42 U.S.C. § 403 : US Code - Section 403: Reduction of insurance benefits

Search 42 U.S.C. § 403 : US Code - Section 403: Reduction of insurance benefits

(a) Maximum benefits
(1) In the case of an individual whose primary insurance amount
has been computed or recomputed under section 415(a)(1) or (4) of
this title, or section 415(d) of this title, as in effect after
December 1978, the total monthly benefits to which beneficiaries
may be entitled under section 402 or 423 of this title for a month
on the basis of the wages and self-employment income of such
individual shall, except as provided by paragraphs (3) and (6) (but
prior to any increases resulting from the application of paragraph
(2)(A)(ii)(III) of section 415(i) of this title), be reduced as
necessary so as not to exceed -
(A) 150 percent of such individual's primary insurance amount
to the extent that it does not exceed the amount established with
respect to this subparagraph by paragraph (2),
(B) 272 percent of such individual's primary insurance amount
to the extent that it exceeds the amount established with respect
to subparagraph (A) but does not exceed the amount established
with respect to this subparagraph by paragraph (2),
(C) 134 percent of such individual's primary insurance amount
to the extent that it exceeds the amount established with respect
to subparagraph (B) but does not exceed the amount established
with respect to this subparagraph by paragraph (2), and
(D) 175 percent of such individual's primary insurance amount
to the extent that it exceeds the amount established with respect
to subparagraph (C).
Any such amount that is not a multiple of $0.10 shall be decreased
to the next lower multiple of $0.10.
(2)(A) For individuals who initially become eligible for old-age
or disability insurance benefits, or who die (before becoming so
eligible for such benefits), in the calendar year 1979, the amounts
established with respect to subparagraphs (A), (B), and (C) of
paragraph (1) shall be $230, $332, and $433, respectively.
(B) For individuals who initially become eligible for old-age or
disability insurance benefits, or who die (before becoming so
eligible for such benefits), in any calendar year after 1979, each
of the amounts so established shall equal the product of the
corresponding amount established for the calendar year 1979 by
subparagraph (A) of this paragraph and the quotient obtained under
subparagraph (B)(ii) of section 415(a)(1) of this title, with such
product being rounded in the manner prescribed by section
415(a)(1)(B)(iii) of this title.
(C) In each calendar year after 1978 the Commissioner of Social
Security shall publish in the Federal Register, on or before
November 1, the formula which (except as provided in section
415(i)(2)(D) of this title) is to be applicable under this
paragraph to individuals who become eligible for old-age or
disability insurance benefits, or who die (before becoming eligible
for such benefits), in the following calendar year.
(D) A year shall not be counted as the year of an individual's
death or eligibility for purposes of this paragraph or paragraph
(8) in any case where such individual was entitled to a disability
insurance benefit for any of the 12 months immediately preceding
the month of such death or eligibility (but there shall be counted
instead the year of the individual's eligibility for the disability
insurance benefits to which he was entitled during such 12 months).
(3)(A) When an individual who is entitled to benefits on the
basis of the wages and self-employment income of any insured
individual and to whom this subsection applies would (but for the
provisions of section 402(k)(2)(A) of this title) be entitled to
child's insurance benefits for a month on the basis of the wages
and self-employment income of one or more other insured
individuals, the total monthly benefits to which all beneficiaries
are entitled on the basis of such wages and self-employment income
shall not be reduced under this subsection to less than the smaller
of -
(i) the sum of the maximum amounts of benefits payable on the
basis of the wages and self-employment income of all such insured
individuals, or
(ii) an amount (I) initially equal to the product of 1.75 and
the primary insurance amount that would be computed under section
415(a)(1) of this title, for January of the year determined for
purposes of this clause under the following two sentences, with
respect to average indexed monthly earnings equal to one-twelfth
of the contribution and benefit base determined for that year
under section 430 of this title, and (II) thereafter increased in
accordance with the provisions of section 415(i)(2)(A)(ii) of
this title.
The year established for purposes of clause (ii) shall be 1983 or,
if it occurs later with respect to any individual, the year in
which occurred the month that the application of the reduction
provisions contained in this subparagraph began with respect to
benefits payable on the basis of the wages and self-employment
income of the insured individual. If for any month subsequent to
the first month for which clause (ii) applies (with respect to
benefits payable on the basis of the wages and self-employment
income of the insured individual) the reduction under this
subparagraph ceases to apply, then the year determined under the
preceding sentence shall be redetermined (for purposes of any
subsequent application of this subparagraph with respect to
benefits payable on the basis of such wages and self-employment
income) as though this subparagraph had not been previously
applicable.
(B) When two or more persons were entitled (without the
application of section 402(j)(1) of this title and section 423(b)
of this title) to monthly benefits under section 402 or 423 of this
title for January 1971 or any prior month on the basis of the wages
and self-employment income of such insured individual and the
provisions of this subsection as in effect for any such month were
applicable in determining the benefit amount of any persons on the
basis of such wages and self-employment income, the total of
benefits for any month after January 1971 shall not be reduced to
less than the largest of -
(i) the amount determined under this subsection without regard
to this subparagraph,
(ii) the largest amount which has been determined for any month
under this subsection for persons entitled to monthly benefits on
the basis of such insured individual's wages and self-employment
income, or
(iii) if any persons are entitled to benefits on the basis of
such wages and self-employment income for the month before the
effective month (after September 1972) of a general benefit
increase under this title (as defined in section 415(i)(3) of
this title) or a benefit increase under the provisions of section
415(i) of this title, an amount equal to the sum of amounts
derived by multiplying the benefit amount determined under this
subchapter (excluding any part thereof determined under section
402(w) of this title) for the month before such effective month
(including this subsection, but without the application of
section 422(b) (!1) of this title, section 402(q) of this title,
and subsections (b), (c), and (d) of this section), for each such
person for such month, by a percentage equal to the percentage of
the increase provided under such benefit increase (with any such
increased amount which is not a multiple of $0.10 being rounded
to the next lower multiple of $0.10);
but in any such case (I) subparagraph (A) of this paragraph shall
not be applied to such total of benefits after the application of
clause (ii) or (iii), and (II) if section 402(k)(2)(A) of this
title was applicable in the case of any such benefits for a month,
and ceases to apply for a month after such month, the provisions of
clause (ii) or (iii) shall be applied, for and after the month in
which section 402(k)(2)(A) of this title ceases to apply, as though
subparagraph (A) of this paragraph had not been applicable to such
total of benefits for the last month for which clause (ii) or (iii)
was applicable.
(C) When any of such individuals is entitled to monthly benefits
as a divorced spouse under section 402(b) or (c) of this title or
as a surviving divorced spouse under section 402(e) or (f) of this
title for any month, the benefit to which he or she is entitled on
the basis of the wages and self-employment income of such insured
individual for such month shall be determined without regard to
this subsection, and the benefits of all other individuals who are
entitled for such month to monthly benefits under section 402 of
this title on the wages and self-employment income of such insured
individual shall be determined as if no such divorced spouse or
surviving divorced spouse were entitled to benefits for such month.
(D) In any case in which -
(i) two or more individuals are entitled to monthly benefits
for the same month as a spouse under subsection (b) or (c) of
section 402 of this title, or as a surviving spouse under
subsection (e), (f), or (g) of section 402 of this title,
(ii) at least one of such individuals is entitled by reason of
subparagraph (A)(ii) or (B) of section 416(h)(1) of this title,
and
(iii) such entitlements are based on the wages and self-
employment income of the same insured individual,
the benefit of the entitled individual whose entitlement is based
on a valid marriage (as determined without regard to subparagraphs
(A)(ii) and (B) of section 416(h)(1) of this title) to such insured
individual shall, for such month and all months thereafter, be
determined without regard to this subsection, and the benefits of
all other individuals who are entitled, for such month or any month
thereafter, to monthly benefits under section 402 of this title
based on the wages and self-employment income of such insured
individual shall be determined as if such entitled individual were
not entitled to benefits for such month.
(4) In any case in which benefits are reduced pursuant to the
provisions of this subsection, the reduction shall be made after
any deductions under this section and after any deductions under
section 422(b) (!1) of this title. Notwithstanding the preceding
sentence, any reduction under this subsection in the case of an
individual who is entitled to a benefit under subsection (b), (c),
(d), (e), (f), (g), or (h) of section 402 of this title for any
month on the basis of the same wages and self-employment income as
another person -
(A) who also is entitled to a benefit under subsection (b),
(c), (d), (e), (f), (g), or (h) of section 402 of this title for
such month,
(B) who does not live in the same household as such individual,
and
(C) whose benefit for such month is suspended (in whole or in
part) pursuant to subsection (h)(3) of this section,
shall be made before the suspension under subsection (h)(3) of this
section. Whenever a reduction is made under this subsection in the
total of monthly benefits to which individuals are entitled for any
month on the basis of the wages and self-employment income of an
insured individual, each such benefit other than the old-age or
disability insurance benefit shall be proportionately decreased.
(5) Notwithstanding any other provision of law, when -
(A) two or more persons are entitled to monthly benefits for a
particular month on the basis of the wages and self-employment
income of an insured individual and (for such particular month)
the provisions of this subsection are applicable to such monthly
benefits, and
(B) such individual's primary insurance amount is increased for
the following month under any provision of this subchapter,
then the total of monthly benefits for all persons on the basis of
such wages and self-employment income for such particular month, as
determined under the provisions of this subsection, shall for
purposes of determining the total monthly benefits for all persons
on the basis of such wages and self-employment income for months
subsequent to such particular month be considered to have been
increased by the smallest amount that would have been required in
order to assure that the total of monthly benefits payable on the
basis of such wages and self-employment income for any such
subsequent month will not be less (after the application of the
other provisions of this subsection and section 402(q) of this
title) than the total of monthly benefits (after the application of
the other provisions of this subsection and section 402(q) of this
title) payable on the basis of such wages and self-employment
income for such particular month.
(6) Notwithstanding any of the preceding provisions of this
subsection other than paragraphs (3)(A), (3)(C), (3)(D), (4), and
(5) (but subject to section 415(i)(2)(A)(ii) of this title), the
total monthly benefits to which beneficiaries may be entitled under
sections 402 and 423 of this title for any month on the basis of
the wages and self-employment income of an individual entitled to
disability insurance benefits shall be reduced (before the
application of section 424a of this title) to the smaller of -
(A) 85 percent of such individual's average indexed monthly
earnings (or 100 percent of his primary insurance amount, if
larger), or
(B) 150 percent of such individual's primary insurance amount.
(7) In the case of any individual who is entitled for any month
to benefits based upon the primary insurance amounts of two or more
insured individuals, one or more of which primary insurance amounts
were determined under section 415(a) or (d) of this title as in
effect (without regard to the table contained therein) prior to
January 1979 and one or more of which primary insurance amounts
were determined under section 415(a)(1) or (4) of this title, or
section 415(d) of this title, as in effect after December 1978, the
total benefits payable to that individual and all other individuals
entitled to benefits for that month based upon those primary
insurance amounts shall be reduced to an amount equal to the amount
determined in accordance with the provisions of paragraph
(3)(A)(ii) of this subsection, except that for this purpose the
references to subparagraph (A) in the last two sentences of
paragraph (3)(A) shall be deemed to be references to paragraph (7).
(8) Subject to paragraph (7) and except as otherwise provided in
paragraph (10)(C), this subsection as in effect in December 1978
shall remain in effect with respect to a primary insurance amount
computed under section 415(a) or (d) of this title, as in effect
(without regard to the table contained therein) in December 1978
and as amended by section 5117 of the Omnibus Budget Reconciliation
Act of 1990, except that a primary insurance amount so computed
with respect to an individual who first becomes eligible for an old-
age or disability insurance benefit, or dies (before becoming
eligible for such a benefit), after December 1978, shall instead be
governed by this section as in effect after December 1978. For
purposes of the preceding sentence, the phrase "rounded to the next
higher multiple of $0.10", as it appeared in subsection (a)(2)(C)
of this section as in effect in December 1978, shall be deemed to
read "rounded to the next lower multiple of $0.10".
(9) When -
(A) one or more persons were entitled (without the application
of section 402(j)(1) of this title) to monthly benefits under
section 402 of this title for May 1978 on the basis of the wages
and self-employment income of an individual,
(B) the benefit of at least one such person for June 1978 is
increased by reason of the amendments made by section 204 of the
Social Security Amendments of 1977; and
(C) the total amount of benefits to which all such persons are
entitled under such section 402 of this title are reduced under
the provisions of this subsection (or would be so reduced except
for the first sentence of subsection (a)(4) of this section),
then the amount of the benefit to which each such person is
entitled for months after May 1978 shall be increased (after such
reductions are made under this subsection) to the amount such
benefits would have been if the benefit of the person or persons
referred to in subparagraph (B) had not been so increased.
(10)(A) Subject to subparagraphs (B) and (C) -
(i) the total monthly benefits to which beneficiaries may be
entitled under sections 402 and 423 of this title for a month on
the basis of the wages and self-employment income of an
individual whose primary insurance amount is computed under
section 415(a)(2)(B)(i) of this title shall equal the total
monthly benefits which were authorized by this section with
respect to such individual's primary insurance amount for the
last month of his prior entitlement to disability insurance
benefits, increased for this purpose by the general benefit
increases and other increases under section 415(i) of this title
that would have applied to such total monthly benefits had the
individual remained entitled to disability insurance benefits
until the month in which he became entitled to old-age insurance
benefits or reentitled to disability insurance benefits or died,
and
(ii) the total monthly benefits to which beneficiaries may be
entitled under sections 402 and 423 of this title for a month on
the basis of the wages and self-employment income of an
individual whose primary insurance amount is computed under
section 415(a)(2)(C) of this title shall equal the total monthly
benefits which were authorized by this section with respect to
such individual's primary insurance amount for the last month of
his prior entitlement to disability insurance benefits.
(B) In any case in which -
(i) the total monthly benefits with respect to such
individual's primary insurance amount for the last month of his
prior entitlement to disability insurance benefits was computed
under paragraph (6), and
(ii) the individual's primary insurance amount is computed
under subparagraph (B)(i) or (C) of section 415(a)(2) of this
title by reason of the individual's entitlement to old-age
insurance benefits or death,
the total monthly benefits shall equal the total monthly benefits
that would have been authorized with respect to the primary
insurance amount for the last month of his prior entitlement to
disability insurance benefits if such total monthly benefits had
been computed without regard to paragraph (6).
(C) This paragraph shall apply before the application of
paragraph (3)(A), and before the application of subsection (a)(1)
of this section as in effect in December 1978.
(b) Deductions on account of work
(1) Deductions, in such amounts and at such time or times as the
Commissioner of Social Security shall determine, shall be made from
any payment or payments under this subchapter to which an
individual is entitled, and from any payment or payments to which
any other persons are entitled on the basis of such individual's
wages and self-employment income, until the total of such
deductions equals -
(A) such individual's benefit or benefits under section 402 of
this title for any month, and
(B) if such individual was entitled to old-age insurance
benefits under section 402(a) of this title for such month, the
benefit or benefits of all other persons for such month under
section 402 of this title based on such individual's wages and
self-employment income,
if for such month he is charged with excess earnings, under the
provisions of subsection (f) of this section, equal to the total of
benefits referred to in clauses (A) and (B). If the excess earnings
so charged are less than such total of benefits, such deductions
with respect to such month shall be equal only to the amount of
such excess earnings. If a child who has attained the age of 18 and
is entitled to child's insurance benefits, or a person who is
entitled to mother's or father's insurance benefits, is married to
an individual entitled to old-age insurance benefits under section
402(a) of this title, such child or such person, as the case may
be, shall, for the purposes of this subsection and subsection (f)
of this section, be deemed to be entitled to such benefits on the
basis of the wages and self-employment income of such individual
entitled to old-age insurance benefits. If a deduction has already
been made under this subsection with respect to a person's benefit
or benefits under section 402 of this title for a month, he shall
be deemed entitled to payments under such section for such month
for purposes of further deductions under this subsection, and for
purposes of charging of each person's excess earnings under
subsection (f) of this section, only to the extent of the total of
his benefits remaining after such earlier deductions have been
made. For purposes of this subsection and subsection (f) of this
section -
(i) an individual shall be deemed to be entitled to payments
under section 402 of this title equal to the amount of the
benefit or benefits to which he is entitled under such section
after the application of subsection (a) of this section, but
without the application of the first sentence of paragraph (4)
thereof; and
(ii) if a deduction is made with respect to an individual's
benefit or benefits under section 402 of this title because of
the occurrence in any month of an event specified in subsection
(c) or (d) of this section or in section 422(b) (!1) of this
title, such individual shall not be considered to be entitled to
any benefits under such section 402 for such month.
(2)(A) Except as provided in subparagraph (B), in any case in
which -
(i) any of the other persons referred to in paragraph (1)(B) is
entitled to monthly benefits as a divorced spouse under section
402(b) or (c) of this title for any month, and
(ii) such person has been divorced for not less than 2 years,
the benefit to which he or she is entitled on the basis of the
wages and self-employment income of the individual referred to in
paragraph (1) for such month shall be determined without regard to
deductions under this subsection as a result of excess earnings of
such individual, and the benefits of all other individuals who are
entitled for such month to monthly benefits under section 402 of
this title on the basis of the wages and self-employment income of
such individual referred to in paragraph (1) shall be determined as
if no such divorced spouse were entitled to benefits for such
month.
(B) Clause (ii) of subparagraph (A) shall not apply with respect
to any divorced spouse in any case in which the individual referred
to in paragraph (1) became entitled to old-age insurance benefits
under section 402(a) of this title before the date of the divorce.
(c) Deductions on account of noncovered work outside United States
or failure to have child in care
Deductions, in such amounts and at such time or times as the
Commissioner of Social Security shall determine, shall be made from
any payment or payments under this subchapter to which an
individual is entitled, until the total of such deductions equals
such individual's benefits or benefit under section 402 of this
title for any month -
(1) in which such individual is under retirement age (as
defined in section 416(l) of this title) and for more than forty-
five hours of which such individual engaged in noncovered
remunerative activity outside the United States;
(2) in which such individual, if a wife or husband under
retirement age (as defined in section 416(l) of this title)
entitled to a wife's or husband's insurance benefit, did not have
in his or her care (individually or jointly with his or her
spouse) a child of such spouse entitled to a child's insurance
benefit and such wife's or husband's insurance benefit for such
month was not reduced under the provisions of section 402(q) of
this title;
(3) in which such individual, if a widow or widower entitled to
a mother's or father's insurance benefit, did not have in his or
her care a child of his or her deceased spouse entitled to a
child's insurance benefit; or
(4) in which such an individual, if a surviving divorced mother
or father entitled to a mother's or father's insurance benefit,
did not have in his or her care a child of his or her deceased
former spouse who (A) is his or her son, daughter, or legally
adopted child and (B) is entitled to a child's insurance benefit
on the basis of the wages and self-employment income of such
deceased former spouse.
For purposes of paragraphs (2), (3), and (4) of this subsection, a
child shall not be considered to be entitled to a child's insurance
benefit for any month in which paragraph (1) of section 402(s) of
this title applies or an event specified in section 422(b) (!1) of
this title occurs with respect to such child. Subject to paragraph
(3) of such section 402(s) of this title, no deduction shall be
made under this subsection from any child's insurance benefit for
the month in which the child entitled to such benefit attained the
age of eighteen or any subsequent month; nor shall any deduction be
made under this subsection from any widow's or widower's insurance
benefit if the widow, surviving divorced wife, widower, or
surviving divorced husband involved became entitled to such benefit
prior to attaining age 60.
(d) Deductions from dependents' benefits on account of noncovered
work outside United States by old-age insurance beneficiary
(1)(A) Deductions shall be made from any wife's, husband's, or
child's insurance benefit, based on the wages and self-employment
income of an individual entitled to old-age insurance benefits, to
which a wife, divorced wife, husband, divorced husband, or child is
entitled, until the total of such deductions equals such wife's,
husband's, or child's insurance benefit or benefits under section
402 of this title for any month in which such individual is under
retirement age (as defined in section 416(l) of this title) and for
more than forty-five hours of which such individual engaged in
noncovered remunerative activity outside the United States.
(B)(i) Except as provided in clause (ii), in any case in which -
(I) a divorced spouse is entitled to monthly benefits under
section 402(b) or (c) of this title for any month, and
(II) such divorced spouse has been divorced for not less than 2
years,
the benefit to which he or she is entitled for such month on the
basis of the wages and self-employment income of the individual
entitled to old-age insurance benefits referred to in subparagraph
(A) shall be determined without regard to deductions under this
paragraph as a result of excess earnings of such individual, and
the benefits of all other individuals who are entitled for such
month to monthly benefits under section 402 of this title on the
basis of the wages and self-employment income of such individual
referred to in subparagraph (A) shall be determined as if no such
divorced spouse were entitled to benefits for such month.
(ii) Subclause (II) of clause (i) shall not apply with respect to
any divorced spouse in any case in which the individual entitled to
old-age insurance benefits referred to in subparagraph (A) became
entitled to such benefits before the date of the divorce.
(2) Deductions shall be made from any child's insurance benefit
to which a child who has attained the age of eighteen is entitled,
or from any mother's or father's insurance benefit to which a
person is entitled, until the total of such deductions equals such
child's insurance benefit or benefits or mother's or father's
insurance benefit or benefits under section 402 of this title for
any month in which such child or person entitled to mother's or
father's insurance benefits is married to an individual under
retirement age (as defined in section 416(l) of this title) who is
entitled to old-age insurance benefits and for more than forty-five
hours of which such individual engaged in noncovered remunerative
activity outside the United States.
(e) Occurrence of more than one event
If more than one of the events specified in subsections (c) and
(d) of this section and section 422(b) (!1) of this title occurs in
any one month which would occasion deductions equal to a benefit
for such month, only an amount equal to such benefit shall be
deducted.
(f) Months to which earnings are charged
For purposes of subsection (b) of this section -
(1) The amount of an individual's excess earnings (as defined
in paragraph (3)) shall be charged to months as follows: There
shall be charged to the first month of such taxable year an
amount of his excess earnings equal to the sum of the payments to
which he and all other persons (excluding divorced spouses
referred to in subsection (b)(2) of this section) are entitled
for such month under section 402 of this title on the basis of
his wages and self-employment income (or the total of his excess
earnings if such excess earnings are less than such sum), and the
balance, if any, of such excess earnings shall be charged to each
succeeding month in such year to the extent, in the case of each
such month, of the sum of the payments to which such individual
and all such other persons are entitled for such month under
section 402 of this title on the basis of his wages and self-
employment income, until the total of such excess has been so
charged. Where an individual is entitled to benefits under
section 402(a) of this title and other persons (excluding
divorced spouses referred to in subsection (b)(2) of this
section) are entitled to benefits under section 402(b), (c), or
(d) of this title on the basis of the wages and self-employment
income of such individual, the excess earnings of such individual
for any taxable year shall be charged in accordance with the
provisions of this subsection before the excess earnings of such
persons for a taxable year are charged to months in such
individual's taxable year. Notwithstanding the preceding
provisions of this paragraph but subject to section 402(s) of
this title, no part of the excess earnings of an individual shall
be charged to any month (A) for which such individual was not
entitled to a benefit under this subchapter, (B) in which such
individual was at or above retirement age (as defined in section
416(l) of this title), (C) in which such individual, if a child
entitled to child's insurance benefits, has attained the age of
18, (D) for which such individual is entitled to widow's or
widower's insurance benefits if such individual became so
entitled prior to attaining age 60, (E) in which such individual
did not engage in self-employment and did not render services for
wages (determined as provided in paragraph (5) of this
subsection) of more than the applicable exempt amount as
determined under paragraph (8), if such month is in the taxable
year in which occurs the first month after December 1977 that is
both (i) a month for which the individual is entitled to benefits
under subsection (a), (b), (c), (d), (e), (f), (g), or (h) of
section 402 of this title (without having been entitled for the
preceding month to a benefit under any other of such
subsections), and (ii) a month in which the individual did not
engage in self-employment and did not render services for wages
(determined as provided in paragraph (5)) of more than the
applicable exempt amount as determined under paragraph (8), or
(F) in which such individual did not engage in self-employment
and did not render services for wages (determined as provided in
paragraph (5) of this subsection) of more than the applicable
exempt amount as determined under paragraph (8), in the case of
an individual entitled to benefits under section 402(b) or (c) of
this title (but only by reason of having a child in his or her
care within the meaning of paragraph (1)(B) of subsection (b) or
(c) of this section, as may be applicable) or under section
402(d) or (g) of this title, if such month is in a year in which
such entitlement ends for a reason other than the death of such
individual, and such individual is not entitled to any benefits
under this subchapter for the month following the month during
which such entitlement under section 402(b), (d), or (g) of this
title ended.
(2) As used in paragraph (1), the term "first month of such
taxable year" means the earliest month in such year to which the
charging of excess earnings described in such paragraph is not
prohibited by the application of clauses (A), (B), (C), (D), (E),
and (F) thereof.
(3) For purposes of paragraph (1) and subsection (h) of this
section, an individual's excess earnings for a taxable year shall
be 33 1/3 percent of his earnings for such year in excess of the
product of the applicable exempt amount as determined under
paragraph (8) in the case of an individual who has attained (or,
but for the individual's death, would have attained) retirement
age (as defined in section 416(l) of this title) before the close
of such taxable year, or 50 percent of his earnings for such year
in excess of such product in the case of any other individual,
multiplied by the number of months in such year, except that, in
determining an individual's excess earnings for the taxable year
in which he attains retirement age (as defined in section 416(l)
of this title), there shall be excluded any earnings of such
individual for the month in which he attains such age and any
subsequent month (with any net earnings or net loss from self-
employment in such year being prorated in an equitable manner
under regulations of the Commissioner of Social Security). For
purposes of the preceding sentence, notwithstanding section
411(e) of this title, the number of months in the taxable year in
which an individual dies shall be 12. The excess earnings as
derived under the first sentence of this paragraph, if not a
multiple of $1, shall be reduced to the next lower multiple of
$1.
(4) For purposes of clause (E) of paragraph (1) -
(A) An individual will be presumed, with respect to any
month, to have been engaged in self-employment in such month
until it is shown to the satisfaction of the Commissioner of
Social Security that such individual rendered no substantial
services in such month with respect to any trade or business
the net income or loss of which is includible in computing (as
provided in paragraph (5) of this subsection) his net earnings
or net loss from self-employment for any taxable year. The
Commissioner of Social Security shall by regulations prescribe
the methods and criteria for determining whether or not an
individual has rendered substantial services with respect to
any trade or business.
(B) An individual will be presumed, with respect to any
month, to have rendered services for wages (determined as
provided in paragraph (5) of this subsection) of more than the
applicable exempt amount as determined under paragraph (8)
until it is shown to the satisfaction of the Commissioner of
Social Security that such individual did not render such
services in such month for more than such amount.
(5)(A) An individual's earnings for a taxable year shall be (i)
the sum of his wages for services rendered in such year and his
net earnings from self-employment for such year, minus (ii) any
net loss from self-employment for such year.
(B) For purposes of this section -
(i) an individual's net earnings from self-employment for any
taxable year shall be determined as provided in section 411 of
this title, except that paragraphs (1), (4), and (5) of section
411(c) of this title shall not apply and the gross income shall
be computed by excluding the amounts provided by subparagraph
(D) of this paragraph, and
(ii) an individual's net loss from self-employment for any
taxable year is the excess of the deductions (plus his
distributive share of loss described in section 702(a)(8) of
the Internal Revenue Code of 1986) taken into account under
clause (i) over the gross income (plus his distributive share
of income so described) taken into account under clause (i).
(C) For purposes of this subsection, an individual's wages
shall be computed without regard to the limitations as to amounts
of remuneration specified in paragraphs (1), (6)(B), (6)(C),
(7)(B), and (8) of section 409(a) of this title; and in making
such computation services which do not constitute employment as
defined in section 410 of this title, performed within the United
States by the individual as an employee or performed outside the
United States in the active military or naval service of the
United States, shall be deemed to be employment as so defined if
the remuneration for such services is not includible in computing
his net earnings or net loss from self-employment. The term
"wages" does not include -
(i) the amount of any payment made to, or on behalf of, an
employee or any of his dependents (including any amount paid by
an employer for insurance or annuities, or into a fund, to
provide for any such payment) on account of retirement, or
(ii) any payment or series of payments by an employer to an
employee or any of his dependents upon or after the termination
of the employee's employment relationship because of retirement
after attaining an age specified in a plan referred to in
section 409(a)(11)(B) of this title or in a pension plan of the
employer.
(D) In the case of -
(i) an individual who has attained retirement age (as defined
in section 416(l) of this title) on or before the last day of
the taxable year, and who shows to the satisfaction of the
Commissioner of Social Security that he or she is receiving
royalties attributable to a copyright or patent obtained before
the taxable year in which he or she attained such age and that
the property to which the copyright or patent relates was
created by his or her own personal efforts, or
(ii) an individual who has become entitled to insurance
benefits under this subchapter, other than benefits under
section 423 of this title or benefits payable under section
402(d) of this title by reason of being under a disability, and
who shows to the satisfaction of the Commissioner of Social
Security that he or she is receiving, in a year after his or
her initial year of entitlement to such benefits, any other
income not attributable to services performed after the month
in which he or she initially became entitled to such benefits,
there shall be excluded from gross income any such royalties or
other income.
(E) For purposes of this section, any individual's net earnings
from self-employment which result from or are attributable to the
performance of services by such individual as a director of a
corporation during any taxable year shall be deemed to have been
derived (and received) by such individual in that year, at the
time the services were performed, regardless of when the income,
on which the computation of such net earnings from self-
employment is based, is actually paid to or received by such
individual (unless such income was actually paid and received
prior to that year).
(6) For purposes of this subsection, wages (determined as
provided in paragraph (5)(C)) which, according to reports
received by the Commissioner of Social Security, are paid to an
individual during a taxable year shall be presumed to have been
paid to him for services performed in such year until it is shown
to the satisfaction of the Commissioner of Social Security that
they were paid for services performed in another taxable year. If
such reports with respect to an individual show his wages for a
calendar year, such individual's taxable year shall be presumed
to be a calendar year for purposes of this subsection until it is
shown to the satisfaction of the Commissioner of Social Security
that his taxable year is not a calendar year.
(7) Where an individual's excess earnings are charged to a
month and the excess earnings so charged are less than the total
of the payments (without regard to such charging) to which all
persons (excluding divorced spouses referred to in subsection
(b)(2) of this section) are entitled under section 402 of this
title for such month on the basis of his wages and self-
employment income, the difference between such total and the
excess so charged to such month shall be paid (if it is otherwise
payable under this subchapter) to such individual and other
persons in the proportion that the benefit to which each of them
is entitled (without regard to such charging, without the
application of section 402(k)(3) of this title, and prior to the
application of section 403(a) of this title) bears to the total
of the benefits to which all of them are entitled.
(8)(A) Whenever the Commissioner of Social Security pursuant to
section 415(i) of this title increases benefits effective with
the month of December following a cost-of-living computation
quarter (!2) the Commissioner shall also determine and publish in
the Federal Register on or before November 1 of the calendar year
in which such quarter occurs the new exempt amounts (separately
stated for individuals described in subparagraph (D) and for
other individuals) which are to be applicable (unless prevented
from becoming effective by subparagraph (C)) with respect to
taxable years ending in (or with the close of) the calendar year
after the calendar year in which such benefit increase is
effective (or, in the case of an individual who dies during the
calendar year after the calendar year in which the benefit
increase is effective, with respect to such individual's taxable
year which ends, upon his death, during such year).
(B) Except as otherwise provided in subparagraph (D), the
exempt amount which is applicable to individuals described in
such subparagraph and the exempt amount which is applicable to
other individuals, for each month of a particular taxable year,
shall each be whichever of the following is the larger -
(i) the corresponding exempt amount which is in effect with
respect to months in the taxable year in which the
determination under subparagraph (A) is made, or
(ii) the product of the corresponding exempt amount which is
in effect with respect to months in the taxable year ending
after 2001 and before 2003 (with respect to individuals
described in subparagraph (D)) or the taxable year ending after
1993 and before 1995 (with respect to other individuals), and
the ratio of -
(I) the national average wage index (as defined in section
409(k)(1) of this title) for the calendar year before the
calendar year in which the determination under subparagraph
(A) is made, to
(II) the national average wage index (as so defined) for
2000 (with respect to individuals described in subparagraph
(D)) or 1992 (with respect to other individuals),
with such product, if not a multiple of $10, being rounded to
the next higher multiple of $10 where such product is a
multiple of $5 but not of $10 and to the nearest multiple of
$10 in any other case.
Whenever the Commissioner of Social Security determines that an
exempt amount is to be increased in any year under this
paragraph, the Commissioner shall notify the House Committee on
Ways and Means and the Senate Committee on Finance within 30 days
after the close of the base quarter (as defined in section
415(i)(1)(A) of this title) in such year of the estimated amount
of such increase, indicating the new exempt amount, the actuarial
estimates of the effect of the increase, and the actuarial
assumptions and methodology used in preparing such estimates.
(C) Notwithstanding the determination of a new exempt amount by
the Commissioner of Social Security under subparagraph (A) (and
notwithstanding any publication thereof under such subparagraph
or any notification thereof under the last sentence of
subparagraph (B)), such new exempt amount shall not take effect
pursuant thereto if during the calendar year in which such
determination is made a law increasing the exempt amount is
enacted.
(D) Notwithstanding any other provision of this subsection, the
exempt amount which is applicable to an individual who has
attained retirement age (as defined in section 416(l) of this
title) before the close of the taxable year involved shall be -
(i) for each month of any taxable year ending after 1995 and
before 1997, $1,041.66 2/3 ,
(ii) for each month of any taxable year ending after 1996 and
before 1998, $1,125.00,
(iii) for each month of any taxable year ending after 1997
and before 1999, $1,208.33 1/3 ,
(iv) for each month of any taxable year ending after 1998 and
before 2000, $1,291.66 2/3 ,
(v) for each month of any taxable year ending after 1999 and
before 2001, $1,416.66 2/3 ,
(vi) for each month of any taxable year ending after 2000 and
before 2002, $2,083.33 1/3 , and
(vii) for each month of any taxable year ending after 2001
and before 2003, $2,500.00.
(E) Notwithstanding subparagraph (D), no deductions in benefits
shall be made under subsection (b) of this section with respect
to the earnings of any individual in any month beginning with the
month in which the individual attains retirement age (as defined
in section 416(l) of this title).
(9) For purposes of paragraphs (3), (5)(D)(i), (8)(D), and
(8)(E), the term "retirement age (as defined in section 416(l) of
this title)", with respect to any individual entitled to monthly
insurance benefits under section 402 of this title, means the
retirement age (as so defined) which is applicable in the case of
old-age insurance benefits, regardless of whether or not the
particular benefits to which the individual is entitled (or the
only such benefits) are old-age insurance benefits.
(g) Penalty for failure to report certain events
Any individual in receipt of benefits subject to deduction under
subsection (c) of this section, (or who is in receipt of such
benefits on behalf of another individual), because of the
occurrence of an event specified therein, who fails to report such
occurrence to the Commissioner of Social Security prior to the
receipt and acceptance of an insurance benefit for the second month
following the month in which such event occurred, shall suffer
deductions in addition to those imposed under subsection (c) of
this section as follows:
(1) if such failure is the first one with respect to which an
additional deduction is imposed by this subsection, such
additional deduction shall be equal to his benefit or benefits
for the first month of the period for which there is a failure to
report even though such failure is with respect to more than one
month;
(2) if such failure is the second one with respect to which an
additional deduction is imposed by this subsection, such
additional deduction shall be equal to two times his benefit or
benefits for the first month of the period for which there is a
failure to report even though such failure is with respect to
more than two months; and
(3) if such failure is the third or a subsequent one for which
an additional deduction is imposed under this subsection, such
additional deduction shall be equal to three times his benefit or
benefits for the first month of the period for which there is a
failure to report even though the failure to report is with
respect to more than three months;
except that the number of additional deductions required by this
subsection shall not exceed the number of months in the period for
which there is a failure to report. As used in this subsection, the
term "period for which there is a failure to report" with respect
to any individual means the period for which such individual
received and accepted insurance benefits under section 402 of this
title without making a timely report and for which deductions are
required under subsection (c) of this section.
(h) Report of earnings to Commissioner
(1)(A) If an individual is entitled to any monthly insurance
benefit under section 402 of this title during any taxable year in
which he has earnings or wages, as computed pursuant to paragraph
(5) of subsection (f) of this section, in excess of the product of
the applicable exempt amount as determined under subsection (f)(8)
of this section times the number of months in such year, such
individual (or the individual who is in receipt of such benefit on
his behalf) shall make a report to the Commissioner of Social
Security of his earnings (or wages) for such taxable year. Such
report shall be made on or before the fifteenth day of the fourth
month following the close of such year, and shall contain such
information and be made in such manner as the Commissioner of
Social Security may by regulations prescribe. Such report need not
be made for any taxable year -
(i) beginning with or after the month in which such individual
attained retirement age (as defined in section 416(l) of this
title), or
(ii) if benefit payments for all months (in such taxable year)
in which such individual is under retirement age (as defined in
section 416(l) of this title) have been suspended under the
provisions of the first sentence of paragraph (3) of this
subsection, unless -
(I) such individual is entitled to benefits under subsection
(b), (c), (d), (e), (f), (g), or (h) of section 402 of this
title,
(II) such benefits are reduced under subsection (a) of this
section for any month in such taxable year, and
(III) in any such month there is another person who also is
entitled to benefits under subsection (b), (c), (d), (e), (f),
(g), or (h) of section 402 of this title on the basis of the
same wages and self-employment income and who does not live in
the same household as such individual.
The Commissioner of Social Security may grant a reasonable
extension of time for making the report of earnings required in
this paragraph if the Commissioner finds that there is valid reason
for a delay, but in no case may the period be extended more than
four months.
(B) If the benefit payments of an individual have been suspended
for all months in any taxable year under the provisions of the
first sentence of paragraph (3) of this subsection, no benefit
payment shall be made to such individual for any such month in such
taxable year after the expiration of the period of three years,
three months, and fifteen days following the close of such taxable
year unless within such period the individual, or some other person
entitled to benefits under this subchapter on the basis of the same
wages and self-employment income, files with the Commissioner of
Social Security information showing that a benefit for such month
is payable to such individual.
(2) If an individual fails to make a report required under
paragraph (1) of this subsection, within the time prescribed by or
in accordance with such paragraph, for any taxable year and any
deduction is imposed under subsection (b) of this section by reason
of his earnings for such year, he shall suffer additional
deductions as follows:
(A) if such failure is the first one with respect to which an
additional deduction is imposed under this paragraph, such
additional deduction shall be equal to his benefit or benefits
for the last month of such year for which he was entitled to a
benefit under section 402 of this title, except that if the
deduction imposed under subsection (b) of this section by reason
of his earnings for such year is less than the amount of his
benefit (or benefits) for the last month of such year for which
he was entitled to a benefit under section 402 of this title, the
additional deduction shall be equal to the amount of the
deduction imposed under subsection (b) of this section but not
less than $10;
(B) if such failure is the second one for which an additional
deduction is imposed under this paragraph, such additional
deduction shall be equal to two times his benefit or benefits for
the last month of such year for which he was entitled to a
benefit under section 402 of this title;
(C) if such failure is the third or a subsequent one for which
an additional deduction is imposed under this paragraph, such
additional deduction shall be equal to three times his benefit or
benefits for the last month of such year for which he was
entitled to a benefit under section 402 of this title;
except that the number of the additional deductions required by
this paragraph with respect to a failure to report earnings for a
taxable year shall not exceed the number of months in such year for
which such individual received and accepted insurance benefits
under section 402 of this title and for which deductions are
imposed under subsection (b) of this section by reason of his
earnings. In determining whether a failure to report earnings is
the first or a subsequent failure for any individual, all taxable
years ending prior to the imposition of the first additional
deduction under this paragraph, other than the latest one of such
years, shall be disregarded.
(3) If the Commissioner of Social Security determines, on the
basis of information obtained by or submitted to the Commissioner,
that it may reasonably be expected that an individual entitled to
benefits under section 402 of this title for any taxable year will
suffer deductions imposed under subsection (b) of this section by
reason of his earnings for such year, the Commissioner of Social
Security may, before the close of such taxable year, suspend the
total or less than the total payment for each month in such year
(or for only such months as the Commissioner of Social Security may
specify) of the benefits payable on the basis of such individual's
wages and self-employment income; and such suspension shall remain
in effect with respect to the benefits for any month until the
Commissioner of Social Security has determined whether or not any
deduction is imposed for such month under subsection (b) of this
section. The Commissioner of Social Security is authorized, before
the close of the taxable year of an individual entitled to benefits
during such year, to request of such individual that he make, at
such time or times as the Commissioner of Social Security may
specify, a declaration of his estimated earnings for the taxable
year and that he furnish to the Commissioner of Social Security
such other information with respect to such earnings as the
Commissioner of Social Security may specify. A failure by such
individual to comply with any such request shall in itself
constitute justification for a determination under this paragraph
that it may reasonably be expected that the individual will suffer
deductions imposed under subsection (b) of this section by reason
of his earnings for such year. If, after the close of a taxable
year of an individual entitled to benefits under section 402 of
this title for such year, the Commissioner of Social Security
requests such individual to furnish a report of his earnings (as
computed pursuant to paragraph (5) of subsection (f) of this
section) for such taxable year or any other information with
respect to such earnings which the Commissioner of Social Security
may specify, and the individual fails to comply with such request,
such failure shall in itself constitute justification for a
determination that such individual's benefits are subject to
deductions under subsection (b) of this section for each month in
such taxable year (or only for such months thereof as the
Commissioner of Social Security may specify) by reason of his
earnings for such year.
(4) The Commissioner of Social Security shall develop and
implement procedures in accordance with this subsection to avoid
paying more than the correct amount of benefits to any individual
under this subchapter as a result of such individual's failure to
file a correct report or estimate of earnings or wages. Such
procedures may include identifying categories of individuals who
are likely to be paid more than the correct amount of benefits and
requesting that they estimate their earnings or wages more
frequently than other persons subject to deductions under this
section on account of earnings or wages.
(i) Repealed. Pub. L. 103-296, title III, Sec. 309(a), Aug. 15,
1994, 108 Stat. 1523
(j) Attainment of retirement age
For the purposes of this section, an individual shall be
considered as having attained retirement age (as defined in section
416(l) of this title) during the entire month in which he attains
such age.
(k) Noncovered remunerative activity outside United States
An individual shall be considered to be engaged in noncovered
remunerative activity outside the United States if he performs
services outside the United States as an employee and such services
do not constitute employment as defined in section 410 of this
title and are not performed in the active military or naval service
of the United States, or if he carries on a trade or business
outside the United States (other than the performance of service as
an employee) the net income or loss of which (1) is not includible
in computing his net earnings from self-employment for a taxable
year and (2) would not be excluded from net earnings from self-
employment, if carried on in the United States, by any of the
numbered paragraphs of section 411(a) of this title. When used in
the preceding sentence with respect to a trade or business (other
than the performance of service as an employee), the term "United
States" does not include the Commonwealth of Puerto Rico, the
Virgin Islands, Guam, or American Samoa in the case of an alien who
is not a resident of the United States (including the Commonwealth
of Puerto Rico, the Virgin Islands, Guam, and American Samoa); and
the term "trade or business" shall have the same meaning as when
used in section 162 of the Internal Revenue Code of 1986.
(l) Good cause for failure to make reports required
The failure of an individual to make any report required by
subsection (g) or (h)(1)(A) of this section within the time
prescribed therein shall not be regarded as such a failure if it is
shown to the satisfaction of the Commissioner of Social Security
that he had good cause for failing to make such report within such
time. The determination of what constitutes good cause for purposes
of this subsection shall be made in accordance with regulations of
the Commissioner of Social Security, except that in making any such
determination, the Commissioner of Social Security shall
specifically take into account any physical, mental, educational,
or linguistic limitation such individual may have (including any
lack of facility with the English language).