The retirement and survivor formula, in the statute's own structure. 42 U.S.C. 403(a)(1) builds the maximum from four slices of the worker's primary insurance amount: 150 percent of the amount to the extent it does not exceed the first dollar threshold, 272 percent of the portion between the first and second thresholds, 134 percent of the portion between the second and third, and 175 percent of anything above the third. The result is rounded down to the next lower multiple of ten cents. The dollar thresholds themselves are not fixed: they were $230, $332 and $433 for workers first eligible in 1979, and 403(a)(2)(B) indexes them to average wages for every year after that. The Commissioner of Social Security must publish the formula for the coming year in the Federal Register on or before November 1. Those thresholds are not the same numbers as the bend points used to compute the primary insurance amount itself, and mixing the two sets is the commonest error in this area.
Disability records get their own formula, and it bites much harder. Where the worker is entitled to disability insurance benefits, 403(a)(6) caps total benefits at the smaller of two figures: 85 percent of the worker's average indexed monthly earnings, or 100 percent of the primary insurance amount if that is larger, and 150 percent of the primary insurance amount. 20 CFR 404.403(d-1), which applies the formula to workers first eligible after 1978 and first entitled to disability benefits after June 1980, states the consequence without softening it: "As a result of this rule, the entitled spouse and children of some workers will not be paid any benefits because the family maximum does not exceed the primary insurance amount."
How the reduction is actually applied, which is the part that changes what a family receives. The regulation's own worked examples make the mechanics plain: the worker's primary insurance amount is subtracted from the maximum, and the remainder is shared among the dependents. A worker with a $600 primary insurance amount and a $900 maximum leaves $300 for a wife and child, so each is reduced from $300 to $150. The worker's benefit is not touched. The equal split in that example follows from the two of them being entitled at the same unreduced rate, which is the ordinary case on a retirement record; the statute's general instruction at 403(a)(4) is that each benefit other than the worker's own is decreased proportionately, so where the unreduced rates differ, as they can among survivors, the cut is proportionate rather than equal. A survivor record works from the same ceiling but without that subtraction, because no benefit is being paid to the worker, so the whole maximum is available to the survivors. This is also why a spousal benefit is described as costing the worker nothing and costing the other dependents something: it never reduces the worker's own check, and it does count against the ceiling everyone else shares.
Two rules quietly rearrange the arithmetic, and both work in the family's favor. First, divorced spouses are outside it entirely. Under 403(a)(3)(C) and 20 CFR 404.403(a)(3), the benefit of a divorced spouse or a surviving divorced spouse is determined without regard to the family maximum, and everyone else's benefit is worked out as if that person were not entitled at all. A former spouse claiming on the record takes nothing away from the current family, and nobody in the current family takes anything from them. Second, where someone entitled on this record is also entitled on another, the amount that cannot be paid here is disregarded and the freed money goes to the remaining beneficiaries. The regulation's example has a wife reduced to $150 by the maximum, then reduced to $30 by her own retirement benefit, with the withheld $120 redistributed to the child, whose benefit rises from $150 to $270. A related floor protects a child entitled on more than one worker's record, so that combining records cannot leave the child worse off than a single record would.
