Don’t Strike Out When It Comes to Disability Benefits

My 11-year-old son played his last Little League “fall ball” game in late October. He was happy to report to me that he had two good hits and pitched two innings. He was sad when he reported to me a tag he made that the umpire called “safe.” My son had the ball under control and in-hand when he tagged the other team’s runner.

Don’t Strike Out When It Comes to Disability Benefits

But the ball slipped from his hand later when he had moved beyond the bounds of play. According to the “umpire bible” website, the rule on tags is “Upon making the tag, and in the sequence of events immediately following the tag, the fielder must maintain possession of the ball.” In my son’s understanding, he had complied with the rule.

In the umpire’s understanding, he had not.  When my son’s team was at bat, they also lost points when one of the boys struck out on wild pitch, which the catcher missed. The batter did not run, even though he probably could have made it to first base, because he did not know the “Dropped Third Strike” rule that permits this.

If you don’t know the rules in baseball, the worst that can happen is that your team loses the game. In other areas of life, the repercussions can be more significant. People with disabilities and those who support them often worry about the rules surrounding disability benefits, because failing to follow these rules may preclude the person from obtaining the benefits or lead to her/him losing them at a critical juncture.

There are two basic types of disability benefits: earned benefits and means-tested benefits. Earned benefits, which include Social Security Disability Insurance (SSDI), Social Security Childhood Disability Benefits (CDB, oddly named because the recipient is usually over 18) and Medicare, are available to the person with a disability because either that person himself/herself or that persons’ parents worked and paid OASDI (FICA) tax.

Means-tested is just a nicer way of saying welfare. These benefits, which include Supplemental Security Income (SSI) and Medicaid, are paid from US Treasury General Funds. Although both types of benefits have rules, the rules for means-tested benefits are stricter.

The first benefit-related rules a person with a disability has to know are those for eligibility. Social Security defines disability primarily by the way it limits a child’s capacity to develop and perform in line with same-age peers and by the way it limits the capacity of an adult—anyone 18 or older—to perform Substantial Gainful Activity (SGA) in an employment setting.

Performing SGA is defined as earning more than $1,220/month (2019), so there is a rule that limits earned income for all disability applicants over 18, regardless of whether the benefit they received is earned or means-tested. But there, things diverge. A person can have up to $1,219/month of earned income and any amount of unearned income and still qualify for SSDI or CDB. But the first dollar of either earned or unearned income already affects the SSI recipient.

Here’s how it works. With unearned income, the first $20/month has no impact. After that, SSI is reduced from the maximum $771/month by the full amount of the recipient’s unearned income. If I have interest or dividend income of $50 in a certain month, my SSI will be reduced by $30.

If a caring relative gives me a cash gift of $800, then I lose my entire SSI benefit for that month. The rule regarding earned income is more generous. The first $65/month in earned income (or the first $85 if the person has no unearned income) has no impact. After that, the worker’s SSI benefit is reduced by 50 cents on the dollar for every dollar earned. Not that for children under 18, a portion of the parents’ earned and unearned income is deemed to the child. It is also worth noting that some unusual things fall into Social Security’s definition of income.

For example, child support is income to the child with a disability rather than to the custodial parent. A foster care stipend may be income to the child with a disability, depending on which Title authorized it. It is crucial to report immediately any change in the earned or unearned income of an SSI recipient and if the person is a minor, of her/his parents.

One of the biggest surprises on the “what is income” front is what is called In-Kind Support and Maintenance or ISM. The concept of ISM is related to the fact that SSI, as welfare, is designed to be a very basic safety net to keep the recipients from literally starving or living on the street.

The Social Security guide for representative payees (https://www.ssa.gov/pubs/EN-05-10076.pdf) states very clearly that SSI must be used first to provide food and shelter. Then, it must be used to cover medical and dental care not covered by insurance. There is no actual rule against using SSI to pay for clothes, electronics or even recreation but, given that the maximum monthly benefit is only $771/month, the Social Security Administration will expect to see that the majority of it was spent on food, shelter and health care if they ever audit.

When a child is a minor, the parents have a legal obligation to provide food and shelter for the child whether or not the child gets SSI and whether or not the SSI would be enough to cover those expenses.

This obligation ends, however, when the child turns 18. As a result, if a person with a disability who is 18 or older and receives SSI lives in her/his parents home and does not pay room and board, the parents, by proving food and shelter free of charge are providing In-Kind Support and Maintenance income and the adult child’s SSI benefit will be reduced by $257. One simple way to prevent this reduction and concurrently satisfy the Administration’s expectation that SSI be spent primarily on food and shelter is for the parents to charge their adult child a reasonable amount of room and board each month.


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Note that once the payment from SSI had been made to the parent it becomes the parent’s money to be used as the parent sees fit.

There is also no rule against saving the portion of SSI benefit not required to provide food, shelter, and health care, should any such amount exist. However, there is a rule that says single SSI recipients may not have more than $2,000 in countable resources. Countable resources are essentially cash and things that can be converted easily to cash such as stocks, mutual funds, bonds, and bank CDs.

Besides preventing the ISM reduction, charging an adult child room and board is also a reliable way to prevent cash from building up as a countable resource in the adult child’s own name. Failure to follow this and the rules that govern SSI eligibility could lead to an unexpected overpayment or to your family member with a disability losing eligibility for both SSI and the related Medicaid benefits that fund almost all adult services.

My son’s team tied that last baseball game, despite the player’s and the umpire’s mishandling of certain rules. Perhaps because, as Yogi Berra might have said, although “Baseball is 90% mental, the other half of it is physical.” Social Security, with its 20,000-page Programs Operations Manual System (POMS), is at least 150% mental but it’s worth the time and work to learn the rules and play by them.

This article was featured in Issue 98 – Fresh ASD Guidance For A New Year

Alexandra Baig

Alexandra Baig, MBA, CFP® has an MBA from the University of Michigan and her CERTIFIED FINANCIAL PLANNER™ designation and is a member of the Academy of Special Needs Planners. Alexandra’s first career was as a stock market analyst in Hong Kong and China. A search for a more meaningful life’s work took her to L’Arche, an international, interfaith network of communities where people with and without intellectual and developmental disabilities share life. Her work at L’Arche introduced Alexandra to the financial planning challenges of people with physical, intellectual, developmental and behavioral disabilities and their families. In particular, she is well-versed in the government benefits available to people with special needs and the rules governing them. Her goal is to help people with disabilities and their families make the most of public and private money to live the life they chose. For more information visit the website www.companionsonyourjourney.com.

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