Hi, GREAT question, and one I had not researched before, but "assumed" an answer:
With regard to your post:
"I and my wife have been drawing social security benefits for approximately 20 years (Yes, I am old (86) and did not start drawing benefits until I was 65+ years old). My wife is the same age. When we first starting drawing benefits, my wife (spousal’s’ benefits) - her personal benefits plus the required accommodation totaled 50% of my benefits as required. --------OK.
I continued to work and still do. Each year we receive a letter notifying us of an adjustment and of our next benefits. My adjustment would include and adjustment based on my new income base, plus a cost of living. -------- OK, sounds right. A "recomputation"
("§ 404.281. Why your primary insurance amount may be recomputed.
(a) Earnings not included in earlier computation or recomputation. The most common reason for recomputing your primary insurance amount is to include earnings of yours that were not used in the first computation or in an earlier recomputation, as described in paragraphs (c) through (e) of this section. These earnings will result in a revised average monthly wage or revised average indexed monthly earnings..." http://www.ssa.gov/OP_Home/cfr20/404/404-0281.htm
"However, my wife’s adjustment only reflected a cost-of-living adjustment. It is my understanding my wife spousal’s benefit should always by at least 150% of mine. -------- No, not 150%, but 50% if she filed for spousal at her full retirement age. And I tend to agree with you - if you work and increase your PIA via annual recomputations, her benefit, being 50% of your PIA, whatever that may be, should also be based on that new PIA.
"Today her monthly check is approximately 1/3 of mine. Yesterday, I talked to an employee at social security and she assured me the initial spousal’s benefit was done correctly (150% of mine------------ Again, I think you mean 50%)
") but has never been updated for my continuing to work. I was told to write the local social security administration and ask for a recalculation of spousal’s benefits. ---------- Or recomputation, believe it or not, to the SSA, these words have 2 different meanings. Atlthough I don't think it will matter, in this case. So it sounds like THAT worker agreed hers should be adjusted.
"Which I have done! QUESTIONS: Should my wife receive 150% of my benefits? ---------- No, 50%.
"And if yes, how do I get social security to recalculate my wife’s spousal’s adjustment? And should she not receive the adjustment for previous years in which this was not done? ---------- From a legal point of view, when I look at the C.F.R. is specifically says HER spousal is a % of YOUR PIA. It does NOT say, your past PIA at the time you reached FRA.
"§ 404.333. Wife's and husband's benefit amounts.
Your wife's or husband's monthly benefit is equal to one-half the insured person's primary insurance amount...."
And Forbes agrees with us here: http://www.forbes.com/sites/kotlikoff/2014/08/22/social-security-qa-will-my-future-covered-earnings-increase-my-wifes-spousal-benefit/
Now, as to how SSA to make a move on it? You need to be a squeaky wheel - I'd make a SIT down appointment with the SSA manager or other "spousal benefit" specialist. And I'd go over the situation and point out the CFR sections that point out that YOUR PIA can change prospectively, via future work earnings and that spousal benefit is noted to be 50% of your PIA (not some old PIA computation). If you can't get action within a few months, I'd write to your Congressperson. They assist us repeatedly when we can't get the SSA to take an action or process a request.