The Social Security system has rules in place to determine how much a beneficiary can earn while still receiving benefits.
One such rule is the annual earnings test, which can result in excess earnings and affect an individual’s entitlement to benefits. In this blog post, we’ll delve into the concept of excess earnings and explore the scenarios in which an individual is deemed not entitled to benefits due to specific circumstances.
Understanding Excess Earnings:
Excess earnings, as outlined in § 404.430, refer to the amount of money a beneficiary earns beyond a certain limit established by the Social Security Administration. Under the annual earnings test, these excess earnings can affect an individual’s entitlement to benefits. However, there are certain situations where excess earnings will not be charged against a beneficiary’s monthly benefits. These scenarios arise when an individual is deemed not entitled to benefits for specific reasons.
Scenarios for Deemed Non-Entitlement to Benefits:
There are two primary scenarios in which a beneficiary is deemed not entitled to benefits, as follows:
- Engaging in Noncovered Remunerative Activity Outside the United States
According to §§ 404.417 and 404.418, a beneficiary is deemed not entitled to benefits for any month in which they engage in noncovered remunerative activity outside the United States. This means that if a beneficiary is working abroad in a job that does not contribute to the Social Security system, their excess earnings will not be charged against their benefits for that month.
- Failure to Have a Child in Their Care
As per § 404.421, a beneficiary may be deemed not entitled to benefits for any month in which they do not have a child in their care. This could occur if the beneficiary is receiving benefits based on caring for a child and fails to meet this condition during a given month. In this case, excess earnings will not be charged against their benefits for that month.
Example: Mary and the Annual Earnings Test
Mary is a 64-year-old Social Security beneficiary who has retired from her full-time job in the United States. However, she decided to take up a part-time job at a local community center to earn some extra income while receiving her Social Security benefits.
In 2023, the Social Security Administration sets the annual earnings limit at $20,000 for individuals below full retirement age. Mary ends up earning $25,000 from her part-time job during the year. This means she has $5,000 in excess earnings ($25,000 – $20,000).
Now, suppose Mary gets an opportunity to work for a non-governmental organization (NGO) based outside the United States for three months during the summer. The work she will be doing with the NGO is considered noncovered remunerative activity, as it does not contribute to the Social Security system. Mary decides to take up the opportunity.
During the three months she spends working for the NGO, Mary is deemed not entitled to benefits due to engaging in noncovered remunerative activity outside the United States. As a result, her excess earnings of $5,000 will not be charged against her Social Security benefits for those three months.
However, Mary must still consider the impact of her excess earnings on her benefits for the remaining nine months of the year. Depending on the specific rules and calculations set by the Social Security Administration, her benefits may be reduced or suspended for some of those months to account for her excess earnings. By being aware of these rules and her earnings, Mary can make informed decisions about her work and benefit entitlements.
Conclusion: Understanding the annual earnings test and the concept of excess earnings is essential for Social Security beneficiaries who want to ensure they receive their entitled benefits. In certain situations, such as engaging in noncovered remunerative activity outside the United States or failing to have a child in their care, a beneficiary may be deemed not entitled to benefits for a month. This means that their excess earnings will not be charged against their benefits for that month. Staying informed about these regulations can help beneficiaries make informed decisions about their work and benefit entitlements.
https://www.ssa.gov/OP_Home/cfr20/404/404-0436.htm
At Hugo Fierro & Michael Perez, we are equipped with the necessary expertise to provide comprehensive guidance to our clients, enabling them to gain a better understanding of the intricate nuances involved in their Social Security disability claim.