Earnings Test

What Is The Earnings Test?

The earnings test determines whether a person receiving Social Security benefits is retired or otherwise depending on his/her benefits.

A beneficiary who is still employed or later returns to work will have his benefits reduced if he/she is earning more than a specific amount. Read more below if you are among those affected by the earnings test.

Who Is Affected?

Retirement, disability, and child insurance beneficiaries under the age of 65 earning over $3,000 a quarter:

If you are a retirement, disability, or child insurance beneficiary under the age of 65, and you continue to work, your benefits will be reduced by $1.00 for every $3.00 of wages in excess of $3,000 earned during a quarter.

Sample Calculation

A 63-year old beneficiary receives $300 every quarter (or $100 a month) in retirement benefits. But he returns to work and is earning $3,500 a quarter.

Calculate amount that is in excess of the allowed maximum remuneration.

In this case, $ 3,000 is the maximum remuneration that a beneficiary between the ages of 60 and 65 can earn and still remain entitled to a full benefit.

$3,500 - $3,000 = $500
 (Excess of the Maximum Remuneration of $3,000)
   
Calculate how much to reduce.

Benefits are reduced by $1.00 for every $3.00 that is in excess of the allowed maximum remuneration. We calculated in step number 1 that this beneficiary is making $500 in excess of the maximum remuneration of $3,000. To calculate how much to reduce, we divide $500 by $3.00

$500 / $3.00 = $166.67 is the Quarterly ET Deduction
$166.67 / 3 Months = $55.56 is the Monthly ET Deduction to apply to monthly benefit
   
Apply reduction.

After determining the amount to deduct, subtract that amount from the monthly benefit.

$198 x 3 Months = $594 is the Quarterly Benefit amount
$594 - $166.67 = $427.33 is the Quarterly Benefit amount after ET Deduction
$198 - $55.56 = $142.44 is the Monthly Benefit amount after ET Deduction
 

Surviving Spouse under the age of 60 earning over $3,000 a quarter:

If you are a surviving spouse under the age of 60 that continues to work, your benefits will be reduced by $1.00 for every $3.00 of wages in excess of $3,000 earned during a quarter.

Sample Calculation

A 57-year old beneficiary is eligible to receive $594 every quarter (or $198 a month) in spouse benefits. But she's still working and is earning $3,000 a quarter.

Calculate amount that is in excess of the allowed maximum remuneration.

In this case, $ 3,500 is the maximum remuneration that a beneficiary between the ages of 60 and 65 can earn and still remain entitled to a full benefit.

$3,500 - $3,000 = $500 is the excess of the allowed Maximum Remuneration for a Surviving
 Spouse under 60 years of age.
   
Calculate how much to reduce.

Benefits are reduced by $1.00 for every $3.00 that is in excess of the allowed maximum remuneration. We calculated in step number 1 that this beneficiary is making $500 in excess of the maximum remuneration of $3,500. To calculate how much to reduce, we divide $500 by $3.00 to get the quarterly amount of ET Deduction. This further divided by 3 months to get the monthly ET deduction, as follows:

$500 / $3.00 = $166.67 is the quarterly ET Deduction
 $166.67 / 3 Months = $142.44 is the monthly ET Deduction
   
Apply reduction.

After determining the amount to deduct, subtract that amount from the monthly benefit.

$594 - $166.67 = $427.33 is the Quarterly Benefit amount
 $198 - $55.56 = $142.44 is the Monthly Benefit amount
 

When Will The Reduction To My Benefits Be Applied?

The reduction will be applied two quarters after the earned wages were reported. For example, if a 57 year-old SP beneficiary reported wages in January to March in excess of $3,000, his/her benefits for July to September will be reduced.

How Long Will The Earnings Test Apply To My Benefits?

The earnings test will no longer apply in the quarter in which the Retirement beneficiary turns 65 years old. ET will no longer apply in the quarter in which the Surviving Spouse beneficiary turns 60 years of age. Earnings test also will no longer apply to retirement beneficiaries who are under 65 years old, or SP beneficiaries who are under the age of 60 years old, who stop working and submit a verifiable termination action or resignation notice to the Social Security Administration.

What Should I Do If I Am A Beneficiary No Longer Residing In Palau?

If you are a beneficiary residing outside of Palau and still working, you must submit a certified or notarized statement of your gross earnings. If you are not employed, then you must also submit a notarized sworn statement stating that fact.