TN 7 (01-07)
DI 10510.010 SGA Criteria in Self-Employment
A. Policy — SGA Criteria
SGA determinations for self-employed individuals will be based on either the general evaluation criteria, which consist of three tests or, when applicable, the countable income test.
Use the countable income test (see DI 10510.010C.) to evaluate work in self-employment performed by a title II disability beneficiary after he/she has received title II disability benefits for 24 months, if the purpose of the evaluation is to determine whether disability has ceased due to SGA.
The FO will use the three tests of the general evaluation criteria (see DI 10510.010B.) in all other cases to determine if the self-employed individual has engaged in SGA. Use the three tests when:
determining initial eligibility for disability benefits;
determining whether work in self-employment performed by a title II disability beneficiary before he/she has received title II disability benefits for at least 24 months is SGA;
determining whether work performed in or after the EPE/reentitlement period is SGA after an SGA cessation has been determined; and
determining SGA during the initial reinstatement period (IRP) for expedited reinstatement (EXR) cases.
B. Policy — Three Tests under General Evaluation Criteria
The general criteria for evaluating work activity of self-employed individuals for SGA purposes consist of three tests. The FO will consider all three tests before it can be established that the individual's work activity is not SGA. The three tests are not used if the countable income test applies (see DI 10510.010C.). The following are just brief descriptions of each of the three tests. For additional policy and procedures on applying these tests, see DI 10510.015 and DI 10510.020. See DI 10505.025D. if the individual is self-employed outside the USA.
1. Test One: Significant Services and Substantial Income
The individual's work activity is SGA if he or she renders services that are significant to the operation of the business, and if he or she receives from it a substantial income; or
2. Test Two: Comparability of Work Activity
The individual's work activity is SGA if, in terms of all relevant factors such as hours, skills, energy output, efficiency, duties, and responsibilities, it is comparable to that of unimpaired individuals in the same community engaged in the same or similar businesses as their means of livelihood; or
3. Test Three: Worth of Work Activity
The individual's work activity is SGA if, although not comparable to that of unimpaired individuals, it is, nevertheless, clearly worth more than the amount shown in the SGA Earnings Guidelines (see DI 10501.015) when considered in terms of its effect on the business, or when compared to the salary an owner would pay to an employee for such duties in that business setting.
C. Policy — Countable Income Test
1. When the Countable Income Test Applies
Use the countable income test to determine whether the work of a self-employed title II disability beneficiary shows that the beneficiary has engaged in SGA when:
You are evaluating work in self-employment which the beneficiary performed after he/she has received title II disability benefits for at least 24 months (under the exemption of work activity provision see DI 10510.010C.3. concerning the 24-month requirement); and
You are evaluating that work to determine if the beneficiary’s disability has ceased due to the performance of SGA.
2. Countable income Test
Compare the self-employed beneficiary’s countable income (see DI 10510.012) to the earnings guidelines in DI 10501.015 to determine if the beneficiary has engaged in SGA.
a. Monthly Countable Income Averages More Than the SGA Amount
If the monthly countable income averages more than the amount in DI 10501.015 for the month(s) in which the individual worked, determine that the individual has engaged in SGA unless there is evidence that shows the individual did not render significant services (DI 10510.015B.) in the month(s).
b. Monthly Countable Income Does Not Average More Than the SGA Amount
If the average monthly countable income is equal to or less than the SGA amount in DI 10501.015 for the month(s) in which the individual worked, determine that the individual has not engaged in SGA. We will not consider significant services when monthly income does not average more than the SGA amount.
3. The 24-month Requirement
For the purposes of the exemption of work activity provision, a beneficiary will be considered to have received title II disability cash benefits for 24 months beginning with the first day of the first month following the 24th month for which he/she received title II disability benefits that he/she was due. The 24 months do not have to be consecutive. For EXR cases, the 24-month requirement will have been met when the individual completes the 24-month initial reinstatement period (IRP).
Any months for which the beneficiary was entitled to title II disability benefits but did not actually receive a title II disability cash benefit will not be counted for the 24-month requirement. For example prisoner suspense, MQGE’s, an individual in full workers compensation offset, a CDB technically entitled to a DMAX, and a SSI only recipient. However, if the reason the beneficiary did not receive a benefit was because the full payment was withheld to recover an overpayment, to pay attorney fees, or for a garnishment order, consider the benefit received for the purpose of the exemption of work activity provision.
Joe has been entitled to title II disability cash benefits since December of 2003 (5-month waiting period –July 2003 through November 2003). In January of 2007, the adjudicator learns that Joe was self-employed since January of 2006. After evaluating the work activity, it is determined that Joe completed his TWP September 2006, and October of 2006 is the first month that needs to be evaluated for SGA purposes. The adjudicator looks at the record and finds that Joe has been entitled and received title II disability benefits for more then 24-months in October of 2006 and therefore the countable income test will be applied.