PURPOSE: To state the policy on the method of averaging earnings for determinations as to whether work is substantial gainful activity (SGA) under the disability provisions of the law.
CITATIONS (AUTHORITY): Sections 223(d)(4), and 1614(a)(3)(D) of the Social Security Act, as amended; Regulations No. 4, Subpart P, sections 404.1574(b), 404.1575(c), and 404.1584(d); Regulations No. 16, Subpart I, sections 416.974(b), and 416.975(c).
PERTINENT HISTORY: Under the disability provisions of the law, except within the trial work period (TWP) provisions, a person who is engaging in SGA is not eligible for payment of disability benefits. SGA is defined in the regulations as work "that involves doing significant physical or mental activities. . . [and] is the kind of work usually done for pay or profit...." See Social Security Ruling (SSR) 83-33, Program Policy Statement (PPS)-107, Determining Whether Work Is Substantial Gainful Activity -- Employees, regarding evaluation of work activity of employees. See SSR 83-34, PPS-108, Determining Whether Work Is Substantial Gainful Activity -- Self-Employed Persons, regarding evaluation of work activity of self-employed individuals. The present PPS (discussion and examples) is applicable to all employees and to those self-employed persons who, under the first SGA test for the self-employed, have been found to perform significant services.
Regulations sections 404.1574(b), 404.1575(c), 416.974(b) and 416.975(c) provide for evaluation of work in terms of average monthly earnings. If an employee's average monthly "countable earnings" (see SSR 83-33, PPS-107) exceed the Earnings Guidelines, the employee will ordinarily be found engaged in SGA. If a self-employed person's "countable income" (see SSR 83-34, PPS-108) exceeds the Earnings Guidelines, he or she will be found to have substantial income, and in conjunction with the performance of significant services, will ordinarily be found engaged in SGA. This PPS describes how "countable earnings" or "countable income" are averaged when averaging is necessary for SGA determination purposes. It enunciates policy currently followed in the averaging of earnings, with the exception of the concept regarding seasonal work patterns, which is being deleted from SGA policy and will no longer be applicable.
Earnings are generally averaged over the actual period of time in which work was performed. According to the seasonal work concept, however, earnings from seasonal work are averaged over the entire year. There have been, historically, several problems with this concept: (1) seasonal work has not been defined; (2) seasonal work often occurs for short periods of time, and termination of such work is generally unrelated to the impairment, which places the concept in logical conflict with the SGA policy concerning an unsuccessful work attempt (UWA), and (3) since earnings from nonseasonal work are generally averaged over the period of time the work was actually performed (which increases the likelihood of a finding of SGA), the seasonal work concept gives the seasonal worker an advantage over other workers.
POLICY STATEMENT: An employee whose average monthly earnings (that is, " countable earnings" as discussed in SSR 83-33, PPS-107) exceed the Earnings Guidelines will ordinarily be found engaged in SGA. Most impaired employees who work do so at a single, ongoing job with a regular pattern of weekly (biweekly, monthly) earnings. In these cases earnings are uniform, so the averaging of earnings is not necessary. A determination as to whether the individual is engaging in SGA on the basis of earnings, therefore, can usually be made by comparing the individual's monthly earnings with the monthly amount for the particular calendar year shown in the Earnings Guidelines. However, when an employee's earnings or work activities vary somewhat from month-to-month, it may be necessary to average the "countable earnings" reported over a number of months in order to compare those earnings with the applicable monthly amount in the Earnings Guidelines. Generally, such earnings are to be averaged over the entire period of work requiring evaluation. However, it will be necessary to average separately the distinct periods of work involved when there is a regulatory change in the SGA earnings level or there is a significant change in work patterns or earnings. (See discussion below titled "When Earnings Are Averaged Over Separate Periods of Work.")
A self-employed person whose average monthly income (that is, "countable income" as discussed in SSR 83-34, PPS-108) exceeds the Earnings Guidelines will have substantial income, and in conjunction with the performance of significant services, will ordinarily be found engaged in SGA. Since self-employment income may fluctuate widely due to transitory business conditions, changes in the nature and size of the business, improved methods of operation, etc., the self-employed person is less likely than an employee to have a uniform income which can be readily compared to the Earnings Guidelines. It is, therefore, necessary to average the individual's "countable income" by figuring total "countable income" over a representative period and dividing by the number of months in that period. It is essential, then, for the evaluator to consider whether the period of time included in determining average monthly "countable income" is, in fact, representative of the individual's financial situation during the period involved in the SGA issue. As in the case of employees, income is generally to be averaged over the entire period of work requiring evaluation. However, it will be necessary to average separately the distinct periods of work involved when there is a regulatory change in the SGA earnings level or there is a significant change in work patterns or income.
If an individual's "countable earnings" or "countable income," when averaged, indicates SGA, an individual may for purposes of the disability determination be considered to have engaged continuously in SGA during the entire period being averaged. On the other hand, although the average for the entire period may not indicate SGA, a disability adjudicator would not be barred from finding that the individual has the ability to engage in SGA, if the medical and vocational factors of the case support such a conclusion.
This PPS explains averaging in initial disability cases and in continuing disability cases except during the reentitlement period. (See SSR 82-67, PPS-77, Extension of Eligibility for Benefits Based on Disability, concerning averaging during the reentitlement period in continuing disability cases.)
When Earnings Are Averaged Over the Entire Period of Work
If the individual's pattern of work was (or is) continuous without significant change in work patterns or earnings, and there was no change of SGA earnings levels during the period involved, earnings are to be averaged over the entire period of work requiring evaluation.
|$2,380 ÷ 8 = $297.50|
When Earnings Are Averaged Over Separate Periods of Work
EFFECTIVE DATE: The policy explained herein is effective as of the date of publication of this PPS.
CROSS-REFERENCES: Program Operations Manual System, Part 4, sections DI 00503.125 and 00503.310.B.2.b.; SSR 83-33, PPS-107, Determining Whether Work Is Substantial Gainful Activity -- Employees; SSR 83-34, PPS-108, Determining Whether Work Is Substantial Gainful Activity -- Self-Employed Persons; SSR 82-67, PPS-77, Extension of Eligibility for Benefits Based on Disability.
 An "unsuccessful work attempt" is an effort to do substantial work in employment or self-employment which was involuntarily discontinued or reduced below the SGA level after a short time (that is, no more than 6 months) for reasons relating to the individual's impairment.
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