This Just the Facts Series details the transition process from Disability to Retirement Benefits

Ridgely, Mary

English

This Just the Facts Series details the transition process from Disability to Retirement Benefits.SSJ3_PDF1.pdf: 497 downloads, before Oct. 1, 2020.0-SSJ3_TXT1.txt: 34 downloads, before Oct. 1, 2020

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Disability and Retirement: Basic Information for BPA&O and PABSS

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References
Code of Federal Regulations:
404.409 What is Full Retirement Age?
404.410 How does SSA reduce my beneﬁts when 
my entitlement begins before full retire-
ment age?
404.411 After my beneﬁts are reduced for age 
404.412 when and how will adjustments to that 
reduction be made?
404.415 Deductions because of excess earnings; 
annual earnings test.
404.252 Subsequent entitlement to beneﬁts 12 
months or more after entitlement to dis-
ability beneﬁts ended.
404.290 Recalculations
Social Security Handbook
302.1 Reduction of Beneﬁt Rate
302.2
723
Just the Facts  |  February 20054
Employment and Disability Institute
201 ILR Extension Building
Ithaca, New York 14853
Phone: 607-255-7727
Fax: 607-255-2673
TTY: 607-255-2891
Email: ilr_edi@cornell.edu
www.edi.cornell.edu
February 2005
?Title: Disability and RetirementBasic Information for BPA&O and PABSS So, what does it mean?How this applies to you.Social Security StatementsThere are several ways an individual who qualiﬁes for Social Secu-
rity beneﬁts can receive a statement of estimated beneﬁt amounts to 
which they may be entitled upon retirement or upon becoming dis-
abled.  The Social Security Administration mails a statement annu-
ally to workers or former workers 25 years of age or older, approxi-
mately 3 months before the person’s birthday.  This letter, entitled 
“Your Social Security Statement,” includes 1) an overview about 
the Statement of beneﬁts calculations, 2) estimated monthly beneﬁt 
amounts for the individual’s Retirement, Disability, Family Survi-
vors and eligibility for Medicare beneﬁts, and 3) information about 
some of the beneﬁt program rules and regulations.  Any worker of 
any age can also request a Statement at any time (typically, a request 
for a Statement will take 2-4 weeks to receive in the mail).
The Statement includes a disclaimer that the amounts may not be 
accurate because they are based on an estimate of future earnings 
and current law.  The retirement estimate includes an approximation 
of how much the person will receive at early retirement (at age 62), 
and at full retirement age (the full retirement age began to increase 
gradually in 2003 from age 65 years, 0 months, and will eventually 
be capped at age 67).  The estimated amount of  a person’s monthly 
disability payment will often be less than the amount at full retire-
ment age because there is an assumption the person will work fewer 
years if disabled.  The disability beneﬁt estimate is based on the 
person becoming disabled “right now.”  Page 3 of the letter includes 
a list of “Your Social Security Taxed Earnings.”  Individuals can 
review this record to be sure that the Social Security Administra-
tion has an accurate record of earnings (underreporting of earnings 
ADVANCING  THE  WORLD  OF  WORK 1
Contact Information:
Employment and Disability Institute
Cornell University
School of Industrial and Labor Relations
201 ILR Extension Building
Ithaca, New York 14853
Phone: 607-255-7727
Fax: 607-255-2673
TTY: 607-255-2891
Email: ilr_edi@cornell.edu
www.edi.cornell.edu
Just the Facts
July 2004
Work Incentives Support Center
With the intervention of beneﬁts plan-
ning, more SSDI beneﬁciaries are 
choosing to return to work.  However, 
many are unable to earn at the same 
level as their pre-disability salary/earn-
ings.  They are legitimately concerned 
that returning to work at a lower wage 
level will cause a reduction in future 
retirement payments
Basic Information for BPA&O and PABSS          by Mary Ridgely
Employment and Disability Institute
can result in lower beneﬁt amounts).  Pages three and 
four of the letter also include information on how to 
report to SSA and additional facts about SSA beneﬁt 
programs.
Individuals can receive an estimate of their Social Se-
curity beneﬁts online from the SSA website.  The pro-
cess is:
1.   Log onto at www.ssa.gov, (the SSA home page)
2.  On the home page, click on the “Calculate Your 
Beneﬁts” item in the middle of the page
3.  There are three types of calculators available on the 
bottom of the page, the “Quick Calculator,” the On 
Line Calculator,” and the “Detailed Calculator” 
(Note: The On Line calculator is easy to use but re-
quires the individual to input past earnings for each 
year worked.  This option provides rough estimates 
and should never be counted as highly accurate).
Individuals can also receive an SSA beneﬁt statement 
and related information through the following page 
under the SSA website: www.socialsecurity.gov/mys-
tatement/
This web page includes buttons to other options:
● “Need to request a Statement?” allows the individ-
ual to request a Statement of Beneﬁts in the mail
● “Sample Statement with explanations” provides an 
example of a beneﬁts statement
● “Questions About Your Statement” includes links 
to frequently asked questions and answers to topi-
cal areas related to the beneﬁt calculations, state-
ments, and possible problems with information.
Individuals who cannot or do not want to use the in-
ternet can call the Social Security Administration at 
1-800-772-1213; they can write to Social Security Ad-
ministration, Ofﬁce of Earnings, Operations, P.O. Box 
33026, Baltimore, MD, 21290-3026, or they can go 
into their local SSA ofﬁce to request a Statement.
Retirement: Considerations for 
Disability Beneﬁciaries
When a worker becomes disabled, and qualiﬁes 
for SSDI, the monthly beneﬁts are an estimate of 
the beneﬁts he would receive had he worked until 
reaching full retirement age.  The methods used to 
calculate disability or retirement beneﬁts are very 
complicated and BPA&O specialists should refer 
beneﬁciaries to the Social Security Administration 
if they have questions about beneﬁt calculations.
The earnings used in determining the Primary In-
surance Amount (PIA) are set or ﬁxed at the time 
the person qualiﬁes for disability beneﬁts.  The 
SSA will not use any years of “non-work” during 
a period of disability to calculate the retirement 
beneﬁt.
If a SSDI beneﬁciary returns to work and leaves 
the rolls, the amount of disability beneﬁts received 
will not reduce future retirement beneﬁts.  Nor will 
wages earned during a period of disability have 
a negative impact on future retirement beneﬁts. 
Wages are “frozen” during a period of disability 
and used in the calculation of retirement beneﬁts 
only if it would be to the person’s advantage to do 
so.  However, if the lower earnings continue AF-
TER cessation of beneﬁts and termination of the 
disability, retirement beneﬁts may be reduced.
If the SSDI beneﬁciary switches to retirement ben-
eﬁts prior to reaching Full Retirement Age (FRA), 
the monthly cash beneﬁt is reduced by the number 
of months remaining until FRA.  The reduction 
is 5/9 of 1 percent for each of the ﬁrst thirty-six 
months and 5/12 or 1 percent for each month in 
excess of thirty-six.
In certain situations, it may be advantageous for 
the DI beneﬁciary to take early retirement at age 
62.  Some examples include:
2 Just the Facts  |  February 2005
Disability and Retirement
1. Workers Compensation beneﬁts will offset the 
SSDI beneﬁt, but in many states will not offset 
retirement beneﬁts.  A DI beneﬁciary receiving 
Workers Compensation may be better off by tak-
ing the early retirement payment.  The Claims 
Representative can provide the beneﬁciary with a 
comparison of the payment with offset versus the 
lower retirement payment without offset.  Since 
there are differences among states in administra-
tion of the Workers’ Compensation beneﬁt, the 
beneﬁciary or BPA&O specialist should consult 
with the entity administering the WC beneﬁt be-
fore making the change to ask if the retirement 
beneﬁt would reduce the workers’ compensation 
payment.
 A subsequent change in the workers’ compensa-
tion payment could reduce the offset, resulting in 
a higher DI payment.  The beneﬁciary can request 
that they be returned to DI status rather than con-
tinue with the reduced retirement beneﬁt.
2. Because the computation for retirement beneﬁts 
is more generous than for disability beneﬁts, the 
family maximum will often be higher for retirees. 
If a DI beneﬁciary has a spouse and dependent 
children, he/she may decide to switch to retire-
ment status at age 62 to get the higher auxiliary 
payments for family members. [Family maximum 
goes from 50% to 75%]
3. Retirees are allowed to earn more than SSDI ben-
eﬁciaries, but people under age 65 are subject to 
the “Annual Earnings Test.”  In 2005, people who 
elect to take retirement at age 62 can earn $12,000 
before beneﬁts are reduced.  Retirees who turn 65 
in 2005 can earn $31,800 before any beneﬁts are 
withheld.  SSDI beneﬁciaries are subject to the 
test of Substantial Gainful Activity and risk ter-
mination of beneﬁts if they have completed their 
Trial Work Period and countable earnings are 
more than $9,960 in 2005.
Because they are technically still entitled to SSDI 
beneﬁts even if they elect to take the early retire-
ment beneﬁt, the SSA will track the earnings for the 
purpose of determining if Trial Work months are be-
ing used, or if the individual is in the Extended Pe-
riod of Eligibility.  Conceivably, the disability status 
could be terminated due to SGA level earnings even 
if the beneﬁciary is receiving reduced retirement 
beneﬁts rather than SSDI beneﬁts.
 
Normally, when retirement beneﬁts are elected at 
age 62 the reduced beneﬁt will continue because the 
full beneﬁt is reduced by the number of months until 
full retirement age.  This is called the “adjustment 
reduction factor,” or ARF.  It is important to note 
that SSDI beneﬁciaries who elect retirement at age 
62 are not subject to the adjustment reduction fac-
tor.  Therefore, when they reach full retirement age 
they will get the full beneﬁt rather than the reduced 
beneﬁt.  Technically, the disability status never re-
ally ended, so they are simultaneously eligible for 
retirement and disability between age 62 and full 
retirement age.  POMS RS 00615.482 indicates that 
in adjusting the reduction factor, any month of si-
multaneous eligibility for retirement and disability 
is a crediting month, that is, not counted as a reduc-
tion month.  CFR 404.412
In the scenario described in #3 above, lower earn-
ings and termination of disability status due to SGA 
level earnings would result in a reduced retirement 
beneﬁt at FRA.
It cannot be emphasized enough that BPA&O and 
PABSS specialists should always encourage beneﬁ-
ciaries to consult with the local Social Security of-
ﬁce if they have questions about retirement.
3Just the Facts  |  February 2005
Disability and Retirement


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Disability and Retirement: Basic Information for BPA&O and PABSS

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