Old-Age and Survivors Insurance: Coverage Under the 1950 Amendments by GEORGE J. LEIBOWITZ*

The first large-scale extension of old-age and survivors insur- basic means of livelihood. It also ance coverage in the lb-year history of the Federal social secu- avoids collecting contributions that rity program occurred when Congress enacted the Social Secu- might never result in benefits. rity Act Amendments of 1950. Many workers, however, are still The excluded professional groups not covered. In thefollowingpages the new coverageprovisions are lawyers, physicians, dentists, oste- are examined and the purposes behind the continuing exclusions opaths, chiropractors, naturopaths, are explored. Christian Science practitioners, op- tometrists, veterinarians, professional engineers, architects, funeral direc- HE Social Security Act Amend- In amending the law, Congress pro- tors, and certified, registered, licensed, ments of 1950 extend the pro- vided coverage for at least a portion or full-time practicing public ac- ,T tection of old-age and surviv- of all the major groups previously ex- countants. In each of these cases, ors insurance so that, in an average cluded. It is the purpose of this article Congress made it clear that the exclu- week, a possible 10 million persons, to describe the extent to which cover- sion reflected an attempt to comply previously excluded, will be covered by age is provided for the previously ex- with what it believed were the wishes the program. Of these, 7.7 million are cluded groups and to explore some of of the group itself. Unfortunately, to be covered on a compulsory basis the reasons underlying the current many of these groups had been con- and 2 million on the basis of voluntary limitations of coverage. fronted with a dilemma with respect coverage agreements. The addition to their desire for coverage. Faced of the newly covered groups to those The Self-Employed with the choice of being covered and protected under earlier legislation Under the amendments, 4.6 million not listed among professional groups brings the total coverage of the pro- self-employed persons are brought un- in the law, or of not being covered gram to about 45 million members of der the old-age and survivors insur- but receiving congressional recogni- the total labor force in an average ance program. This group includes tion of their professional status, most week. The new coverage will become such persons as proprietors (whether of them decided in favor of the latter. effective on January 1,195l. sole owners or partners) of retail Farm operators were excluded from Of the 14 million gainfully employed stores, service establishments, whole- coverage, mainly because few indi- persons not yet covered by the pro- sale and jobbing businesses, manufac- vidual farmers expressed a desire for gram, more than 7 million are covered turing plants, and transportation, coverage to their Congressmen and by some other retirement system, such communication, insurance, real estate, because the farm organizations were as the Federal civil-service, railroad, publishing, and financial enterprises. split on the question. While two of Armed Forces, and State and local It also takes in about 250,000 workers, the major farm organizations recom- government retirement systems. The such as part-time life-insurance sales- mended the coverage of farmers, an- remainder, comprising about 10 per- men, house-to-house salesmen, oper- other suggested that it would be de- cent of the Nation’s labor force, in- ators of leased taxicabs, and “news- sirable to get some experience with cludes 3 million farm operators net- boys” over age 18 who are excepted the coverage of other groups of the ting at least $400 in a year; 500,000 from coverage as employees but will self-employed before attempting to professional self-employed people; be treated as self-employed persons. include farmers in the program. and 2 million domestic and farm All persons in self-employment, in The coverage of the self-employed workers who, while they spend sub- fact, are covered except those whose was made practicable by the solution stantial time in their occupation, do net earnings from self -employment of a number of serious administra- not work steadily enough with a single are less than $400 in a year, those tive problems. First, a method of re- employer to meet the regularity test whose income is derived from agri- porting and contributing different required for coverage under the new cultural enterprises, and those whose from that used for employees had to law. These are the principal remain- income is derived from the practice be devised. Second, so that benefits ing groups who do not have protection of certain specified professions. The might be geared to income losses ac- under a government insurance pro- exclusion from coverage of persons tually due to retirement or death, the gram against the hazards of old-age whose annual net earnings from self- earnings to be reported and on which and death. employment do not reach $400 affects benefits are to be based had to repre- mainly those whose self-employment sent as far as possible a return for *Division of Program Analysis, Bureau is either sporadic or supplementary work done rather than a return for of Old-Age and Survivors Insurance. to other income that provides their capital investment. Third, a retire-

Bulletin, 3 ment test had to be devised under An individual’s self -employment in- son entitled to benefits throughout a which benefits would be paid if the come is ordinarily the same as his net year. self -employed person had substan- earnings from self-employment. In If the beneficiary renders substan- tially retired even though he con- three situations, however, it would be tial services during all 12 months of tinued to receive income from his different. First, if his net earnings the year, the effective ceiling on the business. are less than $400 in a taxable year number of benefits he can lose is the The contributing and reporting there is no self-employment income. amount of net earnings for the year. method is geared to the income-tax Second, a nonresident alien, regard- When such net earnings are, for ex- return filed by the self-employed less of his net earnings from a trade or ample, $830, he would lose five bene- person. The same schedule of the business carried on within the United fits, one for each of the four full $50- tax return in which the individual States, has no self-employment in- units of excess earnings and one for computes his earnings from a trade come. Third, if an individual’s net the remaining $30. or business will serve for both income- earnings, either alone or in combina- If the beneficiary’s annual net tax and social security purposes. The tion with his covered wages as an em- earnings are in excess of $1,150, there combined income-tax and social se- ployee, exceed $3,600 in a taxable year, are at least 12 $50-units of excess curity return will now be filed by the his self-employment income will be net earnings and the effective ceiling self-employed person at the same reduced to either $3,600 or an amount on the number of benefits he can lose time that the income-tax return equal to $3,600 less his covered wages. is the number of months in the year alone would have been filed. These provisions were designed to during which substantial services The basis for the self-employed avoid contributions that might never were rendered. If, for example, the person’s social security coverage is the result in benefits, to exclude a group beneficiary’s net earnings are $1,170 amount of his “net earnings from Congress did not wish to cover, and to and he renders substantial services in self-employment.” In essence, this avoid taxing earnings in excess of the his trade or business only from the is his net profit from his trade or $3,600 maximum. first day of July through October, he business as computed for income-tax The law makes it possible for a self- would lose only four benefits. purposes, with certain exceptions de- employed person to continue to own If the beneficiary’s net earnings are signed to exclude certain groups from his business and at the same time to $900 and he performs substantial coverage and to exclude investment be considered retired and therefore to services in 10 months of the year, both income from self-employment earn- draw retirement benefits. A benefi- earnings and services must be ex- ings. The term “net earnings from ciary aged 75 or over can receive bene- amined. In this case the number of self-employment” is specifically de- fits without regard to whether he benefits lost is determined on the basis Aned in the law and does not include works or the amount he earns. A of earnings since this limitation gives income from farming, from the prac- beneficiary under age 75 is permitted the more favorable result-six de- tice of certain specified professions, a certain amount of net earnings from ductions compared with 10 on the from the performance of service as a self-employment without any question basis of services. clergyman, or from the holding of being raised as to his retirement The law authorizes the Federal Se- public office. In addition, the term status. The permitted amount is curity Administrator to presume that also excludes the following types of computed by multiplying the number an individual has rendered substan- investment income: rentals from real of months in his taxable year by $50. tial services in any month unless the estate unless received by a real estate Since in the ordinary case the taxable individual shows otherwise, and to dealer in the course of his trade or year covers 12 months, a beneficiary prescribe, by regulations, the methods business, dividends and interest on may have $600 of net earnings from and criteria for determining whether stocks and bonds unless received by a self-employment in a year without or not an individual has rendered securities dealer in the course of his any question as to whether he worked substantial services with respect to trade or business, capital gains and or not. any trade or business. In explaining losses, and income from an estate or If the beneficiary’s net earnings the reason for giving the Adminis- trust derived by a beneficiary of the from self-employment are in excess trator this authority, the House Ways estate or trust. Another deviation of this permitted amount of $600 for and Means Committee said: from normal income-tax procedure a full year, he may lose some bene- concerns the carry-over loss deduc- fits for the year. The number of There is no single rule under which tion. For social security purposes, monthly benefits he may lose is sub- the determination of whether or not a losses in previous years are not used ject to two limitations: It can be no beneficiary has rendered substantial in computing net earnings from self- greater than the number of months services in self-employment can be employment for a current year. in the year in which the beneficiary made. The determinations are to be The self -employed person would renders substantial services in his based on the facts in each particular first compute his net earnings from trade or business; nor can it be case, consideration being given to the particular factors applicable to the self-employment and then his “self- greater than the number of times $50 trade or business of the individual. employment income,” which is the can be divided into his annual net Exemplary of the factors to be con- amount to be posted to his social se- earnings in excess of $600. Here are sidered are: The presence or absence curity wage record and on which his some examples of the way these limi- of a paid manager, a partner, or a insurance contributions are figured. tations operate in the case of a per- family member who manages the

4 Social Security business; the amount of time devoted under State law who work in accord- services formerly classified as agri- to the business; the nature of the ance with specifications prescribed by cultural are not so classified under the services rendered by the beneficiary; their employer. (Such home workers new definition; as a result, workers the type of business establishment; will not be covered during quarters in performing such services are covered the seasonal nature of the business; which they are paid less than $50 in without regard to the regularity of the relationship of the activity per- cash wages. 1 formed prior to the period of “retire- their employment or the amount of ment” with that performed subse- It is significant that both Houses their cash wages. Approximately quent to retirement; and the amount of Congress expressed themselves on 850,000 workers will be covered by of capital invested by the beneficiary the manner in which the usual com- these two changes. in the business.’ mon-law rules should be applied for To be regularly employed by an em- old-age and survivors insurance pur- ployer, an agricultural worker must Definition of Employee poses. In the Senate the point was first serve a qualifying period during made that the usual common-law which he works continuously for that In view of the fact that the self- rules realistically applied and not the employer throughout a calendar quar- employed will contribute at a some- restrictive rules of a particular State ter. He will then be regularly em- what higher rate than employees, should be used.’ The position of the ployed in the next calendar quarter Congress was concerned with the House is contained in the Conference and those that follow as long as he manner in which persons in the bor- Report,3 which quotes verbatim the works for the same employer on at derline areas between employment Report of the Committee on Ways and least 60 days on a full-time basis dur- and self-employment would be cov- Means on the Social Security Act ing each quarter. Once the worker ered under the program. While both Amendments of 1939. has been regularly employed, he will Houses of Congress agreed that the also be deemed regularly employed in usual common-law rules should not A restricted view of the employer- the first calendar quarter in which he be the only criteria for determining employee relationship should not be performs agricultural work for the employee status, there was consider- taken in the administration of the same employer on fewer than 60 days. Federal old-age and survivors insur- able question as to the proper method Any time he works less than 60 days ance system in making coverage de- for broadening the scope of the defini- in a quarter, however, that quarter tion of employee. terminations. The tests for deter- mining the relationship laid down in becomes his last quarter of regular The House Committee recom- employment. He must then serve a mended a revised definition that cases relating to tort liability and to the common-law concept of master new qualifying period during which would have provided employee cover- and servant should not be narrowly he is continuously employed through- age for persons who perform services applied. out a calendar quarter before he can under prescribed circumstances in again become regularly employed. seven specified occupational cate- The House conferees on the 1950 Take the case of Bill Gardner, for gories; in addition, it developed a amendments endorsed this position, example. statutory test designed to determine declaring “This statement made in an individual’s status on the basis of 1939 is equally applicable to the phrase Bill worked as a dairy hand for Paul the combined effect of seven enumer- in the bill as agreed upon in the con- Drew from September 25 through De- ated factors. The Senate Committee ference agreement, which contem- cember 31, 1950, without a break in rejected the statutory test. plates a realistic interpretation of the employment. He has thus served his In the final law, all who are covered common-law rules.” qualifying period (October 1 through as employees under the earlier act- December 31, the fourth quarter of officers of corporations and individ- Agricultural Labor 1950) with Mr. Drew. Prom January 1, 1951, through March 31 (the first uals who are employees under the The amendments make two major usual common-law rules-continue to quarter of 1951) he works 72 days on a changes with respect to agricultural full-time basis and earns $200 in cash be covered in that manner. In addi- labor. First, they provide coverage wages plus his meals. He is regu- tion, the amended law provides em- for agricultural workers who are “reg- larly employed by Mr. Drew in this ployee coverage for approximately ularly employed’ by an employer and quarter, and since his cash wages 400,000 persons in specified occupa- earn cash wages of at least $56 in a exceed $59 he is covered for the tional categories who may not be calendar quarter.’ Second, certain amount of his cash wages. common-law employees but who have Bill continues to work for Mr. Drew a similar status. The occupational during the second and third quarters categories are full-time life-insurance * Congressional Record, August 17, 1950, p. 12,885. of the year, working 65 days and earn- salesmen; certain full-time traveling a House Report No. 2’771 to accompany ing $185 in April-June and working 71 or city salesmen (other than house- H. R. 6000 (Elst Cong., 2d sess.), p. 104. days and earning $215 in July-Sep- to-house salesmen) ; certain agent 4 Workers performing services in con- tember. During the fourth quarter drivers and commission drivers; and nection with the ginning of cotton or (October-December 19511, after hav- the production and harvesting of oleo- ing earned $65, Bill quits his job with home workers subject to regulation resin and its processing into gum spirits of turpentine are “agricultural,” but Mr. Drew on November 5. Bill is reg- these coverage tests do not apply to them ularly employed in the second and 1 House Report No. 1300 to accompany and they are not covered under any cir- third calendar quarters because he H. R. 6000 (81st Cong., 1st sess.), p. 65. cumstances. worked more than 60 days and in the

Bulletin, December 1950 5 fourth because it is the first quarter farm workers will file a social security rigation systems operated for profit following a go-day “regularly em- report form four times a year. The were also eliminated from the defini- ployed” quarter in which he works first report from employers of newly tion of agricultural labor and thus less than 60 days for the same em- covered farm workers will be due covered as nonfarm employment. ployer. Bill is covered in all three of in April 1951 and will cover the 3- these quarters because he is regularly month period, January through employed and earns more than $50 in Domestic and Other cash wages in each quarter. March. Porms for preparing the re- Nonbusiness Services port will be sent to the farm employers Under the amendments, domestic On November 15, Bill goes to work for by collectors of internal revenue. On service in a private home not on a Peter Kook, another dairy farmer in the quarterly reports, employers will farm operated for profit 5 is covered the neighborhood. Before he can be list the names, account numbers, and if the cash wages paid in a calendar considered regularly employed by Mr. taxable wages of their employees. Kook, he must serve a qualifying quarter are $50 or more and the work- They will then mail the report to the period with him during which he is er is “regularly employed” by the em- collector with a check or money order continuously employed throughout a ployer during the quarter. Thus, in an amount representing contribu- calendar quarter. The fourth quarter households employing such persons as tions deducted from the employees of 1951 (October-December) cannot maids, cooks, laundresses, handymen, wages and their own matching taxes. be the qualifying period, since Bill housekeepers, baby-sitters, practical Under the amendments, most agri- began working for Mr. Kook in the nurses, governesses, valets, butlers, middle of it. The first quarter of cultural processing operations are gardeners, and chauffeurs will be re- 1952 (January-March), however, can no longer agricultural labor. The quired to determine whether their be the qualifying period. If Bill is services continue as agricultural labor, workers meet the tests for covereage. continuously employed by Mr. Kook in however, when the agricultural proc- A domestic worker who works for that first quarter, it will constitute his essing is done for an individual em- an employer on 24 different days dur- qualifying period. Bill is not, how- ployer who was also the producer of ing a calendar quarter is considered ever, “regularly employed” during the more than half the commodities on regularly employed by that employer first quarter of 1952. The experience which the work is done. Likewise, in that quarter mereIy makes it pos- in both that quarter and the quarter if the services are performed for an sible for him to be regularly employed immediately following it. informal group of farm operators by Mr. Kook in the second quarter of Only the cash wages of a domestic with fewer than 21 members, who 1952. worker are taken into consideration. among them grew all the commodi- Noncash wages, such as room, board, ties, the services remain agricultural. The coverage of agricultural labor meals, and transportation, are not In all other cases, however-when was limited to regularly employed considered. Tokens used for carfare the employer is a farm operator who workers to avoid the diillculty farm are not to be considered as cash pay- did not grow half the commodities, employers would have in reporting ment, but cash for carfare is to be employment, wages, and social secur- or a farmers’ cooperative, or an in- included with the wage. An example ity contributions for seasonal, migra- formal group of farmers with more of the application of these tests fol- than 20 members, or an informal tory, and other part-time agricultural lows : workers. group of farmers with 20 or fewer members who did not grow all the On farms operated for profit, house- During the quarter from January 1 hold workers and workers performing commodities, or a commercial handler through March 31, 1951, Mildred services not in the course of the em- of fruits and vegetables-the services Jones works for Mrs. Brown on Mon- ployer’s trade or business are con- are no longer agricultural. In these day and Tuesday of each week. Mrs. sidered “agricultural labor” and, in cases, the workers will be covered on Brown pays Mildred $4 a day, plus her order to be covered, must meet the the same basis as workers in com- meals, and calls for and takes her regularity and cash wage tests for merce and industry and without re- home. Since Mildred works 2 days a farm workers. The inclusion of these gard to regularity of employment. week and there are 13 weeks in a workers as “agricultural” allows farm Services in the production or har- calendar quarter, she would work on 26 days if she doesn’t miss any days. employers to apply a single standard vesting of maple sirup or in connec- Even though Mildred misses 2 days of to all their employees, whether per- tion with the raising or harvesting of work because of illness, she still works forming services in the home or on mushrooms or the hatching of poul- a total of 24 days and thus meets the other parts of the farm or ranch and try (all previously excluded from cov- requirement of being regularly em- whether performing the usual work erage by being deflned as agricultural ployed by Mrs. Brown in the quarter. incident to farming or performing labor) are now classified according to Since she is paid cash wages that services not in the course of the em- where the work is performed. Those total $96, her employment with Mrs. ployer’s trade or business. services performed “on a farm” con- Brown is covered for the quarter. Only the cash remuneration paid to tinue to be agricultural labor and Every Wednesday, Mildred is em- agricultural workers will count for so- subject to the laws and regulations cial security; lodging, meals, farm governing that type of work. The produce, and other noncash payments off-farm services are covered employ- 6Domestfc workers on farms operated for profit are considered to be in “agri- are excluded. ment without any such limitations. cultural labor” and covered on the same Employers of regularly employed Services in connection with farm ir- basis as other agricultural workers.

6 Social Security ployed by Mrs. Lane, who pays her $4, housewife. A stamp plan, which has the levy of an employer’s tax on non- plus meals and 25 cents for carfare. been much discussed, was found un- profit institutions might tend to weak- Since she works only 13 days for Mrs. necessary. One reason is the fact en their traditionally tax-exempt Lane, she is not regularly employed that coverage in this area is limited status. In addition, religious groups and therefore not covered. Mrs. to regularly employed workers. opposed any appearance of govern- Lane has no social security report to make. The 1950 amendments change the mental control that might seem to de- coverage requirements for services not part from the traditional principle of Mildred also works for Mrs. Smith, on Fridays and Saturdays. Her pay is in the course of an employer’s trade separation of church and state. Over $4.50 a day. plus meals and 25 cents or business by establishing almost the the years, however, there has been a a day for. carfare, Since Mildred same tests for these services as for growing desire for coverage on the works for Mrs. Smith on 26 days. she domestic service in private homes. part of both the nonprofit employees is regularly employed by Mrs. -Smith The new law limits the covered wages and their employers. Accordingly, and her total cash wage of $130.00 ’ is of an employee performing nonbusi- the legislative provisions Anally en- covered. ness services to cash payments. It re- acted must be viewed as a compromise Since Mildred is regularly employed quires also that to be covered the em- of conflicting objectives and views. by Mrs. Brown and Mrs. Smith in the ployee must be paid at least $50 in Both Houses of Congress recognized first quarter of 1951, she will be con- cash wages for the quarter by an the desirability of making the cover- sidered a regularly employed worker of these employers in the next quarter employer. The $50 test refers, how- age provisions for nonprofit employ- regardless of the number of days she ever, to an amount of wages paid for ees compulsory to the greatest degree works for them. Her coverage in the a given quarter, rather than to the possible. Each of them approved a second quarter, for these employers, amount paid in the quarter as is the measure containing a mixture of vol- will depend solely on whether she is case for domestic service. On farms untary and compulsory provisions. paid cash wages of at least $50 in the operated for profit, nonbusiness serv- The provisions developed by the Con- quarter. ices, like domestic service, are defined ference Committee and Anally en- as agricultural labor. acted tend further toward voluntary It is estimated that, of the 1.8 mil- The most common nonbusiness coverage than the measures approved lion persons who work in domestic services are those of artisans who by either House. service, approximately 1 million will build or repair residential property Under the new law, service for non- be covered. Nearly all the full-time under the supervision of the employ- profit organizations operated exclu- workers will be covered for practically er-owner rather than as self-employed sively for religious, charitable, scien- all their employment. Perhaps half contractors. An important distinc- tiflc, literary, or educational purposes the regular day workers will be cov- tion between this type of service and or for the prevention of cruelty to ered but often only with respect to domestic employment is that the for- children or animals may be covered some of their employers. All irregu- mer is subject to income-tax with- if the organization files a certificate lar day workers will be excluded from holding while domestic service in a with the Commissioner of Internal coverage. private home is not. Revenue requesting coverage for those The most important problem in ad- of its employees who wish coverage ministering domestic coverage is the Employees of Nonprofit and certifying that at least two-thirds development of a reporting and con- Organizations of its total employees concur in the tributing system simple enough to be Coverage is made available on a filing of the certificate. All negotia- used by persons unaccustomed to rec- voluntary basis to the employees tions concerning the filing of a certif- ord keeping The need for simplicity of most nonprofit organizations. icate and determinations as to the was recognized in the plans developed Clergymen and members of religious validity of certificates are the respon- by the Bureau of Old-Age and Sur- orders are excepted, Initially, if the sibility of the Bureau of Internal vivors Insurance and the Bureau of employing organization is willing to Revenue.’ Internal Revenue. Where the hus- have its employees covered and two- Coverage starts on the first day of band is making social security reports thirds of them desire coverage, those the calendar quarter following the for his business employees, he may employees who wish to be covered will quarter in which the certificate is add the domestic worker in his home be brought under the program. Once flied. Its effectiveness may be ter- to these reports. In other cases, do- any coverage is in effect for an organ- minated by the nonprofit organiza- mestic workers will be reported on a ization any new employees are to be tion on 2 years’ notice, but only after simple return devised with special at- compulsorily covered. the certiilcate has been in effect at tention to the convenience of the The factors that led Congress to en- least 8 years. For the effective period, act this unique provision are much the both the nonprofit organization and same as those underlying the exclu- its employees are covered on substan- 8 This amount results from the round- ing of the cash wage of $4.75 a day to sion of nonproflt employees up to tially the same basis as a private em- $5.00. The administering agencies are now. Employees of nonproilt organi- ployer and his employees. authorized by the legislation to issue reg- zations were excluded under both the ulations that provide for considering the original law and under the 1939 ‘These certificates have been prepared nearest dollar as the wage for social se- by the Bureau of Internal Revenue and curity purposes and for figuring the tax amendments principally because some can be obtained from the local collectors on such rounded amount. employing organizations feared that of internal revenue.

Bulletin, December 1950 7 Coverage under these voluntary because optional coverage may attract made applicable to the coverage group provisions is available in an average an unduly large number of expensive involved. The main reason for this week to about 600,900 employees of risks, the law contains provisions to exclusion was the strong feeling re- nonprofit organizations. Roughly minimize adverse selection and pre- vealed during the hearings on the 200,000 clergymen and members of vent an undue drain on the old-age part of members and beneficiaries of religious orders remain excluded from and survivors insurance trust fund. established retirement systems that coverage. The Federal-State agreement may old-age and survivors insurance cov- Coverage would be extended on a cover State employees, or employees erage might adversely affect the re- compulsory basis to some nonprofit of one or more political subdivisions, tirement systems. Among the other employment previously excluded-to or both. Whether the employees of types of service that cannot be cov- service for agricultural and horticul- a State government will be covered ered are: service on work relief proj- tural organizations and for voluntary will depend, of course, on the wishes ects, service performed “in a hospital, employees’ beneficiary associations, to of the State. Whether the employees home, or other institution by a pa- certain ritualistic or dues-collecting of a particular political subdivision tient or inmate thereof,” and service services for fraternal beneficiary so- of a State will be covered will, for the performed “by an individual who is cieties, and to services performed by most part, depend on the preference employed to relieve him from unem- students in the employ of nonprofit of the political subdivision, although ployment.” organizations other than schools, col- the final decision rests with the State. There are also certain types of leges, or universities. Other nonprofit Before a State agency can enter into service that may be excluded at the organizations whose employees were a coverage agreement with the Fed- option of the State. These are serv- heretofore covered only when they eral Security Administrator it must ices of an emergency nature and serv- earned over $45, in a calendar quarter be given the authority to do so. Such ices in any class of elective jobs, part- now have their employees’ coverage authority generally can be granted time jobs, or jobs compensated on a based on earnings of $50 in a quarter. only by the legislature of the State. fee basis. Also, the State may ex- These organizations include labor or- States that have already passed legis- clude agricultural labor, or service ganizations, mutual savings banks, lation relating to social security cover- performed by a student, if such labor building and loan associations, coop- age are Arkansas, California, Idaho, or service would be excluded from erative banks, chambers of commerce, Kentucky, Massachusetts, North coverage if performed for a nongov- civic leagues, and social clubs. Inci- Carolina, , South Dakota, ernmental employer. dentally, this $50-in-a-quarter rule Utah, Vermont, Washington, and The State is required to collect from applies to all nonprofit employment, West Virginia. each employee an amount equivalent whether compulsorily covered or For purposes of coverage, em- to the employee contribution that covered by virtue of a certificate filed ployees are divided into four kinds of would be imposed under the Internal with the Bureau of Internal Revenue. “coverage groups”: (a) All the em- Revenue Code ; it must pay to the Fed- ployees of a State other than those eral Government that amount plus an Employees of State and Local engaged in performing service in amount equivalent to the employer Governments connection with a proprietary func- tax. The State must also agree to The amendments make coverage tion; (b) all the employees of a po- comply with regulations relating to available, under agreements that may litical subdivision of a State other payments and reports prescribed by be negotiated between the States and than those engaged in performing the Federal Security Administrator. the Federal Security Administrator, service in connection with a proprie- Agreements once made may be to about 1.4 million employees of tary function; (c) all the employees modified to cover additional coverage State and local governments not cov- of a State engaged in performing groups. No agreement or modifica- ered by State or local retirement sys- service in connection with a single tion of an agreement can become ef- tems. The 2.4 million employees al- proprietary function; and (d) all the fective before January 1, 1951, or ready protected under State, city, or employees of a political subdivision of before the calendar year in which it other local retirement systems will a State engaged in performing service is entered into. An exception to this not be eligible for old-age and sur- in connection with a single proprie- rule provides that agreements or vivors insurance coverage. Coverage tary function. modifications agreed to before Janu- is compulsory, however, for employees If any employees of a coverage ary 1, 1953, can be made effective of certain transit systems taken over group are to be covered by an agree- January 1, 1951. The purpose of this from private ownership after 1936. ment, then all employees in that exception is to prevent disadvantage State and local government em- group (other than those covered by to employees when the process of ne- ployees were originally excluded from retirement systems and certain others gotiating agreements cannot be com- coverage because of doubt as to the named in the law) must be included. pleted immediately. Since eligibility constitutionality of a compulsory tax Certain types of employment can- requirements and benefit computation levy upon State and local govern- not be covered under an agreement. provisions are set in terms of time mental units. Because of this con- The most important of these is serv- elapsing after January 1, 1951, it is stitutional question, optional coverage ice performed by an employee in a generally to the employee’s advantage in this area appears to be the only position covered by a retirement sys- to have coverage made retroactive to practical approach. Nevertheless, tem on the date the agreement, is that date.

8 Social Security The law provides that interest at an Federal Employees major group of employees who will annual rate of 6 percent may be re- be covered throughout the Federal The amendments provide retire- quired if the State does not make service consists of temporary em- ment and survivor protection for most payments when due. In addition, the ployees, whether hired for temporary employees of the Federal Government Administrator may deduct the jobs or pending the establishment of amount of the delinquent payments, and its instrumentalities who here- a register. Still excluded, however, plus interest, from grants due the tofore have lacked such protection. are temporary employees of the State under any other provision of Those covered are, in general, the Bureau of the Census employed for the Social Security Act. most likely to shift between Federal the taking of a census, and temporary and private employment. The vast The State is authorized to termi- employees hired for temporary jobs majority of Federal employees have nate an agreement in its entirety in the field service of the Post Ofice protection under Federal retirement after it has been in effect for at least Department. systems and will continue to be ex- 5 years, or with respect to any cover- The amendments provide that the cluded from old-age and survivors in- age group after the group has been Federal Security Administrator shall surance coverage. Excluded also are covered for at least 5 years, by giving not make determinations as to em- specifically named types of employees 2 years’ advance notice in writing. ployment or wages with respect to who are not regularly in the labor The Federal Security Administrator is service in the employ of the United market or who are not normally de- directed to terminate an agreement States or its wholly owned instru- pendent upon Federal employment in its entirety, or with respect to any mentalities, but shall accept the de- for a livelihood. At the time of the coverage group, if it appears, after terminations of the appropriate Fed- new legislation, it was estimated that reasonable notice and opportunity for eral agency or instrumentality. This about 200,000 Federal employees hearing, that the State has failed, or provision represents an extension of would be covered. The recent con- is not able legally, to comply substan- previous provisions of title II of the gressional action placing the hiring tially with the terms of the agree- Social Security Act applicable to serv- of many new employees on a tempo- ment. If an agreement with a State ices for the United States Maritime rary basis without civil-service retire- is terminated in its entirety, no agree- Commission and the Bonneville Power ment coverage will probably increase ment with that State may be made Administration. It is expected that this number to between 500,000 and again. If the termination affects each agency or instrumentality will 600,000 in the next year. only particular groups, those groups delegate responsibility for reporting Employees of Federal instrumen- may not again be covered by the Fed- and making determinations to the or- talities that are exempt from the eral program. ganizational units now withholding employer tax on December 31, 1950, Federal income tax. The provisions for compulsory cov- generally continue to be excepted. erage of employees of certain transit Employees of several types of instru- Geographical Limitations on systems acquired from private owner- mentalities are, however, specifically Coverage ship by ‘a State, political subdivision, covered (subject, of course, to the ex- or instrumentality are intended to Heretofore coverage has been lim- ceptions mentioned above). These ited not only by the requirement that assure continued protection of em- are employees of national farm loan ployees of transportation systems the worker be an employee engaged associations (other than directors) ; in certain types of employment but that become publicly owned. For a the Army and Air Force Exchange transit system taken over after 1950, also by the requirement that the serv- Service, Army and Air Force Motion ice be performed within the United the employees will be covered by old- Picture Service, Navy Exchanges, age and survivors insurance unless States-deflned to include the conti- Marine Corps Exchanges, and similar nental United States, Alaska, and the employer provides protection for organizations; Federal credit unions; them under a general retirement sys- Hawaii-or on or in connection with county and community committees an American vessel. The new law tem. For a transit system taken over under the Production and Marketing between 1936 and 1951, the employees extends coverage by relaxing these Administration (but not the commit- geographical restrictions in three will as a general rule be covered under teemen themselves) ; Federal Reserve and survivors ways. old-age insurance Banks; and production credit associa- whether or not the employer provides First, the term “United States” is tions. Also covered are employees of redefined to include the Virgin Islands protection for them under a general corporations wholly owned by the retirement system, except that they and also, if its legislature should ex- United States, such as the Virgin will not be covered by old-age and press a desire for coverage, Puerto Islands Corporation and the Tennes- survivors insurance if they are pro- Rico. The necessary resolution was see Valley Authority, if the employees tected by a retirement system whose passed by the Puerto Rican Legisla- are not covered by civil-service retire- benefits are guaranteed by the State ture on September 22, 1950. This ex- constitution. In application, it is be- ment or by some other system in lieu tension will bring under the program lieved that this latter exception will of civil-service retirement. about 400,000 persons of a total em- exclude only one group, employees of Most Federal agencies will have ployed labor force of 700,006 on these the transportation some employees covered under old- islands. The coverage of regularly system. age and survivors insurance. The employed agricultural workers will be

Bulletin, December 1950 9 915770-m-2 of particular benefit to the islands. insurance protection they would have Serious consideration was given by had if they had been in civilian jobs the Congress to the desirability of a The granting of wage credits under during their period of service. This separate system for these areas be- old-age and survivors insurance objective is substantially accom- cause of the low level of income, the for World War II military service plished except for those who would high proportion of agricultural em- potentially affects more persons than have averaged more than $160 a ployment, and other economic differ- all the provisions extending coverage month in civilian employment. Even ences between the islands and the to specific areas of employment. for most of these, however, the pro- Under this provision, some 16 million continental United States. The visions for using January 1, 1951, as individuals could receive from 1 to 83 House Ways and Means Committee an optional starting point in com- months’ credit of $160 a month for sent a subcommittee to the islands puting the average monthly wage and military service between September to obtain “information and advice” the use of a higher wage base after 16, 1940, and , 1947. Thus as with respect to their coverage. The 1950 will remove the handicap im- Committee decided that two adjust- many as 29 quarters of coverage and posed by their World War II service. more than $13,000 in wages could be ments in the general system-retain- In general, this group would continue credited to the social security account ing the earnings requirement of $50 to have above-average earnings and of an individual who served through- for a quarter of coverage rather than would be likely to benefit by the new out the war period. increasing it to $100 as in the House provisions. The wage credits are to be granted bill, and reducing the minimum bene- The retroactive granting of wage effective September 1, 1950, to any fit from $25 to $20 in certain cases- credits is a good step in itself but serviceman (or woman) who had at would provide a satisfactory solution is not a permanent answer to the least 90 days’ service in the active to the problem. problem of offsetting the gap in social military or naval forces of the United The second relaxation of the geo- insurance protection created by serv- States during the defined period or graphical restrictions is the extension ice in the armed forces. This fact who, if he had served less than 90 of coverage to services performed out- is emphasized by the current emer- days, died or was discharged because side the United States (the continen- gency during which men and women of disability incurred or aggravated in tal United States, Alaska, Hawaii, in the armed services are not receiv- service. Wage credits may not be the Virgin Islands, and ) ing credits under the old-age and granted to an individual who was dis- by an American citizen for an Ameri- survivors insurance program. This honorably discharged or whose death can employer. The latter term is very difficulty might be overcome by add- was inflicted as lawful punishment specifically defined in such a way as ing the present period of crisis to for a military offense. to assure the collection of contribu- the period for which wage credits are The new credits count toward eligi- tions without difficulty. This pro- granted; a more effective solution, bility for and raise the amount of vision results in the coverage of about however, would appear to be the cov- benefit payments to the veteran and 150,000 American citizens working in erage of service in the armed forces his family when he retires, the family all parts of the world, including the on a permanent basis. of a veteran who dies at any future few remaining dependencies of the time, and the family of an already United States not defined as part of Conclusion deceased serviceman. The wage the United States for social security Unquestionably the chief signifi- credits may be used with respect to purposes. cance of the expanded old-age and any monthly benefit payable after The new law does not solve all the survivors insurance coverage is the and any lump-sum death problems concerning service per- protection that many more persons payment when the veteran dies after formed outside the United States. will now have against the hazard of that month. For example, foreign service of aliens loss of income caused by the death To avoid duplication of retirement long resident in the United States is of the wage earner or by his retire- credit granted because of World War not covered. Likewise, American cit- ment in old age. Also significant is II service, the new law provides that izens working for foreign subsidiaries the fact that in the 1950 amendments the wage credits may not be used if of American corporations continue to Congress has limited coverage in cer- periodic benefits based in whole or be excluded. tain areas on the basis of factors and part on the same period of service are The third change in geographical considerations that previously were determined to be payable by any Fed- ,requirements brings the coverage of not widely applied to the insurance eral agency or wholly owned instru- services on American airships into Iine program. Experience will show mentality other than the Veterans with the coverage of services on Amer- whether these limitations should be Administration. The credits would ican vessels. In general, services per- retained. not be used in computing old-age and formed on or in connection with an A consideration clearly evident in American aircraft are covered if the survivors insurance benefits if a larger the provisions for agricultural work- individual’s contract of service was benefit would be payable without ers, domestic workers, home workers, entered into “within the United them. and nonprofit employees was the States” or if the aircraft, while the The purpose of the provision is to avoidance of possibly unproductive employee is employed on it, “touches guarantee to servicemen of World War at a port in the United States.” II the same old-age and survivors (Continued on page 21)

10 Social Security Answer. New York: The Cham- tribution; apply to the Division of dren of School Age: Recommenda- ber, 1950. 19 pp. State Grants, Public Health Serv- tions by a Special Committee Ap- A report and resolution prepared by ice, Washington 25, D. C. pointed by the Federal Security the Chamber’s Committee on Public INTERNATIONAL LADIES GARMENT Agency. Issued by the Children’s Health and Welfare and adopted by WORKERS’ UNION. UNION HEALTH Bureau of the Social Security Ad- the Chamber on June 1, 1950. CENTER. Triennial Report, 1947- ministration, the Ofice of Educa- DEARING, WARREN PALMER. Medical 1949. New York: The Union, 1950. tion, and the Public Health Service, Care for Public Assistance Recipi- Describes the various health serv- Federal Security Agency. Wash- ents. Washington: Federal Se- ices provided by the Center and also ington : U. S. Govt. Print. Off., curity Agency, Public Health Serv- the insurance programs for tempo- 1950. 24 pp. ice, 1950. 14 pp. Processed. rary and partial disability and per- Includes a resume of the Commit- An address delivered in September manent and total disability. tee’s findings. Limited free distri- before the Conference of State Public MULANEY, S. GERTRUDE, and WATER- bution; apply to the Children’s Welfare Directors. Limited free dis- MAN, THEDA L. “A Community Bureau, the Office of Education, or the tribution; apply to the Public Health Plans for Its Aged and Chronically Public Health Service, Washington Service, Washington 25, D. C. Ill.” Public Health Nursing, Utica, 25, D. C. FEDERAL SECURITY AGENCY. PUBLIC N. Y., Vol. 42, Oct. 1950, pp. 568-573. 45 cents. U. S. CONGRESS. HOUSE. COMMITTEE HEALTH SERVICE. DIVISION OF STATE ON EXPENDITURES IN THE EXECUTIVE GRANTS. Resume of Public Health “The National Health Service in Eng- DEPARTMENTS. United Medical Ad- Service G-rant-In-Aid Programs land and Wales.” International ministration. Hearings, 81st Con- Providing Medical Services. Wash- Labour Review, Geneva, Vol. 62, gress, Second Session, on H. R. ington : The Division, 1950. 16 July 1950, pp. 44-57. 50 cents. 5182. . . Washington: U. S. Govt. pp. Processed. Limited free dis- Priorities in Health Services for ChiZ- Print. Off., 1950. 216 pp.

COVERAGE UNDER AMENDMENTS coverage will help to solve the ad- sults of such study should give valu- (Continued from page 10) ministrative difficulties that once pre- able information on the best methods contributions by excluding from cov- vented the establishment of a pro- of coordination between old-age and erage low-paid and nonregular serv- gram of universal coverage. survivors insurance and these public ices. There is little doubt but that Another significant fact was the retirement systems. the definitions of such services, how- conclusion of Congress that public A third factor leading to the con- ever, will exclude many workers who employees and others covered by pub- tinued exclusion of certain groups- could gain insurance protection along lic retirement systems should remain that is, farmers and professional self- with those who could not. It is to excluded, at least for the time being, employed people-was the feeling of be hoped that methods will be found from old-age and survivors insur- Congress that members of these to accomplish the purpose of the ance. It is obvious, however, that groups had not expressed sufficient Congress and at the same time pro- a great deal of further study is desire for coverage. With the pas- vide coverage for more workers. To needed of the disadvantages suffered sage of time and growing awareness a certain extent the coverage limita- by individuals shifting between the of the value of old-age and survivors tions in the amendments were due several systems and old-age and sur- insurance, it may be expected that to administrative considerations. It vivors insurance and of possible al- these groups will come to realize the is likely that experience with the new ternatives for overcoming them. Re- advantages of coverage.

Bulletin, December 1950 21