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Leslie Bonacum
Neil Allen

Retirees Gain Unlimited Earnings Potential With Repeal Of Social Security Limit

(RIVERWOODS, ILL., March 29, 2000) – For the first time since the Social Security Administration began sending out checks in 1940, people who have reached full retirement age can earn as much as they are able without having their Social Security benefits reduced, according to CCH INCORPORATED (CCH), a leading provider of pension, benefits and payroll law information and software. The House on March 28 passed the Senior Citizens’ Freedom to Work Act of 2000, agreeing to the Senate version of the bill by a vote of 419 to 0. The measure, which sailed through the Senate on March 22 by a vote of 100 to 0, is now on its way to the President for his promised signature.

The Act repeals the "earnings limit" rule, which under current law cuts benefit checks for Social Security beneficiaries aged 65 to 70 by $1 for every $3 they earn in excess of a set "exempt" amount – $17,000 for 2000. Thus, retirees under age 70 who were entitled to the average Social Security check of $804 per month this year would have their benefits reduced to zero if they earned $45,945 or more. Retirees age 70 and above can earn unlimited amounts without benefit reduction.

According to Avram Sacks, JD, CCH Social Security analyst, the repeal of the earnings limit for all who have reached full retirement age is part of a trend away from the original Depression-era bias of the Social Security Act to remove senior citizens from the workforce, thus opening jobs for younger workers.

"Labor markets are tighter today, while seniors are healthier and living longer after retirement than ever. Over the years, Congress has reduced the effect of the earnings limit and now there is practically no sentiment for retaining it, as evidenced by the overwhelming votes in both houses."

A separate earnings limit remains in place for those who begin collecting their Social Security benefits before reaching full retirement age, which is currently age 65, but gradually increases to age 67 over the next 22 years. In 2000, beneficiaries aged 62 to 65 lose $1 for every $2 they make over a $10,080 exempt amount. However, workers who first attain age 62 in 2000 will be subject to the reduction, should they take early retirement, until they reach age 65 and two months.

Sacks noted that repeal of the under-age-65 limit is more complicated.

"Benefits for all recipients under full retirement age are automatically reduced according to age. When those beneficiaries do reach full retirement age, their benefits may be increased if they lost benefits for an entire month or year due to the earnings limit," he said.

CCH provides an overview of the history of Social Security legislation in a brief timeline, which follows.


CCH INCORPORATED, Riverwoods, Ill., is a leading provider of social security, pension and benefits law information for human resources professionals, including the Social Security Reporter, Unemployment Insurance Reports, Payroll Management Guide, Pension Plan Guide and Employee Benefits Management. CCH also provides tax and business law information in print and electronic form for accounting, legal and health care professionals. CCH is a wholly owned subsidiary of Wolters Kluwer U.S. The CCH web site can be accessed at The CCH Human Resources group web site can be accessed at

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1909 — The first Federal old-age pension bill was introduced in Congress.

1935 — The Social Security Act became law with President Roosevelt's signature, creating a social insurance program designed to pay retired workers age 65 or older a continuing income after retirement. Disability and medical coverage would come later. The original Act, in addition to the program we now think of as Social Security, included unemployment insurance, old-age assistance, aid to dependent children and grants to the states to provide various forms of medical care. In the original Act, benefits were to be paid only to the primary worker when he/she retired at age 65. Taxes would first be collected in 1937 and monthly benefits would begin in 1942. (Under amendments passed in 1939, payments were advanced to 1940.)

1939 — The Social Security Amendments of 1939 broadened the program to include dependents' and survivors' benefits.

1940 — Monthly benefits first became payable under old-age and survivors insurance to aged retired workers and their dependents and to survivors of deceased insured workers.

1946 — The Social Security Board was abolished and replaced with the Social Security Administration.

1950 — Social Security Act Amendments established a program of aid to the needy who are permanently and totally disabled and increased benefits for existing beneficiaries for the first time.

1952 — Legislation increased benefits a second time, nearly doubling the original benefit.

1954 — The Social Security Amendments established a disability "freeze" to help prevent the erosion of a disabled worker's benefits during the years the worker is unable to work. Another provision of the 1954 Amendments reduced from age 75 to age 72 the age at which the earnings test no longer applied. Under that test, a retired worker’s retirement benefits are reduced by $1 for every $2 of earnings.

1956 — The Social Security Act was amended to provide monthly benefits to permanently and totally disabled workers aged 50-64 and for adult children of deceased or retired workers, if disabled before age 18. The retirement age for women was reduced from age 65 to age 62.

1961 — The Social Security Amendments of 1961 were signed by President Kennedy, permitting all workers to elect reduced retirement benefits at age 62.

1972 — Social Security Amendments of 1972 signed by President Nixon provided for automatic cost-of-living increases based on the annual increase in consumer prices.

1974 — Supplemental Security Income went into operation as a result of the Social Security Amendments of 1972.

1980 — President Carter signed the Social Security Amendments of 1980. Major provisions involved greater work incentives for disabled Social Security and SSI beneficiaries. The Amendments also provided, for the first time, reviews of current disability beneficiaries to certify their continuing eligibility.

1980 — Public Law 96-473 terminated benefits to prisoners.

1981 — The Omnibus Budget Reconciliation Act of 1981 made major changes in Social Security, SSI and AFDC. These included: a phasing out of student's benefits; stopping young parents benefits; stopping young parents benefits when a child reached 16; limiting the lump-sum death payment and changes in the minimum benefit.

1983 — Following the 1977 amendments as modified in 1981, workers above age 70 are no longer subject to the earnings test, in which $1 in benefits are withheld for each $2 in earnings above an annual exempt amount. The exempt age had previously been at age 72.

1983 — President Reagan signed into law the Social Security Amendments of 1983, which imposed a tax on Social Security benefits, provided for coverage of federal employees and increased full retirement age over a 22-year period to age 67, beginning with those reaching age 62 in 2000. Additionally, the law changed the earnings test for beneficiaries age 65 and over so that $1 in benefits would be withheld for each $3 of earnings above the annual exempt amount, beginning 1990.

1984 — The Disability Benefits Reform Act of 1984 was signed.

1995 — SSA became an independent agency following legislation enacted in August 1994.

1996 — President Clinton signed the Contract With America Advancement Act of 1996 which ended eligibility to disability benefits for drug addicts and alcoholics. Another significant provision of this law doubled the earnings limit exemption amount for retired Social Security beneficiaries, on a gradual schedule from 1996 to 2002. In 2002, the exempt amount will be $30,000 per year in earnings, compared to $14,760 under previous law.

1996 — President Clinton signed the Personal Responsibility and Work Opportunity Reconciliation Act of 1996. This "welfare reform" legislation, terminated SSI eligibility for most non-citizens and made it more difficult for children to qualify as disabled for SSI purposes. It also ended the federal entitlement to Aid to Families with Dependent Children, that was part of the original 1935 Social Security Act. It also eliminated the "comparable severity standard" and reference to "maladaptive behavior" in the determination of disability for children to receive SSI. Also, children who were receiving benefits under the old standards were to be reviewed and removed from the rolls if they could not qualify under the new standards.

1996 — The Omnibus Consolidated Rescissions and Appropriations Act of 1996 was passed, requiring that all federal payments (including Social Security and SSI) be made by electronic funds transfer (no more paper checks) effective January 1, 1999, unless a waiver is granted by the Secretary of the Treasury.

1997— The 1994-1996 Social Security Advisory Council released its report. Unable to achieve consensus, the Council offered three options: a Maintain Benefits plan; an Individual Accounts plan; and a Personal Savings Account plan.

1997— The cycling of Social Security benefit payments began.

1997— President Clinton signed The Balanced Budget Act of 1997. This law restored SSI eligibility to certain cohorts of non-citizens whose eligibility otherwise would be terminated under the "welfare reform" of 1996.

1998 — In his State of the Union address, President Clinton emphasized the central task of addressing the solvency of the Social Security program. He stated that any budget surplus should not be used in any way until Social Security was saved first.

Also in 1998, the first-ever White House Conference on Social Security was held.

1999 — Legislation was introduced in the House to eliminate the Social Security earnings test for individuals who have attained full retirement age. (Individuals under full retirement age would still be subject to a reduction of $1 in benefits for every $2 earned above the threshold amount.)

3/2000 – Congress passes legislation to eliminate the Social Security earnings test for individuals who have attained full retirement age. President Clinton supports the legislation and is expected to sign the bill.



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