Navigating Benefit Reductions for Disabled Individuals Receiving Multiple Disability Benefits, § 404.408

Understanding the regulations and provisions surrounding benefit reductions for disabled individuals receiving multiple disability benefits can be quite complex.

This blog post aims to simplify and explain the key aspects of § 404.408, which covers the reduction of benefits based on disability on account of receipt of certain other disability benefits provided under Federal, State, or local laws or plans.

Section 1: When is a Benefit Reduction Required?

A disabled individual’s disability insurance benefit and any monthly benefit payable to others based on the same earnings record may be reduced if the individual:

1. First became entitled to disability insurance benefits between 1965 and 1981, and the disability began between June 1, 1965, and March 1981.
   • The individual must also be entitled to periodic benefits under a workers’ compensation law or plan for that month.
   • The Commissioner has received a notice of the entitlement.
   • The individual has not attained age 62.
2. First became entitled to disability insurance benefits after August 1981, and the disability began after February 1981.
   • The individual must also be concurrently entitled to a periodic benefit, including workers’ compensation or any other payments based on a work relationship, for that month.
   • The individual has not attained full retirement age as defined in § 404.409.

Section 2: When is a Benefit Reduction NOT Made?

A benefit reduction is not made if:

1. The workers’ compensation law or plan under which the periodic benefit is payable provides for the reduction of such periodic benefit when anyone is entitled to a benefit under title II of the Act on the basis of the earnings record of an individual entitled to a disability insurance benefit.
2. The law or plan under which the periodic public disability benefit is payable provides for the reduction of that benefit when anyone is entitled to a benefit under title II of the Act on the basis of the earnings record of an individual entitled to a disability insurance benefit and that law or plan so provided on February 18, 1981.
3. The benefit is a Veterans Administration benefit, a public disability benefit payable to a public employee based on employment covered under Social Security, a public benefit based on need, or a wholly private pension or private insurance benefit.

Section 3: Amount of Reduction

The total of benefits payable for a month to which § 404.408 applies is reduced by the amount by which the sum of the monthly disability insurance benefits payable on the disabled individual’s earnings record and the other public disability benefits payable for that month exceeds the higher of:

1. Eighty percent of the individual’s average current earnings (as defined in § 404.408).
2. The total of the individual’s disability insurance benefit for that month and all other benefits payable for that month based on the individual’s earnings record, prior to reduction under this section.

Section 4: Reentitlement to SSDI Benefits

If an individual’s entitlement to SSDI benefits terminates and the individual again becomes entitled to SSDI benefits, the amount of the reduction is again computed based on the figures specified in the regulations.

Section 5: Computing SSDI Benefits

When reduction is required, the total monthly SSDI benefits payable after reduction can be more easily computed by subtracting the monthly amount of the other public disability benefit from the higher of the two limits mentioned in Section 3.

Section 6: Items Not Counted for Reduction

Amounts paid or incurred, or to be incurred, by the individual for medical, legal, or related expenses in connection with the claim for public disability payments or the injury or occupational disease on which the public disability award or settlement agreement is based, are excluded in computing the reduction.

Section 7: Certification and Verification of Eligibility for Public Disability Benefits

Individuals may be required to furnish evidence and certify as to their eligibility for a public disability benefit that would give rise to a reduction under the regulations. Federal agencies are required to provide information needed to determine the reduction amount or verify other information needed to carry out these provisions. The Social Security Administration may also enter into agreements with States, political subdivisions, and other organizations to obtain information required to carry out these provisions.

Section 8: Public Disability Benefits Payable on Other Than a Monthly Basis

When public disability benefits are paid periodically but not monthly, or in a lump sum, the reduction is made at the time or times and in the amounts that the Social Security Administration determines will approximate as nearly as practicable the reduction required under the regulations.

(i) Effect of changes in family composition: The addition or subtraction of beneficiaries in a family may cause the family benefit to become, or cease to be, the applicable limit for reduction purposes. When the family composition changes, the amount of the reduction is recalculated based on the new number of beneficiaries. Example 1 and Example 2 illustrate how these changes can affect the benefits payable.

(j) Effect of social security disability insurance benefit increases: Any increase in benefits due to a recomputation or a statutory increase in benefit rates is not subject to the reduction for public disability benefits, and does not change the amount to be deducted from the family benefit. The increase is simply added to what amount, if any, is payable. The example provided demonstrates how this works in practice.

(k) Effect of changes in the amount of the public disability benefit: Any change in the amount of the public disability benefit received will result in a recalculation of the reduction, potentially adjusting the amount of such reduction. The adjustments due to an increase or decrease in the amount of the public disability benefit will be effective with the actual date of entitlement to the new amount of the public disability benefit, or the month after the Commissioner received notice of the increase in the public disability benefit. The example given shows how these changes can affect the benefits payable.

Overall, these provisions illustrate how various factors can influence the calculation of benefits payable to individuals and their families under social security and public disability benefits.

Redetermination of Benefits: The redetermination of benefits is a process that occurs in the second calendar year after the initial reduction of an individual’s benefits under sections 223 and 202 of the Act, and every third year thereafter. This process reevaluates the amount of benefits still subject to reduction, without decreasing the total amount of benefits payable under title II of the Act.

In this process, an individual’s average current earnings are recalculated by considering the ratio of the average total wages and taxable wages reported to the Secretary of the Treasury or Commissioner of Social Security. The redetermined benefit takes effect in January following the year of redetermination.

The effect of redetermination can lead to an increase in the amount of benefits payable if the previous limit was 80 percent of the average current earnings, or if the limit was the total family benefit and the redetermination causes the average current earnings to exceed this limit. If a benefit has already been increased for another reason, such as a statutory increase or recomputation, no additional increase is made. The goal of redetermination is to align benefits with current wage levels when no other changes in payments have been made.

The example provided illustrates the redetermination process for Alice, who became entitled to disability insurance benefits, as well as her two children who received monthly benefits. The example demonstrates the redetermination process, including cost-of-living increases and the recalculations of benefits for the family, to determine the new amount payable to each family member.