Understanding SSI and SSDI - The Complex World of Government Benefits
by Don Drake, Connelly Law Offices, Ltd. 4.14.24
"A client recently sought clarification regarding her disabled sibling's social security payment while discussing special needs planning," said professional fiduciary and certified elder law Attorney RJ Connelly III. "The client's brother had suffered an acquired brain injury due to an accident at work and was approved for Social Security Disability Insurance (SSDI) at the age of 57. As the client's brother approached full retirement age, the client was uncertain whether to continue receiving SSDI or retiree benefits."
Despite multiple attempts to seek answers from the Social Security Administration (SSA), the client could not obtain a clear or understandable response after waiting hours on the phone. She consulted several individuals at her brother's former employer, but their responses only perplexed her. Consequently, she reached out to Connelly Law for assistance.
Attorney Connelly stated that his firm frequently receives similar inquiries about SSDI and another federal program, Supplemental Security Income (SSI) when meeting with clients to develop an estate plan or a trust. While a definitive answer exists, it is often intricate and replete with special circumstances for both programs.
"Navigating the complex world of government programs can be arduous, and understanding SSI and SSDI criteria is necessary," said Attorney Connelly. "Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI) are two distinct programs with significant differences. While both programs offer financial support to individuals with disabilities, the eligibility criteria, benefits, and funding sources differ significantly."
Social Security Disability Insurance (SSDI)
"The Social Security Disability Insurance (SSDI) program benefits are based on earned benefits," said Attorney Connelly. "This implies that an individual approved for these benefits has acquired them by earning taxable income. The credits earned by an individual who has contributed to the Social Security system by working determine the amount of benefit they are eligible for. The number of credits required to qualify for disability benefits depends on the person's age when they become disabled."
"Typically, a person requires forty credits with twenty credits earned in the last ten years preceding the onset of disability," Attorney Connelly continued. "However, it is important to note that there are certain exceptions to this, which we will not explore in this blog."
Social Security work credits received by an individual are calculated based on their yearly wages or self-employment income. Furthermore, the earnings required to earn a credit may fluctuate annually. As of 2024, an individual can earn one Social Security and Medicare credit for every $1,730 in covered earnings yearly. To receive the maximum of four credits for the year, an individual must earn a minimum of $6,920.
"An individual's assets do not impact their eligibility for SSDI benefits," stated Attorney Connelly. "As such, even individuals with substantial wealth can still be eligible to receive the benefits. SSDI is an insurance program that provides financial assistance to individuals who have participated in the system and paid the required premiums in case of an injury or illness that renders them disabled."
The average monthly SSDI payment for 2023 was $1,665.14. However, the maximum monthly benefit for 2024 is $3,822. The exact amount of an individual's monthly benefit check is based on numerous factors, such as their average lifetime earnings, work history, and the severity of their disability.
Individuals who receive lower-end SSDI benefits may also qualify for needs-based programs such as SNAP, Medicaid, and Housing assistance. This can provide additional support to individuals struggling financially due to their disability.
Supplemental Security Insurance (SSI)
"This federal benefit program aims to provide financial assistance to individuals with disabilities and limited income who have not earned sufficient work credits to qualify for Social Security Disability Insurance," stated Attorney Connelly.
"Supplemental Security Income (SSI) is a federal program administered by the Social Security Administration. It is financed through general funds of the U.S. Treasury, derived from various sources, including personal income taxes, corporate taxes, and other taxes. SSI is not funded by Social Security taxes collected under the Federal Insurance Contributions Act (FICA) or the Self-Employment Contributions Act (SECA)."
The maximum monthly payment for SSI in 2024 is $943 for an individual and $1,415 for a couple. However, it is worth noting that these figures may vary depending on the recipient's living arrangement and other factors. Some states also offer eligible recipients a State Supplement Payment (SSP), which may further supplement their income. However, the amount of the SSP varies by state and may be affected by the recipient's living arrangement, income, and other factors.
The state supplemental payments are monthly payments paid out of state funds rather than federal funds. Their goal is to supplement the monthly federal SSI payments that disabled residents receive. However, not all states offer these payments, with only four states (Arizona, Mississippi, North Dakota, and West Virginia) not paying state supplements to their disabled residents who receive SSI. The remaining states offer some form of state supplement to their disabled residents, and in some cases, the Social Security Administration (SSA) administers the state supplement.
Individuals who receive SSI may also be eligible for other low-income programs such as Supplemental Nutrition Assistance Program (SNAP) benefits, Medicaid, Housing vouchers, and other government assistance programs. These programs can help to support the individual's financial needs further and improve their standard of living. However, it is essential to note that SSI recipients must not have more than $2,000 in countable resources, such as a bank account. Exceptions include assets such as a home and property, burial funds and spaces, household goods and jewelry, a vehicle (if used for transportation of the person or a household member), and a life insurance policy of $1,500 or less.
SSDI and Retirement Age
The receipt of Social Security Disability Insurance (SSDI) benefits can provide significant relief to people who are unable to work due to a disability. However, what happens when an individual reaches full retirement age while receiving SSDI benefits?
If an individual on SSDI reaches full retirement age, the Social Security Administration will transition their benefits from SSDI to the retirement program. This means the individual will no longer receive SSDI benefits but will instead receive Social Security retirement benefits. It should be noted, however, that there is a complex and rare exception to this rule, which will not be discussed in this context.
An individual cannot receive SSDI and Social Security retirement benefits simultaneously, except in rare circumstances. The amount received remains the same when benefits are changed from SSDI to retirement benefits.
Consider a scenario where an individual becomes disabled at the age of sixty-two and applies for SSDI benefits but chooses to retire early at the same age, resulting in up to a 30% reduction in benefits. If the SSDI application is approved, the check amount will increase. However, taking early retirement with the expectation of receiving SSDI benefits is risky. It is, therefore, imperative to think carefully before making such a choice.
SSI and Retirement Age
Attorney Connelly explained that a significant difference exists between individuals receiving Supplemental Security Income and those receiving Social Security Disability Insurance. Most SSI beneficiaries do not meet the eligibility criteria for SSDI due to insufficient work credits, which results in extremely low or no payments from the Social Security Administration. These payments are aimed at supporting individuals with low incomes, disabilities, the elderly, and the visually impaired to help them maintain a safe and secure standard of living.
The qualification for these benefits depends on the individual's financial need, regardless of age. For SSI beneficiaries, a specific income limit must be considered. The countable income thresholds vary by state, and for those who qualify for retirement benefits, their income must still remain below $943 (the monthly SSI benefit in 2024). In the event of retirement, the first $20 of income is not accounted for, and therefore, the income can be lower than $943.
Furthermore, if the beneficiary receives unearned income, their monthly SSI benefits will be reduced dollar-for-dollar for any money they receive above the first $20 that does not count. For instance, if an individual gets a Social Security retirement benefit of $700 per month, their SSI benefits would be reduced by $700, and they would receive only $243 per month from SSI to supplement their retirement benefits.
Going back to work on SSDI
Attorney Connelly outlined some of the intricacies of Social Security Disability Insurance. "Some of these individuals may recover to the extent that they can return to work. For instance, let's look at a fictional example of Jim Jones. Jones sustained a severe back injury at work and was initially deemed too disabled to work again. However, after years of rehabilitation and multiple surgeries, Jones has significantly improved and is now contemplating a return to work."
"Jones is understandably anxious about losing his SSDI income and job if his injury prevents him from performing at the required level. Fortunately, the Social Security Administration does provide a program to assist those who wish to return to work, providing a safety net for individuals such as Jones."
The SSA allows recipients to participate in a trial work period to facilitate this transition without sacrificing access to their disability income. During the trial period, the individual can continue to receive full benefits irrespective of how much they earn if they meet the definition of disabled. The trial period generally lasts for nine months, and once the recipient has worked for nine months within 60 months, the trial period ends.
After the trial period, the recipient can continue receiving disability benefits for the next 36 months, provided substantial earnings are not earned. The substantial gainful activity (SGA) amount for persons with disabilities other than blindness is $1,550 per month in 2024. For those who are blind, the earnings that indicate SGA is $2,590 per month in 2024. These limits are subject to change from year to year.
If benefits are terminated due to SGA earnings, there is an expedited reinstatement period during which the SSA can be requested to restart benefits if the disability prevents continued work. In this case, the individual will not need to go through the application process again or wait for the SSA to review their medical status before granting SSDI again.
Lastly, expenses incurred while working with a disability, such as taxi rides, adaptive devices, etc., can be deducted from countable income. This provision ensures that individuals are not penalized for working while receiving SSDI benefits.
Going back to work on SSI
Attorney Connelly provided information concerning the eligibility criteria and regulations for Supplemental Security Income (SSI) benefits. He clarified that the criteria and rules for receiving SSI benefits are distinct from those of standard Social Security benefits. The chief distinction lies in the limits for earned and unearned income. Although a person can still receive SSI benefits while employed, their income must not exceed the SSI income limits.
As stated earlier, the Social Security Administration will pay up to $943 in SSI benefits for 2024. However, this amount does not include any supplement provided by the state. The monthly benefit amount is determined by calculating the disparity between the federal benefit rate (FBR) and an individual's countable income. Countable income encompasses diverse sources, such as wages earned from a job, with some salary portions being excluded.
Countable income also includes the expenses of free food and shelter provided to the individual. Support money from family or friends is also counted, although not all of an individual's spouse's earnings are counted against them. Lastly, payments from other sources, such as veterans benefits or unemployment, contribute to an individual's countable income.
No longer disabled
By the guidelines provided by the Social Security Administration, disability is a medical condition that significantly impairs an individual's ability to perform fundamental work activities, such as sitting, walking, or retaining information. To be eligible for disability benefits, an individual must meet specific criteria established by the SSA. These criteria are precise and restrictive and include the following:
The medical condition must have endured for at least 12 months, be anticipated to last for at least 12 months, or be terminal.
The medical condition must have a substantial impact on the individual's ability to perform fundamental work activities.
The medical condition must prevent the individual from engaging in any work they performed previously.
The medical condition must be included in the SSA's Listing of Impairments or must be medically equivalent in severity to a listed condition.
The Listing of Impairments, popularly known as the Blue Book, is a comprehensive compendium of medical conditions encompassing musculoskeletal issues, neurological disorders, and other such maladies. If an individual's medical condition is listed in the Blue Book and exhibits specific requisite symptoms, they are generally eligible for disability benefits. This resource serves as an important tool for the Social Security Administration (SSA) in its efforts to provide financial assistance to those unable to work due to their medical condition.
A Final Note
The Social Security Administration conducts regular reviews to ensure an individual is still eligible for disability benefits. The frequency of these reviews depends on the individual's condition. The case may be reviewed every six to 18 months if medical improvement is expected. If improvement is possible but unexpected, the case may be reviewed every three years. If improvement is not anticipated, the case may go without a review for five to seven years. Other events, such as earning income from work or completing a vocational rehabilitation program, could also trigger a Continuing Disability Review.
If the SSA determines that an individual no longer meets the disability criteria, their Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) benefits may be terminated. Additionally, benefits could be discontinued if the person has not complied with treatment requirements or fails to follow a doctor's orders. In such cases, the person has a 60-day appeal process if they wish to continue receiving benefits.
Finally, remember that SSDI has no asset limits, but SSI does. Having more than $2000 in countable resources can halt benefits for those receiving SSI benefits, which can occur unintentionally if an individual suddenly receives a generous gift or inheritance. In that case, it may be necessary to consult an elder law attorney about special needs trusts or other tools that can protect the benefits of a disabled person.
Please note that the information provided in this blog is not intended to and should not be construed as legal, financial, or medical advice. The content, materials, and information presented in this blog are solely for general informational purposes and may not be the most up-to-date information available regarding legal, financial, or medical matters. This blog may also contain links to other third-party websites that are included for the convenience of the reader or user. Please note that Connelly Law Offices, Ltd. does not necessarily recommend or endorse the contents of such third-party sites. If you have any particular legal matters, financial concerns, or medical issues, we strongly advise you to consult your attorney, professional fiduciary advisor, or medical provider.
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