Has Anyone At The Federal Level Considered Reducing This Year's Substantial Earnings Amount Given The Current Economy?

May 8 2020 - 5:23pm

Larry, I continue to work, have a small monthly pension from a state retirement fund and am collecting Social Security benefits. My monthly SSA benefit checks are reduced somewhat with the WEP based on my state (CO) retirement pension. I have been whittling that WEP deduction down each year by continuing to work and currently have logged 27 years of Substantial Earnings, with three to go before that WEP deduction is completely eliminated. I see that the published Substantial Earnings (SE) minimum for 2020 is $25575. Due to the Coronavirus shutdowns, I am going to be out of work for at least three months during 2020. That enforced downtime is going to make hitting that SE minimum problematic this year. I am sure I am not the only one in this situation. Has anyone at the federal level looked at that minimum and considered reducing it? I would think it's only fair that consideration be given to those out of work who are going to have a harder time meeting the SE requirements that were put in place prior to the nationwide shutdown. Thanks for your time.

Hi,

Your point is well taken, but I'd be surprised to see a change in the 'substantial earnings' amount currently set for 2020. It would require an act of congress to change the amount, and I assume that congress has their hands pretty full right now. I'm guessing they'd consider amending the substantial earnings amount to be rather low on their list of priorities, but I don't actually know whether or not a change is being considered. You may want to try presenting your proposal to your representative in congress, or at least to someone in his or her office.

For the record, the annual substantial earnings amounts are based on the following formula:
For earnings years prior to 1979, the substantial earnings amount is based on 25% of the maximum amount of earnings subject to Social Security taxes. For years after 1978, the substantial earnings amount is set at 25% of the maximum amount of earnings that would have been subject to Social Security taxes prior to changes made in the 1977 Social Security amendments. The 1977 amendments basically increased the maximum annual amount of earnings subject to Social Security taxes, so basing the substantial earnings amount on 25% of the old-law rules actually limits the substantial earnings amount to less than 25% of the new law maximums (https://www.ssa.gov/OACT/COLA/yoc.html). For example, the 2020 substantial earnings amount of $25,575 is roughly 18.7% of the new law 2020 maximum earnings that are subject to Social Security taxes (i.e. $137,700).

Best, Jerry