"Old-law" Contribution and Benefit Base

Updated October 19, 2004

Latest amount & definition

The "old-law" contribution and benefit base for 2005 is $66,900. This is the base that would have been effective without the enactment of the 1977 amendments to the Social Security Act. The present-law contribution and benefit base is substantially higher than the old-law base.

Purpose of the base

The old-law contribution and benefit base is used by:

the Railroad Retirement program to determine certain tax liabilities and tier II benefits payable under that program to supplement the tier I payments which correspond to basic Social Security benefits,
the Pension Benefit Guaranty Corporation to determine the maximum amount of pension guaranteed under the Employee Retirement Income Security Act,
Social Security to determine a year of coverage in computing the special minimum benefit, and
Social Security to determine a year of coverage (acquired whenever earnings equal or exceed 25 percent of the old-law base for this purpose only) in computing benefits for persons who are also eligible to receive pensions based on non-covered employment.

Determination of the old-law contribution and benefit base for 2004

By law, the old-law contribution and benefit base for 2005 is determined to be the 1994 old-law base ($45,000) multiplied by the ratio of the national average wage index for 2003 to that for 1992, or, if larger, the 2004 old-law base ($65,100). If the amount so determined is not a multiple of $300, it is rounded to the nearest multiple of $300.

Calculation details
Amounts in formula	1994 old-law base	$45,000
	1992 average wage index	$22,935.42
	2003 average wage index	$34,064.95
Computation	$45,000 times $34,064.95 divided by $22,935.42 equals $66,836.48, which rounds to $66,900.
Higher amount	$66,900 exceeds $65,100, so the old-law base for 2005 is $66,900

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