[Federal Register Volume 59, Number 209 (Monday, October 31, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-26819]
[[Page Unknown]]
[Federal Register: October 31, 1994]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
1995 Cost-of-Living Increase and Other Determinations
AGENCY: Social Security Administration, HHS.
ACTION: Notice.
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SUMMARY: The Secretary has determined--(1) A 2.8 percent cost-of-living
increase in Social Security benefits under title II, effective for
December 1994;
(2) An increase in the Federal Supplemental Security Income (SSI)
monthly benefit amounts under title XVI for 1995 to $458 for an
eligible individual, $687 for an eligible individual with an eligible
spouse, and $229 for an essential person;
(3) The national average wage index (formerly, the average of the
total wages) for 1993 to be $23,132.67;
(4) The Old-Age, Survivors, and Disability Insurance (OASDI)
contribution and benefit base to be $61,200 for remuneration paid in
1995 and self-employment income earned in taxable years beginning in
1995;
(5) The monthly exempt amounts under the Social Security retirement
earnings test for taxable years ending in calendar year 1995 to be $940
for beneficiaries age 65 through 69 and $680 for beneficiaries under
age 65;
(6) The dollar amounts (``bend points'') used in the benefit
formula for workers who become eligible for benefits in 1995 and in the
formula for computing maximum family benefits;
(7) The amount of earnings a person must have to be credited with a
quarter of coverage in 1995 to be $630;
(8) The ``old-law'' contribution and benefit base to be $45,300 for
1995; and
(9) The OASDI fund ratio to be 116.6 percent for 1994.
FOR FURTHER INFORMATION CONTACT: Jeffrey L. Kunkel, Office of the
Actuary, Social Security Administration, 6401 Security Boulevard,
Baltimore, MD 21235, (410) 965-3013. A summary of the information in
this announcement is available in a recorded message by telephoning
(410) 965-3053. This telephone message will be updated to reflect
changes to the cost-of-living benefit increase and other
determinations.
SUPPLEMENTARY INFORMATION: The Secretary is required by the Social
Security Act (the Act) to publish within 45 days after the close of the
third calendar quarter of 1994 the benefit increase percentage and the
revised table of ``special minimum'' benefits (section 215(i)(2)(D)).
Also, the Secretary is required to publish on or before November 1 the
national average wage index for 1993 (section 215(a)(1)(D)), the OASDI
fund ratio for 1994 (section 215(i)(2)(C)(ii)), the OASDI contribution
and benefit base for 1995 (section 230(a)), the amount of earnings
required to be credited with a quarter of coverage in 1995 (section
213(d)(2)), the monthly exempt amounts under the Social Security
retirement earnings test for 1995 (section 203(f)(8)(A)), the formula
for computing a primary insurance amount for workers who first become
eligible for benefits or die in 1995 (section 215(a)(1)(D)), and the
formula for computing the maximum amount of benefits payable to the
family of a worker who first becomes eligible for old-age benefits or
dies in 1995 (section 203(a)(2)(C)).
Cost-of-Living Increases
General
The cost-of-living increase is 2.8 percent for benefits under
titles II and XVI of the Act.
Under title II, OASDI benefits will increase by 2.8 percent
beginning with the December 1994 benefits, which are payable on January
3, 1995. This increase is based on the authority contained in section
215(i) of the Act (42 U.S.C. 415(i)).
Under title XVI, Federal SSI payment levels will also increase by
2.8 percent effective for payments made for the month of January 1995
but paid on December 30, 1994. This is based on the authority contained
in section 1617 of the Act (42 U.S.C. 1382f). The percentage increase
effective January 1995 is the same as the title II percentage increase
and the annual payment amount is rounded, when not a multiple of $12,
to the next lower multiple of $12.
Automatic Benefit Increase Computation
Under section 215(i) of the Act, the third calendar quarter of 1994
is a cost-of-living computation quarter for all the purposes of the
Act. The Secretary is, therefore, required to increase benefits,
effective with December 1994, 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 1994, the benefit
increase is the percentage increase in the Consumer Price Index for
Urban Wage Earners and Clerical Workers from the third quarter of 1993
through the third quarter of 1994.
Section 215(i)(1) of the Act provides that the Consumer Price Index
for a cost-of-living computation quarter shall be the arithmetic mean
of this index for the 3 months in that quarter. The Department of
Labor's Consumer Price Index for Urban Wage Earners and Clerical
Workers for each month in the quarter ending September 30, 1993, was:
For July 1993, 142.1; for August 1993, 142.4; and for September 1993,
142.6. The arithmetic mean for this calendar quarter is 142.4 (after
rounding to the nearest 0.1). The corresponding Consumer Price Index
for each month in the quarter ending September 30, 1994, was: for July
1994, 145.8; for August 1994, 146.5; and for September 1994, 146.9. The
arithmetic mean for this calendar quarter is 146.4. Thus, because the
Consumer Price Index for the calendar quarter ending September 30,
1994, exceeds that for the calendar quarter ending September 30, 1993
by 2.8 percent, a cost-of-living benefit increase of 2.8 percent is
effective for benefits under title II of the Act beginning December
1994.
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 1995, benefits will increase by 2.8 percent
beginning with benefits for December 1994 which are payable on January
3, 1995. In the case of first eligibility after 1994, the 2.8 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. In accordance with section 215(i)(4) of the Act, the
primary insurance amounts and the maximum family benefits shown in this
table are revised by (1) Increasing by 2.8 percent the corresponding
amounts established by the last cost-of-living increase and the last
extension of the benefit table made under section 215(i)(4) (to reflect
the increase in the OASDI contribution and benefit base for 1994); and
(2) by extending the table to reflect the higher monthly wage and
related benefit amounts now possible under the increased contribution
and benefit base for 1995, as described later in this notice. A copy of
this table may be obtained by writing to: Social Security
Administration, Office of Public Inquiries, 4100 Annex, Baltimore, MD
21235.
Section 215(i)(2)(D) of the Act also requires that, when the
Secretary determines an automatic increase in Social Security benefits,
the Secretary 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)(C)(i). 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 2.8 percent
benefit increase.
Special Minimum Primary Insurance Amounts and Maximum Family Benefits
----------------------------------------------------------------------------------------------------------------
Number of Special minimum primary Special minimum family
Special minimum primary insurance amount payable years of insurance amount benefit payable for
for Dec. 1993 coverage payable for Dec. 1994 Dec. 1994
----------------------------------------------------------------------------------------------------------------
$25.10........................................... 11 $25.80 $38.80
50.10............................................ 12 51.50 77.80
75.60............................................ 13 77.70 116.90
100.80........................................... 14 103.60 155.70
126.00........................................... 15 129.50 194.30
151.30........................................... 16 155.50 233.80
176.60........................................... 17 181.50 272.80
202.00........................................... 18 207.60 311.60
227.20........................................... 19 233.50 350.60
252.30........................................... 20 259.30 389.50
277.90........................................... 21 285.60 428.70
303.00........................................... 22 311.40 467.60
328.50........................................... 23 337.60 507.20
353.70........................................... 24 363.60 545.90
378.90........................................... 25 389.50 584.60
404.40........................................... 26 415.70 624.20
429.70........................................... 27 441.70 663.00
454.80........................................... 28 467.50 701.80
480.00........................................... 29 493.40 740.90
505.30........................................... 30 519.40 779.70
----------------------------------------------------------------------------------------------------------------
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 $183.40 for an
individual under sections 227 and 228 of the Act is increased by 2.8
percent to obtain the new amount of $188.50. The present monthly
benefit amount of $91.80 for a spouse under section 227 is increased by
2.8 percent to $94.30.
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 2.8 percent
effective January 1995. Therefore, the yearly Federal SSI benefit
amounts of $5,352 for an eligible individual, $8,028 for an eligible
individual with an eligible spouse, and $2,676 for an essential person,
which became effective January 1994, are increased, effective January
1995, to $5,496, $8,244, and $2,748, respectively, after rounding. The
corresponding monthly amounts for 1995 are determined by dividing the
yearly amounts by 12, giving $458, $687, and $229, 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.
National Average Wage Index for 1993
General
Under various provisions of the Act, several amounts are scheduled
to increase automatically for 1995. These include (1) The OASDI
contribution and benefit base, (2) the retirement test exempt amounts,
(3) the dollar amounts, or ``bend points,'' in the primary insurance
amount and maximum family benefit formulas, (4) the amount of earnings
required for a worker to be credited with a quarter of coverage, and
(5) the ``old law'' contribution and benefit base (as determined under
section 230 of the Act as in effect before the 1977 amendments). These
amounts are based on the annual increase in the average of the total
wages. Section 321(e) of the ``Social Security Independence and Program
Improvements Act of 1994'' (Pub. L. 103-296), enacted August 15, 1994,
provided the name ``national average wage index'' for the average of
the total wages. This new designation will be used throughout this
notice.
Section 321(g) of the new legislation also revised the formula used
to determine the OASDI contribution and benefit base, the retirement
test exempt amounts, and the old-law contribution and benefit base.
Under the old formula, the determination in a given year of the next
year's amount was the product of the current year's amount and the
ratio of (1) The prior year's national average wage index to (2) the
second prior year's average wage index. (For example, the determination
of the 1995 contribution and benefit base under the old formula would
have been the product of the 1994 base times the ratio of the 1993
national average wage index to the 1992 average wage index.)
The revised formula differs from the old formula in that the
current year's amount is replaced by the amount in effect for 1994 and
the national average wage index for the second prior year is replaced
by the 1992 national average wage index. Thus, the revised formula can
be stated as follows: the determination in a given year of the next
year's amount is the product of the 1994 amount and the ratio of (1)
The prior year's national average wage index to (2) the 1992 national
average wage index.
Under both the old and the revised formula, the resulting dollar
amounts are rounded--to the nearest multiple of $300 in the case of
each of the two types of contribution and benefit bases, and to the
nearest $10 in the case of the monthly retirement test exempt amounts.
By using fixed amounts in the revised formula, cumulative rounding
distortions are eliminated.
For the first determinations under the revised formula, the
resulting amounts are the same as those that would have been determined
under the old formula. For subsequent determinations, this may not be
the case.
Computation
The determination of the national average wage index for calendar
year 1993 is based on the 1992 national average wage index of
$22,935.42 announced in the Federal Register on October 28, 1993 (58 FR
58004), along with the percentage increase in average wages from 1992
to 1993 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 this data were $22,001.92 and $22,191.14 for 1992 and 1993,
respectively. To determine the national average wage index for 1993 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), we multiplied the 1992 national average wage index of
$22,935.42 by the percentage increase in average wages from 1992 to
1993 (based on SSA-tabulated wage data) as follows (with the result
rounded to the nearest cent):
Amount
The national average wage index for 1993 is $22,935.42 times
$22,191.14 divided by $22,001.92, which equals $23,132.67. Therefore,
the national average wage index for calendar year 1993 is determined to
be $23,132.67.
OASDI Contribution and Benefit Base
General
The OASDI contribution and benefit base is $61,200 for remuneration
paid in 1995 and self-employment income earned in taxable years
beginning in 1995.
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 1995 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 1995 is 12.4 percent. (The Hospital Insurance tax is due on
remuneration, without limitation, paid in 1995, at the rate of 1.45
percent for employees and employers, each, and on self-employment
income earned in taxable years beginning in 1995, at the rate of 2.9
percent.)
(b) It is the maximum annual amount used in determining a person's
OASDI benefits.
Computation
Section 321(g) of the ``Social Security Independence and Program
Improvements Act of 1994'' amended section 230(b) of the Act. As noted
above, the amendment provided a technical change to the formula used to
determine the OASDI contribution and benefit base. Under the revised
formula, the base for 1995 shall be equal to the larger of the current
base ($60,600) or the 1994 base of $60,600 multiplied by the ratio of
the national average wage index for 1993 to that for 1992. 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 1993, $23,132.67
as determined above, compared to that for 1992, $22,935.42, is
1.0086002. Multiplying the 1994 OASDI contribution and benefit base
amount of $60,600 by the ratio of 1.0086002 produces the amount of
$61,121.17 which must then be rounded to $61,200. Accordingly, the
OASDI contribution and benefit base is determined to be $61,200 for
1995.
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. A formula for determining the monthly exempt amounts is
provided in section 203(f)(8)(B) of the Act. The 1994 monthly exempt
amounts were determined by the formula to be $930 for beneficiaries
aged 65-69 and $670 for beneficiaries under age 65. Thus, the annual
exempt amounts for 1994 were set at $11,160 and $8,040, respectively.
For beneficiaries aged 65-69, $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
Section 321(g) of the ``Social Security Independence and Program
Improvements Act of 1994'' also amended the indexing formula provided
in section 203(f)(8)(B) of the Act. Under the revised formula, each
monthly exempt amount for 1995 shall be the larger of the corresponding
1994 monthly exempt amount or the corresponding 1994 monthly exempt
amount multiplied by the ratio of the national average wage index for
1993 to that for 1992. The ratio of the national average wage index for
1993, $23,132.67 as determined above, compared to that for 1992,
$22,935.42, is 1.0086002. Section 203(f)(8)(B) further provides that 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 Aged 65 Through 69
Multiplying the 1994 retirement earnings test monthly exempt amount
of $930 by the ratio of 1.0086002 produces the amount of $938.00. This
must then be rounded to $940. The retirement earnings test monthly
exempt amount for beneficiaries aged 65 through 69 is determined to be
$940 for 1995. The corresponding retirement earnings test annual exempt
amount for these beneficiaries is $11,280.
Exempt Amount for Beneficiaries Under Age 65
Multiplying the 1994 retirement earnings test monthly exempt amount
of $670 by the ratio 1.0086002 produces the amount of $675.76. This
must then be rounded to $680. The retirement earnings test monthly
exempt amount for beneficiaries under age 65 is thus determined to be
$680 for 1995. The corresponding retirement earnings test annual exempt
amount for these beneficiaries is $8,160.
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 1995, the national average wage index for
1993, $23,132.67, is divided by the national average wage index for
each year prior to 1993 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
1993. Any earnings in 1993 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 1995.
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 govern 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 1995 are obtained by multiplying the
corresponding 1979 bend-point amounts by the ratio between the national
average wage index for 1993, $23,132.67, and for 1977, $9,779.44. These
results are then rounded to the nearest dollar. For 1995, the ratio is
2.3654391. Multiplying the 1979 amounts of $180 and $1,085 by 2.3654391
produces the amounts of $425.78 and $2,566.50. These must then be
rounded to $426 and $2,567. Accordingly, the portions of the average
indexed monthly earnings to be used in 1995 are determined to be the
first $426, the amount between $426 and $2,567, and the amount over
$2,567.
Consequently, for individuals who first become eligible for old-age
insurance benefits or disability insurance benefits in 1995, or who die
in 1995 before becoming eligible for benefits, we will compute their
primary insurance amount by adding the following:
(a) 90 percent of the first $426 of their average indexed monthly
earnings, plus
(b) 32 percent of the average indexed monthly earnings over $426
and through $2,567, plus
(c) 15 percent of the average indexed monthly earnings over $2,567.
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 adjustments
we have described 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 which 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 which may be paid to a
worker's family. The Social Security Disability Amendments of 1980
(Pub. L. 96-265) established a new formula for computing the maximum
benefits payable to the family of a disabled worker. This new 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. The new formula was
explained in a final rule published in the Federal Register on May 8,
1981, at 46 FR 25601. 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 between $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 1995 are obtained by multiplying the
corresponding 1979 bend-point amounts by the ratio between the national
average wage index for 1993, $23,132.67, and the average for 1977,
$9,779.44. This amount is then rounded to the nearest dollar. For 1995,
the ratio is 2.3654391. Multiplying the amounts of $230, $332, and $433
by 2.3654391 produces the amounts of $544.05, $785.33, and $1,024.24.
These amounts are then rounded to $544, $785, and $1,024. Accordingly,
the portions of the primary insurance amounts to be used in 1995 are
determined to be the first $544, the amount between $544 and $785, the
amount between $785 and $1,024, and the amount over $1,024.
Consequently, for the family of a worker who becomes age 62 or dies
in 1995 before age 62, the total amount of benefits payable to them
will be computed so that it does not exceed:
(a) 150 percent of the first $544 of the worker's primary insurance
amount, plus
(b) 272 percent of the worker's primary insurance amount over $544
through $785, plus
(c) 134 percent of the worker's primary insurance amount over $785
through $1,024, plus
(d) 175 percent of the worker's primary insurance amount over
$1,024.
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 adjustments
we have described are contained in section 203(a) of the Act (42 U.S.C.
403(a)).
Quarter of Coverage Amount
General
The 1995 amount of earnings required for a quarter of coverage is
$630. A quarter of coverage is the basic unit for determining whether a
worker is insured under the Social Security program. For years before
1978, an individual generally was credited with a quarter of coverage
for each quarter in which wages of $50 or more were paid, or an
individual was credited with 4 quarters of coverage for every taxable
year in which $400 or more of self-employment income was earned.
Beginning in 1978, wages generally are no longer reported on a
quarterly basis; instead, annual reports are made. With the change to
annual reporting, section 352(b) of the Social Security Amendments of
1977 (Pub. L. 95-216) amended section 213(d) of the Act to provide that
a quarter of coverage would be credited for each $250 of an
individual's total wages and self-employment income for calendar year
1978 (up to a maximum of 4 quarters of coverage for the year).
Computation
Under the prescribed formula, the quarter of coverage amount for
1995 shall be equal to the larger of the current amount of $620 or the
1978 amount of $250 multiplied by the ratio of the national average
wage index for 1993 to that for 1976. The national average wage index
for 1976 was previously determined to be $9,226.48. This was published
in the Federal Register on December 29, 1978, at 43 FR 61016. The
average wage index for 1993 is $23,132.67 as determined above. Section
213(d) further provides that if the amount so determined is not a
multiple of $10, it shall be rounded to the nearest multiple of $10.
Quarter of Coverage Amount
The ratio of the national average wage index for 1993, $23,132.67,
compared to that for 1976, $9,226.48, is 2.5072043. Multiplying the
1978 quarter of coverage amount of $250 by the ratio of 2.5072043
produces the amount of $626.80, which must then be rounded to $630.
Accordingly, the quarter of coverage amount is determined to be $630
for 1995.
``Old-Law'' Contribution and Benefit Base
General
The 1995 ``old-law'' contribution and benefit base is $45,300. This
is the base that would have been effective under the Act without the
enactment of the 1977 amendments. The base is computed under section
230(b) of the Act as it read prior to the 1977 amendments.
The ``old-law'' contribution and benefit base is used by:
(a) the Railroad Retirement program to determine certain tax
liabilities and tier II benefits payable under that program to
supplement the tier I payments which correspond to basic Social
Security benefits,
(b) the Pension Benefit Guaranty Corporation to determine the
maximum amount of pension guaranteed under the Employee Retirement
Income Security Act (as stated in section 230(d) of the Act),
(c) Social Security to determine a year of coverage in computing
the special minimum benefit, as described earlier, and
(d) Social Security to determine a year of coverage (acquired
whenever earnings equal or exceed 25 percent of the ``old-law'' base
for this purpose only) in computing benefits for persons who are also
eligible to receive pensions based on employment not covered under
section 210 of the Act.
Computation
The base is computed using the automatic adjustment formula in
section 230(b) of the Act as it read prior to the enactment of the 1977
amendments, but with the revised indexing formula introduced by section
321(g) of the ``Social Security Independence and Program Improvements
Act of 1994.'' Under the formula, the ``old-law'' contribution and
benefit base shall be the larger of the current ``old-law'' base
($45,000) or the 1994 ``old-law'' base ($45,000) multiplied by the
ratio of the national average wage index for 1993 to that for 1992. 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 1993, $23,132.67
as determined above, compared to that for 1992, $22,935.42, is
1.0086002. Multiplying the 1994 ``old-law'' contribution and benefit
base amount of $45,000 by the ratio of 1.0086002 produces the amount of
$45,387.01 which must then be rounded to $45,300. Accordingly, the
``old-law'' contribution and benefit base is determined to be $45,300
for 1995.
OASDI Fund Ratio
General
Section 215(i) of the Act provides for automatic cost-of-living
increases in OASDI benefit amounts. This section also includes a
``stabilizer'' provision that can limit the automatic OASDI benefit
increase under certain circumstances. If the combined assets of the
OASI and DI Trust Funds, as a percentage of annual expenditures, are
below a specified threshold, the automatic benefit increase is equal to
the lesser of (1) The increase in the national average wage index or
(2) the increase in prices. The threshold specified for the OASDI fund
ratio is 20.0 percent for benefit increases for December of 1989 and
later. The law also provides for subsequent ``catch-up'' benefit
increases for beneficiaries whose previous benefit increases were
affected by this provision. ``Catch-up'' benefit increases can occur
only when trust fund assets exceed 32.0 percent of annual expenditures.
Computation
Section 215(i) specifies the computation and application of the
OASDI fund ratio. The OASDI fund ratio for 1994 is the ratio of (1) the
combined assets of the OASI and DI Trust Funds at the beginning of 1994
to (2) the estimated expenditures of the OASI and DI Trust Funds during
1994, excluding transfer payments between the OASI and DI Trust Funds,
and reducing any transfers to the Railroad Retirement Account by any
transfers from that account into either trust fund.
Ratio
The combined assets of the OASI and DI Trust Funds at the beginning
of 1994 equaled $378,285 million, and the expenditures are estimated to
be $324,516 million. Thus, the OASDI fund ratio for 1994 is 116.6
percent, which exceeds the applicable threshold of 20.0 percent.
Therefore, the stabilizer provision does not affect the benefit
increase for December 1994. Although the OASDI fund ratio exceeds the
32.0-percent threshold for potential ``catch-up'' benefit increases, no
past benefit increase has been reduced under the stabilizer provision.
Thus, no ``catch-up'' benefit increase is required.
(Catalog of Federal Domestic Assistance: Program Nos. 93.802 Social
Security-Disability Insurance; 93.803 Social Security-Retirement
Insurance; 93.804 Social Security-Special Benefits for Persons Aged
72 and Over; 93.805 Social Security-Survivors Insurance; 93.807
Supplemental Security Income)
Dated: October 25, 1994.
Donna E. Shalala,
Secretary of Health and Human Services.
[FR Doc. 94-26819 Filed 10-28-94; 8:45 am]
BILLING CODE 4190-29-P
