TN 6 (01-07)

The following substantial gainful activity (SGA) evaluation guides concerning employment are applicable to nonblind employees under title II and title XVI for all years, and to blind employees under title II through calendar year 1977. For evaluation guides applicable to title II blind employees in 1978 and later, see DI 10515.001B.

Before applying the SGA evaluation guides, deduct from the employee's reported earnings the amount of any subsidized earnings (see DI 10505.010A.) and any impairment-related work expenses (see DI 10505.010B., and DI 10520.000) in order to determine the employee's “countable earnings.” Then, when necessary, average the individual's earnings, according to DI 10505.015.

A. Policy - earnings which ordinarily demonstrate SGA

An employee will ordinarily be considered engaged in SGA if his or her “countable earnings” average more than the amount shown in the Earnings Guidelines (DI 10501.015). When evaluating work in special employment situations other than military service, see DI 10505.025.

NOTE: Military service members can have severe impairments and be performing limited, or no, services as part of a limited duty or a work therapy program. Do not assume their salary represents the value of the services they are doing. These services must be evaluated based upon the policies and procedures provided in DI 10505.023.

B. Policy - earnings which ordinarily demonstrate that an employee has not engaged in SGA

An employee will generally be considered not engaged in SGA if his or her average monthly “countable earnings” are equal to or less than the amount shown in the Earnings Guidelines (DI 10501.015).

If there is evidence, however, showing that an individual may be engaging in SGA, or appears to be in a position to defer compensation, or by special arrangement is able to suppress earnings, develop fully the facts concerning the comparability of the employee's work to that of unimpaired individuals (see DI 10505.020C.1.), and the worth of the employee's work (see DI 10505.020C.2., unless the exemption of work activity provision applies (see DI 10505.020D.).

Do not use the test of comparability or the test of worth of work to make an SGA cessation determination for a title II disability beneficiary if the exemption of work activity provision described in DI 10505.020D. applies.

C. Policy - test of comparability and test of worth of work

When an employee’s “countable earnings” do not average more than the amount shown in the Earnings Guidelines (DI 10501.015), but there is evidence indicating that the individual may be engaging in SGA or that the individual is in a position to control when earnings are paid to him or her or the amount of compensation paid (see DI 10505.020B.), evaluate the individual’s work activity under the tests of comparability and worth of work to determine if the work is SGA, unless the exemption of work activity provision in DI 10505.020D. applies. The FO will apply these tests to make an SGA cessation determination for a title II disability beneficiary if the exemption of work activity provision does not apply. Both of the following tests must be considered before a finding can be made that the individual's work is not SGA.

1. Test of comparability

Is the employee's work comparable to that of unimpaired individuals in the community engaged in the same or similar occupations as their means of livelihood? The individual's work is considered SGA if analysis of the time, energy, skills and responsibility involved in its performance shows that the work is essentially the same in quality and quantity as that done by unimpaired individuals engaged in the same or similar occupations as their means of livelihood. For obvious reasons, the performance of the same work under the same circumstances as that done by unimpaired individuals as their means of livelihood must be considered SGA regardless of the amount of earnings the impaired person receives for such work.

• The amount of corroborative development required will depend upon the extent to which information already in the file discloses limitations in duties, hours, responsibilities, etc. In some cases it will be clear to the field office (FO) that the individual's work is not comparable to that of unimpaired individuals in the community doing the same or similar work as their means of livelihood. Generally, a statement to this effect will be sufficient evidence that the individual's work is not SGA under the test of comparability.

• Where there is doubt, it will be necessary to contact the employer, the U.S. Employment Service, or other informed sources in the community for information as to the time, energy, duties, and responsibilities of unimpaired workers doing the same or similar work. The precise manner in which such development is carried out will vary with individual cases and requires the exercise of judgment, together with background knowledge of local conditions. Therefore the payment service centers (PSC) will transfer these cases to the FO for the determination.

• Regardless of whether a conclusion is clear from the evidence already in file or whether further development is required, the file must reflect thorough consideration of this question.

2. Test of worth

Is the employee's work clearly worth more than the amount shown in the Earnings Guidelines? If the individual's work is not comparable to that of unimpaired individuals according to the test of comparability, it will still be considered SGA if, according to the prevailing pay scales in his or her community, it is clearly worth more than the SGA amount shown in the Earnings Guidelines.

• The amount of corroborative development required will depend upon the amount of information already in file and the FO's knowledge of local conditions. In some cases it will be clear to the FO based upon knowledge of local pay scales, that the individual's work is not worth more than the SGA amount shown in the Earnings Guidelines (e.g., the individual is being paid the same amount as others who do the same or similar work). Generally, a statement to this effect will be sufficient evidence that the individual's work is not SGA under the test of worth DI 10505.020C.3.

• Where there is doubt, it will be necessary to contact the employer, the U.S. Employment Service, or other informed sources in the community for information as to the worth of the individual's work. The precise manner in which such development is carried out will vary with individual cases and requires the exercise of judgment, together with background knowledge of local conditions.

• Regardless of whether a conclusion is clear from the evidence already in file or whether further development is required, the file must reflect thorough consideration of this question.

3. When development may not be necessary and other considerations when applying the tests

1. Under the tests of comparability and worth of work, development may not be required if there is a reasonable explanation as to why an employee's earnings are not substantial.

   A reasonable explanation as to why an employee’s earnings are not substantial might be the inability to perform the full responsibilities of the job, such as working at a slower rate or working fewer hours (part-time) than unimpaired persons. When the file adequately explains why an employee's earnings are not substantial, and there are no indications that the comparability or worth of work tests could be met (i.e., the work is obviously not the same in quality and quantity as that done by unimpaired people as their means of livelihood, and the work is obviously not worth more than the amount shown in the SGA Earnings Guidelines), development under the comparability and worth of work tests is not required. The file must clearly reflect why development under these 2 tests was not undertaken.

2. The fact that there are unimpaired persons who work for the same low earnings as the impaired person would not be persuasive that the individual is engaged in SGA. For the impaired individual's work to be SGA, the evidence would have to show that unimpaired individuals make their livelihood doing the same or similar work for the same low earnings, or that the impaired individual's work is clearly worth more than the applicable amount shown in the Earnings Guidelines.

3. After development has been completed, if there is any reasonable doubt as to whether an individual engaged in SGA under the tests of comparability or worth of work, the adjudicator should generally conclude that the individual did not engage in SGA.

EXAMPLE 1:

Ann works part-time in her mother’s flower shop. She works 15 hours a week and earns $8.00 an hour, the amount usually paid for this type of work in her community. Her monthly earnings total $519.60. In this example, Ann’s low earnings can readily be explained by the fact that she works only 15 hours a week. There is no evidence to suggest that her work could be the same in quality and quantity as that done by unimpaired people as their means of livelihood; and, since all workers in her community earn $8.00 an hour working at a flower shop, there is nothing to suggest that her work should be valued any higher. Therefore, this work can be found to be not SGA without any further development under the comparability and worth of work tests. The file should include a statement from the adjudicator that reflects why development under the 2 tests was not undertaken.

EXAMPLE 2:

Bill has been receiving title II disability benefits since November 2004. In January of 2007, Bill reports he has been working full-time as a desk clerk in a local motel that is owned by his family since December of 2004. Bill is paid $500 a month. Bill completed his TWP in August of 2005 and the adjudicator needs to determine if SGA level work activity was performed after August of 2005. Bill's low earnings are not adequately explained because Bill's earnings do not appear to be consistent with the full-time work he is doing, development under the comparability and worth of work tests may be required. Since Bill has not received cash benefits for 24 months in September of 2005, the adjudicator can apply the comparability and worth of work tests to determine if SGA has been performed.

4. SGA decision should be based only on work performed

When an individual does not have substantial earnings because he or she is not performing the full responsibilities of the job, such as working at a slower rate or working fewer hours (part-time) than unimpaired persons, do not conclude in a work-issue-only determination that the individual could increase a limited work effort to a level of SGA. Such a decision concerns the capability to engage in SGA and requires consideration of medical and vocational factors. The SGA determination should be based only on work activity actually performed.

D. Policy - exemption of work activity as a basis for SGA cessation determination

1. Definition - exemption of work activity provision

For work determinations made on or after 12/18/06, work activity engaged in by a title II disability beneficiary after he/she has received title II disability benefits for 24 months, may not be used as evidence that the individual’s disability has ceased. Specifically, do not consider the activities engaged in by the beneficiary in work performed after the 24-month requirement is met to determine that the work shows the beneficiary is able to perform SGA. Instead, compare the countable earnings from the work with the earnings guidelines in DI 10501.015 to determine if the beneficiary is engaging in SGA for disability cessation purposes.

Determine countable earnings in the usual manner (see DI 10505.010). Then apply the guides in DI 10505.020A. or in DI 10505.020B. to determine whether the beneficiary has engaged in SGA for purposes of deciding if disability has ceased. Do not consider the tests of comparability or worth of work if countable earnings are equal to or less than the SGA threshold amount (see DI 10505.020B.).

NOTE: If countable earnings are over the SGA threshold amount, and there is information indicating that not all of the beneficiary’s earnings are directly related to the individual’s own productivity (i.e., the earnings are subsidized or the work is performed under special conditions), consider the work activities performed by the beneficiary in deciding the reasonable value of the services performed to determine countable earnings before applying the SGA earnings guidelines.

The Exemption of Work Activity provision does not apply when:

• determining initial eligibility for disability benefits;

• determining whether work activity performed by a title II disability beneficiary before he/she has received title II disability benefits for at least 24 months is SGA;

• determining whether work performed in or after the EPE/reentitlement period is SGA after an SGA cessation has been determined; and

• determining SGA during the initial reinstatement period (IRP) for expedited reinstatement (EXR) cases.

2. Who is eligible

A title II disability beneficiary will qualify for the Exemption of Work Activity provision if:

• The beneficiary has received title II disability cash benefits for at least 24 months during the current period of entitlement, and the work being evaluated was performed after the 24^th month of receipt of benefits; and

• The beneficiary’s disability has not ceased due to SGA in the extended period of eligibility (EPE).

NOTE: If the reason the beneficiary did not receive a benefit was because the full payment was withheld to recover an overpayment, to pay attorney fees, or for a garnishment order, consider the benefit received for the purpose of the exemption of work activity.

3. The 24-month requirement

For the purposes of the exemption of work activity provision, a beneficiary will be considered to have received title II disability cash benefits for 24 months beginning with the first day of the first month following the 24^th month for which he/she received title II disability benefits that he/she was due. The 24 months do not have to be consecutive. For EXR cases, the 24-month requirement will have been met when the individual completes the 24-month initial reinstatement period (IRP).

Any months for which the beneficiary was entitled to title II disability benefits but did not actually receive a title II disability cash benefit will not be counted for the 24-month requirement. For example prisoner suspense, Medicare Qualified Government Employee (MQGE), an individual in full workers compensation offset, a childhood disability benefit (CDB) technically entitled to a disability maximum (DMAX), and a supplemental security income (SSI) only recipient. However, if the reason the beneficiary did not receive a benefit was because the full payment was withheld to recover an overpayment, to pay attorney fees, or for a garnishment order, consider the benefit received for the purpose of the exemption of work activity provision.

EXAMPLE 1:

Mary has been entitled to title II disability cash benefits since November 2004 (5-month waiting period- June through October 2004). In January of 2007, Mary reports that she has been working since December of 2004. The adjudicator determines that the TWP months are as follows: December 2004, January 2005 through August 2005. Starting in September of 2005, the work activity needs to be evaluated under SGA rules.

In September of 2005, Mary had not been entitled and received 24 months of cash benefits and therefore the comparability and worth of work tests can be applied when making the SGA determination. In this example the comparability and worth of work tests were applied but it was determined that Mary was not working at the SGA level through the current month-January 2007. If Mary reports any subsequent work activity for months after January of 2007, the adjudicator will not apply the comparability and worth of work tests, because the adjudicator has determined that Mary has been entitled and received 24-months of benefits and the exemption of work activity provision will apply starting in November of 2006 and continuing.

EXAMPLE 2:

In January of 2007, Henry came into the office to inform the adjudicator that he started his own business in January of 2007 and to file an appeal on his SGA cessation claiming that his IRWE was not calculated correctly. He wants to know how his new business will be evaluated because he will not be making any money in the beginning. At first glance, Henry’s Master Beneficiary Record (MBR) would indicate the exemption of work activity would not apply because an SGA cessation is on the record. However, Henry is filing an appeal on that decision. If the SGA decision is re-opened and determined not to be SGA, the exemption of work activity provision may apply. In this example, the adjudicator re-opens the decision and determines that Henry has not performed SGA work activity. Henry had been entitled and received title II cash disability benefits since November of 2004. The exemption of work activity provision would apply starting in December 2006 and the recent work activity being reported in January of 2007 would not be evaluated under the comparability and worth of work tests.