SSR 74-3a: SECTIONS 205(c), 209 and 210(a)(3)(A) (42 U.S.C. 405(c), 409 and 410(a)(3)(A)). -- EMPLOYMENT -- SERVICE IN EMPLOY OF SPOUSE -- EXCLUSION OF WAGES -- STATUTE OF LIMITATIONS -- CORRECTION OF EARNINGS RECORD
20 CFR 404.806 and 404.1011
- Where claimant filed application for retirement insurance benefits in July 1970 and alleged as her only employment, services performed from 1956 for a sole proprietorship operated by her spouse, held, (1) such services specifically excepted by section 210(a)(3)(A) of Act as employment; (2) earnings subsequent to 1966 (within statutory time limitation for correction) must be deleted pursuant to section 205(c) of Act, but earnings prior to 1967 remain credited, and computation of benefit amount is limited to remaining wages on earnings record.
R, a fully insured worker, filed application for retirement insurance benefits in July 1970. She indicated that she had been employed since 1956 until her retirement by the X Company, a sole proprietorship operated by her husband. There was no contention that it was a partnership at any time.
The Social Security Administration determined that wages credited to R's earnings record from the X Company were not derived from covered employment for social security purposes as they were earned in the employ of her spouse. R was advised that earnings credited to her record after December 1966 must be deleted and could not be used in computing her benefit amount. She was entitled, nevertheless, to a retirement benefit less than what would have been payable had the deleted wages been used in computing the benefit she protested.
The general issue is whether the remuneration paid to R by the X Company was wages under section 209 of the Social Security Act. The specific issue is whether her services for the firm constituted employment under section 210(a) of the Act.
Section 209 of the Act provides, as pertinent here, that the term "wages" means remuneration paid for employment.
Section 210(a)(3)(A) of the Act provides that services performed by an individual in the employ of her spouse is excepted from the definition of the term employment.
Section 205(c)(4) of the Act provides that prior to the expiration of the time limitation (a period of 3 years, 3 months, and 15 days), following a taxable year, the Secretary may correct any item of wages for such year, if it is brought to his attention that such entry is erroneous.
Section 205(c)(5)(A) of the Act provides, in pertinent part, that after the expiration of the time limitation following any year in which wages were paid, or alleged to have been paid to an individual, the Secretary may change or delete any entry with respect to wages in his records of that year for the individual but only if an application for monthly benefits was filed within the time limitation following such year, except that no such change may be made pursuant to subparagraph (A) after a final decision upon the application.
The fact is undisputed that R did perform the services alleged over a period of years and was paid accordingly. However, the explicit provisions of sections 209 and 210(a) of the Act regarding "wages" and "employment" must be applied in her case. The services performed by R for her husband are clearly excluded from the definition of the term "employment" under section 210(a)(3)(A) of the Act. Since her services did not constitute employment, it follows that the remuneration paid to R by X Company was not "wages" under section 209 of the Act.
Inasmuch as R filed her application for benefits in July 1970, and since there is no applicable provision under section 205(c) of the Act for deletion of the amounts from X Company credited to R for the years prior to 1967, such amounts must remain credited to her earnings record. However, all earnings after 1966 from X Company may, pursuant to sections 205(c)(5)(A), and section 205(c)(4) where applicable, be deleted from R's earnings record.
Accordingly, the Appeals Council held that R is entitled to retirement insurance benefits on the basis of her earnings record established prior to 1967 only, and that she has no creditable earnings record thereafter.