by Alexandra Rampy
Individuals who receive disability benefits are often hesitant to pursue employment opportunities for various reasons. First, many people collecting disability benefits have health conditions or restrictions that limit their ability to work, resulting in their reliance on the financial assistance these benefits provide. Additionally, many fear that earning an income will reduce their benefits, exacerbating their financial situation. Furthermore, individuals with disabilities generally face more significant barriers to employment, such as discrimination, lack of accommodations in the workplace, and limited job opportunities. Overall, the lack of readily accessible resources designed to assist people with disabilities in finding or creating employment opportunities only adds to their reluctance to pursue such opportunities. Attorneys, especially those who work with nonprofit organizations, could benefit greatly from having a general understanding of how the Social Security Administration (SSA) regulates disability benefits when a beneficiary either works for or starts a nonprofit organization.
The SSA distributes disability payments through two programs – Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI) – the largest Federal programs assisting individuals with disabilities. SSDI pays benefits to workers with a qualifying disability who are “insured,” meaning they have worked recently and long enough and paid Social Security taxes on their earnings. On the other hand, SSI distributes benefits to those with a qualifying disability who have limited resources and income. Eligibility for these programs is evaluated by state Disability Determination Services (DDS), a division of the Massachusetts Rehabilitation Commission contracted and fully funded by the SSA. Additionally, Massachusetts has a disability benefits program called the State Supplemental Program (SSP), which also distributes monthly payments to eligible individuals. Whether a disabled Massachusetts resident qualifies for SSP payments is determined by SSI eligibility; even if a person is above the income requirement for SSI, they may be eligible for partial benefit payments from the state. Navigating the different programs, eligibility requirements, and complex relationships between state and federal regulatory agencies administering these benefits is no simple feat. For many individuals who rely on their disability benefits, financial security is a particularly critical factor when considering employment opportunities.
Could creating a nonprofit corporation in Massachusetts impact an individual’s disability benefits? When a disability beneficiary creates a nonprofit corporation, their SSI benefits could be affected mainly through earnings considered Substantial Gainful Activity (SGA) by the SSA. The impact on SSDI benefits depends primarily on the nature and extent of their involvement with the nonprofit corporation.
The SGA Earnings Guide provides that if a beneficiary’s countable earnings are over a certain amount from work or self-employment, their social security disability benefits may be reduced or stopped. This amount changes yearly, but for 2023, the monthly earnings limit is $1,470 for non-blind disabled individuals. Therefore, if a person receiving disability payments creates a nonprofit and earns an income, this income will likely count towards the earnings limit. If the amount of income from their work exceeds the SGA limit, then they are no longer eligible to receive disability benefits. However, there are some exceptions. If there is evidence that an individual receiving SSI payments is engaging in SGA (*not covered by an exception or regulated incentive program, see “Social Security Benefits: An Opportunity to Start Anew”) or that they are able to control when or how much they are paid, the SSA will evaluate the work activity under the test of comparability and the test of worth work. Under the test of comparability, if the work being performed is essentially the same in quality and quantity as that of an unimpaired individual as their means of livelihood given the circumstances, regardless of the amount of earnings of the impaired person, it must be considered SGA. If the work would not be regarded as substantial or gainful under the comparability test, it may still be considered SGA if the work performed is clearly worth more than the SGA amount per the pay scales of the community. Nevertheless, the SSA’s Program Operations Manual System (POMS) states that after reviewing the facts and circumstances surrounding the individual’s work history, if there is “any reasonable doubt as to whether an individual engaged in SGA under the tests of comparability or worth work, the adjudicator should generally conclude the individual did not engage in SGA.”
In general, maintaining SSDI benefits is based on an individual’s inability to work due to their medical condition. If creating a nonprofit provides an employment opportunity for the beneficiary that they are able to perform, the SSA may determine that they are no longer eligible for SSDI. Furthermore, if the beneficiary receives compensation for their work, this income may also impact their eligibility for SSDI benefits. In practical application, a beneficiary may need to limit their involvement in forming a nonprofit corporation, so the SSA does not consider them to have employment opportunities or make an income. For example, if the beneficiary’s involvement is minimal, such as serving on the board of directors but not actively participating in meetings or decision-making, their benefits will certainly not be impacted. However, if the beneficiary is actively involved in the operations of the nonprofit by serving on the board of directors, working as an employee of the nonprofit, or receiving compensation for services provided, their benefits may be affected.
Navigating the provisions and regulations regarding disability benefits can be complex. Therefore, it is crucial for attorneys and disability beneficiaries alike to understand the impact creating a nonprofit corporation may have on social security disability benefits. Similarly, it is essential for attorneys assisting beneficiaries seeking to create nonprofit corporations to understand the client’s specific circumstances. In conclusion, with prudent planning, a beneficiary can create a nonprofit that helps the community and their own financial situation while preserving their eligibility for indispensable social security disability benefits. Ultimately by being aware of applicable regulatory policies, various exceptions, and incentive programs offered by the SSA, a beneficiary can achieve independence and give back to their community while maintaining financial security.