</b><SmalL.Dear Editor: <br><br>
If you’re like most people, that vacation you took this summer was, at least in part, provided by your employer. By that I mean you probably earn a certain number of paid vacation days every year. And, as you get older and reach retirement age, those paid vacation days might have an impact on your Social Security benefits. <br><br>
Many American workers accumulate large amounts of vacation time and sick leave. And, after your retire, you may receive some accumulated vacation or sick pay. You might wonder if those payments count towards the earnings limit imposed on Social Security beneficiaries under their "full retirement age." Usually, they won’t, if we know they are compensation for work done before you retired. However, many times we don’t know this unless you tell us. We call this compensation a "special payment." <br><br>
If you worked for wages, income received after retirement counts as a special payment if the last thing you did to earn the payment was completed before you stopped working for your employer. Besides vacation and sick pay, the most common types of special payments include bonuses, severance pay, back pay and sales commissions. <br><br>
If you are a Social Security beneficiary whose total yearly earnings exceed the annual limit and these earnings include a special payment, you should contact Social Security. Tell us you think you received a special payment. If we agree, we will not count the amount of the special payment as part of your total earnings for the year. <br><br>
The example below shows how a special payment is treated under Social Security rules. Mr. DeSilva retired at age 62 in January 2002 from his job at Crown Jewelry Company and began to receive Social Security benefits. A few months later, Mr. DeSilva received a check from his employer for $12,000 for vacation and sick time he earned while he worked. Simultaneously, the jewelry company reported those "earnings" to Social Security. That report generated a letter we sent to Mr. DeSilva telling him that he was paid more Social Security benefits than he was due, because his 2002 earnings exceeded the $11,280 limit for that year. But Mr. DeSilva contacted us immediately and explained that the $12,000 payment was not earnings for work done in 2002 but vacation and sick pay he accumulated before he retired. We agreed that the $12,000 was indeed a "special payment" and canceled the overpayment. <br><br>
The next example involved insurance agents. Many insurance salespeople continue to receive commissions after the year they retire for policies they sold prior to retirement. Maria Juarez worked as an insurance agent for Safety Net Insurance Company. She retired at age 62 in 2002 and began to collect Social Security benefits. In July 2003, she received $8,000 in renewal commissions on life insurance policies she sold before retirement. In addition, she continued to work part time in 2003 as a self-employed contractor for another insurance company. She received $12,000 in net commissions from new policies she sold in 2003 working part-time. Although her total 2003 income is $20,000 the $8,000 in renewal commissions will not count toward the earnings limit, because Ms. Juarez did the work to earn that amount before she retired. However, the $12,000 will count as earnings because Ms. Juarez sold these policies after she began receiving Social Security benefits. And, because the $12,000 earnings slightly exceed the $11,520 limit for 2003, her Social Security benefits will be adjusted. <br><br>
We have a fact sheet that explains these provisions in more detail. It’s called Special Payments After Retirement. You can find it on our website at www.socialsecurity.gov/pubs/10063.html, or you can get a free copy by calling 1-800-772-1213 (TTY: 1-800-325-0778). <br><br>
Yvonne Bryant<bR>
Social Security Manager, Jersey City