It is important to understand the significance of the Social Security Disability Insurance (SSDI) 5-year rule. The SSDI 5-year rule is crucial and helpful if you or a loved one has had a disability, participated in a Social Security Disability program, has received payments as a result, and now plans to return to the workforce.
The SSDI 5-year rule states that in order to be eligible for SSDI benefits, a person must have worked and paid Social Security taxes for at least five of the previous ten years. Both SSDI and Disabled Widow’s Benefits (DWB) are subject to this provision.
In this article, we will discuss the advantages, exceptions, and necessary work credits associated with the 5-year rule for Social Security disability benefits eligibility.
Everything About The Social Security Disability 5-Year Rule
Thanks to the Social Security Administration’s (SSA) five-year regulation for Social Security disability benefits, people can skip the required waiting period for receiving disability payments
This rule applies to people who previously received disability benefits, either through Supplemental Security Income (SSI) or Social Security Disability Insurance, stopped receiving those benefits, and then, within five years after that, developed a physical or mental impairment that prevented them from working.
Who Qualifies for Social Security Disability?
There are stringent requirements that must be met to qualify for SSDI payments. These include the length of time you have been disabled at the time you apply as well as the length of time you worked prior to becoming unable to work because of a qualifying disability.
If you fall into one of the following categories, you may qualify for disability payments:
Qualifying Condition
In order to qualify for disability benefits from the Social Security Administration, an individual must have a “medically determinable physical or mental impairment” that has lasted for or is expected to last for a minimum of 12 months. This medical condition must render you unable to work at the job you were doing previously, as well as any other “substantial gainful work that exists in the national economy.”
If you are applying for SSDI due to blindness or survivor benefits, you must follow a different set of guidelines.
Full Retirement Age
According to the SSA’s website, you can receive Social Security benefits based on your earnings record if you are age 62 or older, or a person with a disability or blindness and have enough work credits. Family members who qualify for benefits based on your work record do not need work credits.
The Social Security Administration uses a person’s birth year to calculate their full retirement age.
Work Credits
Before becoming disabled, you must have worked for a minimum of five of the previous ten years. People receive “credits” from Social Security based on their earnings and contributions. Each year of employment is worth up to four credits.
You will need 40 work credits to be eligible for SSDI benefits; 20 of these credits must have been acquired within the last 10 years before your disability began. However, younger individuals applying for SSDI benefits will require less work credits.
Earning $1,640 in 2023 will get you one credit; to qualify, you’ll need to have made at least $6,560 over the previous five years. If you have earned enough work credits, the Social Security Administration will consider you “insured” if you suffer a disability.
Duration of Disability
According to this rule, you will start getting your benefits in the sixth month following your application. If your disability began before you applied for SSDI, you may be entitled to retroactive payments for up to a year. The SSDI five-year rule allows you to immediately begin benefits if you have received them within the prior five years, skipping the five-month waiting period.
How Does The Social Security 5-Year Rule Work?
If you return to work and if within five years of your benefits stopping, your income ever drops below the Substantial gainful activity (as how SSA defines it), you could resume monthly SSDI benefits without needing to reapply or undergo the initial application process. The SSA’s threshold for substantial gainful activity has a different threshold each year.
Your benefits will be reinstated as soon as you notify the Social Security Administration that you are unable to continue working, whether in your recently ended job or any other position.
The Trial-to-Work Period
People who are receiving SSDI benefits will have the option to return to work while still maintaining their disability status. This time frame is referred to as the trial work period (TWP). The Social Security Administration will not terminate your benefits throughout the trial work period if you work for nine months out of the five-year trial period.
You are free to work and keep whatever income you earn during these nine months without affecting your Social Security Disability Insurance benefits in any way.
If you earn more than a particular amount in a given month, the Social Security Administration will consider that you worked a trial work month in that given month. In 2023, a trial work month is defined as any month in which you earned at least $1,050.
If you put in more than nine months of work within a five-year period, your “trial work months” will be exhausted, and your “trial work period” will come to an end.
But it doesn’t stop there. There are other programs in place that help safeguard your benefits while you return to work.
Social Security 5-Year Rule and Trial To Work Period (TWP)
The SSA found that people with disabilities that were gradually improving were afraid to try to return to work for fear that they would lose their Social Security Disability benefits if they did.
This was a problem with the older version of the Social Security Disability Program.
Since claimants believed that any attempt to return to work would be used against them, they did not want to risk losing their SSDI benefits in the event that they were unable to find gainful employment again or were unsuccessful.
Workers were concerned that the Social Security Administration would conclude that their disability had improved to the point where they could return to work.
However, the Social Security Administration encourages individuals to try to return to the workforce.
The government wants to make sure that the funds in the Social Security Trust Fund are only used for those who continue to have significant limitations with regard to their daily lives and employment. If a benefits recipient gets healthy enough to go back to their previous job and perform all their duties again, they do not need to keep providing benefits.
The Social Security Administration created the Trial Work Period program so that people with disabilities who feel capable of going back to work or want to enter, re-enter, or continue in employment could do so by protecting their eligibility for SSDI benefits and/or health care coverage until they achieve self-supporting employment.
If you receive SSDI, your TWP allows you to test your ability to work for at least nine months. During your TWP, you’ll receive full SSDI benefit payments, no matter how much you earn, so long as you continue to report your work activity and continue to meet the SSA’s rules for disability. The TWP continues until you accumulate nine TWP service months (not necessarily consecutive) within a rolling 60-month period.
Benefits Of Meeting The Social Security 5-Year Rule
If you attempt to work, whether in your old employment or a different occupation, but are unable to continue due to your physical or mental condition, there is no need to reapply for benefits after meeting the Social Security five-year criterion.
The Social Security Administration wants to encourage and support people with disabilities in returning to the workforce without worrying about having to reapply for benefits if the work arrangement is not viable.
Exceptions To The Social Security 5-Year Rule
However, people should be aware of the various exceptions to the Social Security 5-year rule. Firstly, those who petitioned for Social Security spousal benefits on or after April 1, 2004, or those who retired after June 30, 2004, are subject to a 60-month exemption.
Secondly, individuals should confirm with the SSA that the Social Security-covered employment was inside the current plan or had been working before March 24, 2004 and that at least one month was worked after March 2, 2004, if any of the last 60 months fell during a transitional period.
If the amount of Social Security-covered earnings recorded is less than the annual amount calculated based on the federal minimum wage amount but may be justified, the Social Security Administration grants an exception.
In such circumstances, the person’s assertion regarding the number of months of covered employment shall be taken into consideration.
For instance, if a person worked as a school bus driver for only 2-3 hours per day and the amount posted is only one-third of the annual amount calculated using the federal minimum wage figure, they will still be given credit for nine months of Social Security-covered employment that year.
What Are Work Credits For Social Security?
Employees receive credits under the Social Security Disability Insurance Program for the taxes they pay into Social Security on the money they make annually from their jobs. Employees are only allowed to accrue a maximum of four credits per year. Each year, as the average wage rises, the amount you must earn to receive one credit varies and significantly increases.
In 2023, you will get one credit for every $1,640 in earnings. Even if you change jobs or take a break from earning for a while, the credits you once earned are still recorded on your earnings record. Depending on the worker’s age when requesting disability benefits, different disability programs have varied credit requirements.
In comparison to someone in their 20s or 30s who has been disabled and is consequently unable to perform either their prior job or another job, the threshold for the quantity of qualifying work credits will be substantially lower for those who are close to retirement age.
How To Earn Work Credits For Social Security
Work credits are the building blocks that Social Security uses to determine whether you have worked long enough to be eligible for each type of Social Security benefit, according to the Social Security Administration.
Your credits will remain on your record even if you stop working before you have accrued enough to be eligible for benefits. You can add more credits if you return to work later to qualify. Regardless of when you actually performed the labor, credits are calculated depending on your annual revenue.
Depending on your pay, your summer employment might qualify you for all four credits, saving you from working all year. You can amass a maximum of four credits for each year while you work and pay social security taxes.
For those born in 1929 or later, 40 credits or ten years of work are required. Depending on your age when you become disabled, you may need more work credits to qualify for disability benefits.
In general, you need 40 credits, 20 of which must have been obtained in the ten years before the year of your disability. Younger employees, however, may be eligible with fewer credits. If you are under 24 and have acquired six credits within the three years preceding the onset of your disability, you may be eligible for benefits.
Social Security Disability And Workers Compensation
You can be qualified for Social Security disability benefits if you are receiving workers’ compensation benefits for an illness or injury sustained at work.
However, if you also receive workers’ compensation payments, your Social Security disability benefits may be reduced in amount. It is referred to as the workers’ compensation offset.
The offset might change depending on how many workers’ compensation payments you receive. It is intended to prevent people from obtaining more benefits than they would have expected by working.
Understanding the workings of the workers’ compensation offset and how it could impact your Social Security disability benefits is crucial.
Conclusion
For people who have suffered an impairment or disability and have paid social security taxes, the Social Security Disability 5-year rule is a crucial consideration. People can make educated decisions about their eligibility for SSDI benefits by knowing the rules, advantages, exclusions, and work credits required for eligibility.
Additionally, it is critical to understand how social security payments may be impacted by workers’ compensation benefits and how these offsets may change your SSDI benefits.
