Veterans Can Get Extra Social Security Earnings Credits
Earnings for active duty military service or active duty training have been covered under Social Security since 1957. Active duty military service means an individual served on Active Duty, Active Duty for Training (ADUTRA) or was in the Reserves for any of the following United States military organizations: (1) Air Force; (2) Army; (3) Coast Guard; (4) Coast and Geodetic Survey (CGS); (5) Marines; (6) National Guard; (7) Navy; and (8) Commissioned Officer in the Public Health Service (PHS).
Social Security has covered inactive duty service in the armed forces reserves --- for example, weekend drills --- since 1988.
An individual who served in the military before 1957 --- for example, during World War II or the Korean War --- did not pay Social Security taxes on their military service compensation. But the Social Security Administration (SSA) gave special earnings credits to these individuals including those who attended a service academy. In particular, an individual who served in the military on active duty or who attended a service academy between Sept. 6, 1940 and Dec. 31, 1956 may be credited with $160 a month in earnings for military service under the following circumstances:
- The individual was honorably discharged after 90 or more days of service, or was released because of a disability or injury received in the line of duty; or
- The individual is still on active duty; or
- The individual is applying for survivor's benefits and the veteran died while on active duty.
An individual's Social Security retirement benefit depends on his or her Social Security earnings (wages or salary that are subject to Social Security payroll tax) averaged over his or her working lifetime. In general, the higher one's earnings, the higher the Social Security benefit. Under certain circumstances, special earnings can be credited to one's military pay record for Social Security purposes. The extra earnings are for periods of active duty or active duty for training. These extra earnings may help an individual qualify for Social Security or increase the amount of one's Social Security benefit.
Note that members of the military have paid Social Security taxes on their military compensation (base pay and bonuses, if any) since Jan. 1, 1957. Since 1988, inactive duty in the Armed Forces reserves such as weekend drills has also been covered by Social Security.
Under certain circumstances, special extra earnings for periods of active duty from 1957 through 2001 can also be credited to an individual's Social Security earnings record for benefit purposes. The following is a summary as to how the extra earnings for periods of active duty between 1957 and 2001 are applied:
- Any individual who served in the military between Jan. 1, 1957 and Dec. 31, 1967 will have the extra credits added when he or she applies for Social Security benefits. In particular, an individual will be credited with $300 in additional earnings for each calendar quarter in which the individual received active duty basic pay -- a maximum of $1,200 per calendar year of active duty.
- Any individual who served in the military between Jan. 1, 1968 and Dec. 31, 2001 automatically had $100 in earnings added to his or her Social Security earnings for every $300 in earned active duty pay up to a maximum of $1,200 a year. But any individual who enlisted after Sept. 7, 1980 and who did not complete at least 24 months of active duty or a full tour of duty may not be able to receive the additional earnings. These individuals should check with the Social Security Administration for more details.
Any military service starting Jan. 1, 2002 will not result in earnings added to an individual's Social Security record.
What is the effect of this additional earnings credit for individuals who service in the Armed Forces between 1957 and 2001? Given that: (1) the maximum earnings credit per year is $1,200; (2) an individual's averaged indexed monthly earnings (AIME) is based on an individual's 35 highest years of Social Security earnings; and (3) the primary insurance amount (PIA) - the amount of a Social Security monthly retirement benefit at full retirement age - is calculated based on the first 90 percent of an individual's AIME. The result: For every three years of military service between 1957 and 2001 an individual will receive an extra $90 of monthly Social Security retirement benefits. For example, if an individual serves six years in the Armed Forces, the monthly benefit increases by $180.
Finally, it is important to note that in addition to retirement benefits, Social Security also pays survivor benefits to eligible family members -- spouses, former spouses, children and dependent parents. The amount of the survivor benefit is determined by the deceased family member's PIA. Therefore, if the deceased family member's PIA was increased as a result of military service, family members will also benefit as a result of the deceased's military service and increased PIA.
When applying for Social Security benefits, those individuals who served in the military may be asked for proof of their military service. DD Form 214 will suffice, or specific information about one's reserve time or National Guard service should be sufficient.
Posted: 07/25/2011; Revised 07/26/11
About the Author
Edward A. Zurndorfer is a Certified Financial Planner, Registered Health Underwriter, Registered Employee Benefits Consultant and Enrolled Agent in Silver Spring, MD and the owner of EZ Accounting and Financial Services, an accounting, tax preparation and financial planning firm also located in Silver Spring, MD. He is an instructor at federal employee retirement seminars throughout the country and writes numerous columns and books on federal employee benefits.