Professional Patient

SSDI Lump Sum Payment - Passing Through to LTD Carrier

When you are awarded Social Security Disability Income, the Social Security Administration sends you a single, lump-sum payment for any back-owed benefits. This check can be enormous... tens of thousands of dollars. And it has no tax taken out of it, which bites you in the bum at tax time.

In my case, it wasn't even my money to keep... I have private long-term-disability (LTD) income from a plan at work. The terms of the LTD policy are that they (UnumProvident) reduce their monthly payment to me by the amount of my monthly SSDI benefit. They had not been doing this while I was waiting to get approved for SSDI (I didn't think it would happen, and I needed the money right then). So I had to send 95% of the check amount (approximately) to them. 

The real rub: depending on how you pay for LTD insurance, the monthly benefit you receive from an LTD plan may be tax-free. And mine was. But I had to pay them the back-owed amount with taxable income (the SSDI). Which bites. 

I asked my CPA, and she asked several peers, and they all agreed. While it defies logic that you should have to reimburse the LTD company with after-tax or taxable money even though the money you receive from the LTD plan is tax-free, there is NOTHING you can do on your tax return about this. No deduction, no credit, nothing. It sucks!

Which just goes to show - if you can manage it, you need to save some of your LTD/SSDI money for a rainy day - tax issues like this, overpayments (Unum recently told me they overpaid me $1600 and needed it back ASAP), sudden termination of benefit payments, etc.

SSDI Lump Sum Payment = Major Tax Headache

I have been MIA from this blog for weeks now, because I am wrestling with my 2008 taxes. In 2008, the Social Security Administration approved me for SSDI and sent me a single check for back-owed payments for 2006, 2007, and the first part of 2008. 

Now I am trying to avoid the potential tax nightmare of having all of this income apply to my 2008 return (it's not my fault they didn't pay me my 2006 benefits in 2006 and my 2007 benefits in 2007). The IRS publication 915, Social Security and Equivalent Railroad Benefits, discusses a "lump sum election" option that somehow allows you to attribute lump sum amounts for prior years to those prior years, without having to go back and amend your older tax returns. I tried reading it, tried getting TurboTax to deal with it for me, and wound up cross-eyed and more confused than ever.

So for the first time, I've had to find a tax professional. And the ones I've spoken with thus far aren't any more familiar with the lump sum election than I am! It's unnerving. It probably does not help that I have waited so late into the tax season to try and find help. Lots of CPAs and tax preparers I've contacted are too busy to take me as a new client for this year. I suspect that somewhere in that group of people may lie a handful of pros who have done lump sum elections before.

So, my one piece of crucial advice to anyone who has just been approved for SSDI - go to a tax professional immediately! Determine right away whether that lump sum payment of back-owed benefits is going to wreck your taxes for that year... and take steps to counteract it. (If SSDI is your only real source of income, you should not have any problems... it's people who have working spouses or are working part-time themselves who may wind up owing taxes on those SSDI benefits.) The Social Security Administration can do things for you like voluntarily withhold taxes from future SSDI checks and/or add additional withholding to future SSDI checks to make up for any possible tax liability you may have from a lump sum payment for prior years. 

I wish I had known that then! Argh.

Related Reading:

Individuals with Disabilities Face Added Complexities at Tax Time, Business Wire, Feb. 20, 2008, as reprinted on findarticles.com.

The SSDI Work Activity Report (Form SSA-821)

If you receive SSDI benefits and then are able to return to work, you must notify your local Social Security office. They will want to track how much you earn at your job and determine when/if you earn too much to remain on SSDI.

The Work Activity Report (Form SSA-821) is how Social Security keeps tabs on your earnings. I got one in the mail a few days ago. And like any other gem from the Social Security office, this one requires that I complete the form and return it in no more than 15 days. 

Interestingly, when I called my Social Security office last February and told them I was returning to work, they asked me to send my pay stubs to them once a month so they could track my earnings. So why do they need a form that asks me to write down how much I've earned each month that I've been working?!? Don't they have that information? (They must have brain fog, too! Arrgh.) 

Unlike most Social Security forms, this one is pretty straightforward. You tell them who you have worked for since returning to work, and explain how much money you have made (pre-tax earnings per month). If you have spent your own money for equipment or transportation that makes it possible to work with your disability, you will need to explain that on the form as well. (These are called "impairment-related work expenses," or IRWE. Learn more: Impairment Related Work Expense, from the Work World website, published by the Employment Support Institute at Virginia Commonwealth University.)

Social Security asks for your earnings information to determine if you have entered a "trial work period", or TWP, which occurs when your earnings reach a particular level (in $2008, that level was $670 per month or more; in 2009, that level is $700 per month or more). Entering a TWP puts you on the path to having your SSDI benefits terminated (eventually... read on). 

You can have 9 months of TWP-level earnings while still receiving SSDI benefits. After 9 months, you enter a 3-month grace period in which you still receive SSDI benefits. The grace period constitutes the first 3 months of a 3-year extended period of eligibility, or EPE. During the EPE, you will receive an SSDI payment for any month in which your earnings fall below a level called "substantial gainful activity," or SGA. (For 2009, you achieve SGA by earning $980 per month or more.) If at the end of the EPE, you are still earning money at the SGA level, you will be terminated from the program altogether. 

IRWE allow you to effectively get around the SGA earnings cap in some situations. As the Minnesota Work Incentives Connection's Impairment Related Work Expense page explains (better than I could):

"If you receive Social Security Disability Insurance (SSDI), you are usually ineligible for a benefit check if you earn more than the Substantial Gainful Activity (SGA) level.  With an approved IRWE, SSA doesn’t count earnings you use to pay for certain expenses, which allows your SSDI benefits to continue even though you are earning more than the SGA level."

Additional Resources:

SGA - SSDI, from the Work World website.

SSDI Work Incentives, from the Work Ability website (a project of the Utah Work Incentives Initiative) 

SSDI Work Incentives, from the Work World website.

Work Activity Report - Employee, from the Survivorship A to Z website, has some tips for completing the Work Activity Report (SSA-821). 

Next Steps after Your Social Security Disability Claim Is Denied

Ron recently posted a comment asking what you can do when your Social Security Disability Income (SSDI) claim is denied. I've been meaning to write more about the SSDI process, and here's Ron prompting me along.

Ron, what you can do next can be summed up in one word: Appeal. You need to appeal their denial of your claim. Depending on where you are in the SSDI process, you might need to pursue one or more of these appeal steps (listed in order). The SDDI process includes (1) initial application, (2) reconsideration (first appeal), (3) hearing (second appeal), and (4) Appeals Council (third appeal). If you are at step #1 (you submitted your application, and now, months later, they have denied your claim), your next step is #2, reconsideration. And if reconsideration results in a continued denial, you would pursue step #3, an in-person hearing. If you are still rejected at step #3, there is an option to appeal your claim to an Appeals Council (step #4). 

Allsup.com's SSDI Process web page explains in greater detail how the process works. And it gives some alarming statistics... 64% of claims are denied at step #1 (initial application). 86% of claims are denied at step #2 (reconsideration). 37% are denied at step #3 (hearing). 67% are denied at step #4 (appeals council). The Social Security online publication "The Appeals Process" also has lots of useful information. 

It is important that if you are denied anywhere along the way, you move to the next step (reconsideration, hearing, or appeals council) QUICKLY. You have 60 calendar days from the date of your denial to file the appropriate form to start appealing the denial. For a reconsideration, the HCV Advocate's "Reconsideration of a Social Security Denial" page includes lots of helpful information about what paperwork to complete, and how to go above and beyond to maximize the chances that your reconsidered claim will be approved. 

To actually initiate an appeal, fill out the online form at www.socialsecurity.gov/disability/appeal.  If you don't want to file for an appeal online, there are other ways to notify the Social Security Agency of your wish for an appeal. These web addresses work for any level of appeal - reconsideration, hearing, appeals council, etc. 

If you feel like you need help winning an appeal (and who doesn't? The sheer volume of paperwork involved is enough to make any chronically ill person give up in despair), you may wish to hire a disability attorney or other representative to manage the appeal process for you, file forms and send medical records, stand with you at your appeals hearing (if you reach that stage), etc. Of course, this kind of help is going to cost you. According to the Social Security Administration's Fee Agreements web page, no attorney (or other representative) can charge for their services more than the lesser of 25 percent of the past-due benefits you are owed or $5,300. 

Finding a good disability lawyer can be tricky... You generally want a firm that has experience with SSDI representation, not your local guy around the corner who does wills. You could start by searching your local phone book or doing a Google search, or keep an eye on TV commercials (usually during morning TV shows) for ads from law firms like Bender and Bender. A better way might be to hunt for disability organizations in your state and ask them for information about local disability attorneys. You could, for example, research whether your state has a "Disability Law Center" or similar organization. You could also try contacting your state's department or office on disability to request information. And Disabilityresources.org offers state-by-state listings of disability-related agencies, government departments, and organizations. 

What is Life Without Work?

Yesterday was my first official day (half-day) back at work. Nearly 21 months since I first had neck pain and 18 months since my spinal fusion surgeries, I was finally back at my job.

By the end of the day, I was chatting with a good friend at work who has congestive heart failure, severe neck pain, and a host of other medical problems. Her doctor recently recommended she stop working, permanently. And she nearly wailed to me "What am I supposed to do, go home and wait to die?"

We live in an achievement and work-obsessed world. We measure the value of our life in terms of salary, degrees, awards earned, promotions, bonuses, the size of our business "network", etc. We focus on school and career achievement, of getting to some magic point in our lives where we have accumulated enough evidence to prove to others that we are good, worthwhile human beings. To prove once and for all that we measure up.

Leaving our career to tend to our health is terrifying. It doesn't matter if we plan to go back to work or not; suddenly we are confronted with an empty slate. Who are we and what are we worth if we do not work or go to school? How can we be valuable, worthwhile, successful? Who will notice our achievements (whatever they may be) if we don't have a built-in audience of professional colleagues? How can we be intelligent and ambitious when it takes everything we have to just tend to our health?

One way to start answering these questions is to think about the value of our lives in a broader context. We aren't just employees. And we need more than promotions and raises to feel successful and content. Self-help author James Arthur Ray suggests that true wealth involves more than just money. It includes health, relationships, knowledge/experience, and spirituality. We can turn to these additional areas to start redefining our lives and what it means to be successful.

Another way to start answering the question of self-worth and success in life without work is to think about the various roles we play in our lives, other than the role of employee or student. To whom are we parent, sibling, grandchild? Neighbor, mentor, peer? Friend? Counselor or teacher? Positive example? Who and what depends on us for care (kids, pets, aging parents, plants, etc.)? What avocations do we pursue (what are our passionate hobbies... are we chefs? gardeners? Stamp collectors? Community activists? Teachers?) How can we be of service in these roles? I call my lonely grandmother regularly because I know she needs someone to talk to. And it feels wonderful to shine that little bit of light on her day. I also recently guided my father towards dry-mouth products that will help him cope with radiation and chemo for throat cancer. I shipped him an entire box of products because I know he won't have the energy to find them himself. It feels good to know how to help him in this small way. I also smile every time my cat wiggles in delight when I pour her morning food. I know she depends on me for that. In these small kinds of gestures, I am a success. I have value. I feel content.

These examples of being of service in our existing relationships hint at a third way to start defining your life without work. You can redefine success and happiness as internal states of being. Much of the success we so often wish for includes some kind of external validation... your boss says good job and gives you a raise, your peers clap as you receive your award, etc. That external validation feels good, but it is not the core of the success itself. When I feed my cat or call my grandma, it's nice if they express appreciation, but it's not necessary. I get a sense of achievement in simply making the gesture, simply offering what I have to give. And I let my definition of success change with my changing health. On a good day, success is making it to work or calling my grandma. On a bad day, success is making it out of bed and deciding to wait to call my grandma until I have more energy to share with her.

And lest this all sound too new age and self-help-y, realize that there will still be ways to be successful outside of your own mind! You might write a great blog that gets lots of visits. You might volunteer and change someone's life through that activity, or even win an award for your service in that role. You might become the neighborhood or family expert at gardening, stamp collecting, dog training, or cooking. People will love and appreciate whatever talent, expertise, and passion you bring to life. Even if you express it outside of a career.

Snappy Answers to "What Do You Do All Day?!?"

Yesterday, I officially applied for U.S. Social Security Disability Insurance (SSDI) benefits. SSDI is the U.S. government program that pays you a meager monthly stipend if you become too sick to work at any job. It was a major pain in the ass to apply (more on that later), and made me realize one basic truth. I DO NOT WANT to be on government disability income. I DO NOT WANT to have my life up-ended by my neck problems. (Ask anyone who really needs disability income, and they will all say "NO, I don't want it, but I do need it." It's the people who are 100% pleased to get it who are the scammers!)

Earlier, I posted about how people don't know what to say when you explain that you are on medical/disability leave from work or school. "So, what do you do all day, anyway?" they ask. Some smart-ass answers to this indelicate question:

Dance naked and eat nothing but Twinkies… there’s no one around to see me do it, and I’m sick anyway, so who cares?

I'm a government spy. But I can't tell you that, or I would have to kill you.

I'm a professional TV watcher. (Thanks Tiffany, of Sick Girl Speaks for this suggestion!)

Lure small children to my house and cook them up for dinner.

Try and keep the voices in my head from killing each other.

Wish for superpowers.

Eat bon bons and get hot Chippendales guys to massage me all day.

I'm training for the Iron Man Triathalon.

Run a brothel.

I run a email spam empire. All those "bigger" "harder" "richer" emails are from me!

Use the power of positive thinking to “fix” me.

Memorize the entire TV guide.

Memorize every episode of every Law and Order (and L & O spinoff) show.

Hurt myself and get sicker so I can stay home and enjoy the “easy” life.

Devise a solution for peace in the Middle East.

See if I can watch every single title Netflix has to offer.

I own a moving business… load and unload trucks all day.

I help the Jehovah’s Witnesses go door-to-door.

I run a dog-fighting ring.

Exist just to make career-obsessed people nervous, to make healthy people nervous, etc.

The real answers are less exciting, but still important:

I rest. A lot. It takes a lot of energy to get well or be sick.

I email, write, and call family and friends. I wave to neighbors and sometimes have a quick chat.

I teach my dog new tricks.

I watch the Food Network and try and become a better cook (they make it look so easy).

I grunt through shitty exercises and PT!

I exercise more than I would like to!

I collapse midafternoon for an involuntary nap.

I try and put my story out there in case it might help someone else.

I read and meditate.

I take medications no fewer than four times a day.

I appreciate the many blessings in my life: good health insurance; a loving, helpful, and loyal (and sexy) husband); friends and family who haven’t forgotten me; a place to lay my head at night; disability insurance payments to keep the mortgage paid, put some food on the table, and keep the lights on.

So What Do You Do All Day, Anyway? (Disability)

“And what do you for a living?” “How’s work going?”

At parties and gatherings around the country, these two sentences are common conversation-starters. Neutral, not too nosy. A great way to get to know someone quickly or catch up after some time apart.

My responses lately have been something like: “I’m on medical leave from work right now, but I used to be a writer and editor.” “Well, I’m not at work right now, but they keep telling me they will take me back if I ever get well enough to return.”

The words escape my lips, and I realize with horror what I have unleashed: Lead balloons. Poison arrows. Absolute conversation-stoppers. At this point, people often remember that they need another bite to eat, another drink, want to check on their date or their kids or their dog. Anything to get out of this awkward spot with this strange person with whom they have nothing in common.

A few people resist the initial urge to run, and then the conversation can take an even darker turn. “So if you’re on disability, what do you do all day, anyway?” they ask. Or even better: “Wouldn’t you like to go back to work so you have something to look forward to in your day?”

Ahem. Let me rein in my frustration, shame, and anger for a moment. I had top ask myself questions like these when I first got so sick. “What am I going to do all day?” I worried, terrified. “What do I have to look forward to if I’m going to be so sick for the rest of my life?” Panic, panic, panic, the kind that makes you want to dive headfirst into food, call out for your mommy, or hop in the car and drive anywhere but here.

In a work-obsessed culture, I put a lot of myself into my job and measured my personal success largely by my professional success. I had friends and family, a spiritual life, and hobbies. But I took many of them for granted and didn’t always appreciate how they enriched my days.

Going on disability leave from work was a radical readjustment. Without work to set the schedule and priorities for most of my days, what would I do? Who was I as a person if I could no longer be a writer, editor, consultant, working professional? What would the ultimate meaning of my life be if I didn’t or couldn’t have a career?

Many people who are forced onto disability leave struggle with these issues and strive to find a new meaning, a new shape for their lives that is not summarized in a profession. Roles like wife, mother, friend, volunteer, advocate, faithful congregant, dog lover, knitter, and friendly neighbor become more central to our days than our old roles as working professionals.

Of course, as we are struggling to figure this out for ourselves, the “healthy” world is struggling to figure us out, too. “So if you’re on disability, what do you do all day, anyway?” they ask. They assume that my life must be awful… how can I really have a life without a career? I get a lot of “Gosh, I don’t know how you do it day after day.” (Thanks, I’m going to go kill myself now… you make it sound so awful.) Or “I would just go crazy from being at home all the time” (Well, I could make a snippy comment about you not having far to go in that regard, but whatever.)

Even the most well-meaning people lay it on me. At a recent family gathering this past weekend, a nice young man who understood my situation was heartened by the possibility of me returning to work. “It would be nice for you to have something to look forward to again,” he said. I smiled and said “Oh, but I have plenty to look forward to each day… exercise, physical therapy, reading, cooking, blogging, napping, keeping in touch with family and friends.” I hope he got the point. A day without work is worth looking forward to! Although I am happy that my medical leave/disability is temporary. I will get back to work eventually, with a new appreciation for how work is part (but not all) of my life.

I’m finally at peace with being "on disability leave," so the dumfounded looks I get from others, and the dead silences that expand to fill the vast distance between a healthy person and a non-healthy person… they don’t bother me too much anymore. I do, however, sometimes want to offer up bad, inappropriate, slightly deranged answers to some of these people’s questions. I’ll list some of them in a future post.

Surgical Summary Document Key to Filing for Disability

Have you had a major surgery? Are you trying to apply for long-term or short-term disability income from a private disability insurance plan? One tip: Make sure you send the surgical summary to the disability insurance company. Doing so has helped me. Maybe it can help you, too.

My disability insurance company was driving me crazy with paperwork, asking for new documentation every 60 days or so. I sent them notes from doctor's office visits, plans for surgery, reports from xrays and CTs and MRIs that showed that I was seriously in trouble, records of pain medications that I tried (without success), records of epidural injections (that didn't work), etc. It didn't appease them for very long. Then, I sent them the "operative report", "surgical summary" or whatever it's called.... the doctor's dictated notes about the surgery itself -- what he did first, second, third, etc. (Don't read these... you will make yourself sick.) Since then, they have left me alone, for four months and counting! If you have had surgery, make sure you send the surgical summary to the disability insurance company.

Disability Coverage: Do You Have Enough?

Disability insurance saves lives (and the IOUs that go with them) when illness or injury strikes. Disability insurance pays some portion (often between 50 and 70 percent) of your regular salary to you while you recuperate from an illness or injury.

Many, many people out there have little or no disability insurance. We all think we're going to be healthy forever--then we get pneumonia, suffer disabling vertigo, have a heart attack or stroke, or break a bone that just won't heal. We miss weeks or months of work--no income, many bills. Then we get broke. Really broke. Chapter 11 broke.

We are much more likely to become disabled during our working lives than we are to actually die. In 2000, the Census Bureau reported that more than 21 million Americans aged 16 to 64 had a disability that interfered with their employment. Disabling injuries and illness can happen at work or at home:  according to the 2003 Report on Injuries in America, two-thirds of disabling injuries occur outside of work.

So what can we do? Be prepared. Find a short-term disability plan and a long-term disability plan that work for you. Start with your benefits office at work. Chances are, your employer offers some kind of plan. Private plans are available too, but typically cost more.

I learned the joy of having disability insurance when I  became ill with pneumonia in February of this year. I was out of work for weeks. I wasn't getting my regular salary. After doing some paperwork and waiting for a few weeks, money arrived in the mail. It was a lifesaver. 

I have always been someone who signs up for all the available health and insurance benefits available at work. Just because. Just in case. (Yes, I was a Girl Scout.) I never thought I would actually have to USE the darn stuff! Take my experience as a warning--go out there and get yourself some disability insurance.

Learning about disability insurance

• America's Health Insurance Plans has an excellent guide on disability insurance and questions to ask when you shop for it.
  
• Ditto for the Life and Insurance Foundation for Education's guide to disability insurance.
• The Motley Fool has advice on what to look for when buying private disability insurance.
• The Social Security Administration's Disability Benefits Publication (No. 05-10029, January 2005) discusses the SSA's disability insurance program.

How much disability insurance do you need?

• SmartMoney.com has a worksheet that you can use to calculate how much disability insurance you need, taking into account factors such as must-pay expenses and spouse's income.
• The Life and Insurance Foundation for Education also has a similar disability needs calculator.

Statistics on disability

• Census Bureau's Disability Status: 2000 brief
• NSC's 2003 Report on Injuries in America