der sections 209(a) and 211(b)(1) of è Act for any calendar year after 1950 computed in accordance with the prolons of subdivision (ii) of this subragraph. Any amount so computed ich is not a multiple of $1 is reduced the next lower multiple of $1.

b) For benefits for months after cember 1972. An individual's "average rent earnings" for purposes of this tion means the largest of:

(1) The amount arrived at under ragraph (c)(3) (i) (a) (1) of this secn, or

(2) The amount arrived at under ragraph (c) (3) (i) (a) (2) of this secn, or

(3) One-twelfth of the total of such dividual's wages and earnings from f-employment, without the limitations der sections 209(a) and 211(b) (1) of e Act, for the calendar year in which had the highest such wages and earns from self-employment during the riod consisting of the calendar year which he became disabled and the ears immediately preceding that year. e extent by which such individl's wages and earnings from selfployment exceed the limitations unr sections 209(a) and 211(k)(1) of e Act is computed in accordance with e provisions of subdivision (ii) of this bparagraph. Any amount so computed ich is not a multiple of $1 is reduced the next lower multiple of $1. (ii) Method of determining calendar ar earnings in excess of the limitations der sections 209(a) and 211(b)(1) of e Act-(a) In general. For the purses of paragraph (c) (3) (1) (a) (2) and (b) (2) and (3) of this section the tent by which the wages or earnings om self-employment of an individual ceed the maximum amount of earngs credible under sections 209(a) _d 211(b)(1) of the Act in any caldar year after 1950 will ordinarily be timated on the basis of the earnings formation available in the records of e Administration. (See Subpart I of is Part.) If an individual adduces satactory evidence of his actual earngs in any year, the extent, if any, which his earnings exceed the limitions under sections 209(a) and 211 ) (1) of the Act shall be determined the use of such evidence instead of the use of estimates.

(b) Estimated wage earnings-(1) One employer involved. In any calendar year after 1950 in which wages are reported for an individual, the wages credited to his earnings record for each calendar quarter before the quarter in which the maximum amount creditable under section 209 (a) of the Act is attained are deemed to be the individual's actual earnings for each such quarter. The amount of wages for the calendar quarter in which the maximum amount of earnings was attained and for each succeeding calendar quarter of that year, if any, in which the individual worked is deemed to be equal to the largest amount credited to his earnings account in that calendar year for any calendar quarter through the quarter in which the maximum amount of earnings was attained.

Example. In the year 1966 in which $6,600 is the maximum creditable earnings amount under section 209(a) of the Act, W worked for the XYZ Company. His earnings record shows the following amounts of wages:

Wages from Employer No. 1 reached the maximum in the third quarter. For this quarter and the succeeding fourth quarter, A's wages from Employer No. 1 are deemed to equal $2,200 in each of these two quarters. Wages from Employer No. 2 reached the maximum in the fourth quarter, but since all of the quarterly amounts credited are equal, there are no additional deemed wages. Since the total wages reported by Employer No. 3 never reached the maximum, the actual amounts credited are deemed to be his total wages from such employer. Wages from Employer No. 4 reached the maximum in the fourth quarter. However, since this is the highest quarterly amount credited and there are no succeeding quarters, the total earnings from this employer are deemed to be the actual amounts credited. Thus, A's total wages for 1964 are estimated as follows:

(c) Estimated earnings from self-employment. In any such calendar year in which self-employment income is credited to an individual's earnings record and such credit equals the maximum amount of earnings creditable under section 211(b) (1) of the Act, the amount of earnings from self-employment for such individual's taxable year is deemed to equal his total net earnings from selfemployment as shown in his tax returns on file in the records of the Administration.

Example. In the calendar year 1957 in which $4,200 is the maximum amount creditable as self-employment income under section 211(b) (1) of the Act, C has maximum self-employment income of $4,200 credited to his earnings record. C's self-employment

tax return for 1957 shows net earnings from self-employment of $8,300. Thus, C's earnings from self-employment are deemed to equal $8,300 for 1957.

(d) Wages and self-employment income involved. In any such calendar year in which both wages and selfemployment income are credited to an individual's earnings record, the amount of such individual's total earnings for such calendar year is deemed to equal the total of his wages as determined under the provisions of (b) of this subdivision and the amount of his net earnings from self-employment as determined under the provisions of (c) of this subdivision.

Example. For the calendar year 1967 in which $6,600 is the maximum creditable earnings under sections 209 (a) and 211(b)(1) of the Act, D who was both employed and selfemployed has the following amounts credited to his earnings record:

Since the amount of wages credited do not equal or exceed the maximum amount creditable under section 209 (a) of the Act, D's total wages for the year are deemed to be $6,000. However, the amount of net earnings from self-employment shown on D's selfemployment tax return is $2,300. D's earnings from self-employment are deemed to equal net earnings from self-employment which he reported for the year. Thus, D's earnings for 1967 are estimated as follows: Wages Net earnings from selfemployment

Total

----

$6,000

2,300

8, 300

(4) Reentitlement to disability insurance benefits. If an individual's entitlement to disability insurance benefits terminates and such individual again becomes entitled to disability insurance benefits, the amount of the reduction is again computed based on the figures specified in this paragraph (c) applicable to the subsequent entitlement.

(d) Items not counted for reduction. Amounts paid or incurred, or to be incurred, by the individual for medical, legal, or related expenses in connection with his workmen's compensation claim, or the injury or occupational disease on

which his workmen's compensation award or settlement agreement is based, are excluded in computing the reduction under paragraph (a) of this section to the extent that they are consonant with State law. Such medical, legal, or related expenses may be evidenced by the workmen's compensation award, compromise agreement, or court order in the workmen's compensation proceeding, or by such other evidence as the Adininistration may require. Such other evidence may consist of:

(1) A detailed statement by the individual's attorney, physician, or the employer's insurance carrier; or

or

(2) Bills, receipts, or canceled checks;

(3) Other clear and convincing evidence indicating the amount of such expenses; or

(4) Any combination of the foregoing evidence from which the amount of such expenses may be determinable.

Any expenses not established by evidence required by the Administration will not be excluded.

(e) Certification by individual concerning eligibility for workmen's compensation payment. Where it appears that an individual may be eligible for a periodic benefit under a workmen's compensation law or plan which would give rise to reduction under paragraph (a) of this section, the individual may be required, as a condition of certification for payment of any benefit under section 223 of the Act to any individual for any month, and of any benefit under section 202 of the Act for such month based on such individual's earnings record, to furnish evidence as requested by the Administration and to certify as to:

(1) Whether he has filed or intends to file any claim for such periodic benefit, and

(2) If he has so filed, whether there has been a decision on such claim. In the absence of evidence to the contrary, reliance may be placed upon a certification that he has not filed and does not intend to file such a claim, or that he has filed and no decision has been made, in certifying any benefit for payment pursuant to section 205 (1) of the Act.

(f) Workmen's compensation benefit payable on other than a monthly basis. Where workmen's compensation benefits are paid periodically but not monthly, or in a lump sum as a commutation of or a substitute for periodic benefits, the re

duction under this section is made at such time or times and in such amounts as the Administration determines will approximate as nearly as practicable the reduction required under paragraph (a) of this section.

(g) Priorities. (1) For an explanation of when a reduction is made under this section where other reductions, deductions, etc., are involved, see § 404.402.

(2) Whenever a reduction in the total of benefits for any month based on an individual's earnings record is made under paragraph (a) of this section, each benefit, except the disability insurance benefit, is first proportionately decreased, and any excess of such reduction over the sum of all such benefits other than the disability insurance benefit is then applied to such disability insurance benefit.

Example: Under title II of the Act, A is entitled to a monthly disability insurance benefit of $122. His wife, B, and his two children, C and D, are entitled to monthly insurance benefits of $61 each. After adjustment for the family maximum under section 203 (a) of the Act, the benefits are $122 for A and $50.60 for B, C, and D making a total of title II benefits of $273.80. In computing A's "average current earnings," it is determined that A's average monthly wage used in computing his benefit rate is $340, and his average monthly wage for his 5 years of highest earnings after 1950 is $400. Therefore, 80 percent of his "average current earnings" for purposes of the workmen's compensation deduction is $320.

A becomes entitled to workmen's compensation of $48 a week, which converted to a monthly rate amount to $208 a month (i.e., 43 times $48). The total monthly benefits payable under title II of the Act ($273.80) plus the monthly workmen's compensation amount ($208) equals $481.80. The amount of the reduction for workmen's compensation is $161.80 ($481.80 minus $320); and the family benefit payable is $112 ($273.80 minus $161.80 equals $112). (The same result is obtained by subtracting the workmen's compensation amount ($208) from the applicable limit ($320).)

In this example, the $161.80 reduction would be applied first against the three section 202 benefits ($50.60 times 3 equals $151.80) leaving $10 to be deducted from the disability insurance beneft.

(h) Effect of changes in family composition. The addition or subtraction in the number of beneficiaries in a family may cause the family benefit to become, or cease to be, the applicable limit for reduction purposes under this section. When the family composition changes, the amount of the reduction is recomputed as though the new number of bene

ficiaries were entitled for the first month the reduction was imposed, i.e., the same average monthly wage, average current earnings, and workmen's compensation amount and the total benefits payable under title II of the Act for the new number of beneficiaries which would have been subjected to reduction for that first month are used. If the applicable limit both before and after the change is 80 percent of the average earnings, the amount payable remains the same and is simply redistributed among the beneficiaries entitled on the same earnings record.

Example. F is entitled to disability insurance benefits of $110.30 based on an average monthly wage of $289. His wife, G. and his child, H, are entitled to benefit under section 202 of the Act of $55.20 each. F becomes entitled to workmen's compensaton of $192 a month. His average monthly wage for his 5 years of highest earnings after 1950 is $260.

The applicable limit on total benefits payable under title II of the Act and workmen's compensation is $231.20 (1.e., 80 percent of F's average current earnings). The amount payable is figured as follows:

(Deducting the workmen's compensation amount ($192) from 80 percent of the average current earnings ($231.20) gives the same amount payable ($39.20).)

Later, another child, J, becomes entitled on F's earnings record and the benefits after adjustment for the family maximum but before reduction for the workmen's compensation become $110.30 to F, and $40.90 to G, H, and J each. Since the total family benefit is now higher than 80 percent of F's average current earnings, the total family benefit becomes the applicable limit and the amount payable is figured merely by deducting the workmen's compensation ($192) from the total title II benefits ($233) leaving $41 payable to F.

(1) Effect on benefit increases. Any increase in benefits due to a recomputation or a statutory increase in benefit rates is not subject to the reduction for workmen's compensation and does not change the amount to be deducted from the family benefits. The increase is simply added to what amount if any is payable. If a new beneficiary becomes

entitled to monthly benefits on the same earnings record after the increase, the amount of the reduction is redistributed among the new number of beneficiaries entitled under section 202 of the Act and deducted from their current benefit rate.

Example. K is entitled to disability insurance benefits of $118.80 and his wife, L, and his two children, M and N, are entitled to benefits under section 202 of the Act of $47.90 each (after reduction under section 203 (a) to conform to the family maximum of $262.40). K becomes entitled to workmen's compensation of $30 per week (8130 per month). The total family benefit is higher by 10 cents than 80 percent of K's average current earnings (80 percent of 8328, or $262.40). Therefore, the reduction amount equals the monthly workmen's compensation. One-third of this amount (rounded downward to the nearest 10 cents), i.e., $43.30, is deducted from L, M, and N's benefits leaving benefits payable as follows: $118.80 to K, and $4.60 each to L, M, and N.

Beginning in September 1966, a statutory increase raises K's disability insurance benefit to $122 and causes L, M, and N's benefits to be increased to $50.60 each (an increase of $2.70). The benefits then payable become: $122 to K, and $7.30 (1.e., $4.60 plus $2.70) each to L, M, and N.

In February 1967, O, another child of K becomes entitled to benefits under section 202 of the Act based on K's earnings record. The benefits payable now become $122 to K, and $37.90 each to L, M, N, and O. The amount to be deducted from the family remains the same, $130, but is to be divided among four beneficiaries instead of three. Deducting one-fourth of $130 (832.50) from $37.90 leaves $5.40 each to L, M, N, and O, and $122 to K.

(j) Redetermination of benefits—(1) General. In the second calendar year after the year in which reduction under this section in the total of an individual's benefits under section 223 of the Act and any benefits under section 202 of the Act based on his wages and self-employment income is first required (in a continuous period of months), and in each third year thereafter, the amount of such benefits which are still subject to reduction under this section are redetermined, provided such redetermination does not result in any decrease in the total amount of benefits payable under title II of the Act on the basis of such Individual's wages and self-employment income. Such redetermined benefit is effective with the January following the year in which the redetermination is made.

(2) Average current earnings. In making the redetermination required by sub

paragraph (1) of this paragraph, the individual's "average current earnings" (as defined in paragraph (c)(3) of this section) is deemed to be the product of his average current earnings as initially determined under paragraph (c)(3) of this section and the ratio of:

(1) The average of the taxable wages of all persons for whom taxable wages were reported to the Secretary for the first calendar quarter of the calendar year in which such redetermination is made, to

(ii) The average of the taxable wages of such persons reported to the Secretary for the first calendar quarter of the taxable year in which the reduction was first computed (but not counting any reduction made in benefits for a previous period of disability). Any amount determined under the preceding sentence which is not a multiple of $1 is reduced to the next lower multiple of $1.

(3) Effect of redetermination. Where the applicable limit on total benefits previously used was 80 percent of the average current earnings, a redetermination under this paragraph may cause an increase in the amount of benefits payable. Also, where the limit previously used was the total family benefit, the redetermination may cause the average current earnings to exceed the total family benefit and thus become the new applicable limit. If for some other reason (such as a statutory increase or recomputation) the benefit has already been increased to a level which equals or exceeds the benefit resulting from a redetermination under this paragraph, no additional increase is made. A redetermination is designed to bring benefits into line with current wage levels when no other change in payments has done so.

Example. Beginning January 1968, P is entitled to a disability Insurance benefit of $140 and his wife. R, and child. S. are entitled to benefits under section 202 of the Act of $70 each. P becomes entitled to workmen's compensation of $208 per month. In this case, the applicable limit on the combined benefits is 8360 (80 percent of P's average current earnings). Deducting the workmen's compensation amount of $208 from this limit leaves family benefits payable of $152 (8140 to P and 86 to R and 8 each). In 1970 a redetermination raises 80 percent of P's average current earnings to $380 effective January 1971. Thus, the family benefit payable becomes $172 (8380 minus $208). P's benefit is $140, and R's and S's benefits are $16 each.

If there had been a benefit increase in 1969 (either by a statutory increase or a recom

putation) increasing P's benefit by $10 (to $150) and each other benefit by $5 (to $11), the family would already be receiving 8172 ($150 plus $11 plus 811 equals 8172) at the time of the redetermination, so that they would not get an additional increase. If the 1969 benefit increase made less than $172 payable to the family, the redetermination would increase the benefit to $172. Any statutory increase that takes effect after the redetermination would be added to the total family benefit.

(Sec. 224, 79 Stat. 406; 42 U.S.C. 424) [82 F.R. 19159, Dec. 20, 1967; 33 F.R. 3060, Feb. 16, 1968, as amended at 34 F.R. 13312, Aug. 16, 1969; 37 FR 3452, Feb. 16, 1972; 39 FR 43717, Dec. 18, 1974]

An individual's old-age insurance benefit, wife's or husband's benefit, or widow's or widower's benefit is reduced if he or she is entitled to the benent for a month before retirement age. For purposes of this section and §§ 404.411404.413, retirement age is age 65; except that for months prior to January 1973, retirement age for widows and widowers is age 62. However, in the case of an individual entitled to wife's benefits, there is no reduction in benefits for any month Sic nas in her care a child of the insured individual on whose earnings record she is entitled if the child is entitled to child's insurance benefits. Similarly, in the case of an individual entitled to widow's benefits, such benefits will not be reduced below the amount an individual entitled to mother's benefits would receive for any month she has in her care a child of the insured individual on whose earnings record she is entitled if the child is entitled to child's benefits. Reductions in benefits are, subject to §§ 404.411404.413, made in the amounts described below:

(a) In the case of old-age insurance benefits, the individual's primary insurance amount is reduced by 5% of 1 per