The Power of PASS

I was very excited when a former client returned with a request to work together on a Plan to Achieve Self Support (PASS).  Either PASS is a well-kept secret or the 10-page form that the Social Security Administration requires discourages people from using this tool which can generate significant career development and financial benefits for a person with disabilities who receives Supplemental Security Income (SSI)or who could receive SSI once the plan is implemented.  This blog will explore PASS with examples.

A PASS is designed to support a person with a disability to achieve employment-related goals by offering a path for the plan holder to divert income and accumulate financial assets in a way that does not interfere with her/his eligibility for SSI.  As a reminder, people with disabilities are eligible for SSI only when their totable countable income is less than $2,073 per month and their total financial resources (assets) are less than $2,000.  Moreover, any income that an SSI recipient does get reduces her/his SSI payable.  Unearned income reduces SSI payable dollar for dollar and earned income reduces SSI payable by about 50 cents per dollar.  These limitations would make it virtually impossible for an SSI recipient to bear any cost of employment training or career development if it were not for PASS.  Let’s look at an example.

Sara is 23, has a developmental disability and has been receiving SSI since she was 18 years old.  Sara currently works at an art supply store for 25 hours per week at a rate of $15/hour, making $1,612 per month.  The Social Security Administration excludes the first $85 of her monthly earnings and offsets her SSI payment by half of the remaining amount.  As a result, Sara’s average monthly SSI deposit is around $230 for total income of $1,842 or $1,520 after FICA and income tax have been withheld from her earned income.  Sara lives with her parents and contributes about $500/month to the household budget through a room-and-board arrangement.  After paying the $500, Sara uses about $520/month to cover her other expenses.  This would leave her with $500 to pay towards her career development.

Sara is also an excellent artist with a keen interest in animation.  She would like to leave retail and become an animator.  Sara believes a major step towards this goal would be to complete an Animation Certificate at her local community college, where she would learn to use the relevant software programs and develop a portfolio of work. 

The Animation Certificate requires 45 credits.  The community college’s basic tuition is $160/credit hour, so the certificate will cost $7,200.  Sara believes that she can manage 7-8 credit hours per semester while working, so it will take her six semesters to complete the certificate.  Design lab fees are $150/semester, adding another $900 in cost.  She will also need a new laptop with a certain level of processor and storage along with a high-resolution screen.  This will cost about $1,000.  The animation software subscription will cost $50/month or about $150 per semester.  This will bring her total cost to $10,000.  SSI eligibility rules preclude Sara from accumulating more than $2,000 in her bank account. 

So, Sara writes a PASS.  She lists out all the courses that she needs to take at the community college and provides her timeline from initial application to obtaining the certificate.  She itemizes each expense.  She proposes to contribute $1,000 per month to fund her PASS.  Now, the $1,000 of earned income that Sara diverts to her PASS is also excluded when the SSA calculates her SSI payable.  As a result, her SSI increases to $730/month.  Sara’s total income is now $2,342 or $2,020 after accounting for taxes.  Of this amount, $1,000 is going to fund her career development, $500 still goes for room and board, and she can use the remaining $520 to cover her expenses.  The PASS has enabled Sara to save for her education at twice the rate she could otherwise and also accumulate the funds without having to spend them quickly to keep her account under $2,000.

Sara tells Sam, her friend and coworker, about her PASS.  Sam is also a person with a disability who is 27 years old.  Sam was eligible for SSI from the age of 18, but by 24, he had earned sufficient Social Security credits from his employment to qualify for SSDI.  Sam receives $1,000/month of SSDI, which reduces any SSI payable dollar for dollar from the maximum of $994/month.  As a result, Sam no longer receives any SSI.  Sam also earns just over $1,600 from his part time job at the art supply store, generating about $2,280 of total income after taking taxes into account.  Sam’s living expenses are about $1,280.  Sam has been thinking about obtaining his Eye Care Assistant certification.  His program would also cost about $10,000 at the community college.  Based on his budget, Sam could contribute $1,000 to his career development.  Sam writes a PASS for this career development.  And so, he directs his entire $1,000/month SSDI payment plus $300 of his earned income towards the PASS.  Because his SSDI and $300 of his earned income no longer offset his SSI payable and he starts receiving $380/month of SSI.  Sam’s PASS allows him to direct an additional $300/month towards his career development while still covering his living expenses.

At first, it might seem that PASS, which requires the completion of a long form and then approval from the SSA, has been rendered obsolete by the development of ABLE accounts.  After all, a person with a disability who receives SSI can accumulate up to $100,000 in her/his ABLE account without jeopardizing SSI eligibility and ABLE funds can be used to cover education and other employment-related expenses.  However, while ABLE can be used to exclude resources (financial assets) from being counted for purpose of SSI eligibility, directing earned or unearned income into an ABLE does not exclude the income from being counted for purpose of SSI eligibility or the amount of SSI payable.  Thus, Sam would not have become eligible for the $380 of SSI and Sara’s SSI payment would not have increased by $500/month if each of them had used an ABLE instead of a PASS.  PASS provides unique financial benefits that allow people with disabilities to fund employment-related goals more quickly and eff