Effective Dates: 04/29/2024 - Present Previous | Next

TN 53 (04-24)

RS 02501.021 The Earnings Test (ET)

A. Introduction to the ET

Social Security benefits replace, in part, earnings lost to a beneficiary or family because of the beneficiary’s retirement, disability, or death. We use the ET to measure the:

  • •

    extent of a beneficiary's retirement and determine the amount, if any, to be deducted from monthly benefits of the wage earner and auxiliaries, and

  • •

    earnings of auxiliary and survivor beneficiaries to determine the amount of benefits payable to them.

The law provides for a two-tier earnings test:

  1. 1. 

    One test for beneficiaries under full retirement age (FRA), and

  2. 2. 

    One test for beneficiaries who attain FRA during the year.

Earnings test does not apply to individuals at or above FRA.

For information on FRA, see RS 00615.003.

B. Applying the earnings test (ET)

Beneficiaries may receive Social Security retirement, dependent, or survivor benefits and work at the same time. Under the earnings test, we will reduce a beneficiary’s monthly benefits by the amount of their excess earnings if the beneficiary is under or in the year of FRA. The earnings we apply to the ET include wages, self-employment income, or both. For additional information on calculating excess earnings, see RS 02501.080.

Neither the earnings test (ET) nor the monthly earnings test (MET) applies to a beneficiary who has no excess earnings, unless non-service months apply in the grace year.

1. What earnings to count for the annual earnings test (AET)

a. Beneficiary under FRA

If under FRA, count the beneficiary’s earnings for all months of their taxable year to determine excess earnings even though they may not be entitled to benefits during all the months of that year.

b. Beneficiary in the year of FRA

In the year of FRA, count the beneficiary’s earnings for all months of their taxable year up to but not including the month of FRA to determine excess earnings even though they may not be entitled to benefits during all the months of that year.

For more information on exempt amounts, refer to RS 02501.025B.1.

2. Monthly earnings test (MET)

The MET applies to specific years, known as grace years. When applying the MET to beneficiary’s earnings, consider the following:

  1. a. 

    For beneficiaries under FRA, use the entire year’s income to calculate the amount of excess earnings. In the year a beneficiary reaches FRA, use the earnings for all months up to but not including the month of FRA to calculate excess earnings; and

  2. b. 

    Regardless of the excess earnings amount, pay full benefits for any month the beneficiary neither earns wages higher than the monthly exempt amount nor performs substantial services in self-employment. To determine substantial services in self-employment, see RS 02505.065. For information on grace years, see RS 02501.030B.

For additional information on applying the monthly earnings test, see RS 02501.030 or for the monthly exempt amounts, see RS 02501.025.

3. FRA when applying ET for RIB and WIB

Always use the FRA for retirement insurance benefits (RIB) when applying the ET for RIB or widow(er)’s insurance benefits (WIB). Although FRA for WIB may be earlier, the FRA for RIB is controlling for ET purposes. This rule applies even if the beneficiary is not entitled to RIB.

4. The deduction rate for AET

The age of the beneficiary determines the rate at which we deduct excess earnings from their benefits. For beneficiaries who:

  • •

    have not reached their year of FRA, deduct $1 from benefits for each $2 earned over the annual exempt amount.

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    are in the year they attain FRA, count only earnings before the month of attainment of FRA and deduct $1 from benefits for each $3 earned over the full annual exempt amount in the months prior to FRA.

For additional information on exempt amounts and deduction rates, refer to RS 02501.025D.

5. Who is not subject to the ET

The ET generally does not apply to disabled beneficiaries, divorced spouses who might otherwise be offset based on the number holder’s (NH) earnings, or beneficiaries working outside the U.S. However, there are exceptions for these types of cases as discussed in RS 02501.021B.5.a. in this section.

a. When ET does not apply to disabled beneficiaries

The ET does not apply to beneficiaries receiving:

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    Disability insurance benefits (DIB),

  • •

    Disabled widow(er) benefits (DWB), and

  • •

    Childhood disability benefits (CDB).

Exceptions:

For a beneficiary receiving DIB, DWB, and CDB, we apply the ET to any month they have excess earnings and receive:

  • •

    RIB while simultaneously entitled to DIB although the entitlement to DIB continues technically; or

  • •

    Reduced RIB prior to their entitlement to DIB.

If a disabled beneficiary performs any work activity, we look at that activity to determine whether the disability has ceased. For additional information on the suspension of DIB payments because of work activity, see DI 10105.095.

b. When ET does not apply to divorced spouses

The ET does not apply to divorced spouses based on the wage earners excess earnings if the:

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    wage earner is entitled to benefits prior to the month of divorce; or

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    wage earner’s month of entitlement (MOE) is in the month of divorce or later and the spouse has been divorced from the wage earner for at least 2 years.

c. When ET does not apply to foreign work

The ET does not apply to a beneficiary who works outside the U.S. when Social Security does not cover the work. However, the ET does apply to covered work that a beneficiary performs outside of the U.S.

For additional information on working outside the U.S., see RS 02605.000

6. When the ET no longer applies

Effective 1/2000, the ET no longer applies to a beneficiary beginning in the month they attain FRA. For a history of how the ET has evolved, refer to the following:

  • •

    ET applied to all beneficiaries; then

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    The Social Security Amendments of 1950 provided an exemption for beneficiaries age 75 and over; then

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    Before 1983, the ET no longer applied at age 72; then

  • •

    Before 2000, the ET no longer applied at age 70

C. Crediting Months and Adjustment of Reduction Factor (ARF)

A beneficiary will receive crediting months for any month they were in full or partial work deduction due to excess earnings under the AET. See RS 00615.482B. The beneficiary will receive a benefit adjustment, or ARF, if they have at least one crediting month. This will provide a higher benefit amount by removing some or all of the reduction factors from the initial payment calculation. See RS 00615.582B.2.

Note: Beginning with FRA, manual ARFs may be granted for any years that have been closed out per RS 02510.015.

Technicians must clearly explain the relationship between work activity and the AET to all beneficiaries under FRA. The following information must be conveyed:

  1. 1. 

    Work deductions due to work activity convert to crediting months.

  2. 2. 

    Crediting months will result in a higher monthly benefit.

  3. 3. 

    A higher monthly benefit due to crediting months will be realized at FRA.

D. References

RS 00615.003 Full Retirement Age

RS 02501.080 Calculating Excess Earnings

RS 02501.025 Determining Annual and Monthly Exempt Amounts

RS 02505.065 Meaning Of Substantial Services (SS) in Self-Employment (SE)

RS 02501.030 Applying the Monthly Earnings Test (MET)

RS 02501.021 The Earnings Test (ET)

DI 10105.095 Suspension of Disability Insurance Benefit (DIB) Payments Due to Work Activity or Prisoner Suspension

RS 02605.000 Work Outside the U.S.A.

RS 00615.482 Requirements for Adjustment of Reduction Factor (ARF) — Crediting Months

RS 00615.582 Computing the Reduction Factor Adjustment — No Entitlement Prior to Age 60

RS 02510.015 Closed Year Work Reports (Annual Report of Earnings)

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http://policy.ssa.gov/poms.nsf/lnx/0302501021
RS 02501.021 - The Earnings Test (ET) - 04/29/2024
Batch run: 04/29/2024
Rev:04/29/2024