When Social Security receives a claim for disability benefits, the first question is whether the claimant performed Substantial Gainful Activity (SGA) during the alleged period of disability. If so, the claimant is ineligible for benefits during that time. SGA is generally defined as “work that involves doing significant and productive physical or mental duties, and is done (or intended) for pay or profit.” 20 CFR § 404.1510. Each year Social Security formulates a dollar amount that is used as the benchmark for SGA. In 2016 the amount is $1,130 per month and in 2015 it was $1,090. If this amount is or was exceeded, the earnings are presumed to be SGA. Gross earnings through employment can be easily compared to these benchmarks, but earnings through self-employment require further analysis.
The applicable rules are located in sections 404.1080 through 404.1096 and Social Security Ruling 83-34. The ruling should be consulted first for a general overview. Social Security may find that self-employment constitutes SGA under one of three tests:
- Under the Significant Services and Substantial Income test, both elements must be met. The significant services element is met if the claimant is a sole proprietor or, if not, performing more than half of the duties of the business or more than 45 hours per month of work. For a farm landlord, the question is whether he or she “materially participates,” not through an agent. The substantial income element is met if the claimant’s average monthly net income (countable earnings) reaches the benchmark amount; if the claimant’s livelihood derived from the business is the same as before he or she became disabled, or; if the claimant’s income is comparable to that of unimpaired individuals in a same or similar business in that community. If this test is not met, Social Security proceeds to the next two tests.
- Under the Comparability of Work test, the work is SGA if it is comparable in all relevant factors to that of unimpaired individuals in a same or similar business in the same community. Relevant factors include hours, skills, energy output, efficiency, duties and responsibilities.
- Under the Worth of Work test, the work is SGA, even if it is not comparable, if it is clearly worth more than the SGA benchmark amount when considered in terms of its value to the business or when compared to the salary an owner would pay to an employee for such duties in that business setting.
This is a general overview and the authorities cited above should be consulted for each individual situation. There are several additional details and nuances further explained in these sources. If your claim for Social Security Disability involves self-employment earnings, consider enlisting the help of a good attorney to interpret these rules and persuade social security that they operate in your favor.