TN 10 (03-04)
GN 01701.200 Totalization Computations
A. Process – computing a totalization benefit
A theoretical “full career” earnings record is created based on the number holder’s (NH) actual earnings under the U.S. system relative to the average earnings of all covered workers.
A theoretical primary insurance amount (PIA) is computed based on the theoretical earnings record.
The theoretical PIA is multiplied by a pro rata fraction to determine the pro rata PIA.
The monthly benefit amount is established based on the pro rata PIA.
B. Procedure – establish theoretical earnings record
1. Determine the worker’s Relative Earnings Position (REP)
The REP is a number that represents the relationship between the worker’s actual posted earnings during the period he or she was covered under title II and the national average earnings for all covered workers during the same period. To determine the worker’s REP:
Divide the NH’s actual posted earnings for each year through the year before the year of entitlement (in life cases) or through the year of death (in survivor cases) by the national average earnings for all workers for that year.
Ignore any year in which the worker does not have at least 1 quarter of coverage (QC).
The actual earnings used for any year with only 1, 2, or 3 QCs cannot exceed ¼, ½, or ¾, respectively, of the maximum creditable earnings for that year.
Example: A worker has 2 QCs and $4,200 in covered earnings for 1970. Since there are only 2 QCs, only $3,900 of covered earnings (1/2 of the $7,800 maximum) can be used.
For years 1937-1950, use the national average earnings in the following chart.
For years after 1950, use the national average earnings in RS 00605.018D.
If the NH has earnings in the year preceding the year of entitlement or death or a later year, the average wage for all workers may not yet be available for that year. In such cases, use the average for the last available year. The average wage is published in the Federal Register on or about November 1 of each year. Average wage information may not be used for any computation which is effective prior to January 1 of the year following the year in which it is published in the Federal Register.
Example: A claim for benefits is filed in 12/2000 with the first month of entitlement being 12/2000. Although the average wage for all workers for 1999 has already been published, that average is not considered available until January 1, 2001. Thus, when dividing the actual earnings for 1999, the average for 1998 must be used. Do not subsequently recompute the PIA solely to incorporate the 1999 average in the computation. Should a recomputation become necessary for some other reason (e.g., to include subsequent earnings) and the effective date of the recomputation is January 1, 2001 or later, the 1999 average must be used in the computation.
Round the quotient for each year to the nearest 5th decimal place.
Add the quotients for all years, multiply by 4 and divide by the number of QCs actually earned in those years.
Round the result to the nearest 5th decimal place. The resulting figure is known as the REP.
2. Attribute earnings
Attribute earnings to each computation base year (see RS 00605.017) as follows:
First, multiply the average earnings for all workers for each base year by the REP
Second, round the resulting amount for each year to the nearest penny.
After rounding, attribute the earnings for each year to the appropriate year on the theoretical earnings record, subject to the maximum creditable earnings for that year.
Exception: Do not attribute earnings to any year before the year of attainment of age 22 or to computation base years beginning with the benchmark year (see RS 00605.005) other than the year of death, unless the NH is actually credited with at least 1 QC in those years.
b. Year of death
When the year of death is the benchmark year, attribute earnings on a proportional basis based on the quarter of death. If the worker died in the first quarter, second quarter, third quarter or fourth quarter, attribute ¼, ½, ¾, or 4/4 of the result, respectively. Round to the nearest penny.
C. Procedure – determine theoretical PIA
The theoretical PIA is determined based on the theoretical earnings record established in GN 01701.200B. Use the appropriate computation method determined according to the rules in subchapter RS 00605.000 except as noted in GN 01701.200C.2.
When the criteria for using the Average Indexed Monthly Earnings (AIME) computation are met (see RS 00605.015), use only that method. If the criteria for the AIME computation are not met but the criteria for a pre-1978 New Start (NS) are met (see RS 00605.024), then use only a pre-1978 NS method. If the criteria for neither the AIME nor the pre-1978 NS are met, then use an Old Start (OS) method. Generally, an OS computation is possible only if the NH died, became disabled, or attained age 65 before 1951.
3. Computations with minimum QC requirements
Some computation methods apply only if the NH has a specified number of QCs. Use QCs established on the basis of the theoretical earnings record to determine if the applicable QC requirement is met. For this purpose, attribute QCs, as explained in GN 01701.200C.3.b. and GN 01701.200C.3.c., to years in which earnings have been attributed.
b. Years before 1978
For years before 1978, attribute 4 QCs to each year with at least $200 of attributed earnings except for the year of death if the NH died prior to the fourth quarter. If the NH died in the third quarter and there are at least $150 in attributed earnings, assign 1 QC to each of the first three quarters of the year. If the NH died in the second quarter and there are at least $100 in attributed earnings, assign 1 QC to each of the first two quarters. If the NH died in the first quarter and there are at least $50 in attributed earnings, assign 1 QC to that quarter. Otherwise no QCs will be assigned in the year of death.
For years other than the year of death where attributed earnings are less than $200, attribute no QCs.
c. Years after 1977
Attribute 1 QC for each whole increment of attributed earnings required to earn a QC. (See RS 00301.250 for the amount of earnings required to earn a QC.)
D. Procedure – determine pro rata PIA
1. Determine raw pro rata PIA
Multiply the theoretical PIA by the number of U.S. QCs credited to the NH’s record based on actual covered earnings (not attributed earnings) from 1937 through:
the quarter of death in survivor computations,
the year before the effective date of a recomputation if a recomputation is being performed,
the year before the year of initial entitlement in all other cases.
Multiply the result by 3 (to convert QCs to months).
Divide the product by the number of divisor months in the computation used to determine the theoretical PIA.
2. Rounding raw Pro Rata PIA
If the effective date of the raw pro rata PIA is before June 1982 and the result is not an even multiple of 10 cents, round to the next higher multiple of 10 cents.
If the effective date of the raw pro rata PIA is June 1982 or later and the result is not an even multiple of 10 cents, round to the next lower multiple of 10 cents.
The result is the pro rata amount.
3. Determine Pro Rata PIA
If the benchmark year is after 1978, establish the pro rata amount as the pro rata PIA.
If the benchmark year is before 1979 or, regardless of the benchmark year, if the pro rata amount was derived from a theoretical special minimum PIA, and the pro rata amount is below the applicable minimum table PIA, establish the pro rata amount as the pro rata PIA.
If the benchmark year is before 1979 or, regardless of the benchmark year, if the pro rata amount was derived from a theoretical special minimum PIA, and the pro rata amount is at or above the applicable minimum table PIA, establish the pro rata amount as the pro rata PIA if it is already equal to a table PIA. If it is not equal to a table PIA, raise the pro rata amount to the next higher table PIA.
E. Policy – capping the pro rata PIA
In certain rare cases involving disability computations, it is possible for the pro rata PIA to exceed the non-Totalization PIA (i.e., the PIA that would result if the NH were insured without the foreign coverage). This could occur, for example, in cases where the actual number of U.S. QCs exceeds the number of quarters in the computation years but the foreign coverage is needed to meet the recency-of-work test for disability benefits. Capping only needs to be considered in claims involving disability computations.
2. The Capping Rule
When the pro rata PIA is greater than the non-Totalization PIA, the pro rata PIA will be capped and established as the lesser non-Totalization PIA. All benefits are then based on the capped pro rata PIA.
F. Procedure – capping the pro rata PIA
To determine if the capping rule applies, compute a non-Totalization PIA and compare the amount to the pro rata PIA. Establish the non-Totalization PIA as the capped pro rata PIA if it is less than the regular pro rata PIA. To compute the non-Totalization PIA:
Assume the NH is insured based on U.S. coverage only and compute a PIA based on actual U.S. earnings.
Consider all computations that would be applicable if the NH were insured based on U.S. coverage only.
Where a particular computation method requires a given number of QCs within a specific time period, consider only actual U.S. QCs when determining if that requirement is met.
G. Policy – applying the windfall elimination provision (wep) in a capping computation
Public Law 103-296 provides that WEP will not apply in the computation of a Totalization benefit payable for months after December 1994. Therefore, the WEP will not be applied in any capping computation for months after December 1994. The WEP must be applied, when applicable, for any months prior to January 1995. Where entitlement is established prior to January 1995 and the WEP is applied in the capping computation, a recomputation must be done to remove the WEP from the computation effective January 1995.