C, a child insurance beneficiary, entered on active duty with the United State Marine Corps in December 1967. Notice was received by the Social Security Administration that C's total earnings for 1968 would be approximately $2,300, and his benefits were suspended pursuant to the deduction provisions in section 203 of the Social Security Act. That section provides in effect that deductions shall be made from the benefits to which an individual is entitled if his annual earnings exceed $1,680 a year. For purposes of this section, earnings consist of all wages received for services rendered in the year, plus any net earnings and minus any net loss from self-employment for the same year. C's base pay for 1968 from the Marine Corps was less than $1,680; however, he was granted credit for certain "deemed wages" in addition to the amount of his base pay, as provided by section 229(a) of the Social Security Act, which brought his total earnings for 1968 above the statutory limit. C protested the suspension of his benefits, on the ground that only his base pay for 1968 should count as earnings for purposes of making deductions under section 203 of the Act.
Section 229(a) of the Social Security Act provides, as pertinent here, that servicemen on active duty in the uniformed services of the United States (including active duty for training) will receive social security credit not only for their base pay in each quarter, but also for certain "deemed wages" beginning with the March 1968 calendar quarter. The amount of "deemed wages" which may be credited for a quarter is $100 if the basic pay in the quarter is $100 or less; $200 if over $100 but not more than $200; and $300 if more than $200, subject to the maximum wage limitations contained in the law. These "deemed wages" may be used in determining entitlement to, and the amount of, monthly benefits payable for months after December 1967.
In considering wages for deduction purposes under section 203 of the Act, the definition of wages contained in section 209 is generally controlling. Whether or not C's benefits are subject to deductions for 1968 depends on whether the "deemed wages" granted him under the above section constitute "wages" under section 209 of the Act. The language of the statute, supplemented by its congressional history, makes clear that the above amounts are to be "deemed wages" for a specific, limited purpose only, i.e., to provide additional social security protection for those serving in the uniformed services. H.R. Report No. 544, 90th Cong., 1st Session, page 34 and Senate Report No. 744, 90th Cong., 1st Session, page 60, indicate that this provision was prompted by the fact that wages in kind and certain cash increments referable to military service are not credited as "wages" under the Act though they are an important part of total military compensation (particularly in the case of the lowest ranking enlisted personnel). Therefore, a serviceman's social security protection could be impaired during his period of military service because only his basic military pay may be used to determine his (and his family's) benefit rights.
In enacting section 229 of the Social Security Act as a separate section and not amending that part of section 209 of the Act which limits "wages" of a member of a uniformed service to his basic pay only, and stating only that these "deemed wages" are "for purposes of determining entitlement to and the amount of" benefits and entitlement to a period of disability, Congress made clear its limited purpose. On the other hand, section 209 of the Social Security Act, which defines "wages" for a member of the uniformed services generally, clearly makes that definition applicable for all purposes of title II, i.e., for both entitlement and deductions. Thus, it states in section 209
It seems clear, therefore, that section 229(a) does not expand the definition of "wages" for members of the uniformed services contained in section 209 of the Act, which definition is cognizable for all purposes of title II. Nor does section 229(a) in any way expend the scope of section 203(f)(5)(C), which defines and individual's wages for work deduction purposes. The latter section, when construed in conjunction with the definition of "wages" for members of the uniformed services contained in section 209, makes plain that the only "wages" of a serviceman cognizable for deduction purposes are his "basic pay."
In addition, it would be an anomaly for the "deemed wages" which Congress provided in section 229(a) to increase benefit protection for servicemen and their families at no expense to them, to be used also to reduce their benefits. While it has generally been true that earnings amounts used for purposes of entitlement to and computation of benefits have also been used for deduction purposes, different amounts of earnings can be used for entitlement than for deduction purposes. Thus, earnings in excess of the maximum that may be credited to any earnings account under the Act for a particular period may nevertheless be used for deduction purposes. Further, military service wage credits allowed under section 217 of the Act (which, like those involved here, are "deemed wages" and gratuitously provided) are used for entitlement, but not for deduction purposes.
Accordingly, it is held that "deemed wages" provided in the case of members of the uniformed services by section 229(a) of the Social Security Act may not be used for purposes of deductions under section 203 of the Act.
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