Ask the Advisor: Working on Disability

Ask the Advisor: Working on Disability

How Can My Sister's Son-In-Law Work And Claim Disability?

Q:  My sister's son-in-law lost his job several years ago, and not long after filed for disability. My sister says that after a recent tornado, he made "good" money cleaning up storm damage. I thought disability rules disqualified people from benefits if they work. Has this changed?

A: No. Your understanding is correct, although there are circumstances that might explain the income. The Social Security Disability Insurance (SSDI) program's rules generally restrict beneficiaries from working and earning substantial amounts while they are receiving benefits. When beneficiaries first return to work, however, they can earn an unlimited amount for 12 months without losing their benefits under "trial work period" rules. Thereafter they can earn a specified limit, $12,480 in 2013, before their benefits are eliminated.

That said, the SSDI program paid $3.2 billion in benefits to ineligible people in FY2012 according to the Social Security Administration's Office of the Inspector General. And skyrocketing enrollment is putting added financial strains on the program. Both the Social Security Trustees and the Congressional Budget Office have recently forecast that the SSDI trust fund will become fully depleted in three years. When that occurs, program revenues will only be sufficient to pay about 80% of benefits. Unless Congress takes action, severely disabled beneficiaries would face benefit cuts of 20%.

Social Security runs two disability programs – each with separate sources of funding. SSDI provides income to under age 65 adults that is calculated from their own work covered by FICA taxes. Their benefits are paid from the SSDI Fund. The Supplemental Security Income program (SSI) also pays disability benefits, but it's for low-income people without enough of work history to qualify for SSDI. Benefits are funded through both federal (and some state) revenues, and it's means tested like welfare.

Because your former son in-law was employed prior to applying for benefits, he was likely approved for SSDI. The program provides benefits to more than 10.9 million disabled beneficiaries, including some spouses and dependent children. To qualify for SSDI, the Social Security Administration determines whether applicants are unable to do any work because of a medical condition that is expected to last more than one year, or to result in death.  Beneficiaries receive monthly payments for as long as they remain in the program. If disabled people live to their full retirement age, they transfer to the Social Security retirement program but their benefits do not change. They also qualify for Medicare benefits after a 2-year waiting period.

Given that disabled beneficiaries would receive on average $300,000 prior to transferring to Social Security benefits, even the smallest error in determining eligibility can result in significant overpayments. TSCL believes that the government should make every effort to perform timely continuing disability reviews (CDRs) to ensure that benefits are only paid out to those who are eligible. The Social Security Administration estimates that every $1 spent on medical CDRs yields about $9 in SSA program savings over ten years. Currently the CDR backlog stands at 1.2 million. SSA's goal for FY2013 is 435,000 CDRs based on the current level of funding.

To learn more about the problems of disability listen to the NPR story "Unfit for Work" The startling rise of disability in America.

Sources: Testimony: The Social Security Disability Insurance Program, Joyce Manchester, The Congressional Budget Office, March 14, 2013. "Challenges Facing The Next Commissioner Of Social Security," SSA Office of Inspector General, April 26, 2013. 2013 Social Security Trustees Report, May 31, 2013.