The second part of this blog will discuss the way that income is characterized for a means-tested entitlement program and how it affects a benefit award. The federal Supplemental Security Income (SSI) program rules distinguish between and characterize income in different ways. The characterization of income as unearned or earned also affects a benefit award. The rules related to these classifications are complicated and typically unique to the rule.

Most major public assistance programs base eligibility on means, thus restricting eligibility to applicants whose incomes are below a certain threshold income level. These programs further apply demanding tests that measure assets to ensure that the resources of applicants do not exceed program limits.

 There are various rules for calculating whether an applicant meets these income thresholds. Income is classified as follows:

• “Countable” income is the amount of income used to compute eligibility and the amount of benefits.
• “Excluded” income is what the SSA does not calculate or “count” when considering eligibility.
• “Regular” income is that which is received periodically, at least two or more times per quarter or in consecutive months,
• “Irregular” or “infrequent” income is neither periodic nor predictable.
• “Earned” income derives from work performed in exchange for income in the form of wages. Any SSI recipient is permitted to receive a small amount of income of any kind without reducing the amount of their benefits. The SSA refers to this as the SSI “disregard” amount.
• “Unearned” income is that which is passively received, such as SSDI benefits or bank account interest.

In-kind Support & Maintenance

SSI considers “in-kind support and maintenance” (ISM) as countable income when it takes the form of a payment from a third party, such as a trust, for necessities of life, defined as food or shelter, to a third-party provider of goods or services. The amount is based on the particular rules used for calculating the effect of any transfer. The effect of receiving ISM on SSI benefits differs from the rule used for measuring the effect of receiving cash distributions.

While cash payments reduce the SSI payment dollar for dollar, ISM reduces the benefit by the lesser of the presumed maximum value of the payment or an amount calculated by dividing the maximum SSI benefit by three and adding the $20 disregard amount. In 2021, the maximum federal SSI benefit for a single person is $794. One-third of this $264.67 resulting in a maximum reduction in benefits because of ISM, regardless of value, of $284.67 per month.

Earned Income

Earned income only reduces benefits by approximately half of the wages earned. The purpose of this is to encourage SSI recipients to return to the workforce in some capacity. Because federal law defines a disability in the context of an applicant “unable to perform any substantial gainful activity (SGA),” any substantial amount of earned income will compromise an individual’s eligibility for SSI. The Social Security Administration assumes that any individual with a disability who earns more than a specific amount of monthly income, after deducting impairment-related work expenses, is engaging in SGA. 

Unearned income

Any unearned income such as a gift or investment income reduces the SSI benefit by the amount of the income, less the disregard amount. Unearned income includes all income that a person does not earn, including Social Security benefits, workers’ compensation, certain veterans’ compensation or pension payments, unemployment, pensions, support and maintenance in kind, annuities, rent, and any other miscellaneous unearned income.

In 2021, a person must have less than $814 a month in unearned income to receive SSI benefits. A couple can get SSI if they have unearned income of less than $1,211 a month in 2021. Because a larger portion of earned income is not calculated, a person receiving SSI may earn up to $1,673 a month ($2,467 for a couple) and still receive SSI.

An entitlement is a legal obligation of the federal government to make payments to a person or entity that meets the legally established eligibility criteria. Spending levels for entitlement programs are determined by the programs’ eligibility criteria and payment guidelines rather than as an annual budget appropriation. It is important to understand that these criteria and guidelines are complicated. Anyone with a disability must proceed carefully when participating in any means-tested entitlement program to ensure that they do not compromise any amount of essential benefits.   

Rubin Law is a law firm solely dedicated to enhancing the lives of children and adults with intellectual disabilities, developmental disabilities, and mental illnesses. Rubin Law is the only law firm in Illinois that limits its practice to providing legal services and future planning for adults and children with special needs. We offer patience, compassion, and a unique understanding to those with disabilities and those who care for them. For more information, please email us at email@rubinlaw.com or call 866-TO-RUBIN.