TN 18 (09-20)

DI 10505.015 Averaging Countable Earnings

A. Background

Section §404.1574(b)(2) of agency regulations requires us to determine countable earnings from work activity as substantial gainful activity (SGA) if they average more than the SGA threshold amounts. For the tables of SGA earnings, see DI 10501.015. Do not average earnings simply because it is or is not advantageous to the beneficiary. Section §404.1574a, states we will average earnings if:

  • an employee or self-employed person’s work was continuous; without significant change in work patterns or earnings;

  • there has not been a change in the SGA level; and

  • monthly earnings fluctuate from above to below the SGA threshold.

NOTE: Using eWork’s quick distribution tool is not the same as averaging countable earnings to determine SGA. Do not use it to replace earnings development policies found in DI 10505.005. Do not use the quick distribution tool when you have evidence of weekly, bi-weekly or monthly earnings.

B. When to average earnings

Averaging countable monthly earnings means adding the countable monthly earnings within the review period, and dividing the total by the number of months in the review period. For information on how to determine countable earnings, see DI 10505.010. In some instances, we will consider earnings SGA if the averaged earnings exceed the SGA threshold during the averaging period, even if the actual countable earnings in a month may be below the SGA threshold.

1. Average earnings when:

  • Monthly countable earnings fluctuate above and below the SGA earnings thresholds.

  • Evaluating SGA as part of the initial claims process.

  • Determining if disability ceases due to work activity in a work continuing disability review (CDR).

2. Do not average earnings when determining:

  • Trial work period (TWP) service months. For more information on the TWP, see DI 13010.060. You may include TWP months in an averaging period to determine SGA activity in the extended period of eligibility (EPE). See DI 10505.015C.1.a. for an example of using TWP months in the averaging period.

  • Payment months during the EPE after a cessation due to work activity has occurred. For more information on the EPE, see DI 13010.215.

  • Payment months during the initial reinstatement period (IRP) in expedited reinstatement (EXR) cases. For more information on the IRP, see DI 13050.066

C. Significant change in work patterns or earnings

You must average countable earnings over the period of work requiring evaluation unless there is a significant change or a regulatory change in the SGA earnings level. A significant change marks the beginning or ending of an averaging period. Average earnings over each separate period of work. Although there is not an established monetary earnings amount that represents a significant change in earnings or work activity, you can determine if a significant change has occurred by considering the following work issues:

  • Was there a change in job duties or hours (i.e., changing from part-time to full-time work)?

  • Did the person change his or her position?

  • Is this person no longer working at the job?

  • Did the person have any non-work months?

  • Did the person have a month with zero countable earnings?

NOTE: Typically a month with zero earnings represents a significant change, however, if impairment related work expenses (IRWE) or a combination of work incentives reduce countable earnings to zero, the regulations require us to average if the period of work was continuous.

  • Did the person have a partial month of work?

1. Examples of no significant change

a. Continuous work

Mr. A begins working at The Superstore 10/02/2017. He does not report that he started working and we detect the work through an earnings enforcement. A technician opens a work review and Mr. A returns form SSA-821-BK. Paystubs are not available at the time of the review. He does not indicate any change in work patterns or earnings. The technician retrieves his earnings from The Work Number. His earnings are as follows:

Month 2017 2018 2019
January $1,200 $1,300
February $1,200 $1,300
March $1,200 $1,300
April $1,200
May $1,200
June $1,150
July $1,100
August $1,250
September $1,200
October $1,100 $1,200
November $1,150 $1,200
December $1,100 $1,150

Since the work was continuous, earnings fluctuate above and below SGA from 01/2018 to 12/2018, and there is no significant change in earnings or work pattern, the technician averages all months in the averaging period. Average earnings for 2018=$1,187.50 ($14,250/12). His TWP months are 10/2017-06/2018. Since the earnings average more than the 2018 SGA threshold of $1,180, the technician determines that the cessation month is 07/2018, the first month of the EPE. His grace period is 08/2018-09/2018. Benefits are suspended 10/2018, 11/2018, 01/2019, and continuing. Benefits are due in 12/2018 because we cannot apply averaging after a cessation month.

b. No significant change in work pattern

Mr. B calls on 12/03/2018 to report that he returned to work as a part-time Shift Manager at We Are Tires on 01/05/2018. He submits his wages via myWR. Mr. B returns the SSA-821-BK, which indicates that he is still working and that there are no changes in his job duties or salary. He provides proof that 10/02/2018 and 10/03/2018 were paid vacation days, and that 10/23/2018 was a sick day. His countable earnings are as follows:

Month 2018 2019
January $1,225 $1,300
February $1,150
March $1,250
April $1,200
May $1,250
June $1,200
July $1,250
August $1,250
September $1,200
October $1,050
November $1,200
December $1,250

The technician completes the review in 01/2019. In determining countable earnings, the technician excludes the vacation and sick pay in 10/2018, per DI 10505.010. The technician determines that the work is continuous, there is no significant change in work pattern or earnings, and there is no partial work month. The technician averages the earnings. Average earnings 01/2018-12/2018 are $1,206.25 ($14,475/12). This is above the SGA threshold for 2018 of $1,180. The technician determines that Mr. B engaged in SGA in all months of 2018. Based on his allegation, SGA work continues. His TWP months are 01/2018-09/2018, and his cessation month is 10/2018, the first month of the EPE. Even though countable earnings in October are below SGA, we will consider them SGA since earnings in 2018 average over the limit. The grace period is 11/2018-12/2018 and suspension begins 01/2019.

2. Examples of significant change

a. Reduction in hours

Ms. M completed her TWP in 06/2017 and stopped working due to her disabling condition shortly after. In 01/2018, she starts a new job. In 05/2019, SSA initiates a work review. The technician calls Ms. M and has her attest to the information on the SSA-821-BK. During that interview, she indicates that her earnings decreased in 04/2018 because her employer complied with her request to reduce her hours to part-time due to her disability. She then tells the technician that with some therapy, she was able to work back up to full-time effective 09/02/2018 and that full time work continues. Her earnings are as follows:

Month 2018 2019
January $1,205 $1,225
February $1.195 $1,230
March $1,200 $1,250
April $690 $1,300
May $755
June $825
July $795
August $760
September $1,175
October $1,205
November $1,250
December $1,200

The technician determines that work from 01/2018-03/2018 is an unsuccessful work attempt. This period is less than six months, is preceded by a period of non-work, and the work was reduced to non-SGA levels due to the disabling condition. The technician has evidence of a significant change in work pattern 04/2018 through 08/2018; therefore, the technician does not include those months in the averaging period, and instead only averages 09/2018-12/2018. That period results in average earnings of $1,207 ($4,830/4). Since Ms. M continues to work and SGA level work activity is ongoing, her cessation month is 09/2018, with grace months of 10/2018-11/2018, and benefit suspension 12/2018 and continuing.

b. Change in position

Ms. J begins working at ACME Law Firm on 10/03/2017. She completed her TWP in 06/2018. She completes form SSA-821-BK and reports that she worked as an entry-level administrative assistant at the firm through 09/2018. She indicates in the remarks of the work activity report that effective 10/03/2018 she received a promotion to executive administrative assistant. She tells us that with the promotion came increased duties and hours. She also received an increase in pay. Her earnings are as follows:

Month 2017 2018 2019
January $1,000 $1,550
February $1,100 $1,450
March $1,150 $1,550
April $1,200
May $1,150
June $1,150
July $1,100
August $1,200
September $1,200
October $1,100 $1,500
November $1,150 $1,450
December $1,100 $1,500

We have evidence that there was a significant change in work pattern effective 10/2018, when she received the promotion. Since there was no significant change in work pattern or earnings between 01/2018 and 09/2018, the technician averages earnings for that period. Average earnings for this period = $1,138.89 ($10,250/9). Since the earnings average less than the 2018 SGA threshold of $1,180, the technician determines that Ms. J did not engage in SGA after the end of the TWP through 09/2018. She works above SGA 10/18 and continuing. Her cessation month is 10/2018. Benefits are suspended effective 01/2019, the month after the grace period, and continuing.

c. Significant change in earnings

A technician receives an earnings enforcement alert in 07/2019 showing Ms. E works at The Warehouse, Inc. and reviews the prior decisions in eWork. Ms. E previously completed the TWP. A call to Ms. E is unsuccessful. The technician sends an SSA-821-BK to Ms. E, but she does not return it. The technician reviews the earnings per the earnings hierarchy found in DI 10505.005C.2. The best available evidence is the National Directory of New Hires (NDNH) query. NDNH shows a hire date of 04/05/2018 and earnings posted through the first quarter of 2019. There is no indication that Ms. E has stopped working. The technician distributes the earnings evenly for each quarter. The earnings are as follows:

Month 2018 2019
January $1,321
February $1,321
March $1,321
April $1,122 $1,321 (estimate)
May $1,122 $1,321 (estimate)
June $1,122 $1,321 (estimate)
July $1,185
August $1,185
September $1,185
October $322
November $322
December $322

The distributed monthly earnings for the second quarter are $1,122 ($3366/3) and $1,185 ($3555/3) for the third quarter. Since the earnings in the fourth quarter of 2018 are significantly lower than the other quarters in 2018, the technician does not include that quarter in the averaging period. Average earnings 04/2018-09/2018 are $1,153.50 ($6921/6) which is less than the SGA threshold for 2018. The distributed earnings for the first quarter of 2019 are over SGA. The technician has no proof that the work has ended and therefore estimates continuing monthly earnings based on those posted for the first quarter through the month of effectuation. Ms. E’s cessation month is 01/2019 with grace months of 02/2019-03/2019 and suspension as of 04/2019 and continuing.

D. Determining the averaging period

A significant change affects the months used in an averaging period. A significant change marks the beginning or ending of an averaging period. Average earnings over each separate period of work.

1. Averaging when work stops

When a person worked for a continuous period but is no longer working, average earnings over the actual period of time that he or she actively engaged in work activity if there were no significant changes in work patterns or earnings. Consider the following when determining the averaging period:

  • Earnings, and

  • Number of days worked, and

  • Job duties and responsibilities, and

  • Any partial months of work (i.e., the first and/or the last day of work).

When determining whether to include partial months in the averaging period, you must evaluate whether there was a significant change in either the:

  • Earnings; or

  • Pattern of work activity compared to the rest of the period of employment.

Partial months that do not represent a significant change in the work pattern or earnings should be included in the averaging period. Partial months that do represent a significant change should not be included in the averaging period. By not including partial work months with significantly lower earnings in your averaging period, you avoid artificially lowering the average monthly earnings.

1. Example of a partial work month

Mr. D worked at MacArnolds Burgers and completed his TWP in 06/2017. He worked at below SGA until he quit on 12/24/2017. In 01/2018, he begins working at International Screen Printing. He does not report that he started working and we detect the work through an earnings enforcement. A technician opens a work review and requests documentation. Along with his paystubs, Mr. D returns form SSA-821-BK indicating he started working in 01/2018. There is no allegation of a subsidy or IRWE. The NDNH query shows a hire date of 01/24/2018.

Month 2018
January $200
February $1,175
March $1,175
April $1,182
May $1,190
June $1,195
July $1,180
August $1,185
September $1,190
October $1,185
November $1,195
December $1,170

Since the period of work contains a partial month of work activity with a significant change in the earnings and the pattern of work activity, the technician makes the decision not to use the earnings from January in the averaging period. Earnings in the remainder of the year fluctuate just above and just below SGA levels and therefore the technician averages them. Average earnings from 02/18-12/18 are $1,183.80 ($13,022/11) which is above the SGA threshold of $1,180 for 2018. The technician determines that 02/2018 is the month of cessation, with 03/2018 and 04/2018 being the grace period months. Mr. D is due a check for any month after the cessation month in which actual earnings are below the SGA threshold.

2. Averaging when work continues

When estimating continuing average earnings, consider available evidence and the duration of the employment period. If you receive evidence after effectuation that the estimated earnings or anticipated pattern of SGA did not occur, a reopening may be required. Consider the following when work continues:

  • If the individual has been employed for a long period of time (i.e., a number of months after onset in initial cases, or throughout the TWP when developing work CDRs), estimate future earnings based on past earnings already developed.

  • If the individual has been employed for a short period of time (e.g., three or four weeks), determine the pattern of work and estimate expected earnings based on an allegation (i.e., weekly wage hours per week x 4.333).

  • If work was continuing at last contact with the person, determine that the work activity will continue at the same or similar rate of pay unless you have evidence showing otherwise.

3. Averaging when there are multiple work efforts

When a person has multiple work efforts (i.e., he or she works for multiple employers or is simultaneously working as an employee and is self-employed during the same month or months), follow these guidelines:

  • When an individual has wages from multiple employers or wages and self-employment income that do not represent SGA, consider combining the earnings or income. While eWork automatically combines earnings based on all monthly employment efforts, the evaluation of earnings is ultimately the responsibility of the technician.

  • When an individual has wages and has a loss from self-employment, do not use the loss to reduce total earnings. Consider services as specified in DI 10510.010A or the countable income test in DI 10510.010C, as appropriate when making self-employment SGA determinations.

E. Systems coding

1. Future Development

When there is an indication that the work pattern or earnings may change from non-SGA to SGA:

  • Create an issue of SGA on the eWork development worksheet, or

  • Document the SGA issue on the CDR Development Worksheet (CDRW) screen of the disability control file (DCF), and

  • Diary the case for review at the time you expect the change to occur or for a 12-month period. For detailed information on the CDRW screen, see DI 13010.605.

2. Post-entitlement

Use eWork to process the SGA determination. eWork automatically pushes the following to the verified earnings (VERN) (see DI 13010.675) and CDR Remarks Input (IRMK) (see DI 13010.630) screens of the DCF:

  • Monthly earnings information; and

  • Work determination codes; and

  • Averaging documentation.

When making the final SGA determination eWork will present the option to average when appropriate and allow you to choose the averaging period(s). The averaging option is only available when you are in the “preview/process decision” or “effectuation” phase of the work review.

NOTE: While eWork may present the option to average, the decision to apply averaging is the ultimately the responsibility of the technician. Do not apply averaging simply because eWork presents the option to do so.

3. eWork exclusion cases

Manually document the average earnings amount on the VERN screen in the DCF. While you can use eWork’s initial claims (IC) functionality to assist you in making an SGA determination, IC does not post the earnings to the DCF. For more information on eWork exclusion cases and instructions on how to input earnings manually to the DCF, see DI 13010.026.


To Link to this section - Use this URL:
http://policy.ssa.gov/poms.nsf/lnx/0410505015
DI 10505.015 - Averaging Countable Earnings - 09/08/2020
Batch run: 09/08/2020
Rev:09/08/2020