The Voice is the e-mail newsletter of The Special Needs Alliance. This installment was written by Special Needs Alliance member Barbara Isenhour, of the firm of Isenhour Bleck, PLLC in Seattle, Washington. The firm focuses on government benefits for individuals with disabilities and estate planning for families with special needs children. A board member of NAMI Eastside in Redmond, Washington, and Full Life Care in Seattle, Barbara frequently lectures around the state of Washington on issues involving special needs trusts and government benefits for the elderly and disabled.
October 2011 - Vol. 5, Issue 17
Sometimes a person receiving disability benefits has an opportunity to work. The individual still has a medical disability but would like to have a job and earn a wage. A job may mean more monthly income than the disability benefit, and the job can provide a sense of purpose and personal growth. Even with these potential benefits, there is often anxiety about trying to work: “What if my work attempt is unsuccessful?” “Will I end up with less net income than the SSDI cash benefit if I try to work?” And for many individuals attempting work, the biggest worry is what will happen to their health benefits from Medicare or Medicaid.
Title II Disability Benefits
This article discusses how work can affect a person’s eligibility for Title II disability benefits, commonly referred to as “Social Security Disability.” The next Voice article will discuss preserving Medicare and Medicaid benefits when a Title II disability recipient begins to work.
Title II of the Social Security Act provides three types of insurance benefits for individuals with disabilities. Some people receive Title II disability benefits on their own work history (Social Security Disability Income or SSDI). Others receive Title II disability insurance on the account of a deceased spouse or former spouse (Disabled Widow(er)s Benefits or DWB). Some adult children receive Title II disability benefits on the account of a disabled, retired or deceased parent (Childhood Disability Benefits or CDB). In order for a worker, spouse, or child to qualify for Title II disability benefits, the worker on whose account benefits are paid must have paid Social Security taxes on earnings and must have earned the requisite number of work credits. (An upcoming Voice article will cover the work history requirements in order to qualify for Title II disability benefits.) Title II disability benefits are a type of insurance and are not affected by a person’s assets or unearned income.
For simplicity this article refers to SSDI benefits for the disabled worker, but the rules discussed below also apply to CDB and DWB beneficiaries. This article does not cover the work rules for recipients of Supplemental Security Income or SSI, a needs-based benefit available to qualifying elderly, blind or disabled individuals. SSI work rules are different from Title II work rules, and they will be covered in an upcoming Voice article.
There are a couple of preliminary concepts to keep in mind whenever discussing how work affects SSDI benefits. First, wages do not reduce or offset SSDI benefits. Either a person is eligible for SSDI in spite of the wages, or the wages will show the person isn’t disabled and thus not qualified to receive SSDI. It is an “all or nothing” system for SSDI. Second, wages are counted in the month the work is performed, not the month in which the wages are paid.
There are several separate components of the SSDI work rules that must be pieced together to understand how a job and wages can affect a person’s cash benefits. These components include trial work period, substantial gainful activity, extended period of eligibility and expedited reinstatement of benefits. For this discussion, assume that the disabling medical condition still exists but that the SSDI recipient is going to try to work in spite of the medical condition. Also, remember that the financial figures referenced below are likely to change annually – check the Social Security website for the latest figures.
Trial Work Period
Keep in mind that in order to qualify for SSDI, in most cases a person must show an inability to engage in substantial gainful activity (SGA) described in more detail below. Social Security will monitor the SSDI recipient’s earnings as a way to find out if the individual is again able to engage in SGA and therefore is no longer disabled.
After SSDI benefits begin, Social Security will first count every month when the individual’s gross wages equal or exceed $720 toward a “trial work period” (TWP). (Work deductions discussed below are not counted.) For self-employed individuals, months where net income equals or exceeds $720 or where the hours worked exceed 80 hours per month will be counted as a trial work period month. Months when earnings equal or exceed $720 are referred to as service months. An individual is entitled to have 9 service months treated as the TWP. The months do not have to be consecutive months but must be within a five-year period. An individual is only entitled to one TWP.
While individuals are in a TWP it does not matter how much they earn in wages. The Substantial Gainful Activity limit does not apply during the TWP. During the TWP, SSDI recipients will receive their wages, no matter how high, as well as their SSDI benefit.
Example: Jennifer is 28 years old and was severely injured in an auto accident when she was 24. Jennifer worked prior to her accident and was eligible for an SSDI benefit of $800 per month based upon her earnings before she was injured. A year after Jennifer’s accident, she was offered a part time job with Kmart as a stocking clerk. In June through November of 2008 Jennifer earned $800 per month (6 months). In March, August and September of 2009 Jennifer earned $1,500 per month (3 months). Since Jennifer earned more than $720 in each of these months, as of the end of September 2009 Jennifer had completed a TWP of nine months. Until the end of her TWP, it did not matter how much Jennifer earned in wages. She could have earned $3,000 per month and she still would have received her SSDI benefit of $800 per month in addition to her wages for those nine TWP months. On the other hand, if her earnings had been only $710 per month during her first six months, she would not have used up her nine-month TWP, but only three months of it, and would still have received her SSDI benefit even if earning $1,500 per month for the remaining six months of the TWP after September 2009.
Substantial Gainful Activity
After the TWP is over, Social Security will determine if a person’s wages are considered by Social Security to amount to “substantial gainful activity” (SGA). If the gross monthly wages, minus reductions for work related expenses or work subsidies, are $1,000 per month or more, Social Security may determine that there is SGA. (The SGA amount for a person who meets the Social Security definition of blindness is $1,640 per month.) The SGA amount is calculated based upon when the work was performed, not when the wages were paid.
Obviously it is helpful if the SSDI recipient can keep countable earned income below the SGA limit in order to receive the SSDI benefit amount and the earned income. There are two work deductions that can apply: impairment related work expenses (IRWE) and work subsidies.
IRWE include goods or services the individual must purchase in order to work. These expenses cannot be reimbursed and must be paid out of pocket by the SSDI recipient after starting work. Examples of IRWE include purchasing durable medical equipment, transportation to and from work (but not public transportation) or medications required to work. A large out-of-pocket purchase can be amortized over a 12 month period. IRWE are reported as item #7 on the Social Security Administration Work Activity Report (SSA-821 BK).
The second deduction from gross wages to reduce countable wages for SGA purposes is supported or subsidized working conditions. In some cases a person requires special work conditions or support in order to work. If so, the value of this support can reduce the gross wages when computing her countable wages. Unlike IRWE, work subsidies are not paid out of pocket by the SSDI recipient.
Suppose that while Jennifer works for Kmart she requires 25% more supervision than her co-workers in order to perform her duties. If her gross wages are $1,200 per month, Social Security should reduce the value of her wages by 25% in calculating whether her countable wages show SGA, even though Jennifer does not pay for this support out of her pocket. With this work subsidy, Jennifer can continue to receive her SSDI check of $800 per month and her wages of $1,200 because her countable earnings will come below the SGA limit.
If Jennifer is paid the same as other stock clerks but she is 20% less productive because of her impairments, she could also request that her countable wages be determined by reducing her gross wages by 20%. Another example of a work subsidy is if Jennifer’s group home arranges to get her to and from her job. The home estimates the market value of this transportation is $200 per month. In that case Social Security should reduce the value of her wages by $200 even though she does not pay for the transportation herself. Work supports and subsidies are claimed as item #5 on the Work Activity Report SSA-821 BK.
The idea behind reducing the dollar value of Jennifer’s wages is that the SGA limits supposedly measure Jennifer’s true earning capacity – ability to earn – not what she actually earns. If she is getting extra help, requires special equipment to perform her job, or is allowed to be less productive, her true earning capacity is less than what she takes home.
Extended Period of Eligibility
So how does SGA affect a person’s eligibility to continue receiving his or her SSDI check? After the individual has accumulated 9 months of a TWP, he or she then has a 36- month period referred to as an “extended period of eligibility” (EPE). During the EPE, Social Security looks at whether earnings in any given month exceed the applicable SGA amount, after taking into account any gross wage reductions for IRWE or work subsidies. If adjusted net earnings exceed the applicable SGA amount, Social Security will make a determination of cessation of disability. The SSDI benefit amount will be terminated after the third month from the cessation of disability month. If wages drop below the SGA amount in any given month during the 36-month EPE, the SSDI benefit amount will be reinstated.
Example: Again, let’s look at Jennifer. She completed her TWP in September of 2009. Beginning in October of 2009 through September of 2012 Jennifer has a 36 month EPE. In October of 2009 Jennifer’s adjusted earned income, after taking into account work subsidies and IRWE, comes to $1,100 per month. These wages are above the SGA amount so Social Security will give Jennifer a cessation of disability notice effective for October of 2009. Jennifer will still get her SSDI check for a three-month grace period (October, November and December), but her SSDI check of $800 per month will end after December of 2009. In June through August of 2011 Jennifer’s adjusted earned income dropped to $900 per month. Because her countable earnings are below the SGA amount for those months, Jennifer will receive her $800 SSDI check for June, July and August of 2011 because she is still in the EPE. If Jennifer’s countable earnings exceed $1,000 in September, 2011 and subsequent months, she will not get another 3 month grace period and her SSDI check of $800 will be terminated beginning in September. If Jennifer’s countable earnings again drop below $1,000 in subsequent months while she is in the EPE her SSDI benefit amount will be reinstated.
The importance of the EPE is that an individual can again receive the SSDI benefit amount in any month during the 36-month period when countable earnings fall below the SGA amount.
Expedited Reinstatement of Benefits
At the end of the EPE there is an additional five year period called “expedited reinstatement of benefits.” If the original impairment flairs up within five years of the end of the 36-month EPE, preventing the individual from earning SGA, Social Security can reinstate the SSDI benefits provisionally while a medical review is completed. If the medical review confirms the disability condition or blindness, then the provisional SSDI benefits will be made permanent. If the medical review concludes that there is not a medical disability, SSDI benefits will be immediately terminated but with no overpayment for benefits paid provisionally.
Between the TWP, the EPE and the five-year expedited reinstatement of benefits, there are safeguards to protect Title II beneficiaries who want to try to work. It is important for advocates to be sure that appropriate earnings reductions are requested if needed to bring wages below the SGA limit in order to preserve the SSDI benefit.
The next Voice article will discuss three additional work incentives for Title II beneficiaries: Ticket to Work Program, extended Medicare benefits and extended Medicaid benefits.