After the Social Security Administration (SSA) approves a person’s disability claim, that person often receives back pay from SSI or SSDI, in addition to their monthly benefits.
The amount of back pay depends on the length of time elapsing between submitting the initial claim and getting approved.
The Difference Between SSI and SSDI
Supplemental Security Income (SSI) and Social Security Disability Insurance (SSDI) provide monthly benefits to individuals who cannot work due to a physical or mental disability. Eligibility for SSDI depends on work credit history, while SSI depends on income. People without enough work credits receive SSI benefits if they have little to no assets or income. SSI is considered a “needs-based” program for people with temporary or permanent disabilities.
Examples of SSDI and SSI Benefits
Fifty-nine-year-old Sam worked as a machinist for 40 years. He recently suffered a permanent back injury and can no longer perform his job duties. Since Sam has enough work credits to qualify for SSDI, he will receive monthly SSDI benefits until he decides to apply for social security retirement benefits.
Twenty-nine-year-old Mary works as a bank teller. She broke her hip in several places after falling off a ladder while remodeling her mother’s home. With no income and little assets to her name, Mary applied for SSI since she did not have enough work credits for SSDI. The SSA approved her application for SSI.
It is also possible for a person to receive SSI and SSDI at the same time. However, doing so may reduce the amount of the SSI payment because of the way each program is structured. For example, if Mary worked as a bank teller for 20 years, she would have enough work credits to qualify for SSDI. But, if she had little to no assets to her name (real estate, stocks, 401K, etc.), she may have qualified for “concurrent” SSDI and SSI benefits.
Back pay from SSI: How Much to Expect
Calculating the amount of back pay an SSI recipient receives is fairly simple. Just multiply the amount of the monthly benefit and the number of months that have passed since the date of the initial application. Back pay for SSI is not calculated using the onset date of the applicant’s health problem.
An example of how back pay is determined for SSI: :
- Mary’s monthly SSI benefit is $789
- Six months elapsed between the date she mailed her SSI claim and when the SSA approved her claim.
- $789 x 6 = $4,734
- Mary would receive $4,734 in back pay from the SSA.
Mary’s back pay is more than three times the current SSI Federal Benefit (for 2022, that amount is $841). This means she typically won’t receive her back pay in one lump sum because three times $841 is $2,523. Instead, she will receive her back pay in several installments.
However, if certain conditions are met, the SSA issues back pay to SSI recipients in one lump sum, regardless of the amount of back pay.
These conditions include:
- When an SSI recipient has a medical condition or injury with a poor prognosis (less than one year to live).
- When the person is no longer eligible for monthly SSI benefits and is expected to remain ineligible for the following year.
The SSA may also increase back pay installment amounts if the recipient has outstanding needs for shelter, clothing, food, or essential medical services (medication, supplies, etc.).
Back Pay for SSDI Recipients
When determining back pay amounts for SSDI recipients, the Social Security Administration refers to the “disability onset date” instead of the application date. For example, 45-year-old Bob developed flu-like symptoms and missed work for several days. Bob eventually visited his doctor due to worsening symptoms. The results of a series of tests indicated Bob had lupus, an incurable autoimmune disease.
Bob’s doctor diagnosed him on February 4. Eight months later, the SSA approved Bob’s SSDI claim. Since Bob is eligible for SSDI, the SSA uses his disability onset date to calculate back pay.
All SSDI claimants are subject to a mandatory, five-month waiting period before receiving monthly benefits or back pay. However, individuals diagnosed with amyotrophic lateral sclerosis (ALS) are not held to this mandatory waiting period. ALS disease is the only medical condition exempted from the waiting period.
Delivery of Back Pay from SSI
SSI payments are direct-deposited on the first of each month. SSI recipients without a checking account may receive their first SSI payment via check. However, additional payments are delivered electronically. The SSA stopped issuing checks for all disability and retirement programs in 2011.
To receive back pay from SSI as well as disability benefits, recipients must:
- Establish a savings or checking account with a credit union or bank.
- Get a Direct Express debit card (MasterCard) designed exclusively for the deposit of federal benefits. No bank account is needed when you choose to receive SSI payments with Direct Express.
- Establish an Electronic Transfer Account at a financial institution offering such accounts.
Once the full amount of back pay from SSI is issued, the person receiving back pay will receive a letter from the SSA stating their back pay installments have ended.
Taxation of SSI Benefits
Individuals receiving SSI benefits and back pay are exempt from filing taxes. However, individuals receiving SSDI may need to file tax forms if they are married and their spouse earns a certain amount of income. Additionally, some SSDI recipients are subject to state taxes, depending on spousal income and in which state they reside.
Staying Eligible for SSI After Receiving a Large Back Pay Amount
Individual SSI recipients with countable assets (resources) worth over $2,000 could lose their benefits. Currently, the SSA reviews existing disability claims at least once every three years. However, it is the recipient’s responsibility to report health and medical changes immediately to the SSA that could allow them to work and earn income.
The SSA considers the following as countable assets:
- Cash on hand
- Savings and checking accounts
- Stocks, bonds, and life insurance policies with a cash value of at least $1,500
- Personal effects valued at $2,000 or more
SSI recipients are permitted to own one vehicle and one home, regardless of their value. Excluded from countable assets are wedding rings, ABLE accounts, PASS savings, and IDA savings.
Back pay from SSI is also excluded from being a countable asset. For example, Bob receives a lump sum of $6,000, which technically makes him ineligible to receive monthly SSI benefits. But the SSI program allows Bob nine months to use the lump sum for necessities. This rule also applies to SSI back pay installments. If Bob received installment payments, he would have nine months to spend each installment payment.
To avoid issues with SSI eligibility, recipients should spend back pay funds on their mortgage, rent, food, health insurance, medical expenses, and other non-countable resources.
ABLE Accounts and Back Pay from SSI
Putting SSI back pay into an ABLE account eliminates the problem of ineligibility problems arising during a review. The Achieving a Better Life Experience Act of 2014 (ABLE) facilitated the creation of savings programs for disabled individuals 26 years old or younger. Many children, teens, and young adults with chronic disorders rely on ABLE accounts to remain eligible for SSI and Medicaid benefits.
Funds deposited into an ABLE account are called “contributions,” regardless of who deposited the funds. However, annual contributions to an ABLE account cannot exceed $15,000, which is the limit of the annual gift tax exemption for 2021.