If you have a serious medical impairment and your employer pays you more than the reasonable value of your work, in effect the employer is subsidizing part of your salary. The subsidized portion of your earnings will be subtracted from your gross earnings before the amount is considered for purposes of classifying it "substantial." Social Security calls this "subsidized earnings".
For example: You return to work for your former employer who was very fond of you. You are being paid $1,000 per month but the employer maintains that the work you are able to do is only worth $600 per month, that she is, in effect, giving you $400 over and above the $600 you earn each month. SSDI would consider only $600 as gross income.
Circumstances indicating a strong possibility of a subsidy according to Social Security:
- Employment is "sheltered": In a sheltered workshop, work is provided for people who are so mentally and/or physically impaired that the impairment keeps them from working in a competitive work place. For example, Jane can only work at 25% of capacity, but she is paid as if she is working 100%. 75% of her income is subsidized and should be deducted from "gross earnings."
- Childhood disability is involved, or
- Mental impairment is involved; or
- There appears to be a marked discrepancy between the amount of pay and the value of the services; or
- Someone alleges that the employee does not fully earn his/her pay (for example, the employee receives unusual help from others in doing the work); or
- The nature and severity of the impairment indicates that the employee receives unusual help from others in doing the work; or
- The employee is involved in a government-sponsored job training and employment program.
Determining the Amount of the subsidy: Social Security first looks to the employer to provide an explanation of the subsidy amount. For information on what the employer should include in a letter or statement, Subsidized Earnings -- Letter From Employer.
If the employer doesn't provide such an explanation: Social Security compares the time, energy, skills and responsibility involved in the employee's services with the same elements involved in the performance or similar work by unimpaired people in the community. It then estimates the proportionate value of the individual's services according to the prevailing pay scale for such work.
For More Information on Subsidized Earnings, see: http://policy.ssa.gov/poms.nsf/lnx/0410505010!opendocument .