SSI Back Pay Spending Rules: Am I Required to Spend Instead of Saving?

Once approved for Supplemental Security Income (SSI), the Social Security Administration (SSA) will owe you back pay. This is because the approval process takes four to six months. As a result, you will receive lump sum installments every six months until your payments are caught up. Because the SSA does not allow you to go over a certain amount of cash assets, this can pose a problem if the money is placed in your savings account. Here we explain the SSI back pay spending rules for SSI benefits with tips to help you avoid challenges with lump sums.

Does SSI Give Back Pay?

Yes, in all cases of eligibility for SSI, the SSA will owe back pay for the months your application was processed. They award back pay based on the number of months between the day of your application and the day of approval.

How Does SSI Back Pay Work?

SSI back pay is the money owed to all approved applicants. Delays in the application process are the norm, which means it would be very unusual not to be owed some form of back or retroactive pay. Once you are approved, the SSA pays benefits effective from the date of your application. The SSA pays SSI back pay installments in lump sums as they realize you have likely suffered financial hardships awaiting approval.

You will receive three months of SSI in the first lump sum payment, and the balance paid every six months for a total of three payments. You will then begin to receive your approved payment level each month. If you are facing unusual hardships, you have the right to request more of the money owed. We discuss this in more detail below.

How Does Back Pay Work for SSI Children?

If your child is approved for SSI, the SSA uses a dedicated account fund for back pay. You can open a dedicated checking, savings, or money market account where the SSA will deposit back pay installments.

How are SSI Disability Backpay Benefits Calculated?

Once your local SSA determines your eligibility to receive SSI, they calculate your back pay based on the date you applied and when your claim is approved. They count the months between these dates and multiply it by the amount they will owe you for your monthly payments. The maximum payment is $735 per month, so if your approval took five months, the calculation is $735 x 5 for a total of $3,675 in back pay. There are no time limitations applied to back pay, so even if your claim takes a year or longer (typically, it would not), you would still be owed the total amount.

What are SSI Back Pay Spending Rules?

Because you are not allowed to have more than $2,000 in assets as an individual or $3,000 as a couple, your lump sum could cause your assets to go above your countable assets limit. However, this asset count does not include your vehicle, home and personal belongings. Also, because the SSA realizes they are providing a lump sum due to back pay, SSI back pay rules allow nine months to spend your back pay from the date the payment is submitted. This applies to each lump sum received. So even if you have money left over from your last installment, it is only added onto your new installment if it is past the nine-month spending date.

What Expenses Can Lump Sum SSI Disability Back Pay Be Used For?

Because you have been managing your finances without your SSI payments for months, chances are you will have several outstanding costs to cover with your back pay. Some of the everyday things covered by your first back pay installment include:

• Rent or mortgage payments
• Home repairs
• Debt payment
• Food
• Medication and medical treatments
• Medical equipment and other health costs, such as therapy
• Vehicle modifications for your disability
• Training programs to improve your work skills to find work
• In-home assistance such as a housekeeper or cook

You can even use the money for entertainment or a visit to the beauty salon. If you find you have additional money after all your expenses are paid, you can also use SSI benefits to cover costs for assets not included in your $2,000 limit, such as:

• A vehicle
• Clothing
• Furniture
• Computer
• Household goods
• A home
• Equipment to start a side business
• Up to $1,500 Cash Surrender Value in life insurance
• $1,500 in burial funds put into a separate account

Countable Resources

Remember that many assets you purchase are added to your $2,000 asset limit. The SSA includes all “countable resources” to determine your eligibility for SSI. Countable resources include things such as cash money, bank accounts, some types of life insurance, stocks, bonds, additional vehicles, and properties not used as your primary residence. Assets not considered countable resources other than those listed above include:

• Property Essential to Self Support: (PESS) Property you or your spouse own used in a trade or business or on your job when working for an employer.
• Plan to Achieve Self-Support (PASS): If you are disabled or blind, money or property used towards your PASS is excluded.
• State ABLE Program: Up to $100,000 of funds in an Achieving a Better Life Experience (ABLE) account established through a State ABLE program.

If you aren’t sure what the SSA considers a countable resource, a Princeton disability advocate can advise you on the types of assets to avoid.

Deemed Resources

If SSI is owed to your child, the SSA considers a parent, spouse, or stepparent’s resources for applicants under 18. Minor children living with you can exclude either $2,000 (living with one parent) or $3,000 (living with two parents) based on your deemed resources which are included as the child’s resources. Once a dependent reaches the age of 18, their parents’ resources are no longer counted as part of the asset limit. If at any time the SSA “looks back” to find the 18-year-old had over $2,000 or $3,000 between the parent’s assets in the past, this will impact eligibility for the young adult.

Selling Countable Resources

If you are above the asset limit, conditional payments are available if you are willing to sell some of your countable resources, including investment properties or non–excluded vehicles. You can receive SSI for up to nine months while selling real property. You can receive benefits for up to three months when selling other types of approved personal assets. Speak to a disability advocate before signing an “agreement to sell property” form to receive conditional benefits. They can explain what conditions apply and the circumstances that allow you to receive conditional benefits beyond the standard payment periods.

How Can I Get My SSI Back Pay Faster?

Social Security pays SSI back pay benefits in three installment payments every six months. If you need your installment sooner, you can contact SSA and request an early release of your funds. They can start payments sooner for the following situations:

• Presumptive disability (PD) or presumptive blindness (PB) payment;
• Emergency advance payment;
• Immediate payment; and
• Expedited reinstatement cases

A disability advocate can help expedite your back pay installments if you are facing dire need situations. It also pays to work with a disability advocate from the beginning of the application process, as you are 66% more likely to receive benefits with assistance from a professional. Click here to set up a free consultation with the experts at Princeton Disability today.