BASIC (09-08)
DI 52150.010 Average Current Earnings (ACE)
Use the number holder’s (NH) average current earnings (ACE) to determine whether disability insurance benefits (DIB) payable to the NH and any entitled auxiliaries will be reduced (i.e., offset) due to the NH’s receipt of worker’s compensation (WC) and/or public disability benefits (PDB).
The highest of three computation methods is the ACE:
A. Beginning with benefits payable 01/73, the ACE is the highest of three methods:
“High-1” ACE | “High-5” ACE | Average Monthly Wage (AMW) |
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Based on the one calendar year in which the worker's unindexed covered earnings were highest | Based on the five consecutive years after 1950 with the highest unindexed covered earnings | Based on the unindexed covered earnings used to determine the DIB PIA. |
Selected from the period consisting of the year of current DIB onset and the five years immediately preceding the year of onset (regardless of whether or not any of these years is within a prior period of DIB) | Computed without regard to the statutory maximum. (i.e., we can use years of over-maximum earnings in the ACE computation. See RS 01401.015 and RS 01404.300 for over-maximum earnings). | |
Computed without regard to the statutory maximum. (i.e., we can use years of over-maximum earnings in the ACE computation. See RS 01401.015 and RS 01404.300 for over-maximum earnings). | | |
NOTE: The ACE, as used in computing WC/PDB offset, cannot be indexed nor can it be based on indexed earnings. | | |
For a definition of over-maximum earnings, see RS 01401.015 and the chart of maximum earnings in RS 01404.300. See RS 00605.018 regarding indexed earnings.
B. Developing earnings for the ACE
Take the following actions to develop earnings for the ACE:
Ask the NH to submit proof of unposted earnings. In many instances, the NH's highest year of earnings is in the lag period (i.e., the current year and the preceding year).
Review the earnings record for earnings years that are posted at the maximum wages creditable for that year.
Review the earnings record to determine if actual earnings could be higher than the amount posted. Pay attention to years with multiple employers.Maximum earnings on the WCDE (COMPUTATIONAL EARNINGS) screen in ICF can be overkeyed with "over maximum" earnings. (RS 01404.300, Maximum Contribution of Social Security Employment Taxes Paid By Employee, contains a chart of the yearly maximum amounts from 1937 on.)
For any year that could be material to the determination of the highest earning year (High-1) or a year in the high five consecutive years (High-5), obtain proof of the actual earnings amount for that year.
Use the Detailed Earnings Query (DEQY) to verify over-maximum earnings. For DEQY instructions, see SM 00344.001.
Beginning in 1994, there is no limit on the Medicare taxable wage amount, so the amount listed on the DEQY as Medicare wages or self-employment income is the actual earnings amount.
NOTE: If the total compensation (TOTAL COMP) amount on the DEQY is higher than the MEDICARE TOTAL amount, use the TOTAL COMP amount to compute the ACE.
Obtain proof of earnings for years that may be material to determine the ACE, if prelag earnings (i.e., earnings two or more years prior to the current year) are not posted or if the DEQY posting is questionable.
W-2 is available: Use the total earnings in item 1 of the W-2. This amount may include compensation that is both covered and non-covered. Assume the entire amount represents covered wages unless there is evidence to the contrary, e.g., the NH indicates receipt of non-covered sick pay.
W-2 not available: Use any other statement from the employer of wages paid; a certified copy of the Federal or State tax return; or an uncertified copy of the tax return with evidence that the return was filed (e.g., a cancelled check for paid taxes).
Use Earnings Modernization (EM 2.8) to search for earnings in the Suspense Files. See MSOM EM 012.001 for instructions.
If net earnings from self-employment (NESE) are involved:
Determine the NESE from the NH’s tax return. For instructions on computing NESE, see RS 01803.002.
Use EM 2.8 to complete self-employment scouting. For EM 2.8 instructions, see MSOM EM 016.006. Also, for complete information about developing self-employment income, see RS 01804.000.
Use deemed military wages (DMW) in the ACE determination even if the DMW causes the statutory maximum to be exceeded.
NOTE: Do not use railroad earnings in the ACE determination if the NH has 120 RR service months. Effective 01/01/2002, RR earnings are not useable if there are less than 120 RR service months, but at least 60 RR service months after December 31, 1995.
C. Compute the ACE
In most cases, the High-1 method is the highest ACE. If the NH’s highest year of earnings is in the year of onset or one of the five years immediately preceding the year of onset, the High-1 ACE is the highest of the three methods. Therefore, in this case, it is not necessary to manually compute the High-5 or the AMW ACE.
1. Computing the ACE
Use the following chart to compute each ACE method. MCS EC and the interactive computation facility (ICF) automatically compute all three methods and select the highest ACE when computing WC/PDB offset.
NOTE: If the MCS EC ACE or ICF ACE must be refigured due to over-maximum earnings, see DI 52150.010D.
“High-1” | “High-5” | AMW |
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Select the highest yearly earnings from the year of current onset and the 5 previous years and | Take the sum of the 5 consecutive years after 1950 with the highest unindexed earnings and | Divide the total unindexed earnings for the computation years (dividend) by number of months in the computation years (divisor) |
Divide the yearly total by 12 months | Divide by 60 months | |
Round to the next-lower dollar amount | Round to the next-lower dollar amount | Round to the next-lower dollar amount |
2. Example of ACE computation
Highest actual earnings amounts (unindexed and after maximum earnings amounts):
2002 $16,782.16
2003 $16,703.38
2004 $18,915.10
2005 $21,762.44
2006 $29,876.05
2007 $ 8,789.77
“High-1” | “High-5” | AMW |
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High year is 2006: $29,876.05 divided by 12 = 2489.67 | 16,782.16 16,703.38 18,915.10 21,762.44 29,876.05 104,039.13 | 203,416.33 divided by 300 = 678.05 |
| 104,039.13 divided by 60 = 1733.98 | |
100% ACE = 2489 | 100% ACE = 1733 | 100% ACE = 678 |
Highest of the three methods above is the “High-1” with a 100% ACE of $2,489.
3. Changing the original ACE
The originally established ACE can be changed in the following situations.
a. Recalculated ACE
Recalculate the original ACE if additional earnings change the calculation of the original ACE. A recalculated ACE is effective in the first possible month of offset and is treated the same as the original ACE.
b. Recomputed ACE
Changes in the statutes caused recomputation of the ACE:
In February 1968, the first month earnings above the statutory limit could be used in the High-5 computation.
In January 1973, the first month the High-1 computation is used.
Compute the ACE under the High-5 or AMW method. This may occur if the NH works after onset and the earnings are higher than the earnings previously used in the ACE. The recomputed ACE, based on additional earnings, is effective in January of the year immediately following the last year used in the computation of the new ACE.
D. Changing the MCS EC or ICF ACE
Earnings posted to the Master Earnings File (MEF) consist only of earnings up to, but not exceeding, the yearly statutory maximum. Both the modernized claim system earnings computation (MCS EC) and ICF compute the ACE using the MEF earnings. There may be instances when MCS EC or ICF do not compute the highest possible ACE.
MCS EC and ICF both include alerts when over-maximum earnings should be considered. In these situations, obtain a detailed earnings query (DEQY) for the years where over-maximum earnings are possible. The “TOTAL COMP” field of the DEQY displays the actual amount earned, even if it exceeds the yearly maximum. Use the “TOTAL COMP” amount(s) from the DEQY to compute the ACE manually or by using ICF.
1. Using MCS EC to determine the ACE
MCS EC uses only the posted earnings. When over-maximum earnings are involved:
Compute the ACE manually or via ICF;
Answer “Y” to “DO YOU NEED TO MANUALLY ENTER A HIGHER ACE” on the WC/PDB Claim Data (WPCL) screen; and
Enter the new 100 percent ACE in the block that follows. For coding instructions, see MSOM COMMON 001.003.
Develop lag-year earnings when the alleged lag earnings affect the ACE. In those cases, post the lag earnings amount to the Earnings (EARN) screen in the claim path. For coding instructions, see MSOM MCS 005.028. For development of lag earnings, see RS 01404.005.
If the lag-year earnings amount is over the statutory limit, you must compute the ACE manually. Enter on the WPCL screen.
2. Using ICF #31 or #32 to calculate the ACE
Manually enter over-maximum earnings when using ICF #31 or #32 to calculate the ACE.
On the WC/PDB Offset-General Information (WCGI) enter “Y” in ACE COMP NEEDED. Also enter the number of divisor months used in the PIA computation. NOTE: The number of divisor months is not a number that is displayed on the MBR. If necessary, compute the PIA in order to determine the correct number of divisor months.
The WC/PDB Offset-Computational Earnings (WCDE) allows earnings to be added or overkeyed. The earnings from that screen are used to determine the ACE.
E. NH questions the ACE
If the NH questions the ACE, refigure the ACE even if proof of earnings comes from a source other than the NH.
Refigure the ACE using actual verified earnings. Compute the ACE by using:
ICF #31 or 32 (For ICF instructions, see DI 52165.001);
ICF #28; or
a manual computation, if necessary. Enter a manual computation in ICF #34 OREO to create an electronic version.
If the refigured ACE is higher than determined previously, effectuate the new ACE as follows:
If the refigured ACE is lower or does not change, treat the NH’s inquiry as a request for reconsideration.
The FO should obtain an SSA-561 (Request for Reconsideration) and forward with all documentation to the processing center (PC).
The PC verifies the ACE computation, takes corrective action as necessary and notifies the NH with the correct appeal notice.
F. ACE computations for benefits payable before 01/1973
These are rare. Recompute benefits payable prior to 01/73 as follows:
For benefits payable beginning 02/68 – 12/72, the ACE is the higher of the:
For benefits payable prior to 02/68, the ACE is the higher of the: