(a) Additional earnings that cause a recomputation -
(1) Earnings not included in earlier computation or recomputation. The most common reason for recomputing a PIA is to include earnings that were not used previously, as described in paragraphs (a)(2) through (a)(4) of this section. The inclusion of these earnings may result in a revised Average Monthly Earnings or revised Average Indexed Monthly Earnings amount and, consequently, cause recomputation of the PIA.
(2) Earnings in the year an employee becomes entitled to an age annuity or becomes disabled. Earnings in the year an employee becomes entitled to an age annuity or becomes disabled are not used in the initial computation of the PIA. However, the Board does consider those earnings in a recomputation of the PIA and begins paying the higher benefits at the time described in paragraph (b) of this section.
(3) Earnings not reported in time to use them in the computation of the PIA. Because of the way reports of earnings are made, the earnings an employee has in the year before he or she becomes entitled to an annuity, becomes disabled, or dies, might not be reported in time to use them in computing the PIA. The Board recomputes the PIA with the new earnings information and begins paying annuitants the higher benefits based on the additional earnings at the time described in paragraph (b) of this section.
(4) Earnings after entitlement that are used in a recomputation. Earnings for a year after an employee becomes entitled to an annuity are used in a recomputation of a PIA when the earnings are higher than those for a year used in the previous PIA computation.
(b) Effective date of recomputation to consider additional earnings. A PIA that is recomputed to include additional earnings becomes payable at the latest of the following times:
(1) Date the annuity begins.
(2) January of the year following the year an employee receiving an age annuity attains age 62.
(3) January of the year following the year an employee becomes disabled.
(4) January of the year following the year in which the earnings are earned.
Mr. Jones, a railroad employee, becomes entitled to an age annuity in June 1986, at the age of 62. Although Mr. Jones has earnings of $23,000 in the first five months of 1986, those earnings cannot be used in the initial computation of the Tier I PIA. However, effective with January 1, 1987, the Tier I PIA is recomputed to include the earnings for 1986.