General Practice, Solo & Small Firm DivisionMagazine
American Bar Association
General Practice, Solo, and Small Firm Division The Compleat Lawyer
Spring 1998 © American Bar Association. All rights reserved.
Securing the Proper Social Security Benefits
BY MATT GREENBAUM
Matt Greenbaum and his associates, located in New Orleans, Louisiana, exclusively practice Social Security disability law. He recently chaired the Fifth Circuit Organization of Social Security Claimant's Representatives Annual Meeting; and he will serve as the moderator for the Spring 1998 Federal Bar Association Seminar on Social Security.
Virtually every lawyer who represents individuals over the age of 50 will eventually receive a call from a prospective client who wants advice about Social Security benefits.
While most clients only think of Social Security benefits in the context of old age retirement, savvy practitioners can render important advice to their clients regarding a wide array of different programs.
Disability and Supplemental Security Income
The Social Security Administration defines disability as "the inability to engage in any substantial gainful employment because of a medically determinable physical or mental impairment that can be expected to result in death or which has lasted or can be expected to last for a continuous period of at least twelve months."1
The most misunderstood element of disability entitlement is the requirement that the claimant must be unable to perform any work. An individual who because of her impairment is precluded from performing her past relevant work and/or is incapable of earning similar compensation is not entitled to disability benefits.
To assess an individual's entitlement to disability benefits, the Social Security Administration follows a five-step sequential process:
- Is the claimant presently engaged in substantial gainful activity?2
- Does the claimant have a severe mental or physical impairment?
- Is the impairment listed in or equivalent to an impairment in 20 C.F.R. § 404, Subpt. P, App. 1 of the regulations? (See "The Listing of Impairments" on page XX.)
- Does the impairment prevent the claimant from doing past relevant work?
- Does the impairment prevent the claimant from doing any other work?3
The regulations recognize the limited marketability and vocational adaptability of older claimants (50 years plus).4 Also advantageous to older claimants is the arduous unskilled labor rule. That rule awards benefits to an individual who has only a marginal education,5 and whose work experience consists of 35 years or more as an unskilled physical laborer, which now—due to a severe impairment—he is incapable of performing.6
Once an individual is found disabled, the benefits she receives are dependent upon her work history.
Disability Benefits for the Insured Worker
An individual insured at the time of his disability onset is paid monthly benefits regardless of the family's income and/or assets. The primary test for determining insured status is the 20/40 rule: The disabled worker must have at least 20 quarters (five years) of coverage within the 40-quarter period (ten years) immediately preceding disability.7 Quarters of coverage (QCs) are earned for income upon which Social Security taxes are paid (see table 1). No more than four quarters will be credited for a single year.
Disabled insured individuals are paid monthly benefits beginning the fifth month after disability onset, in an amount commensurate with Social Security taxes paid. Twenty-four months after disability entitlement, the disabled worker, assuming continuing disability, is entitled to Medicare coverage.
Supplemental Security Income Benefits for the Uninsured Worker
An uninsured individual who is disabled is entitled to benefits when the income and resource (assets) limitations are met. For 1998, the Supplemental Security Income (SSI) resource limit is $2,000 for an individual, and $3,000 for a couple.
However, in counting resources, the Social Security Administration does not include such items as the disabled individual's home, household goods and personal property, one wedding and engagement ring, some burial funds and spaces, some life insurance policies, and a car.8
Income limitation is determined by the Federal Benefit Rate (FBR)—the monies paid as a monthly benefit. For the year 1998, the FBR is $494 for an eligible individual and $741 for an eligible couple. Generally, countable income reduces a disabled individual's monthly benefit dollar for dollar. Countable income greater than the FBR precludes SSI eligibility.9
Because SSI benefits are awarded on a need basis, monthly benefits and Medicaid coverage are immediately available, upon the first month of disability onset or the month following the date of application, whichever is later.
Widow's and Widower's Benefits
A widow or widower who is disabled and uninsured on the basis of her own earnings record is entitled to disability benefits on the basis of a deceased spouse's earnings record if: (1) the deceased spouse was insured at the time of death; (2) the claimant is at least 50 years in age; and (3) the disability occurred within seven years of the insured's death.10
Divorced spouses are also entitled to widow/widower's benefits if the marriage lasted ten years immediately before the divorce and the other, above criteria are met.11
Because they are based on an insured worker's earnings, widow/widower's benefits are paid irrespective of income and assets beginning five months after entitlement, with Medicare benefits available 24 months after the date of entitlement.
In order to qualify for retirement benefits, a worker must be fully insured, i.e., have earned the required number of QCs (as explained above). With the exception of those born prior to 1929, the worker must have 40 QCs (ten years of work) to be fully insured for retirement benefits12 (see table 2).
Normal retirement. At present, the normal retirement age is 65. However, under legislation passed in 1983, that age will slowly rise (see table 3).
Early retirement. An insured worker is eligible for retirement benefits as early as age 62; however, the monthly benefit will permanently be smaller than if the worker waited until normal retirement age to receive retirement benefits.13
Late retirement. If a worker waits until after his normal retirement age to receive Social Security old age benefits, the monthly benefits are increased by a percentage for each year receipt of benefits is delayed up to age 70.14
As in other benefit programs, a retired individual's family members may also be entitled to benefits.
Spouse. Spouses are entitled to benefits:
• Upon reaching 62 years in age15; or
• At any age if the spouse has in his or her care an eligible child (one who is under 16 years of age or disabled). If the eligible child is not the natural child of the spouse, the spouse must have been married to the insured for one year.16
Divorced spouse. A divorced spouse is entitled to benefits on the account of an insured worker, whether or not the worker has applied for retirement benefits, if he is: at least 62 years in age; unmarried; was married to the worker for at least ten years; and the divorce occurred two years prior to the application.17
Note: There is a maximum family limit to auxiliary benefits. If the sum of the auxiliary benefits based on a single earner's record exceeds the maximum family limit, the benefits paid to the family members will be proportionately reduced. However, the worker's benefits are not reduced. Further, any amount payable to a divorced spouse is not included in the family maximum.18
Impact of Wages on Retirement Benefits
Earned income may reduce the amount of Social Security retirement benefits paid. For the year 1998, the earnings limitation for an individual age 65 to 69 years is $9,120. For beneficiaries under age 65 it is also $9,120. A beneficiary's earnings in excess of the above amounts reduces the retirement benefits. For individuals under the age of 65, benefits are reduced by $1 for every $2 earned. For individuals age 65 to 69, benefits are reduced by $1 for every $3 earned.19
Note: Excess earnings by the insured worker are charged against both the worker's benefits and the auxiliary benefits, with the exception of a divorced spouse.20
Excess income earned by an auxiliary beneficiary is charged only against his or her benefits.21
Passive Income and Retirement Benefits
Income not attributable to services performed after the month of entitlement does not reduce monthly benefits.22 Examples of passive income not affecting retirement benefits are capital gains, dividends, interest, rental income, pensions, annuities, retirement pay, and royalties. The key to excluding income is that it must be passive. If an individual "retires" but thereafter continues to work in a business, taking higher dividend payments rather than a salary, the Social Security Administration will consider the dividends to be wages and will reduce retirement benefits accordingly.
Particularly in dealing with family businesses and closely held corporations, it is suggested that an individual seek advice regarding structuring of post-retirement income. The Social Security Administration has the authority to examine retirement arrangements and generally, to claim that individuals are guilty until they prove themselves innocent.
- 42 U.S.C.S. § 423(d)(1)(A).
- Generally, substantial gainful activity is earnings in excess of $500 per month. 20 C.F.R. §§ 404.1574 and 416.974.
- 20 C.F.R. § 404.1520 and § 416.920.
- See 20 C.F.R. § 404, Subpt. P, App. 2—"The Medical-Vocational Guidelines."
- Formal education at the sixth grade level or less. 20 C.F.R. § 1564(b)(2).
- 20 C.F.R. § 404.1562.
- 20 C.F.R. § 404.130.
- Note: this list is not exhaustive. For further detail, refer to 20 C.F.R. § 416.1201 et seq.
- For further information regarding countable income, refer to 20 C.F.R. § 416.1100 et seq.
- 20 C.F.R. § 404.335(c).
- 20 C.F.R. § 404.336.
- 20 C.F.R. § 404.115.
- 20 C.F.R. §§ 404.311 and 404.312(c).
- 20 C.F.R. § 404.312(b).
- This early receipt of benefits, prior to normal retirement age, reduces the monthly benefit.
- 20 C.F.R. § 404.330.
- 20 C.F.R. § 404.331.
- 20 C.F.R. § 404.403 et seq.
- 20 C.F.R. § 404.430 et seq.
- 20. 42 U.S.C.S. § 403(b)(2) and (f)(1).
- 20 C.F.R. § 404.434(b)(2).
- 42 U.S.C.S. § 403(f)(D).