Use the MBC payable to the beneficiary, before deductions, for the last month of entitlement in the violation year as the penalty amount, except under the following circumstances.

1. 1. 

   If the annual report is for a grace year and

   • •

     there is only one service month, and

   • •

     the MBC for the service month is less than the MBC for the last month of entitlement.
     
     Use the MBC for the service month.

2. 2. 

   If the beneficiary reaches full retirement age (FRA) in the year of the violation, use the MBC for the month before the month of FRA.

   NOTE: If a recomputation changes the MBC for the month used to determine the penalty amount, use the recomputed MBC to access the penalty.

   For information on grace years and service months, see RS 02501.030,

   Applying the Monthly Earnings Test.

Use the MBC payable to the person, before deductions, for the month of the violation.

If we recomputed the MBC retroactively, use the recomputed amount only if we received and accepted it before the beneficiary filed the report.