What are disability income limits for 2022?

If you employ someone who is receiving SSI, SSDI or Medicaid benefits, you may know that they are limited in the amount of income they are able to receive in a month to continue to receive their benefits. While many people don’t necessarily need to keep their income payments and would like to work more and longer for you, they may need everything they can get from the Medicaid services they carry to have an independent life.

You may have had discussions with them in the past about wanting to have them for more hours or pay them what you actually think they are worth instead of limiting their working time and income, but they may have refused out of concern for what the change would do to their benefits.

If their income is limited to the Substantial Gainful Activity (SGA) amount, you have the opportunity to every January, bump their salary up just a touch to match what they are allowed to earn without jeopardizing any benefits. This January, people limited to SGA will be able to earn $1,350 per month up from 2021’s $1,310 per month.

Granted, the best way to pay them still might need to see you shift some of your employment practices. The easiest one is moving from a 26 pay period (bi-weekly) to a 24 week pay period (twice a month). Not only will they be able to avoid the pesky 5-week month stress, you will also be able to pay them exactly what they will be allowed to receive.

Let’s look at the numbers for the upcoming 2022:

If you paid your employees full SGA for the full year, your employees who are utilizing government benefits will be eligible to receive $16,200 a year, or $675 per paycheck prior to any taxes or other deductions.

If you were to pay your employees a level paycheck throughout the year on a 26 pay schedule, they would not be able to receive the full $16,200 a year. In the example of a pay period that ends on a Friday, for 2022 with the first paycheck being issued on January 14th, there are two months that would have three paychecks, July and December.

To keep the paychecks stable, the employee could be required to take an unpaid holiday in the busiest time of your business cycle. If you want them to be able to have the flexibility to take off when they would like to with pay just as you provide to your other employees, a level paycheck would need to account for just two months of being over in their SGA amount, amounting to paychecks of $450 a pay period. Over 26 pay periods at $450, that amounts to just $11,700 a year, a reduction in pay of $4,500. Not insignificant.

Not everyone receiving disability benefits are mandated to stay under the SGA limits for all of their earned income. Based on their state’s Medicaid program, they may be eligible to discount more of their earned income as a disabled worker’s incentive to work, contributing more themselves to the Social Security program, federal and state taxes. Each state’s laws are different for how much a disabled worker can earn and hold in assets. Not every employee will automatically know that they are eligible for these Medicaid buy-in programs. An employee who has been limiting their work hours based on fear of losing benefits because they earn too much should look into whether they qualify for one of these Medicaid programs, which could drastically change how much they could earn monthly.

The true appeal for your employees of changing to a 24-week pay period is knowing what they will be paid and keeping it steady without worrying about the shuffle around the 3 pay period months. This can be meaningful to all employees. That time can be much more stressful and confusing for an employee who is limited by their need to remain eligible for their Medicaid and Social Security payments. And for you! Shifting the pay periods would in the long run simplify the whole year’s payroll.

What does it look like to change over to a 24 week pay period from a 26 pay period cycle? Actually, it’s not that simple either. We’re talking about increasing the overall monthly pay of individuals who receive government benefits but it but it changes the dynamic of all of your employees paycheck schedule. If they are comfortable with paying bills on a two-week basis and are expected to change their behavior to adjust to a twice a month basis, that change is worth discussing with your employees well in advance.

You are required to notify your employees of a change 30 days prior to it going into effect. However, it’s important take care to make sure that they can maintain their current obligations paying bills every two weeks to switching to a twice a month schedule.

It will not be unheard of that any one of your employees or coworkers are not in a place where they can just go a couple more days from receiving their paycheck and everything work out just fine. Many people, regardless of their income, are paying bills on a paycheck-to-paycheck basis and we need to make sure that there is some understanding and what a change with the shift in your business practices. Make sure to have financial education resources available for them so that they can access the help they need to meet their financial obligations.

Elizabeth Wolleben Yoder, CFP is the director of financial planning at Planning Across the Spectrum. She primarily meets with individuals and families to address the unique needs of disability to make sure they understand how government benefits impact their planning and how to find more local resources of support, housing, and employment, all within the context of financial planning.