A question I used to get asked all the time went something like this — I have received SSDI (Social Security Disability Insurance) benefits for a couple of years now, and i am interested in trying to work again. What will happen to my SSDI?
Sometimes the SSDI would phrase the question in such a way that made it clear he or she was thinking of the rule for everybody except disability beneficiaries, the Annual Earnings Test (AET.) The AET has nothing to do with disabled beneficiaries. This is the test where a portion of annual earnings over an exempt amount are deducted from benefits which would otherwise be payable. The AET pretty much pertains to every beneficiary under full retirement age (presently age 66) who isn’t receiving his or her benefits based on disability.
When considering the case of a disabled beneficiary, a return to work eventually raises the issue of whether his or her disability had ceased.
What Is Disability
Social Security defines ‘disability’ as a medically determinable physical or mental impairment, which:
a. Has lasted or is expected to last for at least a year, or result in death, and
b. Prevents the disabled person from engaging in Substantial Gainful Activity (SGA). SGA will be explained further below.
When a disabled beneficiary who is already receiving SSDI goes back to work, he begins what is called the “Trial Work Period.”
The Trial Work Period
A beneficiary who is disabled is entitled to what is called a Trial Work Period (TWP). The TWP begins with the first month after the month of entitlement to SSDI in which the beneficiary:
a. If a wage earner, has gross earnings over $720 for services performed for an employer in a month, or…
b. If self-employed, either has net earnings over $720 for services performed in his business in a month, or spends over 80 hours in a month performing services in his business.
For both wage earners and self-employed persons, “services” means work activity in employment only if it is actually or usually performed for remuneration or profit; it is an activity which is related to the business. A couple of examples of things which aren’t “services” are running errands, either for oneself, if self-employed, or for the boss, if an employee, doing personal work at the worksite, either for oneself or for the boss, or working on projects unrelated to the business, such as making preparations for an office party or washing the company car.
The TWP ends with the ninth month in which either a. or b. exists.
a. The trial work months need not be contiguous, but…
b. The nine trial work months must occur within a rolling 60 month (5 year) period.
The SSDI beneficiary should report to SSA that he or she has begun working as soon as possible. He or she should also let SSA know right away if the work activity has stopped. This lets SSA keeps track of his trial work months.
When the SSDI beneficiary begins work, he or she should also ask for a copy of the “Red Book,” which is an excellent guide to SSA’s disability rules, and the various work incentives which are available to make it easier and less risky for disabled beneficiaries to try and resume working. It can be accessed online at The Red Book – A Guide to Work Incentives. It can be viewed in HTML online or downloaded as a .pdf file. A copy of the current Red Book is also available at any SSA office, or by calling 1-800=772-1213 7:00AM through 7:00PM in any timezone. By the way, it’s free.
The Continuing Disability Review (CDR)
All disability beneficiaries are subject to medical CDRs at differing intervals while they are receiving disability benefits. These are categorized into three groups: medical improvement expected (MIE) cases, which are diaried (Note 1) for less that three years since the initial disability review or the last medical CDR; medical improvement possible (MIP) cases, which are diaried for either three or five years, and medical improvement not expected (MINE) cases, which are diaried for seven years.
(Note 1) “Diaried” is Social Security lingo for setting a future date when an action has to be taken.
If the beneficiary continues to work beyond the trial work period, he will be scheduled for a CDR. If he has an unexpired MIP or MINE diary, it will be a work issue CDR. SSA will determine whether his work after the TWP is SGA. (More on SGA just below) If there is a MIE diary, or a MIP or MINE diary which has expired (SSA says “matured,) the case will generally be sent to the state Disability Development Service (DDS) (Note 2) which will make a medical determination whether the beneficiary’s disability has ceased. This is called a “medical CDR.”
A medical CDR is processed much like an initial claim. The claims representative (CR) interviews the beneficiary and fills out a lengthy form asking him or her about changes in the disabling condition(s) since the initial claim or last medical CDR, cessation of symptoms or new symptoms, medical or non-medical providers seen since the initial claim or last medical CDR, and any changes in medications taken. The form also covers activities of daily living that are affected by the disabling condition(s,) work status, and educational and vocational training. The CR will fill out another form describing his work, its duties, hours spent working, and other, related information. There are separate, but quite similar forms for wage earners and self-employed persons. The CR will send these forms along with the medical forms to DDS for them to render a medical decision.
Just like they do for initial claims, DDS will contact the medical and non-medical providers for updated records. If DDS determines that the beneficiary’s disability continues despite the work, they will rediary the case for another medical review in the future. They will return the case to the SSA office for further processing. Since the TWP has been used up, the SSDI beneficiary will now be in what is called the Extended Period of Eligibility (EPE.) More on this below. If DDS determines that medical recovery has occurred (in other words, the beneficiary’s disability has ceased,) then they will determine the cessation month, and notify the SSA office. The SSA office will stop the disability benefits. This is an initial determination, and, like all initial determinations, carries with it full appeal rights.
(Note 2) All states have a DDS, usually in several locations. The employees work for the state but spend most of their time working for SSA. They are trained to make medical determinations of disability and cessation of disability for SSA using SSA guidelines. They also make medical decisions for state programs which require them, such as Medicaid.
In the usual situation, however, there is an unexpired MIP or MINE diary in the case, which means that the SSA office will do a work issue CDR.
Work Issue CDRs
The purpose of a work issue CDR is to determine whether or not the beneficiary’s earnings establish whether or not he or she is able to engage in SGA.
Substantial Gainful Employment (SGA)
Generally, if a wage earner’s monthly “countable earnings” (Note 3) in the month following the ninth trial work month exceed the SGA threshold amount (which is $1,000 in 2010 and 2011), then he or she is determined to be engaging in SGA. The beneficiary’s cessation month will be the month following the ninth trial work month. The month of cessation is also the first month of a period called the Extended Period of Eligibility (EPE). The beneficiary will be paid for the cessation month and the two following months. This is called the “Grace Period.” After this, the beneficiary’s checks will stop. I will go into the EPE in more detail below.
(Note 3) Countable earnings are gross earnings less a couple of specific deductions, subsidy and Impairment Relate Work Expenses (IRWE). SSA obtains the monthly gross amounts paid from the best evidence available, usually paystubs or verification from the employer. These amounts are reduced by 1.) an employer [u]Subsidy[/u], and 2.) the cost of any [u]Impairment Related Work Expenses (IRWE)[/u] the beneficiary pays for. The amount of gross earnings after these reductions is “countable income.” The net amounts are then averaged to get the average monthly amount.
a. Subsidy: An employer may subsidize the earnings of an employee with a serious medical impairment by paying more in wages than the reasonable value of the actual services performed. When this occurs, the excess will be regarded as a subsidy rather than earnings.
b. IRWE: The cost of certain items and services that a worker, because of his or her impairment, needs in order to be able to work is deducted from earnings. IRWE items are quite limited and mostly apply to people with physical impairments, but one IRWE applies to nearly everyone: prescription medications and medical services. Payments for routine drugs, over-the-counter drugs, and routine medical services are deductible only if such drugs and services are prescribed and necessary for control of the disabling condition to enable the disabled person to work, and if the he or she pays for them. It is not material if the disabled person also needs these medications and services in order to live his or her life, such as insulin for a diabetic worker.
For a much more complete explanation of IRWE, including which expenses can be deducted from gross wages, go to the Red Book page entitled ‘Impairment-Related Work Expenses (IRWE) (SSDI and SSI eligible).
The rules for determining whether work activity of a self-employed person represents SGA are rather complicated.
The definition of “countable earnings is slightly different. Countable earnings are gross earnings less a couple of specific deductions, unpaid help and IRWE. SSA starts with the amount shown on the beneficiary’s last Schedule C, or if none, his or her current estimate for this year for Net Earnings From Self Employment (NE/SE). This amount is reduced by 1.) any unpaid help that the self-employed beneficiary receives, and 2.) IRWE which the beneficiary pays for. The amount after these reductions is his “countable income.” It is divided by 12 to arrive at the average monthly amount.
a. If the beneficiary has been entitled to SSDI for over 24 months then the rule is the same as for wage earners. Generally, if a self-employed beneficiary’s monthly countable earnings exceed the SGA threshold amount, then he or she is determined to be engaging in SGA. The beneficiary’s cessation month will be the month following the ninth trial work month. The month of cessation is also the first month of a period called the Extended Period of Eligibility (EPE). The beneficiary will be paid for the cessation month and the two following months. This is called the “Grace Period.” After this, the beneficiary’s checks will stop.
b. In all other situations, SSA applies three tests in order. All three have to be considered before work activity is not considered to be SGA.
1. Test One: Significant Services and Substantial Income
The individual’s work activity is SGA if he or she renders services that are significant to the operation of the business, and if he or she receives from it a “substantial income.”
a.) Significant Services means that either:
1.) the business is a one-person business. The services of the self-employed beneficiary are significant, or
2.) the business involves the services of more than one individual. A beneficiary who is sole owner or a partner will be found to be rendering significant services if he or she:
A.) contributes more than half the total time required for management of the business; or
B.) renders management services for more than 45 hours a month regardless of the total management time required by the business.
b.) Substantial Income means that either:
1.) Monthly “countable income” from the business averages more than the SGA threshold amount, or
2.) Monthly countable income from the business does not average more than the SGA threshold amount, but the livelihood which he or she derives from the business is:
A.) Comparable to that which he or she had before becoming seriously impaired, or
B.) Comparable to that of unimpaired self-employed individuals in his or her community engaged in the same or similar businesses as their means of livelihood.
2. Test Two: Comparability of Work Activity
The individual’s work activity is SGA if, in terms of all relevant factors such as hours, skills, energy output, efficiency, duties, and responsibilities, it is comparable to that of unimpaired individuals in the same community engaged in the same or similar businesses as their means of livelihood.
3. Test Three: Worth of Work Activity
The individual’s work activity is SGA if, although not comparable to that of unimpaired individuals, it is, nevertheless, clearly worth more than the amount shown in the SGA Earnings Guidelines, when considered in terms of its effect on the business, or when compared to the salary an owner would pay to an employee for such duties in that business setting.
If none of these tests is met, then the self-employed beneficiary is not performing SGA and his or her benefits will continue. If one of these tests is met, then he is performing SGA. The beneficiary’s cessation month will be the month following the ninth trial work month. The month of cessation is also the first month of a period called the Extended Period of Eligibility (EPE). The beneficiary will be paid for the cessation month and the two following months. This is called the “Grace Period.” After this, the beneficiary’s checks will stop.
When SSA determines that benefits should cease due to SGA, this is an initial determination and full appeal rights are attached to it.
Extended Period of Eligibility (EPE)
The EPE begins the month after the TWP ends, even if the beneficiary is not working that month. The first 36 months of the EPE is the re-entitlement period. The EPE allows the beneficiary to resume receiving benefits if he or she ceases working or his or her earnings fall below the SGA threshold amount during the re-entitlement period, or starts and stops working.
During the 36 month re-entitlement period, benefits are paid for months the beneficiary’s earnings (or work activities) are below the SGA threshold amount as long as he or she continues to have a disabling impairment. Benefits are suspended for months his or her earnings are over the SGA level. SSA will restart benefits within the re-entitlement period if the beneficiary’s earnings fall below the SGA level. A new application and/or disability determination is not required to restart benefits.
If the beneficiary is not working above the SGA threshold and is eligible for a benefit payment for the 37th month of the EPE, he or she will continue to be eligible for benefits until he or she:
a. Works a month at the SGA threahold level, or
b. Medically recovers.
If the beneficiary resumes working after the 36-month re-entitlement period, and his or her earnings are above the SGA threshold, his or her benefits will end. However the beneficiary may be able to start his or her benefits again without filing a new application if he or she stops work within the next 5 years, provided certain conditions are met. This is called “Expedited Reinstatement (EXR.)”
Expedited Reinstatement Cases
As noted above, when a beneficiary resumes working after the 36-month re-entitlement period, and his or her earnings are above the SGA threshold, benefits will end. If he or she stops work within 5 years of this, he can reinstate his benefits by completing a medical CDR, as described above, and receiving a favorable decision from DDS.
Continuing Medicare Coverage
Most disabled beneficiaries who work will continue to receive at least 93 consecutive months of Hospital (Part A); Supplemental Medical Insurance (Part B), if enrolled; and Prescription Drug coverage (Part D), if enrolled, after the 9-month Trial Work Period. There is no premium for Part A. Although cash benefits may cease due to work, the beneficiary has the assurance of continued health insurance. (93 months is 7 years and 9 months.) If the beneficiary’s cash benefits have stopped, he or she is required to pay the Part B and/or Part D premiums out of pocket to keep the coverage. The 93 months start the month after the last month of the beneficiary’s TWP (the same month the EPE begins.) The beneficiary must already have Medicare and be working at SGA, but not be medically improved.