Understanding Partial Monthly Benefits and Excess Earnings for Insured Individuals and Their Entitled Persons, § 404.441

When an insured individual and another person entitled on the same earnings record both have excess earnings, it can be challenging to navigate how these earnings are charged and how their partial monthly benefits are calculated.

In this blog post, we will simplify and explain the process of apportioning excess earnings and calculating partial monthly benefits for such cases.

Apportioning Excess Earnings and Calculating Partial Monthly Benefits

When both the insured individual and another person entitled on the same earnings record have excess earnings, their excess earnings are charged and their partial monthly benefits are calculated as follows:

1. Determine the excess earnings for each person: Calculate the excess earnings for the insured individual and the other entitled person based on their earnings and the guidelines outlined in § 404.430.
2. Charge excess earnings: Charge the excess earnings to the appropriate months for both the insured individual and the other entitled person.
3. Calculate the partial monthly benefit: After charging the excess earnings to the appropriate months, calculate the remaining partial monthly benefit for each person.

Example Breakdown

Let’s examine the example provided to better understand the process:

M and his wife are entitled to combined total benefits of $264 per month based on M’s old-age insurance benefit of $176. For the taxable year in question, M’s excess earnings were $1,599, and his wife’s excess earnings were $265. Both were under age 65.

M had wages of more than $340 in all months of the year except February, while his wife had wages of more than $340 in all months of the year.

After charging M’s excess earnings to the appropriate months (all months through July except February), a partial benefit payment for August of $249 remains. This is allocated to M and his wife in the ratio that the original benefit of each bears to the sum of their original benefits: $166 for M and $83 for his wife.

His wife’s excess earnings are charged against her full benefit for February ($88), her partial benefit for August ($83), her full benefit for September, and from $6 of her October benefit, leaving an $82 benefit payable to her for that month.

Example 2: Calculating Partial Monthly Benefits and Excess Earnings

Let’s consider a hypothetical example of John and his wife, Jane. They are both entitled to Social Security benefits based on John’s earnings record. John receives an old-age insurance benefit of $200 per month, and Jane receives a spousal benefit of $100 per month. Their combined total benefits amount to $300 per month.

For a particular taxable year, John has excess earnings of $1,200, while Jane has excess earnings of $300. Both John and Jane are under the age of 65. John had wages over the limit in all months except March, whereas Jane had wages over the limit in all months except June.

Step 1: Determine the excess earnings

• John’s excess earnings: $1,200
• Jane’s excess earnings: $300

Step 2: Charge excess earnings

• John’s excess earnings are charged to the appropriate months (all months through May except March).
• Jane’s excess earnings are charged to the appropriate months (all months through February, and April and May).

Step 3: Calculate the partial monthly benefit

• After charging John’s excess earnings, there remains a partial benefit payment for June of $275 ($300 – $25 charged against his June benefit).
• This partial benefit of $275 is allocated to John and Jane in the ratio of their original benefits: $200/$300 for John and $100/$300 for Jane.
• Therefore, John’s partial benefit for June is $183.33 ($275 * 2/3), and Jane’s partial benefit for June is $91.67 ($275 * 1/3).
• Jane’s excess earnings are charged against her full benefit for March ($100), her partial benefit for June ($91.67), and from $8.33 of her July benefit, leaving a $91.67 benefit payable to her for that month.

In this example, after charging excess earnings and calculating the partial monthly benefit, John and Jane’s Social Security benefits are adjusted accordingly for the given taxable year.

Conclusion: Understanding how partial monthly benefits and excess earnings are calculated for insured individuals and their entitled persons is essential for managing finances and benefits. This blog post has provided a simplified explanation and an example to help clarify the process.

https://www.ssa.gov/OP_Home/cfr20/404/404-0441.htm