What happens to the DAC benefit if there is 1 year of income in excess of SGA limit? Does the DAC benefit go away forever or just for the year of income over SGA limit? We are looking to pay a disabled employee a retirement bonus when she turns 65 but don't want to jepordize the DAC benefit she receives on her father's earnings record.

Also wondering about making a gift to an ABLE acount for this employee. Are employer contributions to ABLE account counted as earnings toward the SGA limit? Thank you!

Hi. A disabled adult child (DAC) can become re-entitled to DAC benefits if their benefits were previously terminated due to substantial gainful activity (SGA). When and if your employee would lose their benefits if you pay them a bonus depends on their total earnings inclusive of the bonus. Bonuses are considered to have been earned in the month(s) FOR WHICH the bonus is paid, not necessarily in the month that the bonus is actually paid.

In 2023, average monthly earnings that exceed $1,470 are generally considered as SGA for non-blind individuals. And, if the bonus you're contemplating paying causes the employee's average monthly earnings to exceed the SGA level then it could cause their benefits to be either suspended or terminated. If the disabled employee is eligible for an extended period of eligibility (EPE), then their suspended benefits could potentially be reinstated without reapplying for benefits once their earnings drop below SGA level (https://secure.ssa.gov/poms.nsf/lnx/0300203080). But, if the employee's EPE has ended before their earnings drop below SGA level, then they would have to file a new application and have their claim approved before their benefits could be re-started.

Gifts aren't normally considered to be earned income, regardless of whether it is given directly to a person or placed in an account on their behalf. And, only earned income counts toward the SGA limits. However, if Social Security determines that the 'gift' is actually remuneration for the disabled person's work activity, then they could potentially count it as earnings.

Suffice to say that this is a complex issue, so you and your disabled employee may want to discuss your options with a claims representative or technical expert at Social Security who would have access to the employee's records.

Best, Jerry