SSI reforms may empower greater saving, work opportunities

Think back to your first job. It likely didn't pay that much. Chances are that you were also in high school at the time, living at home and a dependent of your parents. For that reason, what the job lacked in pay was more than made up for in real-life work experience. The lessons you learned from that first job likely still serve you in your present career.

For recipients of Supplemental Security Income benefits, however, this stepping-stone experience -- of having a first-time job -- is made impossible by outdated asset restrictions, according to some critics. A new bill introduced in Congress, called the SSI Savers Act, seeks to update that asset ceiling. If passed, the legislation may transform the financial outlook of disabled, low-income New Jersey residents.

SSI's asset ceiling has not been adjusted for inflation since 1989, when savings were capped at $2,000 for an individual and $3,000 for a couple. While some assets, such as the recipient's home or car, might not count against that limit, the SSI test generally includes all other resources, even defined-contribution retirement accounts like 401(k)s and IRAs. The program also makes no exception for savings accounts designated exclusively for retirement or education purposes.

Critics of the asset restrictions imposed by the SSI program say it perpetuates a poverty-line existence. For example, recipients may be discouraged from accepting a first job -- which would provide valuable experience and potentially lead to full-time work -- out of fear that the extra income would disqualify them from SSI benefits, yet not pay enough to take the place of the monthly federal benefit payments. For the same reason, recipients may be forced to spend down savings in order to maintain their eligibility.

The proposed SSI reforms include an equitable inflation adjustment for the savings and asset restrictions. In addition, for recipients under 65, the bill would exclude retirement and education savings accounts. For recipients 65 and older, a gradual reduction of SSI payments -- instead of an immediate cut off -- would be applied against retirement accounts, up to $50,000 for an individual or $75,000 for a couple.

Source: Neighborhood Link, "SSI SAVERS Act & The Disabled Citizen | Initiative," July 25, 2012

• Our firm handles situations similar to the one discussed in this post. If you would like to learn more about our practice, please visit our New Jersey Supplemental Security Income page.