DI 10505.015: Averaging Countable Earnings

changes
←	*	→

~~Effective Dates: 11/21/2014 - Present~~
Effective Dates: 04/25/2018 - Present
TN 11 (08-13)
DI 10505.015 Averaging Countable Earnings
A. Background
Our regulations in § 404.1574(b)(2) require us to determine countable earnings from work activity as substantial gainful activity (SGA) if they average more than the SGA threshold amounts (see DI 10501.0150). This section explains how to average countable earnings; for more information on how to determine countable earnings, see DI 10505.010.
§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; and
* if there has not been a change in the SGA level, see DI 10501.015.
Therefore; when a person has:
* continuous work, and
* does not have a significant change in work patterns, and
* monthly earnings fluctuate from above to below the SGA threshold,
we must average the monthly countable earnings and compare the average monthly amount with the appropriate SGA level.
IMPORTANT: Do not average earnings simply because it is or is not advantageous, or think that you cannot average just because you have paystubs. Averaging is required to determine if monthly countable earnings average more than the SGA guidelines. Also, averaging earnings to determine SGA is not the same process as distributing earnings over a period worked (i.e., quick distribution).
B. Defining terms
1. Averaging
Averaging countable monthly earnings means to add the countable monthly earnings within the review period, and then divide the total by the number of months in the review period.
EXAMPLE:
January 2012 $850
February 2012 $1050
March 2012 $950
April 2012 $900
May 2012 $1200
Total Average Earnings: $990
NOTE: When you make a final SGA determination in eWork, the eWork system provides the option to average to determine SGA when appropriate. The averaging option is only available when you are in the “preview/process” decision phase of the work review.
2. Quick distribution
The quick distribution option in eWork allows for the distribution of posted earnings over a period worked when we do not have primary evidence of monthly earnings, and must determine monthly earnings from secondary sources. The quick distribution button replaces the quick average button on the Earnings Detail screen in eWork.
You may only use the quick distribution tool when you:
* do not have preferred verification of earnings; and
* are in the development process of a work review.
IMPORTANT: Using the quick distribution tool is not the same as averaging countable earnings to determine SGA, and should not be used to replace earnings development policies (see information for verifying earnings in DI 10505.005C, and PC development guidelines and procedures in DI 13010.023B).
3. Significant change
Do not average earnings over the entire period worked if there is a significant change in work patterns or earnings. 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 have to change his or her position, or leave the job?
* Did the person have any months of zero earnings? IMPORTANT: The regulations require us to average earnings if the period of work was continuous. Consequently, you cannot include a month of zero earnings in any period averaged.
C. When to average earnings
Average earnings when:
* monthly countable earnings fluctuate above and below the earnings guidelines;
* evaluating SGA as part of the initial claims process; and
* determining if disability ceases due to work activity.
Do not average earnings when determining:
* trial work period (TWP) service months (see DI 13010.060);
* payment months during the extended period of eligibility (EPE) (see DI 13010.215) after a cessation due to work activity has been determined; or
* payment months during the initial reinstatement period (IRP) in expedited reinstatement (EXR) cases (see DI 13050.066).
IMPORTANT: Consider the work a beneficiary performed in the TWP to determine whether disability ended after the TWP. For example, if the beneficiary performed work activity in his or her 9th month of the TWP, we can include that activity as part of our SGA development in the EPE.
D. Significant change in work patterns or earnings levels
Generally, you can average countable earnings over the entire period of work requiring evaluation; however, if there is a significant change in earnings and work patterns, or if there is a regulatory change in the SGA earnings level, you cannot include those months in the averaging period.
EXAMPLE:
Date of entitlement is 02/2009, and the beneficiary completed the TWP in 06/2011. Part-time work activity began 03/2012, work stopped for one month, and then part-time work activity resumed. Beginning 06/2012 and continuing, earnings and activities rose to full-time work levels, with some earnings over the SGA threshold levels. We have not ceased benefits, so averaging earnings is appropriate:
Month/Year
Earnings
03/2012
$210
04/2012
$0
05/2012
$300
Start averaging here:
Average:
06/2012
~~$1000~~
$1060
07/2012
~~$1060~~
$1000
08/2012
$1100
09/2012
$1040
10/2012
$1080
11/2012
$1000
12/2012
$800
Average Earnings
$1011
Evaluation: When reviewing the year 2012, you can clearly see that there is a significant change in work patterns and earnings for the months of March through May. There was a month of zero earnings, indicating that the work was not continuous for this period of work activity. In contrast, the work effort from June through December was continuous. Consequently, averaging only applies in the months 06/2012 through 12/2012.
E. Determining SGA in multiple work efforts
When a person has multiple work efforts, meaning 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:
If
Then
Example
multiple employers involved, or has wages as an employee and income as a self-employed person; and each separate work effort does not represent SGA
combine the income or earnings from all employment efforts (eWork does this for you)
A beneficiary has more than one employer, and you determine that each separate effort does not average SGA, however when combined, the average monthly earnings are SGA. For example, in 2011, a beneficiary’s average monthly earnings for January through June for employer 1 are $900. The beneficiary also works for employer 2 from March through December, earning an average of $300 for those months. Each separate work effort is below SGA, however if you combine them, the average monthly earnings are SGA.
A self-employment loss would never reduce total earnings
Do not count the self-employment loss (consider services, as specified in the SGA criteria in DI 10510.010A and the countable income test in DI 10510.010C)
In 2012, a beneficiary receives an average of $850 a month in wages from one job and $300 a month in wages from another job, so the total earnings of $1150 are SGA. Suppose the beneficiary had a loss from farm self-employment, averaging $300 a month. Do not subtract this loss from the $1150 monthly combined total to determine if work is SGA.
NOTE: The evaluation of earnings is ultimately the responsibility of the adjudicator; however, eWork automatically combines earnings, based on all monthly employment efforts.
F. Averaging partial months 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. Take into consideration all of the work activity facts, especially in the first and last months of work activity, with the rest of the period of employment.
Some factors you must consider are:
* earnings,
* number of days worked, and
* job duties and responsibilities.
Completed periods of work may contain partial months of work activity. When you determine whether to include partial months in the period you average, you must evaluate whether there was a significant change in either:
* the earnings; or
* the pattern of work activity in comparison to the rest of the period of employment.
If you determine that any partial months:
* do represent a significant change in the work pattern or earnings, do not include those months in your average;
* do not represent a significant change, average them.
Rationale: By not averaging partial work months with significantly lower earnings, you avoid artificially lowering the figure determined to be the average monthly earnings. Including those months may not be representative of the rest of the period of employment.
G. Determining the period of work to average when work is continuing
If employment continued for some time (i.e., a number of months after onset in initial cases or throughout the TWP):
* It should be possible to determine the pattern of work and the average monthly earnings expected on a continuing basis.
* When the person has been employed for a short time (e.g., the work has been performed for only three or four weeks), evaluate the case based on his or her expected work pattern and earnings.
* If work was ongoing 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 that shows otherwise.
* When subsequent evidence shows that an anticipated pattern of SGA did not occur, you may need to revise the determination.
EXAMPLE 1: Averaging certain months in the evaluation period
For the calendar your 2011, the SGA threshold amount is $1000. In this example, a teacher taught two classes each semester, and received an annual wage of $11,800. Rather than receive one lump sum payment, the teacher elected to receive wages throughout the entire calendar year, even though he or she only taught in January through May and September through December. In this case, you must distribute the earnings over the actual period of work activity: January through May, and September through December of 2011.
Look at the chart below. The column on the left shows the annual paid earnings, distributed equally over the 12-month calendar year. The column on the right shows the averaged countable earnings over the period that the teacher actually worked. In this example, we know that the teacher performed work activity 9 months out of the year, so to calculate the average monthly earnings, take the $11,800 total wages, and divide that figure by 9. The average monthly earnings are $1311 for the months of January through May and September through December. You would determine that the teacher engaged in SGA for these months, because the average earnings exceed the monthly SGA amount for 2011 of $1000.
Total Earnings for 2011
$11,800
Averaged Earnings Over the Period of Work Activity in 2011
January
$983
January
$1311
February
$983
February
$1311
March
$983
March
$1311
April
$983
April
$1311
May
$983
May
$1311
June
$983
June
Not in averaging period
July
$983
July
Not in averaging period
August
$983
August
Not in averaging period
September
$983
September
$1311
October
$983
October
$1311
November
$983
November
$1311
December
$983
December
$1311
EXAMPLE 2: Averaging all months in the evaluation period
Assume the same facts as shown in Example 1 of this section, with the following changes. Suppose the teacher alleges working throughout the entire year; for example, he or she used the summer months to prepare materials needed for the classes, including preparation of class materials, lecture notes, and review of textbooks. In this case, you need to consider whether you have enough information to make the determination that the teacher’s work activity is actually 12 months, despite the 9 months of actual classroom time. If yes, then you should use all 12 months to average the countable earnings. So, for this scenario, you average all 12 months. The column on the left in the table shown represents the teacher’s actual monthly earnings of $983 per month, which is below the 2011 SGA threshold of $1000.
H. Follow-up procedure
Diary cases for 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) (see DI 13010.605) to diary the case for review at the time you expect the change to occur, if known, or for a 12-month period.
I. Systems coding
1. Post-entitlement
Use eWork to process the SGA determination; eWork automatically pushes the following:
* correct monthly earnings information;
* work determination code; and
* averaging documentation to the verified earnings (VERN) (see DI 13010.675) and CDR Remarks Input (IRMK) (see DI 13010.630) screens of the DCF.
2. eWork exclusion cases
Use the DCF to document the average amount on the VERN screen in the DCF.
NOTE: You can use the IC functionality procedure to assist you in making an SGA determination; however, IC does not have the capability of pushing the mandated documentation to the DCF. You must manually input earnings and work determinations to the VERN screen if you are unable to process the decision in eWork.

POMS Reference

DI 10505.015: Averaging Countable Earnings