Working and Supplemental Security Income (SSI)

On April 23, I posted about returning to work when receiving Social Security disability. Special rules called work incentives make it possible for people with disabilities, whether receiving Social Security or Supplemental Security Income (SSI), to work and still receive monthly payments and Medicare or Medicaid.

Returning to the topic, today I will mention one of the work incentives when receiving Supplemental Security Income (SSI).

Since SSI is very different from Social Security, the work incentives are different too. SSI involves cash assistance payments to aged, blind and disabled people (including children under age 18) who have limited income and resources. The Federal government pays for SSI from general tax revenues, not Social Security money.

If receiving both Social Security and SSI, you need to follow the separate rules for each program. To discuss your own benefits, speak to a Social Security representative.

Always report a return to work. This is very important. Also report related changes including stopping the work. 

A very basic Supplemental Security Income (SSI) work incentive is the exclusion of some employment income when figuring out the amount of a monthly SSI payment.

When working, the first $65 of earnings received in a month do not count, plus one-half of the remaining earnings. This means that less than one-half of your earnings are counted against your SSI payment amount.

For an example of how this works, use gross wages of $165 received in a month. Not counting the first $65 dollars leaves $100 remaining. Then, not counting an additional one-half of this $100 remaining amount leaves only $50 to reduce the overall SSI amount. In this example of the earned income exclusion work incentive, of the received $165 wages in the month, $115 is not used to lower benefits.

People receiving Supplemental Security Income (SSI) usually report their earnings on a monthly basis to keep benefit amounts accurate.  Discuss how to do this when reporting a return to work.

Referring to the post of April 23, when a person receiving SSI returns to work, the Social Security trial work period (TWP) or concept of substantial gainful activity (SGA) do not apply. To restate, if you receive both Social Security and SSI, you need to follow the separate rules for each program.

Only one SSI work incentive was mentioned today. Many other work incentives can apply. To discuss your own benefits, speak to a Social Security representative.

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When to report work for the annual earnings test

Q: I retired last year, started Social Security, and expect to work part-time this year on a fill-in basis. If I reach the retirement earning limit amount for the year, is it my responsibility to notify Social Security? Are benefits reduced for work immediately or resolved at years’ end. I am 63.

A: Yes, it is your responsibility to contact Social Security. Report your estimated earnings for the calendar year as soon as you think your earnings will exceed the annual limit for your age. You can provide updated estimates during the year as needed for changes up or down.

Providing an estimated earnings amount to Social Security is needed when you expect to earn more than your earnings limit amount during the calendar year. For example, at age 63 in 2015, you are under full retirement age (FRA) for the entire year and must provide an estimate if expected gross wage earnings will exceed $15,720. An estimate is not needed when annual earnings are expected to below the earnings limit.

Adjustments based on your estimated earnings will take place as soon as possible in order to avoid having you incorrectly paid. The usual suggestion to people expecting to earn over the annual limit for their age is to provide an estimate as accurate as possible, but to the high side.

Later, when you receive your W-2 form at the end of the year, report your actual earnings for the year directly to Social Security. Based on your actual earnings, final adjustments are made to either send you benefits due or to withhold those incorrectly paid.

A list of your various Social Security reporting responsibilities is in the booklet, What You Need to Know When You Get Retirement Or Survivors Benefits, available online. Work activity is a topic discussed over several pages of the booklet and an excerpt from page 17 includes:

“Your earnings estimate and your benefits

We adjusted your benefits this year based on the earnings you told us you expected to receive this year.

If other family members get benefits on your record, your earnings may affect the total family benefits. But, if you get benefits as a family member, your earnings affect only your benefits.”   

“Revising your earnings estimate

When you work, you should save your pay stubs. If during the year, you see your earnings will be different from what you estimated, you should call us to revise the estimate. This will help us pay you the correct amount of Social Security benefits.”  

More about working while receiving Social Security retirement or survivors benefits is here.

Social Security disability work incentives

Q: I receive Social Security disability and want to return to work. What will this do to my benefits?

A: For specific information about your own benefits, contact Social Security and speak with a representative.

In general, special rules called work incentives make it possible for people with disabilities receiving Social Security or Supplemental Security Income (SSI) to work and still receive monthly payments and Medicare or Medicaid.

Remember that Social Security, including disability (SSDI), and SSI are different programs, with different work incentives for returning to work.

Always report a return to work. This is very important. Also report related changes including stopping the work.

For Social Security disability, a main work incentive is the trial work period (TWP).

The trial work period allows you to test your ability to work for at least 9 months. During a trial work period, you receive full disability benefit regardless of how much you earn as long as your work activity has been reported and you continue to have a disabling impairment. The 9 months does not need to be consecutive and your trial work period will last until you accumulate 9 months within a rolling 60-month period. Certain other rules apply. In 2015, gross monthly earnings of $780 or more will usually count as a month toward the TWP.

After a trail work period is completed, your work activity will be reviewed to see if you earnings are considered substantial gainful activity (SGA) . Exceptions apply but, in general, in 2015 monthly gross earnings of at least $1,090 are considered SGA for a person who is not blind and $1,820 for a person who is blind. Ongoing ability to work at a substantial gainful activity level can result in benefits being stopped.

If this occurs, you have an extended period of disability (EPE).

This means that if your disability benefits stop after successfully completing the trial work period and ongoing work at the substantial gainful activity (SGA) level, your Social Security disability benefits can be automatically reinstated without a new application for any months in which your earnings drop below the SGA level.

This reinstatement period lasts for 36 consecutive months following the end of the trial work period. You must continue to have a disabling medical impairment in addition to having earnings below the SGA level for that month.

Continuation of Medicare.

Of major importance, even if cash benefits end, for most beneficiaries existing Medicare coverage continues through the EPE and beyond.

Most persons with disabilities who work will continue to receive at least 93 consecutive months of Hospital Insurance (Part A); Supplemental Medical Insurance (Part B), if enrolled; and Prescription Drug coverage (Part D), if enrolled, after the 9-month Trial Work Period (TWP).

You do not pay a premium for Part A. Although cash benefits may cease due to work, you have the assurance of continued health insurance. (93 months is 7 years and 9 months.)

This is not a complete list of work incentives for Social Security disability insurance (SSDI). There are different work incentives for Supplemental Security Income (SSI). More general information is here.

Again, for details about your own benefits, speak to a Social Security representative.

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Earnings test not just for retirement benefits

Q: Do the Social Security earnings limits apply just to retirement? Do they apply if receiving widow’s benefits?

A: Yes, earnings limits apply for survivor benefits. The annual earnings test applies individually to everyone younger than their full retirement age (FRA) unless that person receives benefits due to their own disability. People of all ages receive Social Security and the earnings test applies to many of them.

For examples, if both members of a couple receive Social Security retirement, the earnings test applies separately to each until full retirement age. The earnings test also applies to a child, not disabled, receiving benefits through a parents record whether the parent is retired, disabled or deceased.

The earnings test does not apply to people receiving benefits because of their own disability but it does apply to non-disabled family members, including spouse and children, receiving benefits through the disabled person’s record.

Many young people receive Social Security benefits. Earnings test amounts are the same whether SSA retirement, survivors or disability is involved. Different amounts can be earned during the calendar year before benefits are reduced based on if the person is under full retirement age (FRA) the entire year, reaches FRA during the year, or is already FRA. The earnings test ends when you reach FRA.

Based on year of birth, full retirement age ranges from 65 to 67. Retirement FRA is 66 for people born in 1943 – 1954. Note that FRA’s for survivors benefits are different from retirement FRA’s.

Earnings test details are here.

Separate earning rules and work incentives apply if you receive Social Security due to your own disability. Contact Social Security before returning to work. General information is here.

Special payments after retirement

Q: I retired in 2014 but expect income in 2015 from work done before I retired. Will this lower my 2015 Social Security benefits?

A: For people younger than full retirement age, the Social Security annual earnings test, also called the retirement test, concerns how much can be earned from wages or self-employment in a calendar year without reducing benefits during that year.

Termed a special payment, money received for work done before retirement is not normally included for the earnings test. Income received after retirement is a special payment if the last thing done to earn it was completed before stopping work. Examples could include accumulated vacation or sick pay, bonuses and sales commissions. If self-employed, net income received after the first year you retire is a special payment if you performed the services to earn the payment before becoming entitled to receive Social Security. 

For example, say a person retired at the end of 2014 and started receiving Social Security retirement as of January 2015. In January, the person receives payment from the former employer for unused vacation time. Since this vacation pay was earned before retirement, it is considered a special payment and not counted towards the 2015 annual earnings limit. 

Two local occupations often receiving special payments for SSA retirement purposes are insurance salespeople and farmers. Insurance commissions for policies sold before retirement but received after the year of retirement are usually special payments. If a farmer fully harvested and stored a crop before or in the month of entitlement to SSA benefits, and then carried it over for sale in the next year, the income will not affect benefits for the year of sale. Keep documentation related to this. 

As always, this is general information.  To learn more, read the SSA publication, Special Payments After Retirement, at www.socialsecurity.gov/pubs/10063.html or contact Social Security.  Annual earnings test information is at www.socialsecurity.gov/retire2/whileworking.htm.

Is payroll tax withheld if I work and receive Social Security?

Q: I stopped working full-time at the end of 2014 and started Social Security retirement. For the next few months I will work part-time and then retire completely.

Will Social Security payroll tax be held from my paycheck? If yes, will this increase my retirement amount? 

A: Yes, you continue to pay Social Security and Medicare payroll taxes. Your employer will continue doing so too. Everyone working in employment or self-employment covered by Social Security must pay payroll taxes regardless of age or eligibility to Social Security benefits. Current and historical Social Security and Medicare tax rates are shown here. 

If you are younger than full retirement age, remember annual earnings test limits.

Your new earnings would have to be better than the ones already used to compute your retirement amount to increase your monthly retirement amount. While possible, it is doubtful that a few months of part-time work will change your monthly retirement amount since the best 35 years of your working career are used.  

Benefit amounts of everyone receiving Social Security benefits are automatically reviewed when new earnings are posted to their work record even when low earnings are involved. Due to this, your retirement amount will be automatically reviewed once these 2015 earnings appear on your work record. 

Since you worked full-time all of 2014, it is much more likely that your 2014 earnings will increase your retirement amount when automatically reviewed. 

Employers report your earnings to the Social Security Administration as part of the W-2 process. Different employer deadlines apply based on how reporting is completed. Employers have a March 31 deadline if electronically reporting 2014 W-2 information using Social Security Business Services Online (BSO). If reporting by paper, the deadline is the last day of February.

However reported, national posting of all wage information is usually complete in approximately October, with automatic reviews of benefit amounts starting once wage posting is complete. If 2014 earnings increase retirement benefits, you will receive the increase in approximately December 2015, with payment retroactive to January 2015. 

 

Annual SSA disability report released

The Annual Statistical Report on the Social Security Disability Insurance Program, 2013 was released this week.

This annual report provides program and demographic information about the people who receive Social Security disability benefits—disabled workers, disabled widow(er)s, and disabled adult children. Topics covered include beneficiaries in current payment status; benefits awarded, withheld, and terminated; geographic distributions; Social Security beneficiaries who receive Supplemental Security Income; and the income of disabled beneficiaries.

Following is from the Highlights section of the report:

Size and Scope of the Social Security Disability Program

Disability benefits were paid to just over 10.2 million people.

Awards to disabled workers (868,965) accounted for over 90 percent of awards to all disabled beneficiaries (965,190).

In December, payments to disabled beneficiaries totaled about $11.2 billion.

Benefits were terminated for 769,171 disabled workers.

Supplemental Security Income payments were another source of income for about one out of seven disabled beneficiaries.  (Note: not everyone receives Social Security through his or her own work.  For example, family benefits to disabled children or disabled widows or widowers are possible. 

Profile of Disabled-Worker Beneficiaries

Workers accounted for the largest share of disabled beneficiaries (87.4 percent).

Average age was 53.

Men represented under 52 percent.

Mental disorders was the diagnosis for about a third.

Average monthly benefit received was $1,146.42.

Supplemental Security Income (SSI) payments were another source of income for about one out of eight.  

Spousal benefits – file and suspend

Q: My wife’s Social Security retirement will be much more than mine. If I start my own Social Security retirement before she starts hers, can I apply later as a husband on her record once she retires and applies for benefits?  

A: Yes, a husband or wife can start their own SSA retirement first and then look into spousal benefits when their wife or husband retires.  

Social Security benefits to a husband or wife are based on a comparison of the couples individual full retirement age (FRA) amounts, not their monthly retirement amounts. To learn about benefits to a husband or wife, including to a divorced spouse, go to the Retirement Planner section of the SSA website at www.socialsecurity.gov/retire2/, and then to “how members of your family may qualify for benefits.”  

Age when starting Social Security is important. If younger than full retirement age (FRA) when filing for retirement, a person is considered to also be applying as wife or husband at the same time, assuming both members of the couple will then be receiving benefits. Her or his own retirement amount, reduced for age, is received first. If spousal benefits are payable they, also reduced for age, are added to equal the higher total amount.  

A different opportunity for spousal benefits exists if either husband or wife has reached full retirement age (FRA), especially if that person plans to continue working full-time past FRA. Generally, members of a person’s family can receive benefits on his or her record only when that person does. For an exception, see “If you or your spouse are full retirement age” in the spousal benefit section. If a person is at least FRA, and does not want to start Social Security retirement yet, an exception called “file and suspend” allows payment of spousal benefits on their record while the person delays the start his or her own Social Security retirement. Past FRA, delaying the start of your own retirement benefit lets the amount increase up to age 70 due to delayed retirement credits 

If this “file and suspend” idea is of interest, remember that the annual earnings test ends with the month you reach FRA so another option could be to file for your Social Security retirement while continuing to work. You would not gain delayed retirement credits but you would receive all your retirement and, if eligible as a spouse, your husband or wife would also receive through your record. Each of these ideas has advantages or disadvantages based on your personal situation.

 

Working? Retiring? Options if reaching full retirement age in 2015.

Do you reach your full retirement age (FRA) in 2015? Still working? Thinking about starting Social Security in 2015?

What are some options to consider?  

When to start Social Security benefits is always a popular topic during retirement seminars. In fact, there is no one overall best time that fits everyone. It is an individual decision. 

Last week I posted annual retirement earnings test information for 2015. Noted there, earnings test amounts vary based on whether you are younger than full retirement age (FRA) for the entire calendar year, reach FRA during the year, or are at least FRA. 

Today I am reviewing some options to consider for a person planning to work during 2015 and reaching full retirement age of 66 during 2015. FRA varies with year of birth. It is age 66 for those born from 1943 – 1954. 

If you reach full retirement age in 2015, receive Social Security and are still working, Social Security deducts $1.00 in benefits for every $3.00 you earn above $41,880. Earnings for the retirement test include only your own gross wages and net-income from self-employment. Beginning with the month you reach FRA, earnings no longer reduce your benefits.  

Assume our person, Happy Camper, expects to earn $41,000 in 2015, below the annual earnings test level for a person reaching full retirement age in 2015. Happy reaches FRA in May. 

One option: Since Happy will earn below his retirement test level, he can start Social Security retirement effective with January 2015 and receive benefits for all months of the year even though he continues working. On the plus side, this gets him more monthly benefits. On the negative, this results in a retirement benefit permanently reduced by 4 months with a reduction of 2.22 percent of his full retirement age amount. He gets 97.78 percent of his FRA amount.

Note: To learn percentages for this example, I used the “compute the effect of early or late retirement” calculator, one of the SSA Retirement Planner tools. This calculator uses the terms “normal retirement age” for FRA and “primary insurance amount” for the FRA amount. 

If Happy expects to earn more than the earnings test level of $41,880, this could still be a useful option for him. He would have to compare what he loses due to earnings (the $1.00 for every $3.00 noted above) to what he gains in payable benefits. 

Another option: Since Happy Camper is still working, he could start Social Security effective with May, when he reaches full retirement age. The earnings test ends at FRA so Happy could continue working and receive unreduced Social Security retirement from then on. On the plus side, he does not have any reduction in benefits. On the negative, he gives up the benefits payable in the above option. 

Yet another option:  If Happy Camper plans to work for some months (or longer) past FRA and then retire, he can defer his Social Security until he actually retires. On the plus side, each month of delay gains a small increase from delayed retirement credits. On the negative, Happy again gives up payable benefits.

On a monthly basis, delayed retirement credits increase benefits by 2/3 of 1 percent of the full retirement age amount, or 8 percent annually, up to age 70. Use the previously mentioned “compute the effect of early or late retirement” calculator to compute this.  

The retirement earnings test applies to the full calendar year with a special, one time, monthly earnings test available. The monthly test can apply when a person retires during the year, after already earning over applicable retirement earnings test amounts. It was not considered in the above options since Happy continued working through at least FRA. 

These examples are only to discuss some options involving the earnings test. For simplicity, factors such as the potential for family benefits through Happy Camper’s record were not added in. Social Security benefits are just one thing to consider in your retirement planning. For examples, Happy Camper’s taxable income varies with these options and his life expectancy could influence his decision.

What is best for you?

Annual retirement earnings test amounts for 2015

Q: In 2015, how much can I earn before my Social Security retirement is reduced? 

A: The annual retirement earnings test concerns how your own employment earnings in a year affect your Social Security in that year. The earnings test includes only your personal gross wages or net self-employment for the full calendar year. Your other income or income of a spouse is not applicable.

Three annual earnings levels exist, all based on your full retirement age (FRA). FRA depends on your year of birth. Learn yours here. 

Earnings test amounts for 2015 have changed from 2014. They are: 

  • If under full retirement age (FRA) for the entire calendar year, $1 in benefits will be deducted for each $2 earned above the 2015 limit of $15,720.
  • If you reach FRA in 2015, $1 in benefits will be deducted from each $3 earned above the 2015 limit of $41,880, but only for earnings before the month you reach FRA.
  • No earnings limit exists starting with the month you reach full retirement age.  

Are you starting Social Security retirement in 2015? People retiring mid-year may have already earned over the annual limit for their age. To allow the start of SSA retirement regardless of expected calendar year earnings, there is a special one-time rule based on monthly earnings. This applies for one year, usually the first year of retirement, and lets people receive Social Security for months that they are retired.  

For example, a person retiring in 2015, at least age 62 but younger than full retirement age the entire year, can receive retirement for months that gross wages do not exceed $1,310 even though calendar year earnings will be above retirement test amounts. Similar rules apply for self-employment.   

Consider the retirement earnings test before beginning Social Security. If your plans include working part-time, will those earnings reduce benefits for the year? Can you limit your earnings to stay below earnings test levels? Is retiring with part-time work your best option or should you continue working full time, without SSA benefits, for the immediate future? Keep in mind that Social Security retirement is permanently reduced if started when younger than FRA. 

Learn about the earnings test, including the special, one-time, monthly test, at www.socialsecurity.gov/retire2/whileworking.htm. Examples of how the earnings test is applied are there. 

Reminder: Do you receive Social Security now? Do you expect to earn over your applicable earnings test amount in 2015? If so, provide your estimated earnings amount to SSA early in the year so that benefits can be adjusted in advance to avoid incorrect payment. You can change estimates as needed.

The earnings test does not apply to people receiving SSA benefits due to their own disability. If receiving due to disability, contact Social Security before working.