SSR 82-21a: SECTION 210(a)(5) and (6) (42 U.S.C. 410(a)(5) and (6)) COVERAGE OF WORK FOR U.S. INSTRUMENTALITIES -- EMPLOYEES OF NATIONAL BANKS
20 CFR 404.1018
- The claimant, who was born on July 14, 1917, applied for Old-Age Insurance Benefits (OAIB) in May 1979. The Social Security Administration (SSA) denied her application because she lacked 8 of the 28 quarters of coverage necessary for her to be fully insured as required by law. Although no wages were reported to her earnings record before 1940, the claimant submitted evidence which established that she had worked for two national banks from 1937 through 1939. Based on that employment, the claimant contended that she had acquired at least 8 quarters of coverage and thus was fully insured. Held, because national banks are instrumentalities of the United States, services performed in their employ before 1940 were excluded from coverage under section 210(b)(5) of the Social Security Act of 1935. Consequently, the claimant did not acquire any quarters of coverage before 1940 and thus is not entitled to OAIB because she is not fully insured.
This case came before the Appeals Council under authority of § 404.969 of SSA Regulations No. 4, having decided on its own motion to review the hearing decision.
The general issue before the Appeals Council is whether the claimant is entitled to OAIB. The specific issue is whether the claimant has the 28 quarters of coverage she needs to be fully insured.
The claimant, born on July 14, 1917, filed an application for OAIB on May 15, 1979. SSA determined, initially and upon reconsideration, that the claimant is not entitled to OAIB because she is not fully insured. SSA records indicate that the claimant has 20 of the 28 quarters of coverage she needs to be fully insured.
The claimant's earnings record shows that earnings were first reported to her by National Bank X for the quarter ending March 31, 1940. In connection with her request for a hearing, the claimant alleged that she had also worked for National Bank Y from January 1937 through December 1939. However, no wages were reported by that employer to her earnings record.
At the hearing, the claimant submitted a letter from a bank, dated April 15, 1980, which indicated that it had merged with National Bank Y on April 9, 1955. The records of National Bank Y showed that the claimant was employed by them from December 31, 1934 to May 11, 1937. Further, they indicated she resigned to accept a position with National Bank X.
In view of the above evidence, the administrative law judge (ALJ) held that the claimant had acquired 12 quarters of coverage from 1937 through 1939. Adding those to the 20 quarters of coverage reflected on the earnings record, the ALJ concluded that the claimant has a total of 32 quarters of coverage, is fully insured, and is therefore entitled to OAIB.
Section 202(a) of the Social Security Act provides for the payment of OAIB to an individual who is fully insured, has attained age 62, and has filed an application.
Section 214(a) of the Social Security Act provides, in pertinent part, that a fully insured individual is one who has not less than one quarter of coverage (whenever acquired) for each calendar year elapsing after 1950 and before the year in which he or she attains age 62. Therefore, the claimant needs 28 quarters of coverage to be fully insured.
Section 210(b) of the Social Security Act of 1935 provided, in pertinent part, that "The term 'employment' means any service, of whatever nature, performed within the United States by an employee for this employer, except . . . (5) Service performed in the employ of the United States Government or of an instrumentality of the United States. . . ."
As amended effective January 1, 1940, section 209(b)(6) of the Act provided, in pertinent part, that service performed in the employ of an instrumentality of the United States was not excepted from coverage unless the instrumentality was (A) wholly owned by the U.S., or (B) exempt from the tax imposed by section 1410 of the Internal Revenue code (IRC) by virtue of any other provision of law.
The Appeals Council does not agree with the ALJ's decision. Under section 210(b)(5) of the Social Security Act of 1935, service by an individual in the employ of the U.S. Government or of an instrumentality of the U.S. was excluded from covered employment. National Banks X and Y were instrumentalities of the United States inasmuch as they were "national banks." Accordingly, any earnings the claimant received in their employ before 1940 did not represent creditable wages and did not result in her acquisition of quarters of coverage.
Section 209(b)(6) of the Act, as amended effective January 1, 1940, excluded from coverage, service performed in the employ of an instrumentality of the U.S. which was wholly owned by the U.S. or exempt from the tax imposed by section 1410 of the IRC by virtue of another provision of law. Although national banks are instrumentalities of the U.S., they are neither wholly owned by the U.S. nor exempt from employment taxes under the IRC. National Bank X correctly reported wages paid to the claimant beginning January 1940 because that was the first month the services she performed as their employee constituted "employment" under the Social Security Act.
In view of the above, the Appeals Council finds that the claimant did not acquire any quarters of coverage before 1940 and thus is not entitled to OAIB because she has only 20 of the 28 quarters of coverage she needs to be fully insured.