Working Part-Time While Receiving SSDI and ERISA Disability Benefits
Disabled persons, who are receiving disability benefits, often ask whether they can do some type of part-time work while continuing to receive long-term disability (LTD) benefits from either Social Security (SSDI) or from an employer-sponsored group disability plan under ERISA, or both.
Social Security Allows Limited Part-Time Work
The Social Security Administration (SSA) allows for part-time work up to “substantial gainful activity” or SGA. The SGA amount changes from year to year, but in 2019 it is $1,220 per month. What that means is, even if you are doing part-time work, you may continue to receive your SSDI benefit, and the SSA will still consider you to be permanently disabled, as long as your earned income is no greater than the SGA amount (i.e., $1,220 per month).
It should be noted that earned income is considered in the month the work is performed, not when you get paid, and, it is worth pointing out that after an applicant receives an SSDI award, Social Security monitors an SSDI-recipient's earnings and requires that any earned income be reported promptly to the SSA. Not doing so may constitute insurance fraud.
Any “passive” income that you receive (e.g., from investments such as stocks or bonds) does not count toward SGA. It's only “earned income” or “employment income” that the SSA cares about.
Trial Work Period(TWP)
The SSA allows a 9-month trial work period (“TWP”) during which time an SSDI-recipient continues to receive SSDI benefits and can keep whatever he/she earns, no matter how large an amount. The 9 months need not be consecutive, but they must occur within a 60-month period. During the TWP, the SSDI benefits you receive are not reduced by the amount you earn, but a month counts as a “TWP month” toward your total of 9 months, if the amount earned is $880 per month (or a self-employed person who works 80 hours or more in a month).
There are complicated tests for self-employed individuals under the SSA
One such test is the “countable income” test, which is applied to persons who have been receiving SSDI benefits for more than 24 months. Countable income is the income or profit that a business earns as a direct result of your own productivity and contribution to the business. Countable income that is more than $1,220 a month (in 2019) is considered SGA, and your SSDI benefits will stop, unless you are not providing “significant services”to your business.
The SSA considers “significant services” to mean that you provide at least half the total time needed to manage the business, or 45 hours or more per month of management services. If you are the only person who works for your business, by definition, your services are significant, because without you the business would not exist.
For individuals who are first applying for SSDI benefits or who have received benefits for less than 24 months, the SSA uses the “three tests” approach. The “three tests” are (a) substantial income test, (b) comparability test, and (c) worth of work tests.
[Ref: https://secure.ssa.gov/poms.nsf/lnx/0410510010 and https://secure.ssa.gov/poms.nsf/lnx/0410505020]
You may deduct any impairment-related expenses from the monthly earnings (such as medical supplies, special transportation costs, etc.). You are allowed only oneTWP.
You must inform the SSA of your earnings for each month that you work while receiving SSDI benefits, by sending a letter with copies of your pay stubs by the 10thof the following month after a month that you performed work.
The SSA has represented that being on TWP does not automatically result in a review of your disability status, which is called a Continuing Disability Review (“CDR”), and that the SSA only conducts CDR's randomly.
Extended Period of Disability (EPE)
The SSA allows a 36-month extended period of disability (“EPE”) during which time an SSDI-recipient continues to receive SSDI benefits while working. The SSDI benefits are not reduced by the amount you earn, if what you earn is no more than the SGA amount, which in 2019 is $1,220 per month.
If you earn more than the SGA in any month, you will no longer be considered “disabled,” and your SSDI benefits will stop (although you will be paid for that month and two additional “grace period” months).
If you stop working, then you may be eligible to an expedited reinstatement of SSDI benefits. This is referred to as the “re-entitlement period,” and you will not be required to file a new application in order to reinstate your benefits.
Upon qualifying for SSDI, one important benefit is that after two years, you are eligible for Medicare coverage. That Medicare coverage continues through the TWP and the EPE. When the EPE ends, you are still covered by Medicare for an additional 93 months, even if you are working and earning SGA and even if you are no longer disabled.
Part-Time Work May be a “Red Flag”
Working part-time may be a “red flag” that you are no really disabled. Although the SSA represents that it will not automatically review your disability status just because you are working under its TWP or EPE provisions, it may still be a “red flag” that may jeopardize your disability benefits.
If you start a part-time business or work for yourself (e.g., bookkeeper, consulting work, freelancing, working as a landlord) while receiving disability benefits, the SSA may stop your benefits if it decides that your work amounts to SGA.
With respect to disability benefits under an ERISA plan, there are typically no provisions to allow for part-time work as there are under the SSA and working part-time may trigger a review of your file and a cessation of benefits under a finding that you are no longer disabled.