Social Security earnings test confusion - does unused PTO count toward monthly limit in retirement year?

Unfortunately, the second rep is correct. According to SSA rules, PTO/vacation pay does count toward your earnings limit in the month you RECEIVE it, but it's considered as earned during the months you actually worked and accrued it. This is specified in SSA's Program Operations Manual System (POMS). Since you earned the PTO January-May, it's counted as earnings spread across those months, not as earnings in the month they paid it out. This is different from how regular wages are counted (which are counted when paid). You can request a reconsideration if you have it in writing that the first rep gave you incorrect information. SSA sometimes allows for misinformation adjustments.

same thing happend to me last yr!!! SSA told me 2 different things about vacation pay and i ended up owing them money back. so annoying how they cant even get there own rules right

This is why I ALWAYS write down the name and ID number of every SSA person I talk to and make them send me an email confirming what they told me. They contradict themselves constantly, and then WE get stuck with the consequences. The earnings test is especially confusing because there's the annual test AND the monthly test in your first retirement year. For anyone reading: in your first year of retirement, you can use the monthly earnings test instead of the annual test, but ANY income earned before retirement counts against you - including vacation payouts from time earned while working!

I went through something similar when I retired. For the earnings test, SSA considers vacation/sick pay as earned when you performed the work that earned the leave, not when you received the payment. So your vacation payout technically counts as earnings during the months you actually worked and accrued that vacation time. If you're over the monthly limit, you'll lose benefits for that month. For 2025, if you earn over $2,340 in a month (for those under FRA), you don't receive benefits for that month. One strategy: if this was a significant amount of PTO, you might want to consider withdrawing your application (Form SSA-521) and reapplying later. You have 12 months from when benefits started to do this, but you'd have to repay any benefits received. Might be worth it to avoid the earnings test issues.

i think your getting alot of conflicting info here too! my understanding is that PTO is counted when PAID not when EARNED so if u got the payout in july then it counts toward july's limit. but vacation time earned across months is different than regular wages. check SSA POMS section RS 02505.240 (had to look that up lol) the real question is will they actually catch this?? sometimes SSA doesnt even notice these things until years later during a random audit and by then its a huge mess to fix!

Have you tried calling SSA to speak with a supervisor about this? I spent HOURS trying to get through to them last month about my disability review and kept getting disconnected. My daughter told me about a service called Claimyr that got me through to a real person at SSA in about 10 minutes. I was shocked it actually worked! You just go to claimyr.com and they call SSA for you, then connect you when they get a rep. There's a video demo at https://youtu.be/Z-BRbJw3puU that shows how it works. A supervisor should be able to give you the definitive answer on how your PTO payout affects your benefits. The phone agents often give conflicting information as you've discovered.

Here's something else to consider: If you're significantly over the monthly limit, you'll lose benefits for that month. But if your annual earnings are still under the yearly limit ($22,320 for 2025 for those under FRA), you might be better off using the ANNUAL earnings test rather than the monthly test. The monthly test is only advantageous in the first year of retirement if you have several months with little to no earnings. You get to choose whichever method is more beneficial to you. So calculate your total 2025 earnings and see if staying with the annual test might let you keep more of your benefits despite the PTO payout.

Since you're over both the monthly and annual limits, your best bet might be to withdraw your application entirely (Form SSA-521) and reapply in January 2026. Yes, you'd have to repay what you've received, but your benefit amount will be slightly higher due to delayed retirement credits, AND you'd avoid all the earnings test complications. Or just accept that you'll lose some months of benefits this year due to the earnings test. For every $2 over the annual limit, they withhold $1 in benefits. With $42,000 in earnings, that's $19,680 over the limit, so they'd withhold about $9,840 in benefits.

wait i'm confused about something - doesn't the montly earnings test only apply AFTER you retire? so if you retired in june, then the monthly test would only apply to july-december, and jan-june would use the annual test? that would explain why vacation pay from jan-may counts, because those months use the annual test not the montly test. This whole system is SO confusing!!

This exactly why im waiting until my FRA to file! Too many gotchas with the earnings test. My neighbor had to pay back almost $7000 because her employer paid out a bonus in January that was earned the previous year. The whole system seems designed to trip people up.

I'm in a similar situation and just wanted to share what I learned from my experience. I retired mid-year at 62 and got burned by the earnings test too. The key thing I wish I'd understood is that SSA has two different tests in your retirement year - you can use whichever is more favorable. One thing that might help: if you haven't already, request a detailed breakdown from SSA showing exactly how they're calculating your earnings test. Sometimes they make errors in how they allocate earnings to specific months, especially with lump sum payments like PTO. Also, don't feel bad about the conflicting information from SSA reps. I called 4 times about my situation and got 3 different answers. It's unfortunately very common. The system is incredibly complex and even their own staff struggle with the nuances. Have you considered consulting with a Social Security attorney? Many offer free consultations and might be able to help you navigate the appeals process if SSA made an error based on their initial guidance to you.