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From Out of the Shadows (Part One): Income Averaging


Tucked away in the vast folds of the SSA’s Program Operating Manual System (POMS) are a couple of Substantial Gainful Activity tools that Social Security must apply to SSDI beneficiaries who are beyond the Trial Work Period but have not yet established a cessation month. Beneficiaries can’t apply for them and so they are kept hidden from view, but in those dark recesses they exist: Income Averaging, and the Unsuccessful Work Attempt (UWA). This week we’ll take a look at the former and save the wonders of the UWA for later.

Income Averaging is a tool that Social Security should apply when someone’s monthly countable earnings fluctuate between being considered Substantial Gainful Activity (SGA) and not being so. In order not to punish someone for performing SGA in one or two random months only Social Security will look at all the months worked and see if, on average, someone is generally working at SGA levels. Naturally, this being a Social Security regulation, there are a few more details to the process.

Social Security will average earnings if someone’s work was continuous and without significant change in work patterns or earnings. It is at the discretion of the Social Security worker to decide what actually constitutes a ‘significant’ change in earnings but essentially they’ll look to average income for periods of work where there were no change in job duties; no marked changes in work hours, for example someone going from part time to full time work; and no changes in jobs. If there are some months where there are no earnings they won’t count them at all as those figures would distort the overall average and not give a true indication of someone’s ability to perform SGA. The Social Security worker can also decide whether to include months where someone worked a partial month. Again, if the work looks like it is part of a continuous pattern of work, the month will be included in the averaging sum; if the work appears to be different, it won’t be included. One final detail is that Social Security doesn’t average income across time periods when the SGA levels have changed, which means that averaging periods are generally limited to no more than 12 months because the SGA guideline usually changes each year. 

 

Such are the variables in determining income averaging that it may come as some relief to beneficiaries and benefits counselors that it is solely Social Security’s task to decide where and when income averaging should apply, but it should also be quite the relief to know that income averaging exists and can be another safety net for those on the edge of that post-Trial Work Period cliff.