Alesci v. Bowen, 88 C 3909.

• Decision Date: 03 November 1989
• Docket Number: No. 88 C 3909.,88 C 3909.
• Parties: Pasquale ALESCI, Plaintiff, v. Otis R. BOWEN, Secretary of Health and Human Services, Defendant.
• Court: U.S. District Court — Eastern District of New York

724 F. Supp. 57

Pasquale ALESCI, Plaintiff, v. Otis R. BOWEN, Secretary of Health and Human Services, Defendant.

No. 88 C 3909.

United States District Court, E.D. New York.

November 3, 1989.

Stephen C. Herman, Hamstead, N.Y., for plaintiff.

Andrew J. Maloney, U.S. Atty., Brooklyn, N.Y. (Bruce H. Nims, Sp. Asst. U.S. Atty., of counsel), for defendant.

MEMORANDUM AND ORDER

NICKERSON, District Judge.

Plaintiff seeks review under 42 U.S.C. 405(g) of a final determination of the Secretary of Health and Human Services ("the Secretary") denying plaintiff retirement benefits. Defendant moves for judgment on the pleadings.

Plaintiff, just turned 62, filed an application for retirement benefits in September, 1987. The Secretary found him eligible for benefits as of October 1, 1987, concluding however that in 1987 plaintiff had "excess earnings," that is, earnings in excess of the statutory exempt amount and was expected to have such "excess earnings" in 1988. The Secretary thus denied plaintiff benefits for 1987 and suspended benefits for 1988, reconfirming the decision upon reconsideration. Plaintiff requested review by an administrative law judge who considered the case de novo and also denied benefits. The Appeals Council denied review. This action followed.

I

The administrative law judge found that plaintiff, president of Alesci Electric Corporation (the corporation), had earnings of more than $65,000 in 1987 based on wages and dividends from the corporation for essential services, and that he received total compensation of more than $500 a month in all months of 1987, and is expected to receive compensation in 1988 in excess of the level which would permit payment of benefits. The administrative law judge recited the following facts, among others, in his decision.

Before October 1987, plaintiff ran the corporation, a family owned electrical contracting company, and employed his two sons and two other workers. Though not formally employed, his wife helped with the bookkeeping and basic secretarial work.

In October, 1987, plaintiff decreased his working hours and allegedly turned the business over to his sons. He put his wife on the payroll at $280, though she continued to perform the same tasks, and gave each of the sons a $40 a week increase, thereby making a "shift" of his income to close family members. However, he continued working at the corporation in a position of authority. He remained president and a director. His duties remained the same except that he no longer installed electrical equipment. Plaintiff provided essential services to the Corporation in 1987 and 1988 as its only licensed electrician.

The issue is whether there is substantial evidence to support the Secretary's decision.

II

An individual is entitled to old age (retirement) benefits if he has reached the age of sixty two, filed for benefits and is fully insured as defined by the Social Security Act. See 42 U.S.C. § 414(a). However, the Secretary must make deductions from the payment of benefits for every year the petitioner is under the age of seventy if the petitioner has annual aggregate earnings from wages or self employment in excess of the statutory exempt amount. See 42 U.S.C. § 403(b), (f); 20 C.F.R. §§ 404.430-404.436.

If earnings exceed the exempt amount, the Secretary deducts one dollar for every two dollars of earnings over the exemption. The resulting figure is "excess earnings" and must be deducted from the benefits to be paid claimant. 20 C.F.R. § 404.434. In 1987, $6000 was the annual statutory exempt amount for individuals between the ages of 62 and 65.

No matter how large his annual excess earnings, claimant may receive his full benefits for the "nonservice" months in his "grace year." 20 C.F.R. 404.435(a)(7). The grace year is the first taxable year claimant has a "nonservice" month. 20 C.F.R. § 404.435(c). A "nonservice" month, so far as pertinent here, is a month in which the claimant (i) does not work in self-employment, that is, does not perform "substantial services" in the operation of a business, and (ii) does not perform services for "wages" greater than the monthly exempt amount ($500 for 1987). See 20 C.F.R. § 404.435(b), (d).

Services are presumptively "substantial" if claimant works more than 45 hours a month. See 20 C.F.R. § 404.447(a)(2). Working less than 45 hours suggests that the claimant is retired "unless other factors" make such a finding "unreasonable." See C.F.R. § 404.447(a)(1). The more highly skilled and valuable his services, the more likely the claimant should be considered to be working. 20 C.F.R. § 404.447(b). "Significant reduction in the amount or importance of services performed" tends to "show that the individual is retired," 20 C.F.R. 404.447(c), although if there is a question the Secretary may consider "all other factors" such as whether the company otherwise has a "capable manager." 20 C.F.R. 404.447(d).

III

Plaintiff does not dispute that he was properly denied benefits for 1987 under the annual earnings test. Thus plaintiff would be entitled to benefits only for individual months if 1987 were a "grace year."

Even if plaintiff worked less than 45 hours a month, which seems doubtful, there is ample evidence that he performed "substantial services" every month. He continued to play a significant management role. He was the only one at the corporation licensed. Thus only he could approve electrical work contracts or deal with ConEdison. Only he could obtain...