[Federal Register Volume 60, Number 206 (Wednesday, October 25, 1995)]
[Notices]
[Pages 54751-54756]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-26426]



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SOCIAL SECURITY ADMINISTRATION

Office of the Commissioner; 1996 Cost-of-Living Increase and 
Other Determinations

AGENCY: Social Security Administration.

ACTION: Notice.

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SUMMARY: The Commissioner has determined--
    (1) A 2.6 percent cost-of-living increase in Social Security 
benefits under title II, effective for December 1995;
    (2) An increase in the Federal Supplemental Security Income (SSI) 
monthly benefit amounts under title XVI for 1996 to $470 for an 
eligible individual, $705 for an eligible individual with an eligible 
spouse, and $235 for an essential person;
    (3) The national average wage index for 1994 to be $23,753.53;
    (4) The Old-Age, Survivors, and Disability Insurance (OASDI) 
contribution and benefit base to be $62,700 for remuneration paid in 
1996 and self-employment income earned in taxable years beginning in 
1996;
    (5) The monthly exempt amounts under the Social Security retirement 
earnings test for taxable years ending in calendar year 1996 to be $960 
for beneficiaries age 65 through 69 and $690 for beneficiaries under 
age 65;
    (6) The dollar amounts (``bend points'') used in the benefit 
formula for 

[[Page 54752]]
workers who become eligible for benefits in 1996 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 1996 to be $640;
    (8) The ``old-law'' contribution and benefit base to be $46,500 for 
1996;
    (9) The OASDI fund ratio to be 128.3 percent for 1995; and
    (10) The domestic worker coverage threshold to be $1,000 for 1996.

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. Information relating to this announcement is also 
available on the Social Security Administration's World Wide Web 
server--http://www.ssa.gov.

SUPPLEMENTARY INFORMATION: The Commissioner is required by the Social 
Security Act (the Act) to publish within 45 days after the close of the 
third calendar quarter of 1995 the benefit increase percentage and the 
revised table of ``special minimum'' benefits (section 215(i)(2)(D)). 
Also, the Commissioner is required to publish on or before November 1 
the national average wage index for 1994 (section 215(a)(1)(D)), the 
OASDI fund ratio for 1995 (section 215(i)(2)(C)(ii)), the OASDI 
contribution and benefit base for 1996 (section 230(a)), the amount of 
earnings required to be credited with a quarter of coverage in 1996 
(section 213(d)(2)), the monthly exempt amounts under the Social 
Security retirement earnings test for 1996 (section 203(f)(8)(A)), the 
formula for computing a primary insurance amount for workers who first 
become eligible for benefits or die in 1996 (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 1996 (section 203(a)(2)(C)).

Cost-of-Living Increases

    General. The cost-of-living increase is 2.6 percent for benefits 
under titles II and XVI of the Act.
    Under title II, OASDI benefits will increase by 2.6 percent 
beginning with the December 1995 benefits, which are payable on January 
3, 1996. 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 
2.6 percent effective for payments made for the month of January 1996 
but paid on December 29, 1995. This is based on the authority contained 
in section 1617 of the Act (42 U.S.C. 1382f). The percentage increase 
effective January 1996 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 1995 is a cost-of-living computation 
quarter for all the purposes of the Act. The Commissioner is, 
therefore, required to increase benefits, effective with December 1995, 
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 1995, the benefit increase is the percentage 
increase in the Consumer Price Index for Urban Wage Earners and 
Clerical Workers from the third quarter of 1994 through the third 
quarter of 1995.
    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 arithmetic mean is 
rounded, if necessary, to the nearest 0.1. The Department of Labor's 
Consumer Price Index for Urban Wage Earners and Clerical Workers 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. The corresponding 
Consumer Price Index for each month in the quarter ending September 30, 
1995, was: for July 1995, 149.9; for August 1995, 150.2; and for 
September 1995, 150.6. The arithmetic mean for this calendar quarter is 
150.2. Thus, because the Consumer Price Index for the calendar quarter 
ending September 30, 1995, exceeds that for the calendar quarter ending 
September 30, 1994 by 2.6 percent, a cost-of-living benefit increase of 
2.6 percent is effective for benefits under title II of the Act 
beginning December 1995.
    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 1996, benefits will 
increase by 2.6 percent beginning with benefits for December 1995 which 
are payable on January 3, 1996. In the case of first eligibility after 
1995, the 2.6 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 2.6 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 1995); 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 1996, 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 
Commissioner determines an automatic increase in Social Security 
benefits, the Commissioner 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 2.6 percent benefit increase.

                                                                        

[[Page 54753]]
                      Special Minimum Primary Insurance Amounts and Maximum Family Benefits                     
----------------------------------------------------------------------------------------------------------------
                                                                               Special minimum                  
                                                                                   primary       Special minimum
 Special minimum primary insurance amount payable for Dec.   Number of years  insurance amount   family benefit 
                           1994                                of coverage    payable for Dec.  payable for Dec.
                                                                                    1995              1995      
----------------------------------------------------------------------------------------------------------------
$25.80....................................................                11            $26.40            $39.80
51.50.....................................................                12             52.80             79.80
77.70.....................................................                13             79.70            119.90
103.60....................................................                14            106.20            159.70
129.50....................................................                15            132.80            199.30
155.50....................................................                16            159.50            239.80
181.50....................................................                17            186.20            279.80
207.60....................................................                18            212.90            319.70
233.50....................................................                19            239.50            359.70
259.30....................................................                20            266.00            399.60
285.60....................................................                21            293.00            439.80
311.40....................................................                22            319.40            479.70
337.60....................................................                23            346.30            520.30
363.60....................................................                24            373.00            560.00
389.50....................................................                25            399.60            599.70
415.70....................................................                26            426.50            640.40
441.70....................................................                27            453.10            680.20
467.50....................................................                28            479.60            720.00
493.40....................................................                29            506.20            760.10
519.40....................................................                30            532.90            799.90
----------------------------------------------------------------------------------------------------------------


    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 $188.50 for an 
individual under sections 227 and 228 of the Act is increased by 2.6 
percent to obtain the new amount of $193.40. The present monthly 
benefit amount of $94.30 for a spouse under section 227 is increased by 
2.6 percent to $96.70.
    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 2.6 percent effective January 1996. Therefore, the yearly 
Federal SSI benefit amounts of $5,496 for an eligible individual, 
$8,244 for an eligible individual with an eligible spouse, and $2,748 
for an essential person, which became effective January 1995, are 
increased, effective January 1996, to $5,640, $8,460, and $2,820, 
respectively, after rounding. The corresponding monthly amounts for 
1996 are determined by dividing the yearly amounts by 12, giving $470, 
$705, and $235, 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 1994

    General. Under various provisions of the Act, several amounts are 
scheduled to increase automatically for 1996 based on the annual 
increase in the national average wage index. 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). In addition, Pub. L. 103-387, enacted October 22, 1994, 
requires that the ``domestic employee coverage threshold'' also be 
based on changes in the national average wage index.
    Computation. The determination of the national average wage index 
for calendar year 1994 is based on the 1993 national average wage index 
of $23,132.67 announced in the Federal Register on October 31, 1994 (59 
FR 54464), along with the percentage increase in average wages from 
1993 to 1994 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 $22,191.14 and $22,786.73 for 1993 and 1994, 
respectively. To determine the national average wage index for 1994 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), the 1993 national average wage index of $23,132.67 is 
multiplied by the percentage increase in average wages from 1993 to 
1994 (based on SSA-tabulated wage data) as follows (with the result 
rounded to the nearest cent):
    Amount. The national average wage index for 1994 is $23,132.67 
times $22,786.73 divided by $22,191.14, which equals $23,753.53. 
Therefore, the national average wage index for calendar year 1994 is 
determined to be $23,753.53.

OASDI Contribution and Benefit Base

    General. The OASDI contribution and benefit base is $62,700 for 
remuneration paid in 1996 and self-employment income earned in taxable 
years beginning in 1996.
    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 1996 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 1996 is 12.4 percent. (The Hospital Insurance tax is due on 
remuneration, without limitation, paid in 1996, at the rate of 1.45 
percent for employees and employers, each, and on self-employment 
income earned in taxable 

[[Page 54754]]
years beginning in 1996, at the rate of 2.9 percent.)
    (b) It is the maximum annual amount used in determining a person's 
OASDI benefits.
    Computation. Section 230(b) of the Act, as amended by section 
321(g) of the ``Social Security Independence and Program Improvements 
Act of 1994,'' provides the formula used to determine the OASDI 
contribution and benefit base. Under the formula, the base for 1996 
shall be equal to the larger of the current base ($61,200) or the 1994 
base of $60,600 multiplied by the ratio of the national average wage 
index for 1994 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 1994, 
$23,753.53 as determined above, compared to that for 1992, $22,935.42, 
is 1.0356702. Multiplying the 1994 OASDI contribution and benefit base 
amount of $60,600 by the ratio of 1.0356702 produces the amount of 
$62,761.61 which must then be rounded to $62,700. Because $62,700 
exceeds the current base amount of $61,200, the OASDI contribution and 
benefit base is determined to be $62,700 for 1996.

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, as amended by section 
321(g) of the ``Social Security Independence and Program Improvements 
Act of 1994.'' The 1995 monthly exempt amounts were determined by the 
formula to be $940 for beneficiaries aged 65-69 and $680 for 
beneficiaries under age 65. Thus, the annual exempt amounts for 1995 
were set at $11,280 and $8,160, 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. Under the formula in section 203(f)(8)(B), each 
monthly exempt amount for 1996 shall be the larger of the corresponding 
1995 monthly exempt amount or the corresponding 1994 monthly exempt 
amount multiplied by the ratio of the national average wage index for 
1994 to that for 1992. The ratio of the national average wage index for 
1994, $23,753.53 as determined above, compared to that for 1992, 
$22,935.42, is 1.0356702. 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 1.0356702 produces the amount of $963.17. This must then be 
rounded to $960. Because $960 is larger than the corresponding current 
exempt amount of $940, the retirement earnings test monthly exempt 
amount for beneficiaries aged 65 through 69 is determined to be $960 
for 1996. The corresponding retirement earnings test annual exempt 
amount for these beneficiaries is $11,520.
    Exempt Amount for Beneficiaries Under Age 65. Multiplying the 1994 
retirement earnings test monthly exempt amount of $670 by the ratio 
1.0356702 produces the amount of $693.90. This must then be rounded to 
$690. Because $690 is larger than the corresponding current exempt 
amount of $680, the retirement earnings test monthly exempt amount for 
beneficiaries under age 65 is thus determined to be $690 for 1996. The 
corresponding retirement earnings test annual exempt amount for these 
beneficiaries is $8,280.

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 1996, the national average wage index for 
1994, $23,753.53, is divided by the national average wage index for 
each year prior to 1994 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 
1994. Any earnings in 1994 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 1996.
    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 1996 are obtained by multiplying the 
corresponding 1979 bend-point amounts by the ratio between the national 
average wage index for 1994, $23,753.53, and for 1977, $9,779.44. These 
results are then rounded to the nearest dollar. For 1996, the ratio is 
2.4289254. Multiplying the 1979 amounts of $180 and $1,085 by 2.4289254 
produces the amounts of $437.21 and $2,635.38. These must then be 
rounded to $437 and $2,635. Accordingly, the portions of the average 
indexed monthly earnings to be used in 1996 are determined to be the 
first $437, the amount between $437 and $2,635, and the amount over 
$2,635.
    Consequently, for individuals who first become eligible for old-age 
insurance benefits or disability insurance benefits in 1996, or who die 
in 1996 before becoming eligible for benefits, their primary insurance 
amount will be the sum of:
    (a) 90 percent of the first $437 of their average indexed monthly 
earnings, plus
    (b) 32 percent of the average indexed monthly earnings over $437 
and through $2,635, plus
    (c) 15 percent of the average indexed monthly earnings over $2,635. 


[[Page 54755]]

    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 rounding 
adjustment described above 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 1996 are obtained by multiplying the 
corresponding 1979 bend-point amounts by the ratio between the national 
average wage index for 1994, $23,753.53, and the average for 1977, 
$9,779.44. This amount is then rounded to the nearest dollar. For 1996, 
the ratio is 2.4289254. Multiplying the amounts of $230, $332, and $433 
by 2.4289254 produces the amounts of $558.65, $806.40, and $1,051.72. 
These amounts are then rounded to $559, $806, and $1,052. Accordingly, 
the portions of the primary insurance amounts to be used in 1996 are 
determined to be the first $559, the amount between $559 and $806, the 
amount between $806 and $1,052, and the amount over $1,052.
    Consequently, for the family of a worker who becomes age 62 or dies 
in 1996 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 $559 of the worker's primary insurance 
amount, plus
    (b) 272 percent of the worker's primary insurance amount over $559 
through $806, plus
    (c) 134 percent of the worker's primary insurance amount over $806 
through $1,052, plus
    (d) 175 percent of the worker's primary insurance amount over 
$1,052.
    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 rounding 
adjustment described above are contained in section 203(a) of the Act 
(42 U.S.C. 403(a)).

Quarter of Coverage Amount

    General. The 1996 amount of earnings required for a quarter of 
coverage is $640. 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 1996 shall be equal to the larger of the current amount of 
$630 or the 1978 amount of $250 multiplied by the ratio of the national 
average wage index for 1994 to that for 1976. The national average wage 
index for 1976 was previously determined to be $9,226.48. The average 
wage index for 1994 is $23,753.53 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 1994, $23,753.53, compared to that for 1976, $9,226.48, is 
2.5744954. Multiplying the 1978 quarter of coverage amount of $250 by 
the ratio of 2.5744954 produces the amount of $643.62, which must then 
be rounded to $640. Because $640 exceeds the current amount of $630, 
the quarter of coverage amount is determined to be $640 for 1996.

``Old-Law'' Contribution and Benefit Base

    General. The 1996 ``old-law'' contribution and benefit base is 
$46,500. 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 ($45,300) or the 1994 ``old-law'' base ($45,000) multiplied 
by the ratio of the national average wage index for 1994 to that for 
1992. If the amount so determined is not 

[[Page 54756]]
a multiple of $300, it shall be rounded to the nearest multiple of 
$300.
    Amount. The ratio of the national average wage index for 1994, 
$23,753.53 as determined above, compared to that for 1992, $22,935.42, 
is 1.0356702. Multiplying the 1994 ``old-law'' contribution and benefit 
base amount of $45,000 by the ratio of 1.0356702 produces the amount of 
$46,605.16 which must then be rounded to $46,500. Because $46,500 
exceeds the current amount of $45,300, the ``old-law'' contribution and 
benefit base is determined to be $46,500 for 1996.

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 1995 is 
the ratio of (1) the combined assets of the OASI and DI Trust Funds at 
the beginning of 1995 to (2) the estimated expenditures of the OASI and 
DI Trust Funds during 1995, 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 1995 equaled $436,385 million, and the expenditures are 
estimated to be $340,194 million. Thus, the OASDI fund ratio for 1995 
is 128.3 percent, which exceeds the applicable threshold of 20.0 
percent. Therefore, the stabilizer provision does not affect the 
benefit increase for December 1995. 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.

Domestic Employee Coverage Threshold

    General. Section 2 of the ``Social Security Domestic Employment 
Reform Act of 1994'' (Pub. L. 103-387) increased the threshold for 
coverage of a domestic employee's wages paid per employer from $50 per 
calendar quarter to $1,000 in calendar year 1994. The new statute holds 
the coverage threshold at the $1,000 level for 1995 and then increases 
the threshold in $100 increments for years after 1995. The formula for 
increasing the threshold is provided in section 3121(x) of the Internal 
Revenue Code, as added by the new law.
    Computation. Under the new formula, the domestic employee coverage 
threshold amount for 1996 shall be equal to the 1995 amount of $1,000 
multiplied by the ratio of the national average wage index for 1994 to 
that for 1993. The national average wage index for 1993 was previously 
determined to be $23,132.67. The average wage index for 1994 is 
$23,753.53 as determined above. If the amount so determined is not a 
multiple of $100, it shall be rounded to the next lower multiple of 
$100.
    Domestic Employee Coverage Threshold Amount. The ratio of the 
national average wage index for 1994, $23,753.53, compared to that for 
1993, $23,132.67, is 1.0268391. Multiplying the 1995 domestic employee 
coverage threshold amount of $1,000 by the ratio of 1.0268391 produces 
the amount of $1,026.84, which must then be rounded to $1,000. 
Accordingly, the domestic employee coverage threshold amount is 
determined to be $1,000 for 1996.

(Catalog of Federal Domestic Assistance: Program Nos. 96.001 Social 
Security-Disability Insurance; 96.002 Social Security-Retirement 
Insurance; 96.003 Social Security-Special Benefits for Persons Aged 
72 and Over; 96.004 Social Security-Survivors Insurance; 96.006 
Supplemental Security Income.)

    Dated: October 18, 1995.
Shirley S. Chater,
Commissioner, Social Security Administration.
[FR Doc. 95-26426 Filed 10-24-95; 8:45 am]
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