earnings. The actual wages and self-employment income, as defined in section 211(b) of the Act and credited for each year, is multiplied by the corresponding ratio to obtain the worker's indexed earnings for each year before 1997. Any earnings in 1997 or later are considered at face value, without indexing. The average indexed monthly earnings is then computed and used to determine the worker's primary insurance amount for 1999. 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. The dollar amounts in the formula which gov. ern the portions of the average indexed monthly earnings are frequently referred to as the “bend points" of the formula. Thus, the bend points for 1979 were $180 and $1,085.

The bend points for 1999 are obtained by multiplying the corresponding 1979 bend-point amounts by the ratio between the national average wage index for 1997, $27,426.00, and for 1977, $9,779.44. These results are then rounded to the nearest dollar. For 1999, the ratio is 2.8044551. Multiplying the 1979 amounts of $180 and $1,085 by 2.8044551 produces the amounts of $504.80 and $3,042.83. These must then be rounded to $505 and $3,043. Accordingly, the portions of the average indexed monthly earnings to be used in 1999 are determined to be the first $505, the amount between $505 and $3,043, and the amount over $3,043.

Consequently, for individuals who first become eligible for old-age insurance benefits or disability insurance benefits in 1999, or who die in 1999 before becoming eligible for benefits, their primary insurance amount will be the sum of:

(a) 90 percent of the first $505 of their average indexed monthly earnings, plus

(b) 32 percent of their average indexed monthly earnings over $505 and through $3,043, plus

(c) 15 percent of their average indexed monthly earnings over $3,043.

This amount is then rounded to the next lower multiple of $.10 if it is not already a multiple of $.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. 96265) established a formula for computing the maximum benefits payable to the family of a disabled worker. This formula is applied 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, the family maximum payable is computed the same as 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 be. tween $332 and $433, and the amount over $433. The dollar amounts in the formula which govern the portions of the primary insurance amount are frequently referred to as the "bend points” of the family-maximum formula. Thus, the bend points for 1979 were $230, $332, and $433.

The bend points for 1999 are obtained by multiplying the corresponding 1979 bend-point amounts by the ratio between the national average wage index for 1997, $27,426.00, and the average for 1977, $9,779.44. This amount is then rounded to the nearest dollar. For 1999, the ratio is 2.8044551. Multiplying the amounts of $230, $332, and $433 by 2.8044551 produces the amounts of $645.02, $931.08, and $1,214.33. These amounts are then rounded to $645, $931, and $1,214. Accordingly,

« PreviousContinue »