High up in Copper Canyon.

Dear Ben,

I get SSDI Childhood Disability Benefits on my disabled father’s record. What would be the effect on my benefits if I began trading stock and options, not as long term investments but closer to what would be considered day trading? I don’t want to violate any rules by trading stock and doing research in making a profit from my investments/trades. Would this be considered a form of entertainment like gambling at the casino is or more like self-employment?

Sid
Blackwell WI

Dear Sid,

You are not violating any Social Security Administration (SSA) rules by trading stocks and day trading; Social Security Disability Income (SSDI) beneficiaries can pursue whatever interests or enterprises they wish. However, if your activity is a business, SSA will look at it as self-employment and consider it to be work. The SSDI definition of disability is directly linked to a person’s capacity to do substantial work regardless of the nature of the person’s disabling condition; so if your activity is self-employment and substantial and sustained for a certain period of time, the possibility arises that you may be considered no longer disabled for SSA purposes and your benefits would stop.

SSA follows the Internal Revenue Service (IRS) regarding the definition of a business. Normally if a person intends to make a profit or produce income on a continuing basis from an activity, it is a business. (POMS RS 01802.001 ff)

Special IRS rules apply to traders in the business of buying and selling securities for their own account. If a trader regularly seeks to profit from daily market movements in the prices of securities and not just from dividends, interest, or capital appreciation, and if the activity is significant, it is a business and subject to self employment and FICA tax. (http://www.irs.gov/taxtopics/tc429.html)

Other factors that IRS considers in determining if trading is a business are: typical holding periods for securities bought and sold, the frequency and dollar amount of trades during the year, the extent to which the activity produces income for a livelihood, and the amount of time devoted to the activity. Consulting with a tax advisor or expert may be appropriate to clarify these issues and your options.

If your trading activities do not qualify as a business, you are considered an investor and not a trader, and you would not be self employed for IRS or SSA purposes (though any income realized would still be subject to regular income tax.)

If your trading activity is self-employment, then SSA considers your net profit (Net Earnings from Self Employment or NESE) and possibly other factors (such as the number of hours you work in a month) in determining your nine-month Trial Work Period and then in applying the $1000 per month Substantial Gainful Activity (SGA) standard. For SGA purposes, SSA looks at your month by month net income although averaging over a period of months is often possible. (Please see my posting of February 17th, 2010 which discusses self-employment in more detail.)

As you can see, self-employment in general and trading specifically can be complicated and is reviewed on a case by case basis by SSA. There may be other related factors involved in your situation that you are unaware, so ultimately discussing the issue with SSA will be needed to get an authorized answer.

I hope this works out so you can pursue your interests in the way you want.

Ben

I am working with someone who is currently receiving SSI benefits (he became entitled in March of 2009). We just found out this person will probably become eligible for Disabled Widower’s Benefits, retroactive to September of 2008. His Disabled Widower’s Benefit will be about $847.00 per month. The consumer is very concerned about the potential loss of his Medicaid. He currently has no other income, although he is looking for work. He will turn 60 in August and has a 17-year old son who lives with him.

According to the Medicaid Eligibility Handbook, it appears this consumer would qualify for Special Status Medicaid as a Widower until he becomes eligible for Medicare Part A. Is it true that he will lose Special Status Medicaid once he becomes eligible for Medicare Part A? If he loses it and wants to keep Medicaid, would he have to choose between the Medicaid Deductible Program, BadgerCare Plus, and MAPP? I want to make sure I’m not missing anything for him, since I haven’t worked with Disabled Widow’s benefits very often.

Thanks for your time and assistance!
Karin, Green Bay

Dear Karin,

Your question is an excellent one. It looks like the gentleman you are working with should most definitely apply for Medicaid at his local office.

You are correct. A person cannot have the Widow(er) Special Status Medicaid coverage if they are getting Medicare Part A. When he becomes eligible for Medicare, he will no longer be eligible for this type of Medicaid. Also like you mentioned, his other options for Medicaid would be Medically Needy Medicaid (deductible), MAPP, or BadgerCare+ until his son ages out of the program. He is not likely eligible for HIRSP because he is eligible for Medicaid, but it might be worth checking out nonetheless. Also, he could review Medicare Supplement plans to see if there is one that is affordable and offers the coverage he needs. The best thing for this gentleman to do is to review all of his options and compare costs and coverage to determine what would work best for him.

I would love to hear how everything turns out. Keep us posted!

Sincerely,
Ben

Karin Zuleger

A sunset ride on the Erg Chebbi Dunes, in the Sahara, Morocco.

Hi Everyone:

It’s been difficult to stay in touch lately and I hope you are all doing well. Here’s a recent pic from my travels from the Erg Chebbi Dunes, in the Sahara, Morocco. It was a beautiful sunset but I don’t mind saying I was a little afraid of this camel who’s name was Fred – odd but there you have it! Here’s a question I received recently:

Dear Ben Spec,

I recently had a change to my benefits, and I am concerned about my Medicaid. I was getting SSI and a DAC payment concurrently. When my father passed away, my payment of $650 increased to $975. I am working and getting paid about $150 each month.

I was told that I would lose my Medicaid so I should apply at the county economic support office. I did this, but I was not put into a Special Status Medicaid Category as I had assumed I would. The office told me it has something to do with my shelter costs. My mother no longer makes me pay rent because I stopped receiving SSI. I was under the impression that paying shelter costs wouldn’t affect my Medicaid eligibility because it is no longer tied to SSI. Can you please explain to me why I am not eligible for EBD Medicaid with the DAC Special Status Disregard?

I have been enrolled in MAPP, and it’s free. This is great and I don’t mean to complain, but I am still confused about not being placed into the DAC Special Status Medicaid category.

Yours truly,
Sara of Melrose, WI

Dear Sara,

I am so glad you contacted me with this question. The Special Status Medicaid programs can be a bit trickier than they appear. Many people believe that someone is automatically eligible for Special Status DAC Medicaid if disregarding the DAC payment makes the person eligible for SSI. There is a little more to it.

First, an individual must have lost eligibility for SSI because of a DAC payment. The increase in your DAC payment caused you to lose eligibility for SSI, so you do meet this eligibility factor.

The second factor in eligibility is your countable income. Your DAC payment increase is disregarded because you were once getting concurrent benefits of SSDI and SSI at the same time. The disregard is applied to your full SSDI payment. After that, your countable income can be found.

Finally, your countable income is compared to your Personal Income Limit and/or the Med Needy Income Limit. If your countable income is below either of these limits, you are going to be eligible for this type of Medicaid. You will also be automatically eligible for the Medicare Savings Program, QMB.

Taking a glance at the information you sent, it looks like you do not have any shelter costs. This may be causing your Personal Income Limit to be lower than your countable income. Your countable income is definitely higher than the Med Needy Income Limit, so you wouldn’t be eligible through the use of that test. Again, from the information you sent, it looks like MAPP is your best option at this time.

If you paid toward shelter costs, there is a chance that you would be eligible for the Special Status DAC Medicaid. You can contact your local Economic Office or benefits specialist to find out more information.

Off to new adventures!
Ben

Trapped in D.C.

Hi Everyone: Hope 2010 has been treating you well so far. I have been taking some down time from the traveling so far this year, except I recently drove to D.C. to spend some time with my sister Quimby and ended up being stranded for a while so I thought I would share a photo memory from that experience. Hope the weather is better where you are! Here’s a question I received recently…

Dear Ben,

I receive SSDI based on my own work history (no SSI.) I’ve started a business making and selling jewelry. This is not a hobby, I plan on selling my jewelry at consignment shops and on my own at craft fairs around the state to make a profit. My question is, how does social security treat my self-employment income in deciding if I’m working substantially each month (above SGA)? Someone told me they just take my entire yearly income and divide by 12; is that right?

Jerry
Goodman, WI

Dear Jerry,

Good question, and one that requires more than a brief and simple answer. Due to the nature of self employment, identifying a self-employed person’s monthly countable income for Substantial Gainful Activity (SGA) purposes can be more complicated than it is for a person who works for wages. For a beneficiary with wages, the Social Security Administration (SSA) contacts the employer who can provide a definite amount an employee earned in any month, but with self-employment SSA depends on the beneficiary’s records of time spent working and earnings which can be irregular and difficult to evaluate exactly.

The basic principal to remember is that in determining countable income for SGA purposes, what matters is when income was earned and not paid: SSA needs to know the value of a beneficiary’s work when it was performed. So the critical factor is not when someone actually receives payment for work but rather when the income was earned.

The method you mentioned is how self employment income is counted for Supplemental Security Income (SSI) purposes: SSA takes the total of the net earnings that an SSI recipient received in a calendar year, divides that by 12, and assigns that same amount of earned income to each month of the year. Even if an SSI recipient has months without self-employment activity or income, all 12 months are used in averaging. However, for SGA, which is the issue you as a Social Security Disability Insurance (SSDI) beneficiary are concerned with, SSA tries to identify when you earned the income.

In comparing the income of a self-employed individual to the SGA monthly earnings guidelines ($1000 in 2010), SSA uses the portion of a self-employed person’s income after the deduction of allowable expenses (which yields Net Earnings from Self Employment or NESE) and the value of certain types of assistance (unpaid help, un-incurred business expenses, IRWE). The final amount then is the countable income which SSA considers the actual value of work performed for SGA purposes.

SSA uses a beneficiary’s own business records and income tax returns to determine the countable income for any particular month of self employment activity. SSA considers each month of self employment activity separately in trying to figure the value of the work performed regardless of the actual income received in the month.

However, if establishing monthly countable earnings is not possible due to the kind of variables that often part of self employment, SSA may have to average the earnings over a period of work. This is similar to the averaging process SSA uses with wages but with an important difference. In averaging wages SSA already knows what the countable income is for each month (from the employer) and from that recognizes that the beneficiary is somewhat over SGA some months and under others; so to support the beneficiary’s work effort, SSA averages those amounts over a representative period to see if the resulting figure is below SGA. On the other hand, with self-employment SSA averages the accumulative income from a representative period in order to arrive at the countable income assigned to each month in the period.

For self employment income averaging, SSA takes a beneficiary’s total countable self employment income from a representative period and divides it by the number of months in that period. A representative period is a period of months in which the person actively engaged in work activity with no significant changes in the work pattern or when there is a no regulatory change in the SGA earnings level, which normally occurs every calendar year (for example, from $980 in 2009 to $1000 in 2010.) SSA averages separately each representative or distinct period of work activity. (POMS DI 10510.012B5)

So if a self-employed beneficiary does not engage in work activity for a month or more, the month(s) could not be included in a representative period for averaging and would end any representative period just before.

In the case of a beneficiary who is self-employed as a sole contractor working on a regular basis and receiving about the same income consistently, averaging to arrive at the monthly countable income probably would not be appropriate. In your case, SSA will analyze the period you were engaged in your jewelry business and see if it is possible to determine from your records when you earned your income. It may be necessary to average your income depending on all the factors involved.

As you can see, it is important for self-employed beneficiaries to maintain accurate, complete, and timely records and to work with SSA to keep them informed of your work status.

Good luck with your business.

Ben

Aloha from Kauai, Hawaii

Happy belated Thanksgiving everyone! As I indicated in my last post, some warmth was in the plans for my next travel destination. I’m happy to be checking in with you from paradise – Kauai, Hawaii. Even more exciting, my sister Quimby was able to join me for part of this trip and experience her first surf lesson – not bad for a beginner – keep up the good work Sis. We look forward to your reports on what’s happening in Washington next year. Here’s a question I received recently.

Dear Ben,

I receive both regular social security disability (SSDI) benefits and SSI disability payments. Earlier this year I was overpaid the regular social security benefits, and I just agreed to have $50 a month taken out of my SSDI benefit to repay the money I owe.

I know that SSA counts the gross amount of my SSDI benefit against my SSI payment, so I was wondering how much will SSA use in figuring my SSI payment now: the amount I actually get after the $50 repayment is taken out, or the full benefit amount I normally received before I started repaying the overpayment?

Jesse
Seneca WI

Dear Jesse,

The full amount of any Title II (regular social security) benefit before any deductions normally counts as unearned income in computing a monthly SSI payment. However, an exception applies when the Title II overpayment occurred while the person was receiving SSI and when the overpaid amount was included in the countable unearned income during that time. In such a case, SSA will count just the amount of the Title II payment after overpayment withholding and not the full, regular amount. This is called the “double counting” exception because SSA cannot count your Title II against your SSI twice.

It looks like this exception applies to your case, that the overpayment occurred while you were receiving SSI and the overpaid money was already taken into account when SSA computed your SSI earlier. So while you’re repaying the overpaid amount, SSA will use the lower SSDI amount you actually receive in figuring your SSI payment.

Ben

References: POMS SI 00830.110B2 | SI 00830.115 | SI 00830.210

Quimby's surfing lesson

Antarctica

My friend Nate from ERI is always asking me when I’m going to take a trip to someplace interesting like Antarctica so I’m very excited to give him a shout out from that very place! “Hey Nate! Thanks for the suggestion.” I can report that I have not seen any polar bears from land, air or sea so far. As a matter of fact, from what I understand and from personal experience, spotting polar bears is not very easy. What is easy is keeping in touch with what’s happening at home. I received this excellent question recently – a topic that comes up frequently.

Dear Ben,

I have a client who is disabled and receives both SSDI disability benefits and SSI disability payments. His aunt is 85 years of age and is planning to move out of her house that she owns (worth about $80,000) and into an apartment. She wants to give the house to my client to live in. If she does this and he moves into the house, would he lose his SSDI and SSI?

Neil
Greendale, WI

Dear Neil,

Receiving a house or any other gift does not affect a person’s Social Security Disability Income (SSDI) benefits. And there is no asset limitation for entitlement to SSDI.

On the other hand, there are rules regarding how much in income and resources a person can have and be eligible for Supplemental Security Income (SSI.) The month your client receives ownership of the house, Social Security considers its value as income to him that month because the house provides him shelter; however, the value of shelter is capped at the Presumed Maximum Value (PMV) for in-kind support, which in 2009 is $224.66 (one-third the Federal Benefit Rate for an individual of $674.). So he would be charged with $224.66 as income for that month.

The month after that, the house becomes a resource that he owns. The countable resource limit for an individual for SSI is $2000, however, a home a person owns and resides in is not a countable income so does not count toward that $2000 limit. So as long as he still meets all the other SSI eligibility qualifications, your client will be eligible again with that month. (Source: Social Security Administration POMS SI 00815.550C2 | SI 01120.005 | SI 00835.300)

Please make sure your client contacts his local Social Security office when he receives ownership of the house.

All the best, I’m definitely going to choose someplace warm next!
Ben

Manarola, Italy

Hello Friends

I’m checking in from one of the most beautiful places I have ever been – Manarola, Italy. I received the following question about Childhood Disability Benefits (DAC).

Dear Ben,

Several years ago my father died when I was 19 and I started to receive DAC benefits (I think they’re officially Childhood Disability Benefits) based on his record. But when I got married three years ago, the benefits stopped. I just got divorced and was wondering if I could start up the DAC benefits again on my father’s record since I’m no longer married. I’m still disabled and haven’t been able to work. Also, my mother who is 63 has been working all her life but is retiring and will be applying for retirement social security soon – can I get anything because she’s retiring?

Bruce
Bosstown, WI

Manarola, Italy

Dear Bruce,

Unfortunately, you cannot receive benefits again on your father’s record. Re-entitlement on the same earnings record for a DAC is not possible after a marriage that ended by death or divorce. (POMS RS 00203.015A)

However, it sounds like you may be able to be entitled as a DAC on your mother’s record once she starts receiving Social Security retirement benefits. If a former DAC beneficiary is not married, she/he may be newly eligible on the other parent’s record because the rules for initial entitlement rather than re-entitlement apply. (POMS RS 00203.020)

Also note that if a DAC marries a person who is entitled to a Social Security Title II benefit (retirement, survivor, auxiliary, or disability but not child benefits for someone under 18), DAC benefits would continue. (POMS RS 00203.035A3)

So be sure to contact your local Social Security office when your mother applies for retirement to start the disability application process for yourself.

Ben

Normandy, France

Hi Ben,
I’ve been getting SSDI based on my own work for several years now and I’ll be coming up on the normal retirement age, 66, in a couple of years. I was wondering if my disability benefit amount will change once I hit retirement age?

Otto
Moquah, WI

Dear Otto,

Someone in your situation cannot receive Social Security disability benefits in addition to or instead of retirement benefits. Once a person is over the full retirement age (now 66), he or she cannot be eligible for Disability Insurance Benefits (DIB.) A person can only receive DIB if younger than the full retirement age and no longer able to do substantial work because of a disabling condition.

For those receiving DIB when turning full retirement age, the payments become retirement benefits. The benefit amount is the same as before, but the rules regarding work, Substantial Gainful Activity (SGA), and medical reviews no longer apply since the payments are technically no longer disability benefits. Similarly, Widow(er) Disability Benefits (WDB) essentially become Widow(er) Benefits when the widow(er) turns full retirement age.

One way to look at DIB or WDB payments is as a form of early retirement benefits intended to tide a person over until reaching full retirement age when those payments automatically become retirement benefits.

Note, however, that Childhood Disability Benefits (often called Disabled Adult Child or DAC benefits) are different. Those who are entitled to DAC benefits continue to receive them past full retirement age as long as they remain disabled. It is unlikely a Childhood Disability Beneficiary would ever medically recover after full retirement age, but the disability rules regarding work, SGA, and work incentives still apply.

Ben

Greetings from Costa Rica!

Green vegetation as far as the eye can see, with leaves as big as elephant ears. Jade colored water. Toucans, monkeys, iguanas, dolphins, majestic blue butterflies – all are on splendid display here in Golfo Dulce, Costa Rica.

Though well known for my ability to sleep soundly no matter where I am, I did have some trouble getting to sleep last night whether it was from excitement or all the rainforest activity, I’m not sure. From the front porch of the rustic lodge where I stay, my fellow travelers and I settle into listening to a great cacophony of forest sounds! I’m off today to do a little tarpon and snook fishing and Captain Lee, my host, predicts the weather will be fine. Wishing the same for all of you friends…Ben

Here’s a question…

Can a person have SSDI benefits terminated due to work earnings during the Extended Period of Eligibility?

Good Question! The answer is “no”. A person cannot have SSDI benefits terminated due to work earnings during the Extended Period of Eligibility (EPE). A person can use the Cessation month during the Extended Period of Eligibility. Remember, during the EPE a person is considered to have a disability even if earning SGA or more. In this case, the person’s payment status is suspended. A person’s benefits can be reinstated during the EPE if earnings fall below SGA. You can view the handy chart made by the WDBN.