Business Glossary

figure used in calculating a worker's Primary Insurance Amount (PIA) to determine Social Security benefits in the following manner:

1. calculate the number of years between the worker's twenty-first birthday and the year prior to the worker reaching age 62 (a maximum of 40 years).
2. exclude the five lowest years of earnings, thereby selecting the 35 highest years (420 months) of earnings.
3. divide the total of the 35 highest years of earnings by 420 months to calculate the Average Monthly Wage.

A Social Security Administration table shows the PIA for the Average Monthly Wage calculated in Step 3. The PIA is then increased to reflect the Cost-Of-Living Adjustment (COLA) to determine the actual benefit.