Braille Monitor                                                   March 2010

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Removing the Earnings Penalty:
A Commonsense Work Incentive
For Blind Social Security Beneficiaries

Purpose: To promote and facilitate the transition by blind Americans from Social Security Disability Insurance (SSDI) beneficiaries to income-earning, tax-paying, productive members of the American workforce.

Background: The unemployment rate for working-age blind people is over 70 percent. Part of the reason for this disproportionately high statistic is the myths and misconceptions about the true capacities of blind people. These erroneous perceptions are manifested when employers refuse to hire the blind. Low societal expectations result in low representation of the blind in the workforce.

In addition, governmental programs intended to provide economic security to blind workers during periods of unemployment, especially the SSDI program, have had the unintended consequence of creating an incentive for blind people to remain unemployed or underemployed, despite their desire to work.

Despite the efforts of the National Federation of the Blind, blindness still has profound social and economic consequences. Governmental programs should encourage blind people to reach their full employment potential; they should not encourage economic dependence.

Existing Law: Title II of the Social Security Act provides that disability benefits paid to blind beneficiaries are eliminated if the beneficiary exceeds a monthly earnings limit. This earnings limit is in effect a penalty imposed on blind Americans when they work. This penalty imposed by the SSDI program means that, if a blind person earns just $1 over $1,640 (the monthly limit in 2010 following a Trial Work Period), all benefits are lost.

Section 216(i)(1)(B) of the Social Security Act defines blindness as a disability based on objective measurement of acuity and visual field, as opposed to the subjective criterion of inability to perform Substantial Gainful Activity (SGA). For blind people, doing work valued at the SGA earnings limit terminates benefits but does not terminate disability. Only blind people not working or those with work earnings below an annually adjusted statutory earnings limit receive benefits.

Need for Legislation: When a blind person enters the workforce, there is no guarantee that wages earned will replace SSDI benefits after taxes are paid and work expenses are deducted. For example, Jane worked as a customer service representative with an annual income of $35,000 until she became blind from diabetic retinopathy. Jane meets the criteria for SSDI benefits, which provide income of $1,060 a month (or $12,720 a year) tax-free while she is not working. Jane wants additional income to meet her financial needs. After an adjustment period and blindness skills training, she finds employment as a part-time representative making $10 an hour for thirty-five hours a week. Jane grosses $350 a week for an average of $1,517 a month. Using a conservative 25 percent withholding tax, Jane nets $1,137.50 from her work, combined with her $1,060 disability benefit, for a net total of $2,197.50 a month. If Jane should have the opportunity to work full time (forty hours), her weekly salary would go up to $400 a week for a monthly average of $1,733. This amount is over the 2010 earnings limit, so Jane loses all of her disability benefits. Using the same 25 percent tax level, Jane nets only $1,300 a month—working an extra five hours a week has cost Jane $897.50 net income (over $10,500 a year). This example illustrates the work disincentive contained in current law.

A gradual reduction of $1 in benefits for every $3 earned over the earnings limit would remove the earnings penalty and provide a financial incentive to work. The benefit amount paid to an individual will gradually decrease, while the individual’s contribution to the Social Security trust fund increases over time. Under this approach, as Jane earns more, she pays more into the trust fund, and her dependence on benefits decreases.

Monthly earnings evaluations are unnecessarily complicated for both the beneficiaries and the Social Security Administration. Since the medical prognosis for blind people rarely changes and because blindness is objectively measurable, blind people should be subject to an annual earnings test with the limit equal to twelve times the applicable monthly SGA amount.

Under current law blind workers frequently pay for items and services related to their blindness that are necessary for them to work, and they are permitted to subtract these Impairment-Related Work Expenses (IRWE) from monthly earnings when determining monthly income. Properly crediting IRWE poses a serious challenge to the SSDI program and creates a lack of predictability for the blind person trying to determine whether benefits will be available. To address both issues, Congress should permit SSDI recipients to claim the same amount used when determining an income subsidy under the Medicare prescription drug program, currently 16.3 percent of earnings.

Proposed Legislation: Congress should enact legislation to:

Requested Action: For the House, please cosponsor the Blind Persons Return to Work Act (H.R. 886) by contacting Michaeleen Crowell in Representative John Lewis’s office, and provide a commonsense work incentive for blind Social Security beneficiaries. For the Senate, please consider introducing companion legislation.

Contact Information:
Lauren McLarney
Government Programs Specialist
Phone (410) 659-9314, ext. 2207
Email <[email protected] >

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