20 CFR 404.205 and 404.1070(d)(1)(ii)

SSR 74-12c

Furst v. Weinberger, U.S.D.C., N.D. Ga., Atlanta Div., Civil Action No. 17131 (6/12/73) (CCH, U.I.R., Vol. 1A, Fed. Para. 17,291)

Where decedent, born in 1933, attained age 21 in 1954 and died in 1970, received self-employment income from 1962 until 1970 as doctor of medicine, held, in determining average monthly wage, section 215(b) of Social Security Act requires inclusion of all calendar years after age 21 to year of death, even though self-employment income must by statute be excluded for portions thereof (in this case, from 1962-1964) prior to coverage of physicians by Social Security Amendments of 1965, and since rational justification exists for the statutory classification involved, Congress has not exceeded acceptable bounds of due process.

MOYE, District Judge: This is an action to review the final decision of the defendant in establishing a monetary amount of survivors insurance benefits payable to the plaintiffs under Title II of the Social Security Act, 42 U.S.C. § 401, et seq. This Court has jurisdiction of the action by virtue of Section 205(g) of the Social Security Act. 42 U.S.C. § 405(g).

Plaintiffs filed their applications for Mother's Insurance Benefits and Surviving Child's Insurance Benefits, respectively, on the wage record of their deceased husband and father, Stephen B. Furst on April 29, 1970. These applications were approved by the Social Security Administration, who made a determination of the monetary benefit due the plaintiffs and began payment to them effective in April, 1970. Plaintiffs felt that an erroneous formula was used to compute their benefits, and requested a reconsideration of the monetary amounts and on January 20, 1971 the Social Security Administration concluded that their previous determination had been correct. On July 19, 1971 the plaintiffs requested a hearing before an Administrative Law Judge of the Bureau of Hearings and Appeals and after holding such a hearing the Administrative Law Judge issued a decision on January 26, 1972 affirming, as correct, the previous computation of awards. On March 15, 1972, plaintiffs requested that the Administrative Law Judge's decision be reviewed by the Appeals Council, which request was denied by the Appeals Council on July 13, 1972, thus creating the "final decision" of the Secretary that is subject to review in this action.

The facts in this case are not in dispute. Stephen B. Furst was born in 1933, attained the age of twenty-one in 1954, and died in 1970. From 1962 until his death in 1970, he received self-employment income as a practicing Doctor of Medicine.

Prior to 1965, self-employment income received by an individual in the exercise of his profession as a physician was specifically excluded from his earning record by the Social Security Administration. See Section 211(c) of the Social Security Act. After the 1965 Amendments; see Public Law No. 89- 97, Section 311(a)(1), 79 Stat. 380 (July 30, 1965) this exclusion was eliminated. The amendment specifically stated, however, that the elimination of the exclusion "shall apply only with respect to taxable years ending on or after December 31, 1965."

The primary insurance benefits payable under the Act in these circumstances is based on an individual's "average monthly wage" as defined in Section 215(b) of the Act, 42 U.S.C. 415(b).

Section 215(b) provides in part:

(1) * * * [A]n individual's 'average monthly wage' shall be the quotient obtained by dividing --
(A) the total of his wages paid in and self- employment income credited to his 'benefit computation years' (determined under paragraph (2)), by
(B) the number of months in such years.
(2)(A) The number of an individual's 'benefit computation years' shall be equal to the number of elapsed years (determined under paragraph (3) of this subsection), reduced by five; except that the number of an individual's benefit computation years shall in no case be less than two.
(B) An individual's 'benefit computation years' shall be those computation base years, equal in number to the number determined under subparagraph (A), for which the total of his wages and self-employment income is the largest.
(C) For purposes of subparagraph (B), 'computation base years' include only calendar years in the period after 1950 and prior to the earlier of the following years --
(ii) the year succeeding the year in which he died. * * *
(3) For purposes of paragraph (2), the number of an individual's elapsed years is the number of calendar years after 1950 (or, if later, the year in which he attained age 21) and before --
(b) in the case of a man who has died, the year in which he died. * * * *

The effect of the application of these statutes to the plaintiff's case is that self-employment income from the deceased physician during the years 1962-1964 were not included on his earnings record, although those years were included as "benefit computation years" to arrive at his "average monthly wage."

Plaintiff's contention is that the Secretary cannot have it both ways; that he must either include earnings in 1962-1964 or in the alternative, must, if he excludes the income, also exclude those years in computing the "average monthly wage."

The inclusion or exclusion of employment or income covered under the various programs of the Social Security Act are matters which, because of social considerations, address themselves to the Congress and not to this Court. The history of the Social Security Act demonstrates that in the past there have been many exclusions, although the trend has been in recent years towards more and more coverage.

With the passage of new amendments to the Act, Congress found it desirable to build into the system some formula to guard against dissipation of the fund by those groups newly granted coverage, and who of necessity had made limited contributions to the fund when their death occurred shortly after their entry into the program. This has been done by the "average monthly wage" formula that is in dispute here.

The very early case of Erickson vs. Social Security Board, 149 F.2d 270 (2d Cir., 1945) dealt with this very problem as it was applied to a tugboat captain who had only recently been covered by the Act when he died. The Court said:

* * * To make a fairer distribution, as well as to keep outgo more commensurate with income to the fund, Congress therefore intended the hidden decrement to the share of such late comers who had not paid taxes throughout the Act's life which would result in maintaining in its average monthly wage formula a divisor always weighted to include all quarters not specifically excluded, even though for period not included in the wage receipts of the dividend. Thus to expand the dividend equally with the divisor, as was done below, would defeat the very intent of the particular legislation. * * *

It is a well-known fact to students of social litigation that the medical profession of this country steadfastly objected to inclusion of their members under the Social Security Act and successfully prevented their coverage until the 1965 amendments. If the formula in controversy here had been devised simply to apply to physicians, plaintiff's contention that it was violative of the due process clause of the Fifth Amendment might very well be sustained. The formula, however, does not address itself simply to physicians, but to all persons who had, because of one exclusion or another, come under coverage of the Act at a date later than its initial inception. It is distinctly advantageous to those who become covered at a late date and contribute only a small amount to the fund. The system also has this built-in protection against complete disproportionate payment by including "benefit-computation years" prior to coverage.

We view this as a rational justification for the statutory classification involved and if the classification is rationally justified, then it cannot be found unconstitutional. See Flemming vs. Nestor, 363 U.S. 603 (1960), Richardson vs. Belcher, 404 U.S. 78 (1971).

The Congress has great latitude to make classification in the area of economics and social welfare, Currin vs. Wallace, 306 U.S. 1 (1939). In providing the formula under attack in this case for reducing benefits payable to persons who recently come within the purview of the Act, the Congress has not gone beyond acceptable bounds of due process.

Accordingly, judgment should be granted for the defendant as prayed and the complaint dismissed.

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