SI 00820: Earned Income
TN 28 (03-99)
Citations:
Social Security Act, Section 1612;
20 CFR 416.1110 and 404.1051
A. Definition of sick pay
Sick pay is a payment made to or on behalf of an employee by an employer or a private third party (such as a union or an insurance company) for sickness or accident disability.
B. Policy
1. Sick payments (except annual/sick leave)
Sick pay is either wages or unearned income. (Payments to an employee under a workers' compensation law are neither wages nor sick pay.)
The following chart shows how to treat sick pay received since January 1, 1982. For sick pay received prior to January 1, 1982, see RS 01402.090.
WHEN RECEIVED | ATTRIBUTABLE TO EMPLOYEE'S OWN CONTRIBUTION? |
TYPE OF INCOME |
---|---|---|
More than 6 full calendar months after stopping work |
N/A |
Unearned Income |
Within 6 full calendar months after stopping work |
No |
Wages |
Within 6 full calendar months after stopping work |
Yes |
Unearned Income |
NOTE: When sick pay is alleged within 6 full calendar months after stopping work, it must be determined whether or not the employee contributed by payroll deduction toward a sick pay plan by reviewing the pay slips or contact with the employer. Any sick payment, or portion thereof, received by an employee during the first 6 full calendar months after stopping work, which, according to the employer, are attributable to the employee's own contribution, is not wages.
EXAMPLE: John is still within 6 months of stopping work and receives sick pay of $400 per month. John's employer advises that 40% of sick pay is attributable to John's own contribution. John should be charged with $240 earned income ($400 x 60%) and $160 unearned income ($400 x 40%).
2. Annual and sick leave payments
Annual and sick leave payments are considered a continuation of salary. Annual and sick leave that is donated to an individual is treated the same as if it were the individual's own leave. That is, the gross wages are counted as income to the individual. No additonal income results from the donated leave.
C. Procedure
1. Development
To determine the 6-month period after stopping work:
Begin with the first day of nonwork.
Include the remainder of the calendar month in which work stops.
Include the next 6 full calendar months.
EXAMPLE: If an individual stops work on May 5, the 6-month period begins on May 6 and runs through November 30.
2. Verification
-
General
Verify sick pay which is wages by using the wage verification procedure in SI 00820.135 or SI 00820.140.
-
Last Day (or Month) Worked
Verify the last day (or month) worked with the employer or knowledgeable third party.
3. Documentation
Document the EVID screen with information extracted from the employer/third party's statement or report of contact/DROC screen showing the last day (or month) worked.
D. References
Workers' compensation, SI 00830.235
Sick pay as unearned income, SI 00830.543
Evidence screen, GN 00301.286
Annnual and sick leave payments, RS 02505.240B.25.