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| Benefits Highlights |
| What is the Annual Earnings Test? People who receive benefits based on retirement, or by being the non-disabled child, spouse or widow/widower of a retired, deceased or disabled worker, are all subject to a “test” that determines if they are eligible for all of the Social Security Title II benefits they could receive in a year. This is called the Annual Earnings Test (AET). The Annual Earnings Test is actually an amount that individuals may earn before benefits are affected. In 2005, people under the age of 65 are allowed to earn $12,000.00, and folks who turn 65 in 2005 are allowed to earn $31,800.00 before any benefits should be withheld. If the beneficiary earns more than that annual limit, the beneficiary is subject to the withholding of all or part of the individual’s Social Security benefits. In the case of a retired individual who has children or a spouse receiving benefits on the retired individual’s record, then the children’s or spouse’s benefit is also withheld to help recover the extra benefits. The amount withheld is equal to a portion of earnings over the limit. If the person is under Full Retirement Age the reduction is $1 for every $2.00 over the annual limit. Things are more complicated in the year the person reaches Full Retirement Age. For months prior to attainment of FRA, reduction is $1 for every $3 the person earns over the monthly limit, which is 1/12 of the annual amount. Once the person reaches Full Retirement Age, there is no adjustment at all because of earnings. In order to avoid overpayment situations, the beneficiary offers an estimate to the SSA in the early part of the year if the person is likely to earn over the limit. If this causes a suspension of payments, then the SSA will suspend the number of payments necessary to account for the appropriate percentage of earnings over the annual test. The estimate will be verified the next January through March, when the SSA receives the IRS report of the wages. The beneficiary does not usually have to do anything. Usually, if the amount estimated differs from the reported amount, the overpayment notice is sent, or the underpayment is released. In some more complex situations, the beneficiary may be contacted for verification. Remember that in order for the Annual Earnings Test to apply, the person must be receiving a benefit based on retirement, or on the non-disabled beneficiary's relationship to a retired, deceased, or disabled worker. For the Annual earnings test to apply, the person who is working must not be receiving a benefit based on disability. If they are receiving one of SSA's disability benefits: CDB, SSDI, or DWB, then the work incentives apply, not the annual earnings test. Here are some references that may help you understand the Annual Earnings Test:
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