SSDI Work-Related Overpayments Lawyer Manual

SSDI Work-Related Overpayments

Issues arising from a claimant returning to work are one of the main causes of SSDI overpayments. SSA's rules about returning to work can be very confusing to beneficiaries, and this can be compounded by bad tracking by both the claimant and by SSA. Whether a person receives SSI or SSDI, Social Security regulations require him or her to report any change in income within ten days of receiving it. For each month, SSDI beneficiaries are required to report any income they have to SSA. SSA and the beneficiaries themselves will often miss some source of earned or unearned income until much later and will wind up in an overpayment situation. It is important for advocates to be familiar with SSA's terminology and how SSA counts income for SSDI beneficiaries in order to best help claimants facing an alleged overpayment.

SSDI's Work Incentives

Persons found eligible for SSDI benefits have medical impairments that prevent them from working. SSA has developed rules for dealing with SSDI recipients who return to work while receiving disability benefits. To avoid a system where claimants are punished for attempting to go back to work while on SSDI, while also encouraging them to gradually get back into the workforce, SSA created a series of work incentives. These incentives allow someone on SSDI to attempt to go back to work or to gradually increase their working hours without fear of losing their benefits.

Unearned Income

SSA defines unearned income simply as income that is not earned. 20 C.F.R. § 416.1120. This means any income that does not come from work activities. Section 416.1121 provides the following examples of unearned income:

• Annuities, pensions, and other periodic payments
• Alimony and support payments
• Dividends, interest, and certain royalties
• Rents
• Death benefits
• Prizes and awards
• Gifts and Inheritances

For SSDI beneficiaries, receiving unearned income will not affect their monthly benefits. However, what will count against an SSDI beneficiary is the amount of money (wages) earned from work. As a result, the more monthly income that can be classified as unearned income, the better off the SSDI recipient will be.

Wages from Work Activity

SSA uses the term “substantial gainful activity” or SGA to describe earned income including wages, salary, tips, self-employment. The general definition of SGA is work that “… (a) involves doing significant and productive physical or mental duties, and (b) is done (or intended) for pay or profit.” 20 C.F.R. 404.1510; 20 C.F.R. 404.1572. Wages are defined as payment paid to the beneficiary as an employee for doing a job. 20 C.F.R. § 404.1041. When an SSDI recipient is paid wages, SSA counts the entire amount earned, not the net amount. Certain items are deductible from an SSDI beneficiary's gross wages. The monthly SGA amount for statutorily blind individuals for 2019 is $2,040. For non-blind individuals, the monthly SGA amount for 2019 is 1,220. 

Trial Work Period

One SSA work incentive is known as the Trial Work Period (TWP). Over a rolling 5-year (60-month) period, an SSDI beneficiary is entitled to receive a total of nine Trial Work months. A month of Trial Work is counted if the individual earns over more than the applicable TWP amount for the applicable year of the month in which work was done. The TWP amount in 2019 is $880.00; for more recent updates, please see the SSA website. The SSDI recipient is not required to use these 9 TWP months consecutively. And, the 5 year period is rolling, which means that SSA goes back and looks for the first time there were 9 months of work (consecutive or non-consecutive) within any 5 year period. Once that period is found, the TWP ends with that 9th month. During the TWP period, the SSDI recipient is entitled to keep their entire SSDI check regardless of how much is earned. 20 C.F.R. §§ 404.1592.

Grace Period

SSA provides that when an SSDI recipient has exhausted their Trial Work Period and then works and earns more than the SGA level in a month, a Grace Period of three months is triggered. The Grace Period lasts for three months; during the three-month Grace Period, the SSDI recipient receives regular monthly benefits. Because the Grace Period starts the first time a claimant earns more than SGA after the Trial Work Period, it can run concurrently with or after the Extended Period of Eligibility (explained below).  And, the Grace Period always lasts 3 consecutive months. Once the Grace Period is triggered, it runs three months even if the individual does not work above SGA in the second or third month of the Grace Period.  29 CFR 404.1592(a)(2)(i).

Extended Period of Eligibility

Once an SSDI recipient reaches the 9-month Trial Work Period limit, a 36-month Extended Period of Eligibility (EPE) is triggered. This 36-month period is triggered regardless of the person’s work activity on the first month after the Trial Work Period or thereafter. In all circumstances, an EPE starts the month following the last Trial Work Period month. It is, therefore, possible for an SSDI recipient to “use up” their EPE even if they stopped working after their 9th Trial Work Period month.

During the EPE, an individual is eligible to receive an SSDI benefit check for any month they earn less than the substantial gainful activity (SGA) level amount set for that year. The monthly SGA amount for statutorily blind individuals for 2019 is $2,040. For non-blind individuals, the monthly SGA amount for 2019 is $1,220. SGA for the blind does not apply to Supplemental Security Income (SSI) benefits, while SGA for the non-blind disabled applies to Social Security and SSI benefits. For more recent updates, please see the SSA website.

However, if the SSDI recipient earns more than the SGA level in a month, he or she is not eligible for the monthly SSDI check. §404.1592a(b). SSDI recipients can cycle on and off of monthly checks during the 36 month period; if the person works and makes more than the SGA level in a month, he or she is not entitled to a monthly check. If in the next month, the person does not work or does not earn more than the SGA level if working, he or she is entitled to a monthly SSDI check.

Finally, if the SSDI recipient earns more than SGA in the 36th month of the EPE or any month after the 36th month, SSDI eligibility ends (SSA uses the verb “terminated” to describe this action).

Keep in mind that the Grace Period will be triggered the first time that an SSDI recipient earns over SGA. This can occur during the EPE or after the EPE. If it happens during the EPE, the on and off cycle is suspended for those three months. If it happens after the EPE, the individual will receive three checks, and then the checks will stop.

Expedited Reinstatement

Finally, if a person is eventually terminated from SSDI or SSI benefits due to their work activity, they may still be eligible for Expedited Reinstatement (EXR) of their benefits if the work stops in certain circumstances. To be eligible for EXR, a person must meet the following criteria:

• Must reapply for benefits within five years of the month your benefit was terminated due to work activity;
• Benefits must have stopped due to work activity;
• The person must continue to meet the SSA definition of disability and not be earning over the SGA amount.

For Expedited Reinstatement, a decision on the claim is reached much faster than it would be otherwise by SSA, and the claimant is eligible for 6-months of provisional benefits while SSA's decision is pending. 20 C.F.R. §§ 404.1592b, 404.1592c, and 416.999.

Income Counting Rules for SSDI

When counting income for SSDI beneficiaries, always start with gross income. While there may be later deductions, gross income is always the starting point rather than net income or “take-home pay.” For SSDI, wages are counted in the month they are earned, at the earlier of: when the individual receives them or when they are credited to the individual’s account. 20 C.F.R. § 416.1111. Allowable deductions are discussed below.

Allowable Deductions from Gross Wages

The expenses discussed below are not applicable wage deductions during a person’s Trial Work Period months. In other words, a beneficiary cannot use wage deductions to bring their monthly earned income below the Trial Work Period limit to have that month not count against them as a Trial Work Period month. These deductions are used in Substantial Gainful Activity determinations only, and since the Trial Work Period is not such a determination, the deductions are irrelevant.

Impairment Related Work Expenses

Impairment Related Work Expenses (IRWEs) are expenses that are related to the primary disability or any secondary disability on record that are necessary for the SSDI recipient to go to work and stay on the job. IRWEs can include any number of out-of-pocket expenses, such as:

• Medical appointment payments
• Prescription co-payments
• Prosthetic devices
• Transportation costs
• Costs of adaptive devices for automobiles by persons who cannot drive an unmodified automobile

IRWEs can be deducted from a person's gross monthly earnings to reduce countable earnings below the SGA amount, after the Trial Work Period. This can be vital in keeping a beneficiary eligible for SSDI. Before an IRWE can be subtracted from countable earnings, SSA must approve the expense. All receipts for IRWEs should be kept for verification with SSA. See 20 C.F.R. § 404.1576.

Subsidy and Special Conditions

If an individual receives special conditions or support on the job that results in the person being paid more than the value of the work that is done, it is known as a "subsidy." Subsidies can come in the form of support provided by the employer (extra breaks, more time to finish work) or by someone other than the employer (paying for a job coach).

In any SGA determination, the value of a subsidy is subtracted from countable income. For example, if a beneficiary is paid for doing in 20 hours what a non-disabled worker would do in 10 hours, the 10 hours times the person’s hourly wage would be considered a Subsidy and would be subtracted from earnings in an SGA determination. Subsidies do not apply during the Trial Work Period. If the employer cannot provide an exact value for the Subsidy, there is a form that can be used to help SSA determine the value. See 20 C.F.R. § 404.1574(a)(2).

Where possible, advocates should draft letters for employees to sign when establishing a subsidy. It is helpful for the employer to decide on a percentage of the work that is subsidized and states this in the letter. Under current rules, SSA will take the employer’s subsidy calculation without further development. POMS DI 10505.010.

Unsuccessful Work Attempts

An Unsuccessful Work Attempt (UWA) is when a beneficiary goes back to work and begins earning over the SGA amount, but stops within six months because of:

• The person’s disabling conditions; or
• Elimination of the special services or assistance that the individual needed to work

In these cases, earnings are not counted, but the months may count towards the Trial Work Period. 20 C.F.R. § 404.1574(c). 

Business Expenses

Self-employed persons can deduct the reasonable cost of business-related expenses from monthly gross earnings. This would also reduce countable wages.

Unincurred Business Expenses refers to self-employment business support that someone provides to an employee at no cost. In deciding whether someone is working at the SGA level, SSA will deduct the un-incurred business expenses from net earnings of self-employment (NESE). Examples of un-incurred business expenses are (1) a Vocational rehabilitation agency provides a computer that is used in a graphic arts business, or (2) a friend works for a business as unpaid help. One way to identify an un-incurred business expense is that the IRS does not allow the deduction of the cost of an item or services that was given to the business person.

Averaging Income

If someone’s work is continuous with a significant change in work patterns or earnings, SSA will average earnings over the entire period of work requiring evaluation to determine whether a substantial gainful activity has been done. 20 C.F.R. § 404.1574a. Averaging cannot occur during Trial Work Period Months or after a cessation due to work activity has been determined. Wages are generally averaged over the entire work period being evaluated. However, distinct periods must be averaged separately where the SGA level has changed or there is a significant change in work patterns or earnings. POMS DI 10505.015