Social Security Benefits

A. Introduction

Most people consider Social Security benefits as something available to them upon old age retirement. However, those monies withheld from each paycheck, and those paid each quarter by self-employed individuals, provide a variety of benefits to both the worker and his family.


The Social Security Administration defines disability as “the inability to engage in any substantial gainful employment because of a medically determinable physical or mental impairment that can be expected to result in death or which has lasted or can be expected to last for a continuous period of at least twelve months.” 42 U.S.C.S. §423(d)(1)(A). The most misunderstood element of disability entitlement is the requirement that the claimant must be unable to perform any work. An individual who, due to his impairment, is unable to perform his past relevant work and/or is incapable of earning similar compensation is not entitled to disability benefits.

To assess an individual’s entitlement to disability benefits, the Social Security Administration follows a five step sequential process:

  • Is the claimant presently engaging in substantial gainful activity? (In 2004, substantial gainful activity is considered earnings in excess of $810.00 per month.) 20 C.F.R. §404.1574 and §416.974.
  • Does the claimant have a severe mental or physical impairment?
  • Is the impairment listed in or equivalent to an impairment in 20 C.F.R. §404, Subpt. P, App. 1 of the Regulations? (See Appendix A of this material).
  • Does the impairment prevent the claimant from doing past relevant work?
  • Does the impairment prevent the claimant from doing any other work?

20 C.F.R. §404.1520 and §416.920. A finding of not disabled at any step precludes further inquiry.

Specific to older claimants (50 years and older), the regulations recognize their limited marketability and vocational adaptability. See, 20 C.F.R. §404, Subpt. P, App. 2 – “The Medical-Vocational Guidelines.” Also advantageous to older claimants is the arduous unskilled labor rule. This rule awards benefits to an individual who has only a marginal education (formal education at the sixth grade level or less) and work experiences of 35 years or more as an unskilled physical laborer, which now due to a severe impairment, he is incapable of performing. 20 C.F.R. §404.1562.

Once an individual is found disabled, the benefits he receives are dependent upon his work history.

Disability Benefits: the insured worker

An individual insured at the time of his disability onset is paid monthly benefits irrespective of the family’s income and/or assets. The primary test for determining insured status is the 20/40 rule: the disabled worker must have at least 20 quarters (5 years) of coverage within the 40 quarter period (10 years) immediately preceding disability. 20 C.F.R §404.130.

Quarters of coverage are earned for income upon which Social Security taxes are paid. The amount of income required to earn a quarter of coverage is:


Required Earnings


Required Earnings























































Prior to 1978


No more than four quarters will be credited for a single year. 20 C.F.R. §404.140 et. seq.

Disabled insured individuals are paid monthly benefits beginning the fifth month after disability onset, in an amount commensurate with Social Security taxes paid. Twenty-four months after disability entitlement, the disabled worker, assuming continuing disability, is entitled to Medicare coverage.


Medicare Part A covers inpatient hospital care, skilled nursing care, home health care, and hospice care. Medicare Part B covers doctor’s services, outpatient services, durable medical equipment, and home health care. For further information on services not covered, see

The Medicare Part B premium in 2004 is $66.60 per month, up from $58.70 in 2003. The Part B deductible remains $100 per year in 2004, and the beneficiary pays 20% of the Medicare-approved amount after the deductible is met.

Supplemental Security Income (SSI) benefits: the uninsured worker

An uninsured individual who is disabled is entitled to benefits when the income and resource (assets) limitations are met. Currently, the SSI resource limit is $2,000 for an individual and $3,000 for a couple.

However, in counting resources, the Social Security Administration does not include such items as the disabled individual’s home, household goods and personal property, one wedding and engagement ring, some burial funds and spaces, some life insurance policies and a car. Note, this list is not exhaustive. For further detail, refer to 20 C.F.R. §416.1201 et. seq.

Income limitation is determined by the Federal Benefit Rate (“FBR” – the monies paid as a monthly benefit). For 2004, the FBR is $564 for an eligible individual and $846 for an eligible couple. Generally, countable income reduces a disabled individual’s monthly benefit dollar for dollar. Countable income greater than the FBR precludes SSI eligibility. For further information regarding countable income, refer to 20 C.F.R. §416.1100 et. seq.

One-third of the FBR will be counted as additional income if the individual (or individual’s spouse):

(1) Lives in another person’s household for a full calendar month except for temporary absences; and (2) Receives both food and shelter from the person in whose household the individual is living.

Because SSI benefits are awarded on a need basis, monthly benefits and Medicaid coverage are immediately available, upon the first month of the disability onset or the date of the application, which ever is later.


Under 42 U.S.C. §424a and 20 C.F.R. §404.408, Social Security disability benefits are subject to an offset (reduction) when paid to a claimant who is also entitled to worker’s compensation benefits. The offset is applied when the beneficiary is receiving benefits paid to a worker through a state or federal plan because of work-related injury or disease. Programs which are considered worker’s compensation under the statute include the Longshoreman’s and Harbor Worker’s Compensation Act and the Federal Employees’ Compensation Act. Payments under the Jones’s Act, Veteran’s benefits, welfare benefits, and private pension or insurance benefits are not considered worker’s compensation benefits.

The offset is generally applied when the total of the monthly Social Security disability benefit and the worker’s compensation benefit exceeds 80% of the worker’s “average current earnings” (ACE) before disability. ACE is defined in 42 U.S.C. §424a(a) generally as either 1/60th of total wages and self employment income for five consecutive calendar years after 1950 for which such wages and self-employment income are highest, or 1/12th of total wages and self-employment income for the calendar year in which the beneficiary had the highest such wages and income during the period consisting of the calendar year in which he became disabled and the 5 years preceding that year.

Thus, in order to determine the amount of the offset and the amount of the disability benefit, the worker’s compensation benefit is subtracted from 80% of ACE rendering the amount of entitlement after the offset. This figure is subtracted from the amount of entitlement before the offset to determine the amount of the offset itself.

Commuting periodic worker’s compensation benefits to a lump sum does not preclude offset, as the Social Security Administration will prorate or amortize the offset. Generally, the rate or monthly amount at which Social Security prorates a lump sum will be the amount of the rate specified in the lump sum award. If no rate is specified in the award, the rate paid prior to the lump sum payment is designated. Also, when prorating a lump sum award, Social Security will exclude past and future medical expenses as well as sums expended in pursuit of the lump sum, including attorney’s fees. Also excluded are amounts set aside for rehabilitation, as well as penalties and interest. These amounts must be included in the settlement document and must be properly documented.

Therefore, when settling a worker’s compensation case, the assigned worker’s compensation rate should be made as low as possible and cover as long a period of time as possible. If possible, the period assigned should be the beneficiary’s expected life span. Attorneys should be wary of designating portions of the lump sum as future medical expenses because Medicare will often refuse payment for medical expenses on the basis that these expenses have been provided for in the worker’s compensation settlement.


A widow or widower who is disabled as explained in section A of this outline and uninsured on the basis of his own earnings record, is entitled to disability benefits on the basis of a deceased spouse’s earnings record if:

1. The deceased spouse was insured at the time of death; 2. The claimant is at least 50 years in age; and 3. The disability occurred within seven years of the insured’s death.

20 C.F.R. §404.335(c).

Divorced spouses are also entitled to widow/widower’s benefits if the marriage lasted ten years immediately before the divorce and the other, above criteria are met. 20 C.F.R. §404.336.

Because they are based on an insured worker’s earnings, widow/widower’s benefits are paid irrespective of income and assets beginning five months after entitlement, with Medicare benefits available 24 months after the date of entitlement.


When a worker dies fully insured, family members may be entitled to monthly benefits (no medical insurance coverage is available). Those eligible family members include:

  • Spouse. Spouses are paid survivor benefits if the marriage relationship lasted at least nine months immediately preceding the insured’s death (if the death was the result of an accident or in the line of military duty, there is no length of marriage requirement); or the spouse is the parent of the insured’s child (natural or adopted). 20 C.F.R. §404.335(a).
  • Child. A child is paid benefits when he is the insured’s natural, adopted, step child or dependent grandchild under age 18, under age 19 if in high school, or any age if disabled before age 22. 20 C.F.R. §404.350 et. seq.; specific to grandchildren see, 20 C.F.R. §404.358.
  • Mothers/Father’s Benefits. A spouse or divorced spouse who has in his care an eligible child as described immediately above, who is under age sixteen or disabled. Under this benefit program, a divorced spouse is not required to have been married to the insured for a specific time. However, he must be the natural or adoptive parent of the child. 20 C.F.R. §404.339 and 340.
  • Dependant parents. The parent of a deceased insured can qualify for benefits if he is at least 62 years in age and was receiving one half of his support from the insured at the time of his death or at the beginning of any period of disability that continued up to death. 20 C.F.R. §404.370.

Quarters of coverage needed by an individual who dies to be full insured are:

Year of Birth












After 1929


* Individuals born on January 1, refer to the year prior to birth. 20 C.F.R. §404.110 and 404.115.


In order to qualify for retirement benefits a worker must be fully insured, i.e., have earned the required number of quarters of coverage (QC’s). QC’s are earned as explained in section A of this outline. With the exception of those born prior to 1929, the worker must have forty QC’s (10 years of work) to be fully insured for retirement benefits:

Year of Birth












After 1929


* Individuals born on January 1, refer to the year prior to birth. 20 C.F.R. §404.110 and 404.115.

Normal Retirement

At present, the normal retirement age is 65. However, under legislation passed in 1983 that age has risen:

Year of Birth

Normal Retirement Age

Before 1938



65 and 2 months


65 and 4 months


65 and 6 months


65 and 8 months


65 and 10 months




66 and 2 months


66 and 4 months


66 and 6 months


66 and 8 months


66 and 10 months

After 1960


* Individuals born on January 1, refer to the year prior to birth. 20 C.F.R. §404.110 and 404.115.

Early Retirement

An insured worker may retire as early as age 62; however, the monthly benefit will permanently be smaller than if the worker waited until normal retirement age to receive retirement benefits. 20 C.F.R. §404.311 and 404.3129(c). Taking Social Security at exactly age 62 will add 10 additional penalty months to the benefit reduction formula used for early retirement, yielding 75.8% of their full benefit rate.

Late Retirement

If a worker waits until after his normal retirement age to receive Social Security old age benefits, the monthly benefits are increased by a percentage for each year receipt of benefits is delayed up to age 70. 20 C.F.R. §404.312(b).

Auxiliary Benefits

As in other benefit programs, a retired individual’s family members may also be entitled to benefits

Spouse. Spouses are entitled to benefits: – Upon reaching 62 years in age*; or – At any age if the spouse has in his case an eligible child as defined in section D(2) of this outline, who is under 16 years of age or disabled. If the eligible child is not the naturl child of the spouse, the spouse must have been married to the insured for one year. 20 C.F.R. §404.330.

* This early receipt of benefits, prior to normal retirement age, reduces the monthly benefit.

Divorced spouse. A divorced spouse is entitled to benefits on the account of an insured worker, whether or not the worker has applied for retirement benefits if he is: – At least 62 years in age; – Unmarried; – Was married to the worker at least 10 years; and – The divorce occurred 2 years prior to the application. 20 C.F.R. §404.331.

Note: There is a maximum family limit to auxiliary benefits. If the sum of the auxiliary benefits based on a single earner’s record exceeds the maximum family limit, the benefits paid to the family members will be proportionately reduced. However, the workers benefits are not reduced. Further, any amount payable to a divorced spouse is not included in the family maximum. 20 C.F.R. §404.403 et. seq.


The retirement earnings test “RET” affects individuals between the ages of 62 and 65 and two months, in that it allows a reduction in the amount of Social Security retirement benefits paid to those earning income after retirement. In 2003, the earnings limitation was $11,520.00. However, workers over the normal retirement age no longer face this issue because in 2000, Congress eliminated it.


Income not attributable to services performed after the month of entitlement does not reduce monthly benefits. 42 U.S.C.S. 403(f)(D). Examples of passive income not affecting retirement benefits are capital gains, dividends, interest, rental income, pension, annuity, retirement pay and royalties. The key to excluding income is; it must be passive. If an individual “retires” but thereafter continues to work in a business taking higher dividend payments rather than a salary, the Social Security Administration will consider the dividend, wages and reduce retirement benefits accordingly. Particularly in dealing with family businesses and closely held corporations, it is suggested that an individual seek advice regarding structuring of post retirement income. The Social Security Administration has the authority to examine retirement arrangements and generally, claim that an individual is guilty until he proves himself innocent.


The Listing of Impairments, generally referred to as “Listings”, describes impairments which are considered severe enough to prevent a person from performing any gainful activity. 20 CFR §404.1525. The Listings are generally organized by body systems, i.e. musculoskeletal, respiratory. Each individual listing has a general introduction containing definitions of key concepts used in that section. Also found in the introduction are certain specific medical findings, some of which are required to establish a diagnosis or confirm the existence of an impairment in using a Listing. 20 CFR §404.1525(c). Most of the listed impairments are permanent or expected to result in death, or a specific statement of duration is made; otherwise, the evidence must show that the impairment has lasted or is expected to last for a continuous period of at least twelve months.

The Listing of Impairments (Part A applicable to individuals age 18 and over) is divided into 14 sections as follows:

  • 1.00 Musculoskeletal System
  • 2.00 Special Senses and Speech
  • 3.00 Respiratory System
  • 4.00 Cardiovascular System
  • 5.00 Digestive System
  • 6.00 Genito-Urinary System
  • 7.00 Hemic and Lymphatic System
  • 8.00 Skin Disorders
  • 9.00 Endocrine System
  • 10.00 Multiple Body Systems
  • 11.00 Neurological
  • 12.00 Mental Disorders
  • 13.00 Neoplastic Disease, Malignant
  • 14.00 Immune System

A detailed explanation of Section 1.00 follows:

§1.00 Musculoskeletal System

§1.02 Major dysfunction of a joint(s) (due to any cause): Characterized by gross anatomical deformity (e.g., subluxation, contracture, bony or fibrous ankylosis, instability) and chronic joint pain and stiffness with signs of limitation of motion or other abnormal motion of the affected joint(s), and findings on appropriate medically acceptable imaging of joint space narrowing, bony destruction, or ankylosis of the affected joint(s). With:

A. Involvement of one major peripheral weight-bearing joint (i.e, hip, knee, or ankle) resulting in an inability to ambulate effectively, as defined in 1.00b2b; or B. Involvement of one major peripheral joint in each upper extremity (i.e, shoulder, elbow, or wrist-hand), resulting in an inability to perform fine and gross movements effectively, as defined in 1.00B2c.

§1.03 Reconstructive surgery or surgical arthrodesis of a major weight-bearing joint, with inability to ambulate effectively and return to effective ambulation did not occur, or is not expected to occur, within 12 months of onset.

§1.04 Disorders of the spine (e.g., herniated nucleus pulposus, spinal arachnoiditis, spinal stenosis, osteoarthritis, degenerative disc disease, facet arthritis, vertebral fracture), resulting in compromise of a nerve root or the spinal cord. With:

A. Evidence of nerve root compression characterized by neuro-anatomic distribution of pain, limitation of motion of the spine, motor loss (atrophy with associated muscle weakness or muscle weakness) accompanied by sensory or reflex loss and, if there is involvement of the lower back, positive straight-leg raising test (sitting and supine); or

B. Spinal arachnoiditis, confirmed by an operative note or pathology report of tissue biopsy, or by appropriate medically acceptable imaging, manifested by severe burning or painful dysesthesia, resulting in the need for changes in position or posture more than once every 2 hours; or

C. Lumbar spinal stenosis resulting in pseudoclaudication, established by findings on appropriate medically acceptable imaging, manifected by chronic nonradicular pain and weakness, and resulting in an inability to ambulate effectively.

§1.05 Amputation (due to any cause). A. Both hands; or B. One or both lower extremities at or above the tarsal region, with stump complications resulting in medical inability to use a prosthetic device to ambulate effectively which have lasted or expected to last for at least 12 months; or

C. One hand and one lower extremity at or above the tarsal region, with inability to ambulate effectively; or D. Hemipelvectomy or hip disarticulation.

§1.06 Fracture of the femur, tibia, pelvis, or one or more of the tarsal bones. With: A. Solid union not evidence on appropriate medically acceptable imaging and not clinically solid; and

B. Inability to ambulate effectively and return to effective ambulation did not occur or is not expected to occur within 12 months of onset.

§1.07 Fracture of an upper extremity with nonunion of a fracture of the shaft of the humerus, radius, or ulna, under continuing surgical management directed toward restoration of functional use of the extremity, and such function was not restored or expected to be restored within 12 months of onset.

§1.08 Soft tissue injury (e.g., burns) of an upper or lower extremity, trunk, or face and head, under continuing surgical management, directed toward the salvage or restoration of major function, and such major function was not restored or expected to be restored within 12 months of onset.

Commonly used terms in §1.00:

A. Loss of Function defined

Functional loss is defined as the inability to ambulate effectively on a sustained basis for any reason, including pain associated with the underlying musculoskeletal impairment, or the inability to perform fine and gross movements effectively on a sustained basis for any reason, including pain associated with the underlying musculoskeletal impairment. The inability to ambulate effectively or the inability to perform fine and gross movements effectively must have lasted, or be expected or last, for at least 12 months.

i. Inability to Ambulate Effectively Defined

Inability to ambulate effectively means an extreme limitation of the ability to walk; i.e., an impairment(s) that interferes very seriously with the individual’s ability to independently initiate, sustain, or complete activities. Ineffective ambulation is generally defined as having insufficient lower extremity functioning to permit independent ambulation with out the use of a hand-held assistance device(s) that limits the functioning of both upper extremities.

To ambulate effectively, an individuals must be capable of sustaining a reasonable walking pace over a sufficient distance to be able to carry out activities of daily living. They must have the ability to travel without companion assistance to and from a place of employment or school. The ability to walk independently about one’s home without the use of assistive devices does not, in and of itself, constitute effective ambulation.

ii. Inability to perform fine and gross movements defined

Inability to perform fine and gross movements effectively means an extreme loss of function of both upper extremities; i.e., an impairment(s) that interferes very seriously with the individual’s ability to independently initiate, sustain, or complete activities. To use their upper extremities effectively, individuals must be capable of sustaining such functions as reaching, pushing, pulling, grasping, and fingering to be able to carry out activities of daily living.

iii. Pain or other symptoms

In order for pain or other symptoms to be found to affect an individual’s ability to perform basic work activities, medical signs or laboratory findings must show the existence of a medically determinable impairment(s) that could reasonably be expected to produce the pain or other symptoms.

C. Diagnosis and evaluation

Should be supported, as applicable, by detailed descriptions of the joints, including ranges of motion, condition of the musculature (e.g., weakness, atrophy), sensory or reflex changes, circulatory deficits, and laboratory findings, including findings on x-ray or other appropriate medically acceptable imaging. Medically acceptable imaging includes, but is not limited to, x-ray imaging, CAT scan or MRI, myelography, and radionucleur bone scans.

D. Physical Examination

Must include a detailed description of the rheumatological, orthopedic, neurological, and other findings appropriate to the specific impairment being evaluated. These physical findings must be determined on the basis of objective observation during the examination, and not simple on the individual’s subjective complaints.

E. Major joints defined

Major joints refers to the major peripheral joints including the knee, shoulder, elbow, wrist-hand, and ankle-foot, as opposed to other peripheral joints (e.g., the joints of the hand or forefoot) or axial joints (i.e., the joints of the spine). The ankle and foot are considered separately in evaluating weight bearing, since only the ankle joint with the hindfoot, but not the forefoot, is crucial to weight bearing.

F. Major function of the face and head defined

For purposes of listing 1.08, major function of the face and head relates to impact on any or all activities involving vision, hearing, speech, mastication, and the initiation of the digestive process.