Multiple benefits make for Rube Goldberg calculations

One of my husband’s favorite movies is The Goonies, in which a small band of quirky childhood friends pursue a lost pirate treasure in Oregon.  In one scene, one of the band sets off a Rube Goldberg machine involving a ball, a track, a bucket, a sprinkler, a lot of string and a live, egg-laying chicken which, when functioning correctly, allow him to unlatch and open the front gate without leaving his bedroom.  A Rube Goldberg machine is defined as a chain reaction that uses everyday objects in an intentionally complex and lengthy process to perform a simple mechanical task.  To those of us, who deal with the Social Security Administration’s (SSA’s) method of calculating and adjusting disability benefits, it seems likely that the SSA system relies on one exceptionally large Rube Goldberg machine.

Most young adult with disabilities become eligible first for Supplemental Security Income or SSI because for this benefit, they need only to provide evidence of their “medically determinable impairment” and do not need to have a work history.  The maximum SSI payable is $994/month, but the amount that any particular individual receives depends on whether s/he has any other income.  If the young person starts to work, her/his SSI payable is reduced by $1 for every $2 earned after the first $65 if the person also has unearned income and after the first $85 if the person has no unearned income.  The Rube Goldberg effect comes because the SSI adjustment lags.  So, the SSI payable in the current month reflects the earned income from months earlier.  If the worker’s earned income fluctuates only a little, the SSI may be overpaid only a little in one month and underpaid a little in a subsequent month, such that the over- and under-payments net themselves out.  However, if the worker has significant changes in income, for example due to seasonal work, the lag may generate significant underpayments or, worse, overpayments.

As the young person works and pays Social Security tax, s/he will earn Social Security quarters of credits.  The number of credits that one needs to be “fully insured” for Social Security Disability Insurance (SSDI) are few for young people.  At the lowest point, a young person who is not yet 24 years old needs only 6 credits earned within three years to be insured for SSDI.  For ages beyond 24, the number of credits increases gradually.  The Rube Goldberg effect comes into play as the young worker and her/his family are constantly cross-referencing the number of credits earned with the worker’s current age to see if they have reached the moving target that is “fully insured” status.  It should be noted that, with a few rare exceptions, the SSA does not reach out proactively to inform a claimant that s/he has enough credits to receive SSDI.  More frequently, the worker and her/his family have to request the addition.

Once the young worker is eligible for SSDI, s/he will start to receive that benefit.  Because the work history is still short and because many young people with disabilities work only part time, the SSDI benefit’s amount may be small.  In this case, the person may continue to receive some SSI.  SSDI is “unearned income” for the purposes of SSI calculations and so reduces the SSI payable dollar-for-dollar for every dollar of SSDI over the first $20/month.  At the same time, the person still has the earned-income reductions.  The earned income itself may be increasing if the person gets a raise, or more hours or if the base minimum wage in the area increases.  An ongoing increase in monthly earned income will, in turn, increase the SSDI benefit, which is calculated on the worker’s primary insurance amount (PIA) which is based on the worker’s average indexed monthly earnings (AIME).  On top of this, the worker will see an annual SSDI adjustment for Cost of Living.  Meanwhile, the SSI payable continues to adjust, but always with a lag.  Now the Rube Golberg gears and shoots have doubled in number.

A final level of complexity comes into play when the parents of the worker with disabilities file for their own Social Security retirement benefits.  At that point, the worker with a disability is eligible for an additional benefit called a “Childhood Disability Benefit” (“CDB”) also known as a “Disabled Adult Child” (“DAC”) benefit.  The CDB/DAC is added onto the person’s own SSDI benefit, such that the total is up to 50% of the parent’s PIA.  I say “up to” because the exact amount of the CDB/DAC depends on whether there are other auxiliary claimants on the parent’s work record, for example, a spouse, and whether that other auxiliary has an own-work-record benefit or not.  At this stage, the adult worker with disabilities generally ceases to receive SSI because the total of her/his own SSDI and the CDB/DAC is large enough to eliminate any SSI payment, based on the dollar-for-dollar reduction formula.  Recalculation continues between the SSDI and CDB/DAC.  As long as the person with disabilities continues to work, her/his own SSDI continues to rise because her/his average monthly income is rising.  But the total of the SSDI and the CDB/DAC is capped by the parent’s PIA.  This means that as the person’s own SSDI benefit increases, the person’s CDB/DAC benefit sees a corresponding decrease.  The Rube Goldberg machine is operating at full capacity and overpayments happen because the SSA can take years to make the appropriate adjustments—but then applies them retroactively.

For SSI, SSDI, and CDB/DAC beneficiaries that are managing multiple benefits where recalculations are both delayed and retroactive, it seems as unnecessarily and artificially complicated as a Rube Goldberg machine.  To add insult to injury, the “machine” frequently generates overpayments.  Every claimant dreads receiving a letter that the SSA has overpaid them and now wants the money—sometimes thousands and thousands of dollars paid back.  Thankfully, the claimant does have recourse.  As long as the worker/claimant or her/his representative payee has been reporting earnings on a monthly basis, s/he can request a waiver of overpayment.  Claimants are considered “not at fault” for overpayments if they have reported their earnings in a timely manner, but the SSA continued to pay them anyway and/or made incorrect or delayed adjustments to their benefit amounts.