SSR 68-13: SECTIONS 228(c)(1) and 228(h)(2). -- SPECIAL AGE 72 PAYMENTS -- GOVERNMENTAL PENSION SYSTEM -- TEACHERS' RETIREMENT FUND

20 CFR 404.377(i)

SSR 68-13

Where a retired school teacher, who was entitled to special age 72 payments under section 228 of the Act, was also entitled to an annuity paid by the Teachers' Retirement Fund Association of a county school district in Oregon, and such association was established by the teachers of the school district under authority of and in accordance with provisions of Oregon law, among which was the requirement that the plan for incorporation and organization of the Association, and the collection and disbursement of its funds (part of which was derived from public tax revenues), be approved by the board of directors of the school district, held, annuities paid by the Association are periodic benefits under a governmental pension system within the meaning of section 228(h)(2) of the Act, and, accordingly, the amount of the school teacher's special age 72 payment must be reduced under section 228(c)(1) of the Act by the amount of her annuity.

Public Law 89-368, enacted March 15, 1966, added section 228 to the Social Security Act which provides, effective October 1966, monthly payments of $35 to certain persons age 72 or over, who are not insured under the regular or transitional insured status provisions of the Act and who reach age 72 before 1968, or who have at least 3 quarters of coverage, earned at any time, for each calendar year after 1966 and before the year in which age 72 is attained.

R, a retired school teacher, filed for and became entitled to special age 72 payments of $35 a month, beginning with October 1966. She was receiving an annuity of $136.50 a month from the Teachers' Retirement Fund Association of a county school district in Oregon. In a determination dated December 1, 1966, the Social Security Administration held that the annuity R was receiving from the Association was a periodic benefit under a governmental pension system and, therefore, under the provisions of section 228(c) of the Act, the amount of R's special age 72 payment was reduced by the amount of the annuity. Since the annuity of $136.50 was larger than the special age 72 payment of $35, the amount of R's special age 72 payment was reduced to zero and no payment could be made to her under section 228 of the Act.

R filed for reconsideration of this determination, contending that the Teachers' Retirement Fund Association from which she received the annuity was established by the teachers of the school district under Oregon law; that it was not established by the school district itself, the State of Oregon, or any political subdivision of the State but was a private pension system; and therefore, since her annuity was not paid from a system or fund established by the State, her special age 72 payment was not subject to reduction.

Section 228(c)(1) of the Social Security Act provides as follows:

The benefit amount of any individual under this section for any month shall be reduced (but not below zero) by the amount of any periodic benefit under a governmental pension system for which he is eligible for such month.

Section 228(h)(2) of the Act, in pertinent part, defines the term "governmental pension system" as:

* * * any * * * system or fund established by * * * a State, any political subdivision of a State, or any wholly owned instrumentality of any one or more of the foregoing which provides for payment of (A) pensions, (B) retirement or retired pay, or (C) annuities or similar amounts payable on account of personal services performed by any individual * * *.

The original enabling act which authorized the creation of teachers' retirement fund associations was enacted as Chapter 280, Oregon Laws 1911. Chapter 280, in pertinent part, provided that in every school district having more than 10,000 children of school age, the teachers employed in such district could, with the consent and approval of the board of directors of the school district, incorporate and establish an association to be known as the Teachers' Retirement Fund Association; that the teachers could formulate a plan for the incorporation and organization of such an association and the collection and disbursement of funds for the benefit of retired teachers, which plan would be submitted to the board of directors of the school district for its approval; and that after the organization and incorporation of the association as provided by law the board of directors of the school district was to pay to the Teachers' Retirement Fund Association one percent of the amount of the tax received by the school district for school purposes. Chapter 239, Oregon Revised Statutes 1965, further defines the teachers' retirement system authorized by the original Act of 1911. For example, section 239.108 of Chapter 239 provides that the by-laws adopted by a Teachers' Retirement Fund Association must be approved by the board of directors of the school district and are only effective after the date of approval; further, approval of the by-laws may be withdrawn by the board.

A governmental pension system, as defined in section 228(h)(2) of the Act, supra, includes a system or fund established by a State or any political subdivision of a State. In this case, the framework of the teachers' retirement system was established by the Oregon State legislature. Within this framework, teachers, under certain conditions, were permitted to formulate an association to provide for retirement benefits. It was required that the plan for incorporation and organization, and the collection and disbursement of funds, be approved by the board of directors of the school district. In addition, public tax revenues were authorized to be levied and paid into the fund from which retirement benefits were paid. The fact that certain duties and functions were delegated to the Association does not change the basic facts that the annuities paid by the Association are paid under a system established by the State and that public tax revenues are part of the fund from which the annuities are paid.

Accordingly, it is held that R's annuity from the Teachers' Retirement Fund Association is a periodic benefit under a governmental pension system within the meaning of section 228(h)(2) of the Act, and the amount of her special age 72 payment must be reduced by the amount of her annuity. Since the amount of the annuity exceeds the amount of the special age 72 payment, no payment may be made to her under section 228 of the Act.


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