What Happens When Federal Disability Benefits Stop?

Going back to work after relying on federal disability can be fraught with uncertainty. Some people experience a smooth transition, while others may have trouble becoming self-sufficient after their skills deteriorate and professional contacts dwindle.

Researchers at Mathematica examined how people fare in the labor force after their benefits end. This can happen for one of two reasons. First, Social Security stops paying benefits if one of the agency’s periodic medical reviews determines that a health condition has improved to the point where the individual no longer medically qualifies.

The second reason is that Social Security limits how much beneficiaries are permitted to earn. In order to encourage them to return to the labor force, the agency provides a set of work incentives that allow them to earn more than the limit without affecting their benefits. But after they have used up these temporary work incentives, the benefits stop if the worker’s earnings continue to exceed the limit, which is $1,470 per month in 2023.

The people who lose their benefits for work reasons already have, by definition, stronger ties to the labor force. Not surprisingly, the researchers find, nearly three out of four had earnings above the federal poverty level in the first five years after they went back to work. When the termination was medical, however, fewer than half were earning above the poverty line.

But even though they earned more, on average, the people who lost their benefits for work reasons did not always maintain their independence. They were two times more likely to wind up back on the disability rolls within five years than those who had lost them after their health improved – 32 percent versus 16 percent.

The researchers suggest a couple explanations for this. First, the path to resuming disability benefits is often smoother for people who lost them due to high earnings, because Social Security will, in certain situations, reinstate them on an expedited schedule.

In addition, if the benefits stopped because of earnings, the worker may still have a serious, ongoing health condition that makes it difficult to continue working. If that’s the case, the disability already fits the federal government’s definition of a qualifying condition.

A Social Security task force is currently conducting a study to learn more about people who lose their benefits for medical reasons. The goal is to design employment support programs that address their specific needs in returning to work so they can become self-sufficient.

But the researchers suggested that these efforts be expanded “to include former beneficiaries whose benefits terminated due to work,” they said.

To read this study by Michael Anderson, Monica Farid, Serge Lukashanets, Denise Hoffman, and Kai Filion, see “Outcomes Following Termination of Social Security Disability Insurance.”

The research reported herein was derived in whole or in part from research activities performed pursuant to a grant from the U.S. Social Security Administration (SSA) funded as part of the Retirement and Disability Research Consortium.  The opinions and conclusions expressed are solely those of the authors and do not represent the opinions or policy of SSA, any agency of the federal government, or Boston College.  Neither the United States Government nor any agency thereof, nor any of their employees, make any warranty, express or implied, or assumes any legal liability or responsibility for the accuracy, completeness, or usefulness of the contents of this report.  Reference herein to any specific commercial product, process or service by trade name, trademark, manufacturer, or otherwise does not necessarily constitute or imply endorsement, recommendation or favoring by the United States Government or any agency thereof.