I’ve been getting DIB SSDI for over 7 years because of a physical injury. I decided a few months ago to try to go back to work. The work has been going alright – I’ve been making around $1500 gross a month for 6 months and plan to continue. I’ve kept the SSA office informed. They said I can work at least 9 months with my benefits continuing, then if I am working as much as I have been, my benefits might stop after three more months of payments. They called work that would end my benefits as substantial gainful activity, or SGA for short.

I’m not sure I completely understand SGA? Could you explain it more?

Shirley
Manawa WI

Dear Shirley,

Substantial Gainful Activity (SGA) can be puzzling, but since it is a key factor in the Social Security Administration (SSA) disability programs, understanding it is important.

SGA is a critical concept or idea because SSA’s definition of disability is tied directly to a person’s capacity to work. To become eligible for disability benefits (either Social Security Disability Income, SSDI, or Supplemental Security Income, SSI), a person’s disabling condition must prevent the person from engaging in SGA, which is the performance of significant physical and/or mental activities in work for pay or profit. So regardless of how severe a person’s disability may be, if that person is performing SGA, then he or she is normally not considered disabled for Social Security programs.

SSA considers SGA when someone first applies for SSDI or SSI disability and also later when an SSDI beneficiary has completed their nine month Trial Work Period, which will be your situation soon if you keep working at your present level. (SGA is not considered for SSI once a person becomes eligible.)

In measuring whether or not a beneficiary’s work is SGA, SSA starts by looking at how much the person is earning from that work. This is the gross wages for someone who is an employee and the Net Earnings from Self Employment (NESE) for a self-employed beneficiary. For you as an employee, SSA will look at your gross wages.

Next SSA compares the gross wages to the SGA earnings standard which is the gross monthly amount of work income that for SSA indicates substantial work. In 2010 the SGA earnings amount is $1000, which your wages are exceeding at this point. This SGA amount is adjusted each year based on the national average wage; different rules and amounts apply to people who are blind.

If a beneficiary’s monthly gross earnings exceed the SGA amount, SSA reviews the nature and extent of the work activity itself and looks for any indication that not all of the beneficiary’s wages should be counted because the person is not truly earning them. So SSA considers any special conditions or subsidies the beneficiary may receive at work. SSA also may deduct from a beneficiary’s wages any Impairment Related Work Expenses (IRWE), which are expenses the beneficiary pays for items or services related to his/her disability and needed to work. And any sick or vacation pay the person receives for non-work days in a particular month are also not counted as income for SGA purposes for that month. These deductions could potentially apply to you.

In some cases SSA may look beyond a beneficiary’s wages if there is evidence that despite low pay the person may be engaging in SGA. SSA may decide that a beneficiary is engaged in SGA if the value of the work is more than what is paid. However, after 2006 for an SSDI beneficiary who has received benefits for 24 months, SSA will apply only the SGA earnings guidelines to the beneficiary’s countable income and not consider any evidence showing that the work activities may be worth more. So SSA would only be looking at your wage earnings.

The first month after the end of your TWP in which your countable income from work is over the SGA level will be your cessation month. SSA will pay benefits for the cessation month plus two more months (the grace period), and then benefits stop. (POMS DI 10505.020D, POMS DI 10505.001)

I hope this helps you understand how SGA applies to your situation so you can decide what you want to do.

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