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Learn How Earning Will Impact Your SSI and SSDI Benefits

Our family recently re-watched the first of three movies of the series: The Hobbit (directed by Peter Jackson, 2012) in order to introduce it to our two sons, aged nine and twelve. Probably prepared and hardened by years of playing video games, neither child had any questions about the general “quest” plotline nor about the inevitability that the company of Dwarves plus the Wizard Gandalf and the Hobbit Bilbo Baggins must battle Orcs and Wargs, Goblins and Trolls, and narrowly miss annihilation at the hands of Rock Giants. When it came to Gollum and the Ring, however, my nine-year-old, in particular, wanted to know more. Why, he wondered, was Gollum a skulking, wraithlike character, who spoke in unnecessary plurals, including when speaking of himself? Why did Bilbo take the Ring and why did it matter? In his video-game experience, collecting treasure was always an objective and never generated any negative side effects. I tried to answer—without giving away too much of the rest of the plot. Both Gollum and Bilbo took the Ring without clearly understanding either the way its magic worked or the impact the ring would have on their respective lives. Even if you have not read the book or seen the films, I do not think it is much of a spoiler to say that taking possession of the Ring significantly changes the life of the taker.

For people who receive Social Security disability benefits—either Supplemental Security Income (SSI) or Social Security Disability Insurance (SSDI)—taking up paid employment can have consequences that (on the surface anyway) may appear as disturbing as those that Bilbo experienced from taking possession of the Ring. It is absolutely true that working and earning above a certain amount can call into question one’s ongoing eligibility for disability benefits. I am a firm believer that people with disabilities are best off when they are able to work to the fullest of their capacity, but I also know that it is imperative that a disability beneficiary clearly understands the impact that working will have on her/his cash benefits.

The first step is to understand the basic assumption that governs Social Security disability determinations for adults; that is, for people over 18. The Social Security definition of disability is:

  • A medically determinable physical or mental impairment that is expected to either last more than a year or end in death AND

  • The impairment(s) must be such that the beneficiary cannot perform “Substantial Gainful Activity”, which is defined as the capacity to earn more than $1,310/month (2021).

As a result, if a person with a disability undertakes a job in which s/eh CAN earn more than $1,310 per month, then s/he risks losing her/his disability status and eligibility for benefits. This principal governs both SSI and SSDI.

The second step is to understand that SSI (Title XVI) and SSDI (Title II) benefits do fall into two different categories and that each is further governed by its own rules. Title XVI benefits are means-tested. This means that in addition to belonging to an identified category—in this case “People with Disabilities”—the SSI beneficiary must have limited means. We have already explained above how the SSI recipient cannot earn too much. In addition, s/he cannot OWN too much. To remain eligible for SSI, the beneficiary cannot have more than $2,000 in what Social Security terms “countable resources”. Countable resources are essentially cash and cash equivalents such as investments (including retirement accounts), gift cards, etc. This means that if a person with a disability goes to work and consistently earns more than s/he spends, the savings may accumulate and render her/him ineligible for further benefits.

It is also important to note that each dollar an SSI recipient earns after the first $65/month—called the “earned income exclusion”—will reduce her/his SSI payment by fifty cents. If the beneficiary has no unearned income, the earned income exclusion increases to the first $85/month. Full time students under the age of 22 have a special earned income exclusion that equals $1,930/month up to a total of $7,770/year. This latter is clearly a highly beneficial provision of the regulations, but it can be jarring when the beneficiary turns 22 and/or leaves school and begins to see earned-income reductions at a much lower level. It is clear that, even under the standard, non-student-reduction formula, the worker-beneficiary will be better off than the beneficiary who does not work; however, it is still necessary to be mentally prepared for the earned income offset.

Title II benefits are entitlements for those who are “insured”. A person becomes insured for SSDI by working and earning a certain number of work credits. The number required varies according to the age of the SSDI recipient. Persons, whose disability began before their age 22, can also qualify for a Title II benefit based on the work records of their parents. This benefit, which follows the same rules as SSDI, is alternately called a “Childhood Disability Benefit” or “CDB” or a “Disabled [sic] Adult Child” or “DAC” benefit. When a person receiving a Title II disability benefit either starts work, returns to work or increases her/his earnings, there is no near-immediate reduction in benefits as with SSI. Rather, the person goes through a multi-stage process. For the first stage of the process, the person remains eligible for her/his cash benefit, regardless of earnings. For the next stage, the person remains eligible for a cash benefit when they earn below the SGA threshold, but not when they earn above it. We will discuss this multi-stage process at greater length in a following blog. Over time, then, Social Security evaluates whether the person can consistently earn above the $1,310 threshold. If so, then the person is considered to be capable of SGA, no longer has a disability that meets the Social Security definition and is no longer eligible for cash benefits. It is important to know that the multi-state process can take as less than a year or as long as many years.

Whereas a person with a disability is always better off working than receiving only SSI, an SSDI recipient may (from a purely financial standpoint) be better off working just under the SGA threshold. Again, we will look at this further in a subsequent blog. Either way, whether immediately in the case of SSI or over time in the case of SSDI, taking on a job and earning income from employment will have a significant impact on life, livelihood, and benefit eligibility for a person with a disability.

Had he known or cared more about Gollum’s back-story; Bilbo Baggins in The Hobbit might have anticipated better the impact of the Ring that he appropriated from the unfortunate Gollum. Perhaps, though, because it belonged to the Dark, Ancient magic, the power of the Ring could be neither anticipated nor evaluated before it was experienced. It may seem at times that Social Security benefits are governed by their own type of magic (so to speak), but in fact, they are subject to rules and if you understand the rules, you can accurately anticipate and plan around the impact that going to work will have on your benefits.

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