TN 23 (06-24)

DI 10505.001 Evaluation and Development of Employment

This section provides instructions for evaluating and developing work issues in employment situations for non-blind persons only. For cases with self-employment, see DI 10510.000; and for title II blindness cases, see DI 10515.000. For general information on the meaning of substantial gainful activity (SGA), see DI 10501.001.

A. The SGA determination process

An SGA determination is a process that focuses on a person’s earnings and their work activity. In most cases, the primary consideration for evaluating a person’s work activity is the gross earnings they received; however, this is only the starting point when making an SGA determination.

1. SGA factors

When evaluating for SGA, consider the following factors:

  • Did the earnings represent the person’s own productivity?

  • How many hours did the person work, and what was their rate of pay?

  • Was employer subsidy, or impairment-related work expenses involved?

  • Was there a special employment situation such as government-sponsored programs, foreign work, or sheltered employment?

  • Was the person in the military?

  • Did the person receive pay for non-work (sick and vacation pay, holiday pay, or any bonuses, etc.)?

  • Did the countable earnings exceed the SGA threshold?

See Also:

DI 10505.010 Determining Countable Earnings

DI 10520.001 Impairment-Related Work Expenses (IRWE)

DI 10505.025 Special Employment Situations

DI 10505.023 Military Service

DI 10505.010C Policy — sick and vacation pay

DI 10501.015 Tables of SGA Earnings Guidelines and Effective Dates Based on Year of Work Activity


2. The SGA determination

After considering SGA factors, determine the:

  • gross monthly earnings,

  • the months that the person performed work activity, and then

  • calculate the countable earnings.

Evaluate all information (including information obtained on the work activity report (e.g., SSA-821-BK (Work Activity Report-Employee) to assist you in the SGA determination.

IMPORTANT: If you receive information that the person may be engaging in SGA (despite low earnings), or is in a position to defer or suppress earnings, follow the evaluation guides in DI 10505.020C.

See Also:

DI 10505.015 Averaging Countable Earnings

B. Gross earnings

1. Employee

Gross earnings are a person’s total earnings for work activity before the deduction of taxes or other withholdings. Total earnings may also include in-kind payments that we may not count as “wages” for FICA tax and benefit purposes. Payments in-kind are employer-paid non-monetary payments, such as room and board or free rent. Count payments in-kind in an SGA determination if they are paid based on the employee’s own productivity.

To determine gross earnings:

  • Develop enough evidence to determine the actual period worked and the earnings for that period. Note that we count earnings for title II beneficiaries when earned, and for title XVI, we count earnings when paid.

  • Compare the evidence received with the person’s statement to confirm the information on the SSA-821-BK accurately reflects earnings.

NOTE: Information on developing and verifying gross earnings is in section DI 10505.005.

2. Statutory employee

Social Security Act §210 defines certain persons as employees, who we would normally consider as independent contractors (i.e., self-employed) under the common-law rules for determining employer-employee relationships. There are four categories of statutory employees:

The employer provides statutory employees a W-2 tax form with the amount of Social Security wages in box 3. Review the W-2 following these guidelines:

  • If we consider a person as a statutory employee, the employer should have checked the “statutory employee” block on the W-2 to indicate their status.

  • When filing tax returns, the statutory employee may be able to deduct trade or business expenses from the wages shown on the W-2 by filing a Schedule C or C-EZ. However, we use the Social Security wages (reported on the W-2) as the gross income for SGA purposes.

  • Do not deduct the business expenses from the gross wages when determining countable income, unless you can consider any of the expenses as IRWE.

C. Countable earnings

1. How to determine countable earnings

After obtaining a person’s gross earnings, following these guidelines to determine countable earnings:

  • Deduct the amount of any subsidized earnings provided by the employer, and any approved IRWE--you do not have to develop for subsidy or IRWE when monthly gross earnings are under the SGA limit, and you do not have evidence that the earnings are understated.

  • Take into consideration, and if appropriate, deduct sick or vacation pay and bonus and incentive payments.

  • Do not deduct from gross earnings standard payroll deductions such as Federal and State withholding taxes, insurance premiums, Federal Insurance Contributions Act taxes, pension payments, union dues, etc. These amounts are not deductible because they are attributable to a person's work activity.

For detailed information on applying work incentives to determine countable earnings, see DI 10505.010.

2. When you may not have to determine exact monthly countable earnings

For title II, you may be able to determine if a person has engaged in SGA without having to determine the exact monthly countable earnings if:

  • a person alleges working at levels that are clearly above the SGA level, there is no reason to question the accuracy of their statements, and the evidence is clear that alleged deductions for employment supports (IRWE, subsidy, or special conditions) would not reduce the gross earnings below the SGA threshold level; or

  • the evidence is clear that the person’s monthly earnings are clearly not SGA, and you do not have evidence that they may actually be engaging in SGA, or is in the position to defer or suppress earnings.

See Also:

DI 10501.015 Tables of SGA Earnings Guidelines and Effective Dates Based on Year of Work Activity

DI 10501.025 Clearly Not SGA

NOTE: Different rules apply to persons entitled to title XVI. For information on computing income in title XVI cases, see SI 00810.300.

D. Comparability or worth of work activity as a measure of SGA

If there is evidence that a person may be engaging in SGA, but the countable earnings are below SGA, or a person may be in a position to defer or suppress earnings:

  • develop the comparability and test of worth of work (see DI 10510.020) to the work of unimpaired persons; and

  • determine if the person is engaged in SGA, even though their earnings are not substantial; the work must meet either the test of comparability or the test of worth of work, explained in DI 10505.020C.

EXCEPTION: Do not determine that an employee is engaged in SGA based on the test of comparability or the test of worth of work if the person is protected under the exemption of work activity provision.

E. Unsuccessful work attempt (UWA) is not a measure of SGA

A UWA is an effort to do work in employment or self-employment that discontinues or reduces to the non-Substantial Gainful Activity (SGA) level after a short time (no more than 6 months) because of the impairment or the removal of special conditions related to the impairment that are essential to the further performance of work (see DI 11010.145).

  • A UWA determination cannot apply after a cessation decision in the EPE or at any time during the initial reinstatement period (IRP) for EXR beneficiaries. For more information on the IRP, see DI 13050.066.

  • In continuing disability review (CDR) cases, the FO makes the UWA determination. In all other situations, the FO can recommend that work activity is an UWA, but the disability determination services (DDS) is responsible for a final determination.

  • The UWA does not apply when making a trial work period (TWP) service month determination. However, if a period of work falls within and outside of the TWP, you must consider the work from the TWP in the UWA determination.

ACTION: Document your UWA development on the SSA-821-BK, in eWork, and, if appropriate, the SSA-823 (Report of SGA Determination).

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DI 10505.001 - Evaluation and Development of Employment - 06/11/2024
Batch run: 06/11/2024