20 CFR 404.1918  How benefits are computed.
(a)General. Unless otherwise provided in an agreement, benefits will be computed in accordance with this section. Benefits payable under an agreement are based on a pro rata primary insurance amount (PIA), which we determine as follows:
(1) We establish a theoretical earnings record for a worker which attributes to all computation base years (see §§ 404.211(b) and 404.241(c)) the same relative earnings position (REP) as he or she has in the years of his or her actual U.S. covered work. As explained in paragraph (b)(3) of this section, the REP is derived by determining the ratio of the worker's actual U.S. covered earnings in each year to the average of the total U.S. covered wages of all workers for that year, and then averaging the ratios for all such years. This average is the REP and is expressed as a percentage.
(2) We compute a theoretical PIA as prescribed in § 404.1918(c) based on the theoretical earnings record and the provisions of subpart C of this part.
(3) We multiply the theoretical PIA by a fraction equal to the number of quarters of coverage (QC's) which the worker completed under the U.S. Social Security system over the number of calendar quarters in the worker's coverage lifetime (see paragraph (d)(2) of this section). See § 404.140 for the definition of QC.
(4) If the pro rata PIA is higher than the PIA which would be computed if the worker were insured under the U.S. system without totalization, the pro rata PIA will be reduced to the later PIA.
(b)Establishing a theoretical earnings record.
(1) To establish a worker's theoretical earnings record, we divide his or her U.S. earnings in each year credited with at least one U.S. QC by the average of the total wages of all workers for that year and express the quotient as a percentage. For the years 1937 through 1950, the average of the total wages is as follows:
Year  Average of the total wages of all workers 

1937  $1,137.96 
1938  1,053.24 
1939  1,142.36 
1940  1,195.00 
1941  1,276.04 
1942  1,454.28 
1943  1,713.52 
1944  1,936.32 
1945  2,021.40 
1946  1,891.76 
1947  2,175.32 
1948  2,361.64 
1949  2,483.20 
1950  2,543.96 
(2) For years after 1950, the average of the total wages is as prescribed in § 404.211(c). If a worker has earnings in the year preceding the year of eligibility or death, or in a later year, we may not have been able to establish the average of the total wages of all workers for that year. Therefore, we will divide a worker's actual earnings in these years by the average of the total wages for the latest year for which that information is available. Average wage information is considered available on January 1 of the year following the year in which it is published in the Federal Register.
(3) The percentages for all years of actual covered earnings are then averaged to give the worker's REP for the entire period of work in the U.S. In determining the percentages for all years of covered earnings and the REP, we make adjustments as necessary to take account of the fact that the covered earnings for some years may have involved less than four U.S. QC's. The actual earnings that are taken into account in determining the percentage for any year with 1, 2, or 3 QC's cannot exceed 1/4, 1/2, or 3/4, respectively, of the maximum creditable earnings for that year. When we determine the REP from the percentages for all years, we add the percentages for all years, divide this sum by the total number of QC's credited to the worker, and multiply this quotient by 4 (see Example 1 of paragraph (d) of this section). This has the effect of calculating the REP on a quarterly basis.
(4) For each of the worker's computation base years (see §§ 404.211(b), 404.221(b) and 404.241(c)), we multiply the average of the total wages of all workers for that year by the worker's REP. The product is the amount of earnings attributed to the worker for that year, subject to the annual wage limitation (see § 404.1047). The worker's theoretical earnings record consists of his or her attributed earnings based on his or her REP for all computation base years. However, we do not attribute earnings to computation base years before the year of attainment of age 22 or to computation base years beginning with the year of attainment of retirement age (or the year in which a period of disability begins), unless the worker is actually credited with U.S. earnings in those years. In death cases, earnings for the year of death will be attributed only through the quarter of death, on a proportional basis.
(c)Determining the theoretical PIA. We determine the worker's theoretical PIA based on his or her theoretical earnings record by applying the same computation method that would have applied under subpart C if the worker had these theoretical earnings and had qualified for benefits without application of an agreement. However, when the criteria in § 404.210(a) for the Average Indexed Monthly Earnings (AIME) computation method are met, only that method is used. If these criteria are not met but the criteria in § 404.220(a) for the Average Monthly Wage method are met, then only that method is used. If neither of these criteria are met, then the oldstart method described in § 404.241 is used. If a theoretical PIA is to be determined based on a worker's AIME, theoretical earnings amounts for each year, determined under paragraph (b) of this section, are indexed in determining the AIME under § 404.211.
(d)Determining the pro rata PIA. We then determine a pro rata PIA from the theoretical PIA. The pro rata PIA is the product of 
(1) The theoretical PIA; and
(2) The ratio of the worker's actual number of U.S. QC's to the number of calendar quarters in the worker's coverage lifetime. A coverage lifetime means the worker's benefit computation years as determined under § 404.211(e), § 404.221(c), or § 404.241(d).
Step 1: Establish C's theoretical earnings record:
The following table shows: (1) C's actual U.S. covered earnings for each year, (2) the average of the total wages of all workers for that year and (3) the ratio of (1) to (2):
Year  QC's  C's actual U.S. covered earnings  National average wage  Percentage ratio of (1) to (2) 

(1)  (2)  (3)  
1974  2  $2,045.08  $8,030.76  25.46558 
1975  4  7,542.00  8,630.92  87.38350 
1976  4  9,016.00  9,226.48  97.71874 
1977  4  9,952.00  9,779.44  101.76452 
1978  4  10,924.00  10,556.03  103.48587 
1979  4  12,851.00  11,479.46  111.94777 
1980  4  11,924.00  12,513.46  95.28939 
Since C attained age 62 in 1982, his computation base years are 1951 through 1981. To establish his theoretical earnings record we use 95.85467 percent of the national average wage for each of the years 1951 through 1981. Since national average wage data is not available for 1981, for that year we attribute 95.85467 percent of the national average wage for 1980 or $11,994.74. His theoretical earnings record would look like this:
1951  $2,683.13 
1952  2,850.07 
1953  3,009.30 
1954  3,024.83 
1955  3,164.58 
1956  3,385.93 
1957  3,490.76 
1958  3,521.51 
1959  3,695.96 
1960  3,841.01 
1961  3,917.35 
1962  4,113.51 
1963  4,214.38 
1964  4,386.62 
1965  4,465.60 
1966  4,733.65 
1967  4,997.33 
1968  5,340.79 
1969  5,649.44 
1970  5,929.80 
1971  6,227.75 
1972  6,838.08 
1973  7,265.94 
1974  7,697.86 
1975  8,273.14 
1976  8,844.01 
1977  9,374.05 
1978  10,118.45 
1979  11,003.60 
1980  11,994.74 
1981  11,994.74 
Step 3: Compute the pro rata PIA:
Theoretical PIA  
− Actual U.S. QC's  
calendar quarters in  
benefit computation years  
$453 − 26 QC's (6


104 quarters (26 years)  
= $113.20 pro rata PIA 
To determine M's pro rata PIA, the theoretical PIA will be multiplied by the ratio of the actual number of U.S. QC's to the number of calendar quarters in the benefit computation years. There are 22 benefit computation years, or 88 quarters. The pro rata PIA would, therefore, be 12/88 × theoretical PIA.
(e)Rounding of benefits.
(1) If the effective date of the pro rata PIA is before June 1982, we will round to the next higher multiple of 10 cents if it is not already a multiple of 10 cents.
(2) If the effective date of the pro rata PIA is June 1982 or later, we will round to the next lower multiple of 10 cents if it is not already a multiple of 10 cents.
(f)Auxiliary and survivors benefits; reductions; family maximum. We will determine auxiliary and survivors benefit amounts (see subpart D) on the basis of the pro rata PIA. We will apply the regular reductions for age under section 202(q) of the Act to the benefits of the worker or to any auxiliaries or survivors which are based on the pro rata PIA (see § 404.410). Benefits will be payable subject to the family maximum (see § 404.403) derived from the pro rata PIA. If the pro rata PIA is less than the minimum PIA, the family maximum will be 1 1/2 times the pro rata PIA.