05-4638. Wage Credits for Veterans and Members of the Uniformed Services

AGENCY:

Social Security Administration (SSA).

ACTION:

Final rules.

SUMMARY:

We are amending our rules on wage credits for veterans and members of the uniformed services. The revisions are required by the Department of Defense Appropriations Act of 2002 and the Social Security Protection Act of 2004. The enactments changed a Social Security Act requirement providing deemed military wage credits for service as members of the uniformed services on active duty or active duty for training beginning in 1957 (when that service was first covered for Social Security purposes on a contributory basis). The provisions provide for the termination of such deemed military wage credits effective with military wages earned after December 31, 2001. The wage credits will continue to be given for periods prior to calendar year 2002.

DATES:

These regulations are effective March 10, 2005.

Electronic Version: The electronic file of this document is available on the date of publication in the Federal Register on the Internet site for the Government Printing Office, http://www.gpoaccess.gov/​fr/​index.html. It is also available on the Internet site for SSA (i.e., Social Security Online) at http://policy.ssa.gov/​pnpublic.nsf/​LawsRegs.

FOR FURTHER INFORMATION CONTACT:

Marylin Buster, Social Insurance Specialist, Office of Income Security Programs, Social Security Administration, 6401 Security Boulevard, Baltimore, MD 21235-6401, [phone] or TTY [phone]. For information on eligibility, claiming benefits, or coverage of earnings, call our national toll-free number, 1-800-772-1213 or TTY 1-800-325-0778.

SUPPLEMENTARY INFORMATION:

Background

Beginning in 1957, earnings of members of the uniformed services became covered for Social Security purposes. In 1968, Congress added a new section in the Social Security Act (section 229) providing for deemed military wage credits for active duty service and requiring Social Security to deem wage credits to the earnings record of uniformed service members when determining benefit entitlement and payment. Subsequently, the provision for the wage deeming program was made retroactive to 1957. The deemed military wage credits were granted in recognition that active service members did not get Social Security credit for the value of pay in kind such as food, shelter, and medical care, which is generally counted for other jobs covered under Social Security. However, due to the lower pay of service members, it was decided that it would be unfair to have the service members pay additional Federal Insurance Contributions Act (FICA) tax. The Trust Funds were to be reimbursed from general revenues on a current basis for the added cost of benefits, much the way the trust funds were reimbursed for gratuitous wage credits.

The amount of deemed military wage credits changed over the years. The last change in 1977, provided for the crediting of deemed military wages of $100 for every $300 of covered military wages up to a maximum of $1,200 in deemed military wage credits per year. This modification was due to the change to annual wage reporting from quarterly wage reporting.

In 1983, the method of financing deemed military wage credits changed by authorizing the General Fund of the Treasury to reimburse to the Trust Funds the amount of FICA tax (both employer and employee shares) that would have been paid on the deemed military wages had they been actual earnings. Before enactment of the 1983 amendments, the Social Security trust funds were reimbursed annually by Treasury (i.e., general revenues), based on an amortization schedule, for the cost of additional Social Security benefits attributable to the deemed military wage credits for military service for the period after 1956. The 1983 amendments changed the financing structure so that the Trust funds are reimbursed for an amount equal to the Social Security taxes that would have been imposed annually if the deemed wage credits had been remuneration for employment.

Section 8134 of The Department of Defense Appropriations Act of 2002 (Pub. L. 107-117) modified the requirement of providing deemed military wage credits for service as members of the uniformed services on active duty or active duty for training beginning in 1957 (when that service was first covered for Social Security purposes on a contributory basis). With this modification, military wage credits will no longer be provided for military wages earned after December 31, 2001.

In 2004, a technical amendment in section 420 of Pub. L. 108-203, the Social Security Protection Act of 2004 amended section 229 of the Act to reflect section 8134 of Pub. L. 107-117 which ended the wage deeming program after 2001. The wage credits will continue to be given for periods prior to calendar year 2002. These qualifying periods of military service include active service during the World War II period September 16, 1940 through July 24, 1947, the post-World War II period July 25, 1947, through December 31, 1956, and members of the uniformed service on active duty after 1956 and before 2002.

Explanation of Changes

We are revising §§ 404.1301, 404.1302, and 404.1341 to reflect the termination of automatic across-the-board wage credits effective with military wages earned after December 31, 2001. The wage credits will continue to be applied for periods prior to calendar year 2002.

Regulatory Procedures

Pursuant to section 702(a)(5) of the Social Security Act, 42 U.S.C. 902(a)(5), as amended by section 102 of Public Law 103-296, SSA follows the Administrative Procedure Act (APA) rulemaking procedures specified in 5 U.S.C. 553 in the development of its regulations. The APA provides exceptions to its notice and public comment procedures when an agency finds there is good cause for dispensing with such procedures on the basis that they are impracticable, unnecessary, or contrary to the public interest.

In the case of these final rules, we have determined that, under 5 U.S.C. 553(b)(B), good cause exists for dispensing with the notice and public comment procedures. Good cause exists because these regulations merely conform our rules on deeming military wage credits to current law. The Agency has operated in accordance with the revised laws since January 2002. These regulations contain no substantive changes of interpretation. Therefore, opportunity for prior comment is unnecessary, and we are issuing these regulations as final rules.

In addition, we find good cause for dispensing with the 30-day delay in the effective date of a substantive rule, provided for by 5 U.S.C. 553(d). As explained above, these revisions conform our rules to current law and reflect our current practice. However, without these changes, our rules on military wage credits will conflict with current law and may mislead the public. Therefore, we find that it is in the public interest to make these rules effective upon publication.

Executive Order 12866, as Amended by Executive Order 13258

We have consulted with the Office of Management and Budget (OMB) and determined that these final rules do not meet the criteria for a significant regulatory action under Executive Order 12866, as amended by Executive Order 13258. Thus, they were not subject to OMB review. We have also determined that these rules meet the plain language requirement of Executive Order 12866, as amended by Executive Order 13258.

Regulatory Flexibility Act

We certify that these final regulations will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act, as amended, 5 U.S.C. 601, et seq. Therefore, a regulatory flexibility analysis as provided in the Regulatory Flexibility Act, as amended, is not required.

Paperwork Reduction Act

These final regulations will impose no additional information collection requirements requiring OMB clearance under the Paperwork Reduction Act of 1995, 44 U.S.C. 3501, et seq.

(Catalog of Federal Domestic Assistance Program Nos. 96.001, Social Security—Disability Insurance; 96.002, Social Security—Retirement Insurance; 96.004, Social Security—Survivors Insurance.)

List of Subjects in 20 CFR Part 404

• Administrative practice and procedure
• Blind
• Disability benefits
• Old-age, survivors and disability insurance
• Reporting and recordkeeping requirements
• Social Security

Dated: December 2, 2004.

Jo Anne B. Barnhart,

Commissioner of Social Security.

For the reasons stated in the preamble, we are amending subpart N of part 404 of Title 20 of the Code of Federal Regulations as follows:

PART 404—FEDERAL OLD-AGE, SURVIVORS AND DISABILITY INSURANCE (1950—)

Subpart N—[Amended]

1. The authority citation for subpart N of part 404 continues to read as follows:

Authority: Secs. 205(a) and (p), 210(l) and (m), 215(h), 217, 229, and 702(a)(5) of the Social Security Act (42 U.S.C. 405(a) and (p), 410(l) and (m), 415(h), 417, 429, and 902(a)(5)).

§ 404.1301

[Amended]

2. In § 404.1301, at the end of the fifth sentence in paragraph (a), add “through 2001.”

§ 404.1302

[Amended]

3. In § 404.1302, in the definition of “Wage credit,” the second sentence is revised by removing the words “after 1956” and adding in their place “from 1957 through 2001.”

§ 404.1341

[Amended]

4. In § 404.1341, in the first sentence of paragraph (a), remove the words “after 1956” and add in their place “from 1957 through 2001” and in paragraph (b)(1), remove the words “after 1977” and add in their place “from 1978 through 2001.”