Duration of audio: 18.5 minutes   

Background - Continuing earnings and benefits

1. Context

• History
  • OASI
    • 1939 - Introduction of monthly exempt amount
    • 1960 - First use of a fractional reduction
    • 1972 - Exclusion of earnings after age 72
    • 1977 - Test split in two with a different formula for those beyond "normal" or "full" retirement age
    • 1983 - Enactment of phased increase in the "normal" or "full" retirement age
    • 2000 - Elimination of test for those beyond "normal" or "full" retirement age
• Numbers
  • OAI
  • Spouse benefit recipients
• Current exempt amount (for individuals below their full retirement age): 2004 - $970 or $11,640 / yr. with earnings above those amounts reducing benefits $.50 on the dollar
• Current exempt amount (for months in the year of an individual's full retirement age prior to attaining that age): 2004 - $2,590 or $31, 080 / yr. with earnings above those amounts reducing benefits $1 for every $3

2. The key references

• The Act
  • § 403(b)
  • § 403(f)
• The regulations
  • 20 C.F.R. §§ 404.415-404.420
  • 20 C.F.R. § 404.429
  • 20 C.F.R. § 404.402

3. Taking the excess earnings test into account making plans for retirement

• Excess earnings and actuarial adjustment
• Shifting earnings
  • From one period to another
  • Into a category of revenue that doesn't count
• Earnings that don't count?

4. The effect of excess earnings on benefits to others

• Earnings of the primary benefit recipient
• Earnings of other family members receiving secondary benefits