Extra Income and SSI Eligibility: A Delicate Dance

With the current economic downturn affecting nearly everyone in one way or another, most people would jump at the chance to earn additional income or to receive a large cash gift from a friend or relative. But for Supplemental Security Income (SSI) beneficiaries, extra income sometimes causes more problems than it's worth. That's because SSI recipients must follow very strict rules regarding how much income they can receive in any given month. If a beneficiary's income goes over his allotted SSI award, he could lose not only his SSI eligibility, but also the all-important Medicaid assistance that often comes with it.

The Social Security Administration (SSA), the agency responsible for administering the SSI program, has a unique definition of income: "any item an individual receives in cash or in-kind that can be used to meet his or her need for food or shelter." This means that a beneficiary's wages are income (luckily, the SSA only counts $0.50 of each $1.00 of wages as income), as are any cash payments, or cash equivalent items like gift cards, that are given directly to a beneficiary by anyone or anything, including a trust. While a beneficiary is on SSI, her monthly income must be lower than the amount she receives as an SSI benefit. If the beneficiary's income goes over this limit, even by one dollar, she loses SSI, at least temporarily?

Family members who have not consulted with a qualified special needs planner generally learn about these restrictions the hard way. One of the most common scenarios involves a well-intentioned friend or relative giving a person with special needs a large cash gift, typically on a holiday or birthday, that cancels out the beneficiary's SSI award. Fortunately, the SSA has a specific rule, called the "Infrequent or Irregular Income Exclusion," that allows for small gifts to SSI beneficiaries.

Here's how this rule works: During each quarter of the year, the SSA does not count the first $60 of a beneficiary's infrequent or irregular unearned income, or the first $30 of a beneficiary's earned income against his SSI award. The SSA defines infrequent income as any payment received from a single source that a beneficiary did not receive in the month before the payment and will not receive in the month after the payment. For example, if a beneficiary gets $30 in July for helping to paint a house, but does not do the work in June or August, the $30 counts as infrequent earned income. Irregular income is any income a beneficiary cannot reasonably expect to receive. In this case, if a friend of the beneficiary gives him $50 "just because," that $50 counts as irregular income.

In both the house painting example and the gift giving example, SSI would not count the payments as income because the payments fall under the Infrequent or Irregular Income Exclusion. However, if the beneficiary does not spend the funds during the month in which they are received, any remaining money counts as an available resource in the following month, creating a separate problem for the beneficiary, who must keep assets under $2,000 in order to qualify for SSI.

Clearly, $60 each quarter is not a lot of money. But for SSI recipients, who have to deal with many onerous financial requirements, every little bit helps. Of course, there are other, much less restrictive ways to help an SSI recipient with his daily needs, often through the use of a special needs trust. A qualified special needs planner can help you navigate the tricky world of SSI rules and propose solutions that can make an SSI beneficiary's life much easier.