Trial Work Periods and Extended Periods of Eligibility

Trial Work Periods and Extended Periods of Eligibility

by Charles F. Hall, IV, Esq.

Board Certified Specialist  in Social Security Disability Law by the NC State Bar

Winston-Salem, North Carolina

Originally presented to attorneys on December 11, 2015 at the North Carolina Advocates for Justice

Introduction

This manuscript aims to provide the practitioner with basic information on Trial Work Periods and Extended Periods of Eligibility.[1]

importance of understanding TWP and EPE

Generally, the Trial Work Period (TWP) and Extended Period of Eligibility (EPE) apply to the clients whom we have successfully represented in their pursuit of Title II Social Security Disability (SSD) benefits.  Sometimes, potential clients will approach us with problems that are a direct result of the TWP and EPE jeopardizing their Title II disability benefits.  Either way, understanding the TWP and EPE will prove invaluable in your Social Security practice.  Proactively advising clients who obtain SSD can prevent needless confusion and heartache.  Understanding these fundamental concepts can help us equip those individuals who have lost their benefits due to the TWP and EPE with credible arguments to retain their SSD benefits.

WHO IT APPLIES TO

The TWP and EPE only apply to Title II disability recipients.

Trial Work Period

The TWP is intended to give Title II disabled recipients the opportunity to test their ability to sustain competitive work activity without worrying about loss of benefits.[2]  It is during this period that individuals may engage in services and not worry about jeopardizing their SSD benefits.  The Program Operations Manual System (POMS) defines services as “any activity in employment or self-employment that is performed or is normally performed for pay or profit.”[3]

The TWP contains three key components.  First, it is an initial determination with appeal rights that is protected by administrative finality.  Second, it consists of nine service months (not necessarily consecutive).  Third, it continues so long as the recipient remains disabled according to SSA standards.[4]

The TWP is available only once during a period of Title II disability.[5]  However, should an individual be found disabled again either through a new application or through an Expedited Reinstatement (EXR), then the individual would qualify for a new TWP.  It is important to note that the TWP is available for EXRs only after the completion of the 24 month reinstatement period.[6]

For the majority of cases, the TWP begins the latest of: 1) the application date (protective filing date); 2) the first month that an individual first becomes entitled to a Title II disability benefit payment; or 3) for EXR cases, the month after the initial reinstatement period has ended.[7]  It is important to note that disabled recipients are not entitled to a TWP if they have engaged in Substantial Gainful Activity (SGA) during the required 5 month waiting period, within 12 months of the established onset date of impairments, or any month prior to the month of the application for disability.[8]  The TWP ends when a disabled recipient engages in “services” in any nine months in a rolling 60 month period.[9]

Unfortunately, the Social Security Administration (SSA) does not apply any work incentive rules during any of the TWP service months.  This includes Impairment Related Work Expenses, employer subsidies, special work conditions/accommodations, unsuccessful work attempts, un-incurred business expenses, and etc.  Furthermore, SSA will not average earnings during the TWP.[10]

TWP in employment

Service months are calculated differently in employment and self-employment service periods. In employment situations, work activity constitutes services “only if it is actually or usually performed for remuneration or profit.”[11]  POMS DI 13010.060 provides a table for the precise gross earnings in any month that constitutes a service month.[12]  This amount typically increases every year and since 2001 has been approximately 71-72% of a particular year’s non-blind Substantial Gainful Activity (SGA) amount.  In 2015, a TWP service month in an employment scenario was $780.  For 2016, this amount has been increased to $810.  Likewise, the SGA level in 2015 was $1,090, and was increased in 2016 to $1,130.[13]

TWP in SELF-EMPLOYMEnT

Work activity for self-employed Title II disability recipients is calculated differently from employed Title II disability recipients.  There are two criteria, either of which when met constitute a TWP service month.  The first criterion is whether an individual’s net earnings in a particular month are more than the TWP service month amount for a particular month.[14]  These amounts are the same as the TWP employment service amount.[15]  The second criterion asks whether the individual is engaging in a certain number of hours of work activity per month, regardless of net earnings.[16]  Since 2001 the amount of hours that constitute a service month are 80.[17]

Extended Periods of eligibility

After the ninth service month is completed in a TWP within a 60 month rolling period, the TWP is completed and the EPE begins immediately.[18]  This occurs whether the disabled recipient is engaging in SGA or not.[19]  The first 36 months after the last month of the TWP is called the re-entitlement period.[20]  During the EPE, when an individual engages in SGA in any month their benefits will cease.[21]  During the re-entitlement period, when the disabled recipient’s work activity in any month falls below SGA, then the benefits immediately resume for that month going forward until the disabled recipient earns SGA.[22]  For some disabled recipients whose work hovers around SGA, the benefits during the re-entitlement period will turn off and on many times.  Any month in the 36 month re-entitlement period where earnings are less than SGA, the disabled recipient will receive an entitlement payment.  Once the 36 month re-entitlement period ends, if the disabled recipient engages in SGA, then benefits will cease and the EPE will end.  If the individual never engages in SGA outside the re-entitlement period, then the EPE will continue indefinitely until the individual no longer meets the disability standard.

During EPE, a disabled recipient is entitled to one grace period.[23]  The grace period consists of three months: 1) the first month of SGA, and 2) the next two months.[24]  During this grace period the disabled recipient receives disability entitlement payments.[25]  If the grace period is used during the re-entitlement period, and later SGA is earned again, benefits will cease the very next month without a grace period.  The Benefit Termination Month (BTM) occurs after the grace period when Title II eligibility ends.

Expedited Reinstatement

When a disabled recipient engages in SGA after the 36 month re-entitlement period of an EPE and later is unable to sustain SGA, the disabled recipient may apply for an Expedited Reinstatement (EXR).  EXR is available to both Title II and Title XVI disability recipients.  To qualify for EXR the applicant must show: 1) no SGA in the month of the EXR application; 2) inability to work due to a medical condition; 3) stopped working within 60 months of the final Benefit Termination Month (BTM); 4) the current medical conditions must be the same as or related to the original disabling impairment(s); and 5) meet the medical improvement review standards for disability.[26]  If a disabled individual successfully obtains EXR, the individual must complete a 24 month initial reinstatement period in order to obtain another TWP, EPE, and EXR.[27]

Substantial Gainful Activity

Substantial Gainful Activity (SGA) is a key SSA concept that impacts our representation of disabled claimants.  This concept plays a prominent role in step one of the Sequential Evaluation Process.  It also plays a critical role in the TWP and EXR as noted previously.  The SGA standards for employment and self-employment situations differ greatly, as do the tools that can be deployed in some circumstances to convert potentially harmful SGA work-related activity into benign non-SGA work-related activity.

SGA EMPLOYMENT

Substantial Gainful Activity (SGA) is work activity that is both: 1) substantial, and 2) gainful.[28]  Substantial means work that involves significant physical or mental activity.[29]  Practically speaking, any work that warrants pay in a competitive work environment in the US or local economy requires enough physical or mental activity to qualify as substantial activity.  Gainful means work that is typically done for pay or profit, regardless of whether pay or profit is actualized.[30]  To keep matters simple, if an individual is earning at least the SGA amount, then SSA will likely find that the individual is engaging in SGA.  As mentioned previously, the SGA level in 2015 was $1,090, and was increased in 2016 to $1,130.[31]  It is crucial to note that employer benefits, such as sick and vacation pay, are not included in SGA calculations, even if part of that benefit can be attributed to the month in which it was utilized.[32]  However, just because the person is not engaging in SGA does not prevent a review of the individual’s ability to engage in SGA.  Typically, if an individual is not even earning the TWP service amount, then this does not trigger much scrutiny.  However, once the individual is earning at least the TWP service amount, then SSA looks more closely at the individual’s earnings to see whether the individual is actually able to earn SGA.

There are two key tools in the EPE context available to reduce the income of employed individuals who have met the SGA earnings threshold.  The first key concept is Impairment Related Work Expenses (IRWE).[33]  POMS DI 10520.010 defines IRWE as “an expense for an item or service which is directly related to enabling a person to work and which is necessarily incurred by that person because of a physical or mental impairment.”  IRWE paid on or after December 1, 1980, receive much more favorable treatment than IRWE paid prior to this period.  IRWE paid before December 1, 1980, only include expenses paid for items or services that were incurred only because of work.[34]  IRWE paid on or after December 1, 1980, include items and services that a disabled individual “needs in order to work … even though such items and services are also needed for normal daily activities.”[35]  IRWE must be out-of-pocket and paid in the same month (or anticipated work month) in which the deduction is applied.[36]  IRWE, especially with the newer rule, are especially effective in reducing a disabled worker’s earnings.

The second tool is the employer subsidy.  When an employer pays an employee who has “serious medical impairments” more than their services warrant, the disabled worker has received an employer subsidy.[37]  The excess payment, the subsidy, can be used to directly reduce the monthly earnings.  As such, the employer subsidy is a very useful tool in reducing a disabled worker’s earnings, especially in the context of the EPE.

SGA SELF-EMPLOYMENT

While determining SGA is a relatively straightforward matter in the context of employment situations, it is a bit more challenging in the context of self-employment.  Ultimately, there are four tests that can be used in the self-employment context.[38]  These four tests are arranged into the general evaluation criteria (which contains three tests), and the countable income test.[39]  The countable income test is used “after he/she has received title II disability benefits for 24 months, if the purpose of the evaluation is to determine whether disability has ceased due to SGA.”[40]

The three self-employment tests of general evaluation criteria are used to determine: 1) initial disability eligibility; 2) whether self-employment performed before a disabled recipient has received 24 months of Title II benefits is SGA; 3) whether work performed during or after the EPE is SGA after a determination of SGA cessation; and 4) SGA during the initial reinstatement period in expedited reinstatement cases.[41] The first general evaluation criteria self-employment test is significant services and substantial income.[42]  Both factors must be met for a determination of SGA.  Services of a self-employed individual in a one-person business is per se significant.[43]  On the other hand, a business involving the services of at least two individuals requires a finding that the individual contributes more than half the total management time or renders 45 hours of management services each month.[44]

It is more difficult with farm landlords in determining significant services.  POMS DI 10510.015B2a defines a farm landlord as “one who rents farm land to another farmer.”  When a farm landlord is found to have “material participation” then the farm landlord is presumed to have significant services.[45]  There are four tests to determine material participation for farm landlords.[46]  Test No. 1 is met if the farm landlord performs at least three of the following: 1) periodically advising and consulting with tenant; 2) periodically inspecting production activities; 3) furnishing a substantial portion of equipment and livestock; or 4) assuming responsibility for a substantial portion of the production expenses.[47]  Test No. 2 is met if the farm landlord’s decisions have a “significant effect or contribution to the success of the farm.”[48]  If the tenant has the power to make the final decision, then this test is not met.[49]  The POMS provides the following examples of management decisions: land usage; crops to plant; when to plant; and when to market the harvested crop.[50]  Test No. 3 is met if the farm landlord performs a “significant amount” of production-related physical labor on the farm.[51]  There is a presumption of significant amount when the farm landlord provides 100 hours of physical labor in five or more weeks in the year.[52]  However, this test can be met without 100 hours, depending on the situation. Any work performed as an employee of the tenant are exempted in this test.[53]  Test No. 4 states in whole, “[e]ven if a landlord does not meet tests 1, 2, or 3, he may be found to be materially participating if he does things which, when considered in their total effect, show that he is materially and significantly involved in activities related to the crop production.”[54]

Substantial income is typically found in three ways.  Substantial income is found when countable income from the business averages more than the SGA monthly amount.  Substantial income can be found in two additional ways even when countable income from the business does not average more than the SGA monthly amount.  One way is when the individual’s earnings from the business are comparable to what it was before being seriously injured.  Another way is when the individual’s work is comparable to other non-disabled, self-employed workers in the community engaging in similar business.[55]

The second general evaluation criteria test determines the individual’s work as SGA if in all relevant factors (hours, skills, energy output, efficiency, duties, and responsibilities, etc.) it compares to nondisabled individuals “in the same community engaged in the same or similar business for their livelihood” [56]  The third general evaluation criteria test, worth of work activity, determines work activity as SGA, if the value of the individual’s work, though impaired, is still clearly above SGA.[57]

The countable income test is applicable for individuals after they have received SSD for 24 months.[58]  It simply asks whether the individual has monthly countable income that averages greater than the applicable SGA amount (as listed in POMS DI 10501.015).[59]

conclusion

The TWP and EPE are important concepts for SSD practitioners that are often underutilized despite having a potentially large positive impact on SSD recipients.  Understanding these key concepts ensures that we can proactively counsel our SSD clients to prevent not only unnecessary disruptions in their benefits, but also potentially large overpayments.  While the SSA work incentives programs are designed to assist SSD recipients with the opportunity to test their ability to sustain competitive work activity, the rules can be confusing and even misleading to SSD recipients.  The TWP employment and TWP self-employment tests differ from each other, as do the SGA employment and SGA self-employment tests.  The rules for self-employment are more complex and present fewer opportunities for the SSD recipient to reduce earnings to avoid being found to have engaged in SGA during the EPE.  Understanding what counts towards SGA and what does not presents opportunity to chip away at the monthly earnings during the EPE.  Educating our working SSD clients about IRWE and employer subsidies, provides further opportunities for disabled, working Americans to maintain their SSD benefits.  Understanding the interplay between the TWP, EPE, and EXR enables us to equip SSD recipients with the knowledge needed to avoid jeopardizing their benefits and creating opportunities for them to reinstate their benefits quickly.  The TWP and EPE were designed to encourage SSD recipients to try to return to work.  However, the rules are complex and disabled workers who misinterpret these rules can needlessly jeopardize their benefits.  With our help, the work incentive program can function as it was intended, providing SSD recipients the opportunity to test their ability to return to the work force without jeopardizing their hard earned SSD benefits.

[1] Manuscript for December 11, 2015, NCAJ Social Security Disability CLE “Trial Work Periods and Extended Periods of Eligibility” lecture.

[2] POMS DI 13010.035A.

[3] POMS DI 13010.035A.

[4] POMS DI 13010.035B.

[5] POMS DI 13010.035C.

[6] POMS DI 13010.035C1&2.

[7] POMS DI 13010.035D1.  For Disabled Widow Benefits, the TWP cannot begin before 1980.  For Childhood Disability Benefits it is the later of the month the recipient turns 18 or the first month of Childhood Disability Benefits entitlement (POMS DI 13010.035D1).

[8] 20 CFR §404.1592(d)(2)(ii), (iii), (iv).

[9] POMS DI 13010.035D2a. Please note that if one completed nine service months before 1/1992, then the limitation of the 60 rolling months would not apply (POMS DI 13010.035D2b).

[10] POMS DI 13010.035F. For detailed explanations on work issue determinations made before August 10, 2010, and before January 1992, please see POMS DI 13010.035G2-3 and compare to POMS DI 130101.035G1.

[11] POMS DI 13010.060B1.

[12] POMS DI 13010.060A reads in pertinent part:

[13] Substantial Gainful Activity, SSA.gov. Retrieved November 15, 2015 from https://www.socialsecurity.gov/oact/cola/sga.html.

[14] POMS DI 13010.060B3.

[15] POMS DI 13010.060A.

[16] POMS DI 13010.060B3.

[17] POMS DI 13010.060A.

[18] POMS DI 13010.210G.

[19] POMS DI 13010.201G.

[20] POMS DI 13010.210G. From December 01, 1980 to December 31, 1987 the EPE was only 15 months (POMS DI 13010.210G). For details on the applicable limitations for this period and the period before December 1, 1980, see POMS DI 13010.210E2-3.

[21] POMS DI 13010.210G.

[22] POMS DI 13010.210I.

[23] See generally the examples in POMS DI 13010.210H3.

[24] POMS DI 13010.210H1.

[25] POMS DI 13010.210H1.

[26] POMS DI 13050.001A.

[27] POMS DI 13010.035D1 and POMS DI 13050.001C4.

[28] 20 CFR §404.1520(b).

[29] 20 CFR §404.1572(a).

[30] 20 CFR §404.1572(b).

[31] Substantial Gainful Activity, SSA.gov. Retrieved November 15, 2015 from https://www.socialsecurity.gov/oact/cola/sga.html.  The table with the current and historical SGA amounts are listed there.

[32] POMS DI 10505.010C.

[33] POMS DI 10520.000.

[34] POMS DI 10520.001E.

[35] POMS DI 10520.001A.

[36] POMS DI 10520.001C.

[37] POMS DI 10505.010A1.

[38] POMS DI 10510.010.

[39] POMS DI 10510.010.

[40] POMS DI 10510.010A.

[41] POMS DI 10510.010A.

[42] POMS DI 10510.010B1.

[43] POMS DI 10510.015B1a.

[44] POMS DI 10510.015B1b.

[45] POMS DI 10510.015B2a.

[46] POMS RS 01803.700-716.

[47] POMS RS 01803.708.

[48] POMS RS 01803.713A.

[49] POMS RS 01803.713A.

[50] POMS RS 01803.713B.

[51] POMS RS 01803.715A1.

[52] POMS RS 01803.715B.

[53] POMS RS 01803.715A2.

[54] POMS RS 01803.716.

[55] POMS DI 10510.015C1.

[56] POMS DI 10510.010B2.

[57] POMS DI 10510.010B3.

[58] POMS DI 10510.010A.

[59] POMS DI 10510.010C2.