Hiring Workers Who Are Receiving Social Security Disability Benefits

Consider the matter carefully before hiring a worker receiving these benefits.

Church Finance Today

Hiring Workers Who Are Receiving Social Security Disability Benefits

Consider the matter carefully before hiring a worker receiving these benefits.

State v. Pride Cast Metals, Inc., 764 N.E.2d 1021 (Ohio 2002)

Background. Many churches have hired workers who are receiving Social Security disability benefits. Consider the following examples.

Example. Bob is a church custodian who received a salary of $24,000 in 2002. Late that year, Bob suffered a heart attack and in 2003 is determined to be disabled by his local Social Security office. He begins receiving monthly disability benefits of $900. Bob gradually begins to resume some of his former activities. Because of his need for more income, he asks the pastor if he can perform custodial duties on a part-time basis. The pastor and board are not sure if such an arrangement is permissible given Bob’s disabled status for Social Security and his receipt of disability benefits.

Example. Pastor Dave is the senior pastor of his church. At age 63, he suffers a stroke that results in permanent physical impairment. A local Social Security office rules that he is disabled, and he begins to receive monthly disability benefits of $1,200. Pastor Dave moves to Florida, and begins attending a church. Within a year, the church board would like to hire him as a part-time “minister of visitation.” It is hesitant to do so, however, because Pastor Dave is receiving Social Security disability benefits.

A recent case. An employee (“Sam”) was injured while working for a secular employer, and he received a workers’ compensation award based on “permanent total disability.” Several years later, Sam’s former employer learned that for nearly 15 years following his “injury” he had been earning a weekly salary as a pastor. A state agency later issued an order terminating Sam’s benefits, charging him with fraud, and ordering him to repay all benefits he had received. The agency noted, in its order,

Sam’s functioning as a church pastor for which he received remuneration constitutes engaging in sustained remunerative employment. Therefore, [all benefits will stop immediately]. Sam’s employment while receiving compensation constitutes fraud. Specifically, he failed to notify the [state] of his position as pastor and receipt of compensation for that position. The state paid compensation based on Sam’s misrepresentation of his employment activities. He had knowledge of the falsity of his misrepresentation, as demonstrated by his indication that he was not working on forms sent to him. He intended to mislead the [state], knowing that his employment would cease the [workers] compensation paid to him.

Sam appealed this order, and a state appeals court ruled that the order was appropriate. Sam admitted to the court that for at least seven of the years that he received workers compensation benefits for an alleged inability to do “sustained remunerative work” he also received an annual salary between $24,000 and $29,000 as a pastor. However, he insisted that this was appropriate because he was a pastor. The court disagreed,

Permanent disability benefits are not payable to anyone who is performing or can perform sustained remunerative employment. Sam asserts that his pastoral duties cannot be considered “employment” because as a minister he is not an “employee.” He relies on [the state workers compensation law] which specifically exempts clergy from the definition of “employee” unless the employing church notifies the [state] in writing of its desire to have its minister considered an “employee” for workers’ compensation purposes. We disagree with claimant’s argument. . . . Sam is seeking to create a definition in [the statute] that was intended to guide employers on obtaining coverage and reporting payroll for premium coverage purposes. It was not intended as a method for permitting a claimant to receive both wages and workers compensation benefits. There is no justification for dual receipt, and the suggestion that claimant’s occupation creates a special exception is without merit.

Relevance to church treasurers. What is the relevance of this case to church treasurers? Consider the following two points:

1. Hiring an employee who has not applied for disability benefits. Some churches have hired an employee who is partially disabled due to an accident or illness. If that person later applies for Social Security disability benefits, it is doubtful that he or she will be successful. Disability benefits are not available to persons who are engaged in “substantial gainful activity.”

2. Hiring an employee who is receiving disability benefits. Since disability benefits are not available to persons who are engaged in “substantial gainful activity,” persons who are receiving disability benefits should not be able to work. Therefore, hiring someone who is receiving disability benefits may jeopardize that person’s benefits. If the person can perform any “gainful or substantial work within the economy,” then he or she is not entitled to disability benefits (with certain exceptions noted below).

3. Penalties. Is a church subject to any penalties if it knowingly hires and compensates a person who is receiving Social Security disability benefits? In most cases, the answer is no. It is the employee, and not an employer, who may be required to pay back disability benefits that were received while he or she was earning wages from a job. Note the following rules:

  • Persons who are receiving Social Security disability benefits are legally required to notify Social Security if there is any improvement in their condition. Failure to do so may make the recipient legally obligated to return some or all of the disability benefits that were paid.
  • Persons who are receiving Social Security disability benefits are legally required to notify Social Security if they accept a job regardless of how much is earned.
  • All disability cases are reviewed by Social Security from time to time. This is to make sure that people receiving benefits continue to be disabled and meet all other requirements. Benefits generally will continue unless there is strong proof that a recipient’s condition has medically improved and that he or she is able to return to work. How often a particular case is reviewed depends on the severity of the condition and the likelihood of improvement. The frequency can range from six months to seven years. A recipient’s Certificate of Award shows when to expect the first review.

4. Workers who are 65 years or age and older. At age 65, disability benefits automatically are converted to retirement benefits, and so the “disabled” status of a prospective worker is not relevant. If your church would like to hire a worker who is 65 years of age or older, you do not have to be concerned about the compensation you pay affecting the person’s eligibility for disability benefits.

5. Incentives to return to work. Church treasurers should be familiar with incentives that the Social Security program offers to encourage disabled workers to return to work. Consider the following:

  • Disability benefits can be paid only to persons who are unable to do any “substantial” work. The amount of earnings is the key to determining whether or not work is substantial. Under existing regulations an employee earning wages of more than $800 a month (in 2003) is generally considered to be performing substantial work.
  • Persons receiving disability benefits may be able to continue receiving benefits for up to nine months while they try to work. The months need not be in a row, but they must take place within a 60-month period. Under current regulations a “trial work” month is any month in which a person earns over $570 in gross wages (regardless of amount of time worked) or spends 40 hours working regardless of the amount of earnings. Disabled persons receive their full disability benefits during this period. At the end of nine months of trial work, Social Security will decide if the worker is able to do “substantial” work. If so, the benefits will stop after a three-month adjustment period. If not, disability payments will continue.

6. Be aware of the Americans with Disabilities Act. If your church has at least 15 employees, and is engaged in commerce, then you are subject to the Americans with Disabilities Act. This Act generally prohibits covered employers from discriminating in employment decisions on the basis of the disability of a person who is able to perform the essential functions of a job with or without reasonable accommodation by the employer. There are exceptions. For example, churches are permitted to discriminate on the basis of religion in their employment decisions.

This article first appeared in Church Treasurer Alert, July 2003.

Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.

This content is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. "From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations." Due to the nature of the U.S. legal system, laws and regulations constantly change. The editors encourage readers to carefully search the site for all content related to the topic of interest and consult qualified local counsel to verify the status of specific statutes, laws, regulations, and precedential court holdings.

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