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MCDEVITT v. HARRIS

September 17, 1980

Helen A. McDEVITT
v.
Patricia Roberts HARRIS, Secretary of Health, Education and Welfare



The opinion of the court was delivered by: POLLAK

MEMORANDUM

Plaintiff, Helen A. McDevitt, brought this appeal from a decision of the Secretary of Health, Education and Welfare (now, Health and Human Services), in which the Secretary denied Ms. McDevitt's request for retirement insurance benefits. The single question presented by this appeal is whether the Secretary applied the proper standards in concluding that the sums which Mr. McDevitt earned by baby-sitting in 1974-76 were not income derived from a "trade or business" within the meaning of 42 U.S.C. § 411(a).

 I.

 The facts are not in dispute. In July, 1977, Ms. McDevitt attained the age of 62 and became eligible to apply for retirement insurance benefits under 42 U.S.C. § 402(a). During the preceding three-year period, she had rendered child-care services for her daughter and son-in-law, both of whom were employed and unable to care for their child during working hours. Ms. McDevitt cared for her infant grandchild, usually at her own home, between the hours of 7:30 A.M. and 5:00 P.M., five days per week through June, 1974, and two days per week thereafter. At no time during the period in question did she advertise or otherwise seek the opportunity to provide child-care for other families.

 In exchange for her services, Ms. McDevitt received a fixed monthly fee. She reported earnings, totalling $ 799 in 1974, $ 510 in 1975, and $ 475 in 1976, on her federal income tax returns, as self-employment income. Also, in each year, she paid Social Security self-employment taxes on the income.

 In August, 1978, Ms. McDevitt filed an application for retirement insurance benefits with the Bureau for Social Security Benefits. To qualify for benefits conferred under 42 U.S.C. § 402(a), an accumulation of twenty-six "quarters of coverage," in the form of wages or self-employment income, must be demonstrated by the applicant. 42 U.S.C. § 414(a). Because her earnings for the period 1974-1976 did not comprise wages, they could be credited toward the requisite quarters of coverage only if they fell within the definition of self-employment income supplied by 42 U.S.C. § 411(a); that definition embraces only those earnings which are "derived from (a) trade or business." And, indeed, Ms. McDevitt listed her earnings from child-care services as self-employment income.

 In October, 1978, the Social Security Administration awarded Ms. McDevitt the retirement insurance benefits for which she had applied. The Bureau of Retirement and Survivor's Insurance of the Social Security Administration revoked the award in April, 1979, for the reason that the income listed for the period 1974-76 had not been earned pursuant to a "trade or business" within the meaning of 42 U.S.C. § 411(a), and that, with that income excluded, Ms. McDevitt lacked the twenty-six "quarters of coverage" required by 42 U.S.C. § 414(a).

 In May, 1979, Ms. McDevitt challenged the revocation. On July 25, 1979, a hearing was held before an Administrative Law Judge who ruled, inter alia, that Ms. McDevitt was not entitled to receive retirement insurance benefits because her failure to "hold herself out to others as providing child care services" precluded a determination that her earnings during the period 1974-76 had been the product of a trade or business.

 Thereafter, Ms. McDevitt submitted a timely request to the departmental Appeals Council for a review of the ruling of the Administrative Law Judge. On November 26, 1979, the Appeals Council denied the request; the ruling of the Administrative Law Judge thereby became the final decision of the Secretary. Within the sixty-day period prescribed by 42 U.S.C. § 405(g), Ms. McDevitt sought review of the Secretary's decision by commencing this action.

 II.

 Before proceeding to the merits, it would seem useful to set forth in pertinent detail the several relevant statutory provisions:

 (1) Section 402(a) of Title 42 provides that benefits will be awarded only to "(1) ... a fully insured individual (as defined in section 414(a) of this title)."

 
(2) Section 414 provides in pertinent part:
 
(a) The term "fully insured individual" means any individual who ...

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