C became entitled to old-age insurance benefits beginning March 1957, the month he attained age 65. However, no benefits were payable for any month in 1957, 1958, and 1959 because of deductions required under section 203 of the Act by C's earnings of $7,500 per year. In February 1961 C filed an annual report of earnings with the Social Security Administration in which he stated that his total earnings for 1960 were $1,200. It was also determined that C had received a pension of $325 per month throughout 1960. The question is for what months in 1960, if any, are C's old-age insurance benefits subject to deductions.
For many years prior to 1960, C was president and general manager of the X Company, a family corporation of which he was majority stock-holder. C received a salary of $7,500 per year in his capacity of president and general manager. Effective January 1, 1960, C resigned as president and general manager of the company and became chairman of the board of directors, to serve without compensation. C was voted a pension of $325 per month beginning January 1960. The company had no plan or system for payment of a pension on account of retirement to either officers or employees. C was also given a salary of $100 beginning that month for his continuing supervision of one of the firm's major accounts as well as for his continuing services in an executive capacity in the absence of his son, who succeeded him as president and general manager.
Throughout 1960 C continued to go to the office daily for two or three hours. C's work on the account which he continued to supervise took only two or three hours per week. During the rest of his time in the office C was available for consultation with his son, who consulted him about various phases of the operation of the business. C also served in an executive capacity during 1960 for periods of as much as two weeks when his son was away on vacation or business trips.
Section 203 of the Social Security Act provides, in pertinent part, that an old-age insurance beneficiary may earn as much as $1,200 in a 12-month taxable year and still receive all his benefits for that year. For the taxable year 1960, if his earnings exceed $1,200, a deduction equal to one full month's benefit may be required for each $80 (or fraction of 80) in excess of $1,200. (For 12-month taxable years ending after June 30, 1961, a deduction of $1 may be required from benefits for each $2 of earnings over $1,200 up to and including $1,700, and for each $1 of earnings over $1,700.) However, no deduction may be made from benefits under this provision for any month in which the beneficiary is age 72 or over, or in which he neither renders services for wages of more than $100 nor renders substantial services in self-employment. Section 203 further provides that an individual's earnings for a taxable year shall be the sum of his wages for services rendered in that year and his net earnings from self-employment for that year, minus any net loss from self-employment for that year.
Whether or not C's benefits are subject to deductions for 1960 depends on whether the pension of $325 per month paid to C during 1960 is wages under section 209 of the Act for services rendered during the month for which it is payable. If it is such wages, then C would have earnings of $5,100 for 1960 and his benefits would be subject to deductions for all months of that year. If it is excluded from such wages, then C would have earnings of only $1,200 for 1960 and his benefits would not be subject to deductions for any month of that year.
Section 209 of the Act provides, as pertinent here, that the term "wages" means remuneration for employment, except that, in the case of remuneration paid after 1950, such term shall not include --
In SSR 61-41 it was held that payments made by an employer to an employee who continues to render services in employment for that employer are not excluded from wages under subsections (b) or (c) of section 209 above, even though the payments are considered by the employer and employee to be payments on account of retirement.
In the present case C rendered valuable services for the B Company throughout 1960, while receiving payments of $325 pension and $100 salary each month. Although C formally resigned his position of president and general manager of the company and reduced his working hours, he continued to completely supervise one of the company's major accounts, consulted with the new president on various phases of the business, and acted in an executive capacity during the absence of the president.
Under such circumstances, it is held that both the alleged pension payments as well as the salary payment are wages for services rendered in each month of 1960, and that C's earnings for 1960 are $425 per month, or $5,100 for the year. Accordingly, C's old-age insurance benefits are subject to deductions for all months of 1960.
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