U.S. Social Security PIA

The parameters that tell ProAdmin how to customize the U.S. social security primary insurance amount (PIA) are contained in two topics: Salaries and Computation Age & Law Year.

The standard operator is based upon the current (as of the decrement date) social security law, the <Base Salary Set>, salary history considered to start at the earlier of hire age or age 20, level salaries after the decrement has occurred, and social security benefit payments commencing at the social security normal retirement age. Contrary to the operation of most custom operators (that the default custom operator parameterization produce the same result as the standard operator), the default #PIA custom operator, like the U.S. PIA Calculations Tool, is set to "reflect Social Security Administration age methodology" (see the Computation Age & Law Year topic), but the standard #PIA operator is not.

See our Technical Reference article “U.S. social security PIA calculations” for ProAdmin’s methodology of computation of the PIA. For guidance on computation of PIA offsets to plan benefits, refer to IRC Sec. 401(l) regulations and IRS Revenue Ruling 84-45.

The parameters of the two topics of the PIA Custom Operators command are discussed in separate sections immediately following.

Salaries

Included Salary Definition Set(s): is a spreadsheet that allows you to specify one or more Salary Definition Sets to be combined for the PIA calculation. The default is the <Base Salary Set> as defined in the Member Data topic of Census Specifications. Choose the desired Salary Definition Set(s) from the multi-choice field in the left column and specify a Multiplier in the right column. The multiplier is typically 1 to indicate addition, but it may be, for example, -1 to specify subtraction or 0.5 to specify partial inclusion.

History starts at specifies the range of the salary history to be included in the calculation. You may specify either Hire age or a specific integral Age between 18 and 25 inclusive. The optional check box or hire age if earlier indicates that the salary history starts at the earlier of the specified age and hire age, but not before 1951.

Check the Override salaries before decrement box if you wish to use something other than the actual salary history from the Salary Definitions for salaries prior to decrement (but not before the history start age). Project backwards from allows you to choose from which amount the backwards projection will begin. The multi-choice field provides the options of either the amount at decrement or the 1^st non-$0 amount in the salary history. The two radio buttons allow you to choose how the backwards projection is to be made:

To project backwards at a level rate, select at level rate and enter a (constant) level rate for the projection as a number between 0 and 1 (not as a percentage).
To project backwards using National Average Wages, select following the changes in the National Average Wage (NAW). This uses the same rate of change as the yearly change in the historical U.S. social security national average wage from the file RegNatAvgWage.txt (and the related Projection Assumptions, if any). The NAW is assumed to be only known through 2 years prior to the decrement year, so it is assumed to be level after that 2 year prior value.

If decrement is selected as the starting point for the backwards projection, checking the box to Use an additional pre-calculation year value from allows you to provide an additional estimated national average wage value, or the actual value if known, for the year before the decrement year. In this case ProAdmin will project salaries backward from decrement using the same rate of change as the yearly change in the historical U.S. social security national average wage, but will include the value corresponding to the year before decrement from the Custom Regulatory Table for the NAW for the year prior to the decrement year. You may select a wage-base type of Custom Regulatory Table from the multi-choice field or click the button to create a new one.

Salary at decrement specifies the salary from the salary history that should be used as the assumed salary at decrement. If you choose Prior calendar year salary, the calendar year end salary prior to the year of decrement is treated as the salary at decrement. If you choose Prior calendar year salary except when decrement is 12/31, the most recent calendar year end salary (or the actual decrement salary for a 12/31 decrement), is treated as the salary at decrement. If you choose Actual (grossed up) salary at decrement, the Salary Definition Set salary at decrement, which would typically have been grossed up, is reflected in the PIA calculations for level salary projections regardless of when during the year decrement occurs.

After decrement (or frozen law year if earlier), you may assume either Level salaries (continuing the salary rate in effect at decrement) or Zero salaries.

If you select Level salaries, you may choose to Stop salaries prior to computation age, which will project pays until the earlier of the decrement date or a date defined by an eligibility condition. Click the Stop Params… button to access the dialog box that lets you specify an Eligibility Definition to Stop level salaries beginning with the calendar year defined by the Eligibility Definition, where any service in the Eligibility Definition is evaluated based on the Using Service Definition Set entry.

If you select Zero salaries, ProAdmin will stop the projection of pays as of the earlier of the decrement date or the frozen law year set on the Computation Age & Law Year dialog.

If the Include the computation age salary box is checked, then the computation age salary will be used to calculate the PIA. Comparably to the Social Security Administration, by default ProAdmin ignores the computation age salary, but if this box is checked and either Level salaries after decrement are assumed or the participant decrements on or after the Computation Age, the salary at the computation age will be reflected in the calculation.

Computation Age & Law Year

The PIA calculation is based on an assumed Computation Age, i.e., the age at which the social security benefit payment is presumed to start. To select a computation age other than social security normal retirement age (SSNRA), specify a constant Age in years (y) and months (m). Years must be an integer between 62 and 70 inclusive. Months must be an integer between 0 and 11. To compute the PIA at Decrement age if later than the computation age, check the box; if not checked, ProAdmin will freeze the calculation for later decrement ages at the specified computation age.

ProAdmin will also reduce or increase the PIA for a computation age that is earlier or later than the member’s SSNRA, respectively, if the Reduce (increase) PIA for early (late) commencement box is checked. When increasing the PIA for late commencement (for commencements after the full retirement age and before age 70), you can choose to use the Jan 1 increase rather than the commencement increase (see Section 202(w) of the Social Security Act and Section 4004.313 of the Social Security Regulations) by checking Limit late commencement increase to Jan 1 or age 70. If the computation age is SSNRA and the Decrement age if later box is not checked, no reduction or increase is applicable and the Reduce (increase) PIA for early (late) commencement parameters are inaccessible.

If you choose to Allow CPI increases after decrement, ProAdmin will apply CPI increases to the PIA amount after decrement (beginning no earlier than age 62, if retirement). If unchecked, CPI increases stop with decrement.

If the Assume computation age attained at decrement box is checked, ProAdmin uses an artificial date birth equal to each calculation date minus the computation age. If the computation age in defined in year and months (e.g., 65y 5m or some SSNRAs), then both the years and months are used to determine the artificial dates of birth.

Law Year determines the wage bases used to compute the PIA. If you select Current law, wage bases projected to the decrement date will be used. Alternatively, if you select Current law frozen in year or Current law frozen in year of date field, the wage base will be projected until the earlier of the decrement year and the specified calendar year. In the case of Current law frozen in year, enter the year as 4 digits. With a frozen law year, the CPI and NAW will also be frozen at the appropriate year (and assumed level thereafter). If Zero salaries after decrement is selected along with a frozen law year, then zero salaries are assumed after the earlier of the decrement year or the freeze year.

By default, after the Law Year option is applied, the law that is in effect at decrement is used for all dates after decrement (i.e., Reflect the law in effect at decrement is checked). For example, if you were to choose Current law, then the last known wages base is the wage base at decrement, the last known CPI is at decrement minus 1 year, and last know national average wage is at decrement minus 2 years. These values will be projected according to your projection assumptions (as appropriate). If this PIA is used as an offset, then this is exactly the PIA you want. However, if you are using this PIA to determine a Social Security Level Income payment form, you may want to use the law in effect at benefit commencement. In this case, uncheck Reflect the law in effect at decrement. Now, the last known wages base is the wage base at benefit commencement, the last known CPI is at benefit commencement minus 1 year, and last know national average wage is at benefit commencement minus 2 years. These values may have be projected (as appropriate) from the last known historical values, rather than the values at decrement. Note that when using the law in effect at benefit commencement (i.e., Reflect the law in effect at decrement is unchecked), the PIA calculation for all dates after decrement will use the exact same salaries as used for the PIA calculated for decrement.

If Reflect the law in effect at decrement is unchecked (i.e., use law in effect at benefit commencement), then it's an error if Assume computation age attained at decrement is checked. If Perform a disability PIA calculation is checked, then the law in effect at decrement is used, even if Reflect the law in effect at decrement is unchecked.

If you choose to Reflect Social Security Administration age methodology, when determining early retirement reductions only the year and month of birth are reflected, rather than age in completed years and months based on the day of birth. This potential result can only be seen if Decrement age if later and Reduce (increase) PIA for early (late) retirement are both checked: the commencement age for the decrement age may now differ from the decrement age. Also, checking this parameter causes participants born on the first day of the month to be treated as if they were born on the preceding day. Among other implications, this may affect the first year of salary considered when the salary History starts at a specified age.

You may choose to Perform a disability PIA calculation rather than a retirement PIA calculation. If you choose a disability PIA calculation, the Computation Age parameters are ignored except for ages at or beyond SSNRA (when, in most instances, they no longer apply) and the Salary at decrement parameter is ignored because the decrement year and later salaries are not considered. A Freeze PIA at disability date field (which can be “<none>”) must be specified for disability PIA calculation. This represents the date that members who are already disabled were determined to be so. (The field should be left blank in the data for all members who are not currently disabled.) PIAs after this date will be set to the PIA at this calendar year.

A standard PIA calculation truncates the monthly PIA to $1 and then annualizes. If you select Do not round final PIA, the monthly PIA value is truncated to dimes and then annualized.

Notes:

If the PIA is computed at a decrement age later than 70 (possible only if the decrement age if later box is checked), the adjustment for late commencement will include the delayed retirement credit only through age 70. Salaries after age 70, however, will be reflected in the computation.

The PIA will always be calculated as defined under the new wage-indexed method (which computes an Average Indexed Monthly Earnings, or AIME) prescribed by the 1977 Amendments to the Social Security Act, regardless of whether current law frozen in year is selected and, if so, whether a year prior to the effective date of the 1977 Amendments is indicated. For guidance, refer to the Social Security Act as amended, the Internal Revenue Code Sec. 401(l) regulations and our Technical Reference article “PIA calculations (U.S. social security) ”.