TN 8 (11-93)

A. Introduction

1. Annual Wage Limitation

The annual wage limitation is the maximum amount of earnings credited as wages to an individual's earnings record for any calendar year. It is determined annually by a formula under section 230 of the Act.

Before 1991, the maximum wage bases for Social Security (old age, survivors and disability insurance) and Medicare (hospital insurance) were the same. P.L. 101-508 established a separate and higher wage base for Medicare beginning 1991. Beginning with wages paid after 1993, there is no wage base limit for Medicare (Revenue Reconciliation Act of 1993).

2. Crediting Wages

SSA credits wages when paid. The 1977 Amendments changed the crediting of wages from a calendar quarter basis to a calendar year basis beginning 1978. For State and local employers, the change was effective 1981.

3. Deferred Compensation Contributions

Beginning with 1990 wages, certain deferred compensation (i.e., income-tax deferred contributions to certain retirement plans under Section 401(k) of the Internal Revenue Code) are included in computing average wages for various social security program purposes. Although deferred compensation was covered for social security purposes beginning in 1984, deferred compensation was not included in average wages for computing the contribution and benefit base until the legislative enactment of P.L. 101-239.

B. Policy — Maximum wages creditable

Amounts that exceed the maximum amount specified by section 230 of the Act must not be used in benefit computations. The term “wages” does not include that part of remuneration paid above the maximum earnings limitation for any calendar year. The wage limit applies to the year in which wages are paid, not the year for which payments are made (except for years prior to 1947).

1. Before 1940

A worker may be credited with wages up to $3,000 received from each employer for employment in calendar years 1937-1939. The limitation applies to the year for which wages are paid, not the year in which wages are paid.

2. 1940 through 1946

A worker may be credited with wages up to $3,000 for employment in calendar years 1940-1946. The limitation applies to the year for which wages are paid, not the year in which wages are paid.

C. Policy — Payments “in” or "for" a period

Some provisions of the Act refer to payments “in” a period, or payments “for” a period. Payments “in” a period refer to the period in which wages are paid. Generally, wages are credited for the period in which they are paid.

Payments “for” a period refer to the period for which wages are paid, i.e., the period when earned. An example is back payments under a statute.

D. References

• Maximum wages creditable for a particular year, RS 01404.300.

• Special rules for statutory back pay, RS 01401.130.

• Rules where wages and net earnings from self-employment total more than the maximum, RS 01801.001.