of $3,000 per year. Any remainder which is not a multiple of $3,000 is deemed to have been credited to an additional year in such period.

(3) If the individual's total creditable earnings prior to 1951 are $42,000 or more, such total is deemed to have been credited at the rate of $3,000 for each of the 14 years after 1936, and prior to 1951.

(e) Procedure for computing an individual's primary insurance benefit. The following example shows how the rules in paragraph (a)-(d) of this section on computing an individual's primary insurance benefit are applied.

Example. A, an insured worker, files application for old-age insurance benefits in June 1975, when she attains age 62. Her earnings before 1951 total $30,000, but after 1950 total only $22,800 ($3,600 for each year 1951 through 1954 and $4,200 for each year 1955 through 1956). Depending upon which computation would be most favorable, her computation base years and elapsed years may be selected either from the years 1937 through 1974 or from the years 1951 through 1974. If the computation base years and elapsed years are selected from 1951 through 1974, her total earnings of $22,800 are divided by the number of months in her elapsed years (there are 24 years from 1951 through 1974; when 5 years of low earnings are subtracted, the result equals 19, and 19 years times 12 months per year equals 228). This result yields an average monthly wage of $100. (This total is low because, although 19 years of high earnings can be considered, she has earnings for only 6 years after 1950.) From the applicable table in section 215(a) of the Act, the $100 average monthly wage results in a primary insurance amount of $130.50. If the computation base years and elapsed years are selected from 1937 through 1974, her total earnings are $52,800 ($30,000 before 1951 plus $22,800 for years after 1950). There are only six possible computation base years after 1950 to be considered; to determine how many computation base years there are from 1937 through 1950, the total for this period ($30,000) is divided by $3,000 and yields 10 years. Although earnings for 19 years can be considered, she has earnings for only 16 years (10 years before 1951 and six thereafter). The total of $52,800 for these 16 years is then divided by the number of months in the elapsed years, which total is 396 months (i.e., there are 38 years in the period 1937 through 1974 and when 5 years of low carnings are disregarded, the result is 33 years; and 33 years times 12 months per year equals 396). The resulting total is an average monthly wage of $133. Applying 45.6 percent to the first $50 of this figure yields $22.80 which added to $9.46 (11.4 percent of the remainder of $83 ($133 less $50)) makes the total primary insurance benefit equal

$32.26. When the applicable table in § 404.223 (a) is used, the primary insurance amount is found to be $165.50, the amount in column IV of the table which is on the same line as the $32.26 primary insurance benefit in column I.

§ 404.215 Special rules for computing primary insurance benefits under prior law which may still apply.

(a) General. When the requirements for computing an individual's primary insurance benefit under the basic formula described in § 404.213 are not met, the individual's primary insurance benefit may be computed under the formula provided by the 1965 amendments if the requirements specified in paragraph (b) of this section are met. Under such formula, the individual's actual earnings credited before 1951 (instead of the deemed earnings described in § 404.213 (d)) are used. The primary insurance benefit for purposes of the tables referred to in § 404.207 is obtained by adding 40 percent of the individual's average monthly wage (according to paragraph (c) of this section) to $20 (10 percent of the next $200) and adding to the resulting total 1 percent of such total for each "increment year." "Increment years" are years after 1936 and prior to 1951 in which the individual had at least $200 in creditable earnings.

(b) Requirements for use of 1965 formula. To compute an individual's average monthly wage for the purpose of determining the individual's primary insurance benefit under paragraph (a) of this section, the formula in paragraph (c) of this section is used if the individual:

(1) Does not meet the requirements for use of the basic formula for computing the individual's primary insurance amount described in § 404.213; and

(2) Has at least one quarter of coverage (see § 404.103) before 1951; and

(3) Has less than six quarters of coverage after 1950 if the individual attained age 21 after that year, and

(4) Becomes entitled to old-age or disability insurance benefits after 1965 or dies after 1965 without being so entitled.

(c) Computing the average monthly wage. When the requirements in paragraph (b) of this section are met, an individual's average monthly wage is determined in the same way as described in § 404.213 except that actual earnings credited to the individual's computation base years are used instead of the deemed earnings amounts provided for in that section.

§ 404.217

Determining current primary insurance amount from primary insurance amount previously in effect. As explained in § 404.207, an insured individual's primary insurance amount may be determined by converting the individual's primary insurance amount computed under a table in the Act which was previously in effect. This is done by use of a table which supersedes such table. When an individual was entitled to benefits based upon a primary insurance amount in effect for the month immediately preceding the month for which the new table is effective, the new primary insurance amount is determined directly from the table since it appears on the same line with the prior primary insurance amount shown in column II of the table. In other cases, the prior primary insurance amount is determined from the individual's average monthly wage under the provisions of the Act which were in effect at whichever of the following is later: the time at which the individual died, or the time at which the individual became entitled to old-age or disability insurance benefits, or the time at which the individual's primary insurance amount was last computed or recomputed. The prior primary insurance amount is then converted by use of any tables provided in section 215(a) of the Act which were subsequently in effect, until the converted primary insurance amount is the amount which would have been in effect in the month immediately preceding the month for which the new table is effective (which amount appears in column II of that table).

§ 404.219 Special minimum primary in

surance amounts.

(a) General. The 1972 amendments provided for a special computation of primary insurance amounts as an alternative to the method described in § 404.209 and § 404.213. Under such provision, for monthly benefits payable after December 1972 and for lump-sum payments for deaths occurring after such month, an insured individual's primary insurance amount is equal to $8.50 multiplied by the number of the individual's "years of coverage" (see paragraph (b) of this section) in excess of 10 but not more than 30. The 1973 amendments modified this provision so that for monthly benefits payable after February 1974 and for lump-sum payments for deaths occurring

after that month, an insured individual's primary insurance amount is equal to $9.00 multiplied by the number of the individual's "years of coverage" (see paragraph (b) of this section) in excess of 10 but not more than 30. The maximum primary insurance amount under this special minimum computation is $180 for months after February 1974 ($170 for January 1973 through February 1974). These amendments did not provide any additional increase or change in this provision for months after May 1974. The special minimum PIA provision is applicable only when it produces a PIA which is greater than the PIA determined under §§ 404.209 and 404.213.

(b) Years of coverage. In computing an insured individual's primary insurance amount under the special minimum provision described in paragraph (a) of this section, the number of the individual's "years of coverage" is equal in number to the sum of the following, up to a maximum of 30:

(1) The number obtained by dividing the individual's total creditable earnings (see § 404.209(b)) for years after 1936 and before 1951 by $900 and disregarding any remainder which is not a multiple of $900; plus

(2) The number of "computation base years" after 1950 (see § 404.211(b)) in which the individual's creditable earnings for the year were not less than 25 percent of the maximum creditable amount for that year (see § 404.1027 and § 404.1068).

(c) Procedure for computing the special minimum primary insurance amount. The following example shows how the special minimum primary insurance amount is computed under the rules provided in paragraphs (a)-(b) of this section:

Example. A. an insured worker, attains age 62 in June, 1975, and files an application for old-age insurance benefits. He has earnings of $12,000 for the period 1937 through 1950. Each year from 1951 through 1962, he had earnings equal to one-fourth the maximum creditable amount for that year (i.e., for the period 1951 through 1954 when the maximum creditable amount was $3,600 per year, he had $900 earnings per year; for the period 1955 through 1958 when the maximum creditable amount was $4,200 per year, he had $1,050 earnings per year; for the period 1959 through 1962 when the maximum creditable amount was $4,800 per year he had $1,200 earnings per year). He had no earnings after 1962.

Under the regular benefit computation methods described in § 404.209 and § 404.213, A's highest primary insurance amount would be $130.50. Under the special minimum primary insurance amount provision, A would be credited with 13 coverage years for the period 1937 through 1950 ($12,000 divided by $900, with any remainder disregarded) plus 12 coverage years for the period 1951 through 1962. Total coverage years thus equal 25. From the total of 25 coverage years, 10 years are subtracted. The balance of 15 years is then multiplied by $9 to yield a special minimum primary insurance amount of $135, which is higher than the primary insurance amount of $130.50 computed under the regular benefit computation methods. § 404.221

creases.

Cost-of-living

benefit in

(a) General. (1) Section 215(i) of the Act (added by section 202 of Pub. L. 92-336) permits the Secretary to provide a cost-of-living increase in primary insurance amounts, benefits for the transitionally insured (§ 404.113(a)), and payments for certain uninsured individuals at age 72 (§ 404.374). However, no costof-living increase may be made in special minimum primary insurance amounts (see § 404.231). The 1973 amendments (Pub. L. 93-233) provided that the first increase could be effective no earlier than June 1975. Such cost-of-living increase shall be made by the Secretary when he determines that the first calendar quarter of a year is a "cost-of-living computation quarter."

(2) The first calendar quarter of a year is a "cost-of-living computation quarter" if:

(i) Such calendar quarter is in a year after 1974; and

(ii) Such calendar quarter is not in a year immediately following a year in which a general benefit increase was enacted or became effective; and

(iii) The Consumer Price Index prepared by the Department of Labor for such calendar quarter is at least 3 percent higher than the Index was for the later of: (a) the last "cost-of-living computation" quarter; or (b) the last calendar quarter in which a general benefit increase was effective. (The Index for any calendar quarter is deemed to be the arithmetical mean for the months in that quarter.)

(3) For purposes of paragraph (a) (2) (ii) of this section, the benefit increases provided by the 1973 amendments are not considered "general benefit increases." Accordingly, the first possible "cost-of-living computation quarter"

under this provision is the quarter ending March 31, 1975.

(b) Method of providing cost-of-living benefit increases. When the Secretary determines that the first calendar quarter of any year is a "cost-of-living computation quarter" under paragraph (a) of this section, he computes the amount of the cost-of-living increase. The amount of increase is determined by applying to the appropriate benefits the same percentage (rounded to the nearest onetenth of 1 percent) by which the Consumer Price Index for the "cost-of-living computation quarter" increased over the last "cost-of-living computation quarter" or, if later, the last calendar quarter in which a general benefit increase was effective. Such increase will be rounded to the next higher multiple of $0.10 if it is not a multiple of $0.10. The Secretary publishes in the FEDERAL REGISTER within 45 days of the close of the "cost-of-living computation quarter" the fact that such an increase is due, the amount of the increase, the increased benefit amount for the transitionally insured, and the increased payment amount for certain uninsured individuals at age 72 (which amounts shall be deemed to appear in sections 227 and 228 of the Act, respectively), and a revised table showing the increased primary insurance amounts which shall be deemed to appear in section 215(a) of the Act. The increased amounts shall be effective beginning with June of the year in which the "cost-of-living computation quarter"

occurs.

Example. Assume that the calendar quarter ending March 31, 1977, was used in determining that a 4-percent cost-of-living benefit increase was due effective June 1977 (i.e., the March 31, 1977, calendar quarter was a "cost-of-living computation quarter"). As a consequence of that increase, A's primary insurance amount of $200 was raised to $208 ($200 times 1.04 percent) effective June 1977. Following the March 31, 1978, calendar quarter, the Consumer Price Index shows that the average cost-of-living for that quarter was 5 percent higher than the average costof-living for the March 31, 1977, calendar quarter. Accordingly, A's primary insurance amount of $208 will be increased by 5 percent to $218.40 ($208 times 1.05 percent) effective June 1978.