Retaining SSI and Medicaid While Working
January 20th, 2022
Retaining SSI and Medicaid While Working
Employment is about more than making a living. Working and earning a wage promotes dignity, self-worth, and independence and provides community. Fortunately, a person with disabilities can participate in the workforce, earn income, and not lose vital public benefits.
The Supplemental Security Income benefit is available to an individual who has limited income, limited resources, and a disability severe enough that they cannot earn an average of $1,350 in a month (increased to $2,260 for statutorily blind individuals) in 2022. For SSI, there is no requirement of any previous work history, distinguishing SSI from Social Security Disability Insurance. SSI and SSDI are very different programs. This article addresses only the impact of earned income on SSI and its associated and crucial benefit, Medicaid.
The Red Book
The challenge is finding the balance between employment and benefits, and that starts with understanding the work incentives developed by the Social Security Administration. The dispositive resource for determining how work and earned income intersect with disability benefits (both SSI and SSDI) is the SSA’s Red Book. This guide outlines work incentive programs like these for individuals who want to start working or return to work:
- Plan to Achieve Self-Support and Individual Development Accounts (IDA) to set aside income or resources to meet expenses for achieving a work goal, like tuition and books;
- Ticket to Work, including free employment services to develop a plan to reach earnings-related milestones and outcomes;
- Continuation of Medicaid if earnings are too high for SSI but less than the state-specific threshold amount;
- Expedited Reinstatement of benefits if SSI ended due to earnings but then the individual is later unable to perform substantial gainful activity;
- Work Incentive Liaison in the local Social Security offices to provide advice and information about the SSA incentives and outside organizations that serve individuals with disabilities.
Possibly the most helpful – and potentially confusing - incentives relate to unearned income exclusions and earned income exclusions. In particular, the individual who receives SSI needs to know (1) the SSA disregards the first $65 earned in a month and then (2) disregards one-half of the remaining earnings.
Meet Anne. She receives SSI of $841 per month in 2022, and her Medicaid benefit covers her case management, her wheelchair, and her personal and attendant care services, all of which are essential for her to live in the community. Anne has been offered a job, but she is concerned that any earned income would jeopardize her benefits, especially her Medicaid benefit.
Anne accepts the job and starts earning $1,565 per month which she reports to the SSA. The SSA will disregard the first $65 earned by Anne, leaving $1,500. To calculate Anne’s countable earned income, the SSA will divide $1,500 in half, leaving $750. The SSA will reduce Anne’s SSI of $841 by $750 and provide a monthly SSI cash benefit of $91.
What about Anne’s Medicaid benefit? In this example, because she continues to receive an SSI cash benefit, she will continue to be covered by Medicaid. Anne keeps her earned income of $1,565 plus $91 in SSI, and she enjoys the emotional and social benefits of having a job.
Assume Anne does well at work and receives a raise to $2,065 per month. Her income now exceeds the break-even (BEP) point. That’s the point at which her gross earnings cause her cash benefit to drop to $0. Although she is not receiving even $1 of SSI, Anne retains her Medicaid due to Section 1619(b) of the Social Security Act.
Section 1619(b) is a powerful work incentive for SSI recipients. In all states, it ensures continued Medicaid eligibility for working individuals with disabilities whose earned income is too high to receive an SSI cash payment but too low to offset the loss of Medicaid. In Maine (the author’s state) in 2022, Anne will retain Medicaid unless her gross earnings exceed $44,630.
Earning Work Credits
If Anne’s entry into the workforce is successful and she is paying FICA taxes into the Social Security system through her paychecks, she will start building a work history that could eventually qualify her for Social Security benefits and the associated Medicare benefit. In general, an individual must earn 20 work credits, although there is some variation based on age. In 2022, a worker must earn $1,510 to earn one work credit, and they can earn a maximum of four work credits each year.
Anne will prove her work history to the SSA with each paycheck from which a small portion will be withdrawn for the FICA taxes. Anne will be able to check her record of earnings by setting up her own account at ssa.gov/myaccount.
Reporting to the SSA
Anne will need to keep in touch with the SSA about her work activity, including if:
- She starts or stops working;
- Her duties, hours, or wages change; or
- She needs to pay expenses to keep working.
Anne should keep her paystubs in case the SSA requires that she independently verify her earnings. And whenever Anne provides a report regarding her work, the SSA should give Anne a receipt that confirms she fulfilled her reporting obligation. Anne should keep those records as well.
How an ABLE Account Might Help
To remain eligible for SSI, Anne must also have countable resources of no more than $2,000. The types of resources that count against that limit include money in the bank, investments of any kind, real estate other than a primary residence, and any other money or property in which the individual has an interest, even if not the sole owner.
What if Anne earns so much each month that she cannot keep her funds below $2,000? Just as it does with income, the SSA disregards some resources like a primary residence, clothing, furniture, personal belongings, and a motor vehicle. The SSA also disregards the amounts held in a third-party supplemental needs trust and self-settled special needs trust.
Up to $100,000 in a special type of tax-advantaged savings account called an ABLE account will also be disregarded for SSI eligibility purposes. (Much more is disregarded for Medicaid eligibility purposes.) Anne qualifies for an ABLE account if she receives a benefit based on a condition that began before age 26. Anne can use the ABLE funds to pay for education, housing, basic living expenses, transportation, employment training, and assistive technology, health and preventive wellness, legal fees, funeral and burial, and more.
For most ABLE account owners, the annual ABLE contribution limit (from all sources) is $16,000 in 2022. But assuming Anne is not participating in her employer-sponsored retirement plan, she is able to contribute an additional $12,880 (in 2022) to her ABLE account for a total of $28,880, at least until 2025 when the ABLE to Work Act is set to expire.
Franklin D. Roosevelt suggested, “Happiness lies in the joy of achievement and the thrill of creative effort.” An individual can experience the gratification of work without sacrificing the safety net of SSI and Medicaid.
By Jane Skelton and published in The Voice®, the online newsletter of the Special Needs Alliance of which Jane is a member.
Categories: Special Needs Planning