This is the accessible text file for GAO report number GAO-02-224 
entitled 'SSA Disability: SGA Levels Appear to Affect the Work 
Behavior of Relatively Few Beneficiaries, but More Data Needed' which 
was released on January 16, 2002. 

This text file was formatted by the U.S. General Accounting Office 
(GAO) to be accessible to users with visual impairments, as part of a 
longer term project to improve GAO products' accessibility. Every 
attempt has been made to maintain the structural and data integrity of 
the original printed product. Accessibility features, such as text 
descriptions of tables, consecutively numbered footnotes placed at the 
end of the file, and the text of agency comment letters, are provided 
but may not exactly duplicate the presentation or format of the 
printed version. The portable document format (PDF) file is an exact 
electronic replica of the printed version. We welcome your feedback. 
Please E-mail your comments regarding the contents or accessibility 
features of this document to Webmaster@gao.gov. 

This is a work of the U.S. government and is not subject to copyright 
protection in the United States. It may be reproduced and distributed 
in its entirety without further permission from GAO. Because this work 
may contain copyrighted images or other material, permission from the 
copyright holder may be necessary if you wish to reproduce this 
material separately. 

United States General Accounting Office: 
GAO: 

Report to the Committee on Finance, U.S. Senate and the Committee on 
Ways and Means, House of Representatives: 

January 2002: 

SSA Disability: 

SGA Levels Appear to Affect the Work Behavior of Relatively Few 
Beneficiaries, but More Data Needed: 

GAO-02-224: 

Contents: 

Letter: 

Results in Brief: 

Background: 

The SGA Level Appears to Affect the Work Effort of Relatively Few 
Beneficiaries: 

Effects Of SGA on Program Entry and Exit Rates Difficult to Isolate: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Response: 

Appendix I: Scope and Methodology: 

Our Sample: 

Analysis of the Effect of the SGA on Beneficiaries’ Earnings: 

Analysis Of the Effect of the SGA on Program Entry and Exit: 

Limitations in Our Analysis: 

Appendix II: Comments From the Social Security Administration: 

Tables: 

Table 1: DI Beneficiaries with Earnings Between 75-100 Percent of the 
Annualized SGA Level: 

Table 2: Number and Average Annual Earnings of DI Beneficiaries Who 
Worked: 

Table 3: Subsequent Earnings of Beneficiaries Who Had 1985 Earnings 
Exceeding the SGA Level, 1986-97: 

Table 4: Subsequent Earnings of Beneficiaries Who Had 1985 Earnings 
Between 75-100 Percent of the SGA, 1986-95: 

Table 5: Reasons for Exiting DI: 

Figures: 

Figure 1: Distribution of DI Beneficiaries’ Annual Earnings in 1985 
and 1997: 

Figure 2: Entry and Exit Rates for the DI Program: 

Abbreviations: 

AWI average wage index: 

CWHS Continuous Work History Sample: 

DI: Disability Insurance: 

SGA: Substantial Gainful Activity: 

SSA: Social Security Administration: 

SSI: Supplemental Security Income: 

[End of section] 

United States General Accounting Office: 
Washington, DC 20548: 

January 16, 2002: 

The Honorable Max Baucus: 
Chairman: 
The Honorable Charles E. Grassley: 
Ranking Minority Member: 
Committee on Finance: 
United States Senate: 

The Honorable William M. Thomas: 
Chairman: 
The Honorable Charles B. Rangel: 
Ranking Minority Member: 
Committee on Ways and Means: 
House of Representatives: 

The Social Security Administration’s (SSA) Disability Insurance 
program is the primary federal income program for workers with 
disabilities, paying about $50 billion in cash benefits to over 5 
million disabled workers in 2000. Eligibility for Disability Insurance 
benefits is based on whether a person with a severe physical or mental 
impairment has earnings that exceed the Substantial Gainful Activity 
(SGA) level, which represents SSA’s principal standard for determining 
whether a disabled individual is able to work. SSA terminates monthly 
cash benefit payments for beneficiaries who return to work (after 
completing a trial work period) and have earnings that exceed the SGA 
level, set at $1,300 per month for blind beneficiaries and at $780 per 
month for all other beneficiaries in 2002. 

Some researchers and disability advocacy groups believe that the SGA 
level serves as a significant work disincentive for Disability 
Insurance beneficiaries, with many working beneficiaries “parking,” or 
earning amounts that are close to, but never exceeding, the SGA level. 
According to this view, a large increase in, or elimination of, the 
SGA level would result in increased work by this population. However, 
others believe that while the SGA may serve as a work disincentive for 
some beneficiaries, this disincentive effect is likely to be small in 
comparison to the various other work limitations faced by 
beneficiaries. Rather than emphasizing the effect of the SGA on the 
work behavior of those already receiving Disability Insurance 
benefits, some of these observers point out that increasing or 
eliminating the SGA level could result in a significant increase in 
the number of disabled workers entering the Disability Insurance 
program and a reduction in the number exiting the program, placing 
additional fiscal stress on the program. 

The Ticket to Work and Work Incentives Improvement Act of 1999 
requires that we assess the effects of changes in the SGA level on the 
Disability Insurance program. Specifically, we examined (1) the 
effects of the SGA on the work patterns of Disability Insurance 
beneficiaries and (2) the effects of the SGA on Disability Insurance 
program entry and exit rates. To assess these effects, we reviewed the 
economic and disability literature related to the effects of the SGA. 
We also analyzed SSA’s Disability Insurance program data, including 
the Continuous Work History Sample (CWHS) over the period 1985 through 
1997. In addition, we interviewed various SSA policy officials, 
academic experts, and representatives from disability advocacy groups. 
We performed our work in accordance with generally accepted government 
auditing standards from December 2000 to December 2001. (See appendix 
I for a more detailed discussion of our scope and methodology.) 

Results in Brief: 

Our work found that the SGA level affects the work patterns of only a 
small proportion of Disability Insurance beneficiaries. On average, 
about 32,000, or 7.4 percent, of those Disability Insurance 
beneficiaries who worked in any given year during the period 1985 
through 1997 had earnings between 75 and 100 percent of the annualized 
SGA level.[Footnote 1] These beneficiaries comprised about 1 percent 
of all Disability Insurance beneficiaries. The proportion of 
Disability Insurance workers with earnings in this range of the SGA 
remained relatively small even as the total number of Disability 
Insurance beneficiaries who worked grew by almost 80 percent from 1985 
to 1997. Even among those beneficiaries who have earnings near the SGA 
level in any given year, most experience a substantial decline in 
earnings over time. For example, almost half of those with earnings 
near the SGA level in 1985 had no earnings by 1989. However, our work 
also found evidence that the SGA may affect the earnings of some 
beneficiaries. About 13 percent of those beneficiaries with earnings 
near the SGA level in 1985 still had earnings near the SGA level in 
1995, even though the level was increased during that period. 

However, the absence of key information identifying the monthly 
earnings of beneficiaries, their trial work period[Footnote 2] status, 
and whether they are blind limit our ability to definitively identify 
a relationship between SGA levels and beneficiaries’ work patterns. 

Data limitations also make the effect of the SGA on Disability 
Insurance program entry and exit rates difficult to isolate. While the 
rate of program entry increased in the years immediately following a 
1990 increase in the SGA level, it then gradually declined to a level 
below the pre-1990 entry rates. Although some researchers and policy 
makers believe that an increase in the SGA could encourage more people 
who are capable of working to enter the rolls, our analysis indicates 
that most new Disability Insurance beneficiaries were either not able 
or not inclined to increase their earnings or work at all. However, 
due to data limitations and the wide range of other possible factors 
affecting program entry--such as labor force responses to the 1990-91 
recession and subsequent economic expansion--the link between the 
increase in the SGA level and these trends in entry is unclear. CWHS 
data indicate that, since 1990, Disability Insurance exit rates 
continue to be driven largely by beneficiary death and conversion to 
retirement benefits. However, the percentage of all exits caused by 
improvements in medical conditions or a return to work increased 
slowly, from 1.9 percent in 1985 to 9.2 percent in 1996, and then rose 
dramatically to 19.9 percent in 1997. While a substantial increase in 
the number of continuing disability reviews[Footnote 3] conducted by 
SSA may account, in part, for this 1997 upturn, data limitations 
preclude us from obtaining a full understanding of the link between 
the SGA and exit behavior. 

This report contains a recommendation to the Commissioner of SSA 
concerning the types of data SSA needs to collect in order to assess 
the effects of the SGA on Disability Insurance program beneficiaries. 
In its written comments, SSA agreed that it needed to improve its 
collection of data on Disability Insurance program beneficiaries’ 
earnings and employment and also provided a number of technical 
comments. 

Background: 

From its origin in 1956, the Disability Insurance (DI) program has 
provided compensation for the reduced earnings of individuals who, 
having worked long enough and recently enough to become insured, 
[Footnote 4] have lost their ability to work due to a severe, long-
term disability. The program is administered by SSA and is funded 
through payroll deductions paid into a trust fund by employers and 
workers. In addition to cash assistance, DI beneficiaries receive 
Medicare coverage after they have received cash benefits for 24 
months. In 2000, about 5 million disabled workers received DI cash 
benefits totaling about $50 billion, with average monthly cash 
benefits amounting to $787 per person.[Footnote 5] 

To qualify for benefits, an individual must have a medically 
determinable physical or mental impairment that (1) has lasted or is 
expected to last at least 1 year or result in death and (2) prevents 
an individual from engaging in substantial gainful activity. 
Individuals are considered to be engaged in substantial gainful 
activity if they have countable earnings at or above a certain dollar 
level.[Footnote 6] In addition to determining initial eligibility, the 
SGA standard also applies to the determination of continuing 
eligibility for benefits. Beyond a 9-month trial work period and an 
additional 3-month grace period during which beneficiaries are allowed 
to have any level of earnings without losing benefits, benefit 
payments are terminated once SSA determines that a beneficiary’s 
countable earnings exceed the SGA level. DI benefits are also 
terminated when a beneficiary (1) dies, (2) reaches age 65, upon which 
DI benefits are automatically converted to Social Security retirement 
benefits, or (3) medically improves, as determined by SSA through 
periodic continuing disability reviews. 

Under the Social Security Act, the Commissioner of Social Security has 
the authority to set the SGA level for individuals who have 
disabilities other than blindness. SSA has increased the SGA several 
times over the past decade, to $500 per month in 1990 and to $700 per 
month in July 1999. In December 2000, SSA finalized a rule calling for 
the annual indexing of the nonblind SGA level to the average wage 
index (AWI)[Footnote 7] and recently increased the level to $780 on 
the basis of this indexing. The SGA level for individuals who are 
blind is set by statute and indexed to the AWI.[Footnote 8] Currently, 
the SGA for blind individuals is $1,300 of countable earnings. 
[Footnote 9] 

Despite considerable disagreement and uncertainty among researchers, 
policy makers, and disability advocates over the employment effects of 
the SGA on DI beneficiaries, there is a theoretical basis for 
believing that the SGA acts as a work disincentive. That is, to 
maximize income, maintain health insurance coverage, or achieve a 
desirable labor-leisure tradeoff, beneficiaries may be inclined to 
limit their work effort to remain eligible for program benefits. This 
economic rationale is supported by anecdotal evidence from some 
beneficiaries who have reported that, although they would prefer to 
work or have greater earnings, they are fearful of doing so because of 
the severe financial consequences of exceeding the SGA—losing cash 
benefits and, eventually, Medicare benefits. In addition, some workers 
with disabilities whose current earnings are above the SGA level, 
making them ineligible for the DI program, may reduce their earnings 
to become eligible for DI benefits. 

Other researchers and policy makers believe that although the SGA 
level may serve as a work disincentive for some beneficiaries, this 
disincentive effect is likely to be very limited for several reasons. 
First, because severe long-term disability is a central criterion for 
DI eligibility, many DI beneficiaries may be unable to perform any 
substantial work. Even if they are willing and able to work, 
beneficiaries may face employment barriers, such as high costs for 
supportive services and equipment or discrimination. In addition, we 
reported previously that many beneficiaries are unaware of DI program 
provisions affecting work,[Footnote 10] and several researchers we 
spoke with said that some beneficiaries may not even know how much 
they are allowed to earn. In terms of the SGA’s effect on those not 
currently on the DI rolls, disability advocates have stated that 
workers turn to the DI program only as a last resort and are not 
inclined to reduce income for the sole purpose of qualifying for 
benefits. Also, some studies indicate that the difficulty of 
qualifying for DI benefits–having to limit or cease work for at least 
5 months before receiving benefits and undergoing a stringent review 
to certify one’s condition as severely disabled–may itself be a factor 
discouraging workers with disabilities from applying for these 
benefits.[Footnote 11] 

Few empirical studies have examined the effects of the SGA on the work 
patterns of disabled beneficiaries and nonbeneficiaries. Two studies 
conducted in the late 1970s by SSA researchers found that the SGA 
level does not have a substantial effect on the work behavior of 
beneficiaries.[Footnote 12] These studies examined past increases in 
the SGA level to assess whether these increases led to greater labor 
force participation on the part of DI beneficiaries. Neither study 
identified any clear change in beneficiary earnings as the SGA level 
increased. However, a study conducted by the Office of Inspector 
General (OIG) at the Department of Health and Human Services (HHS) 
found that some beneficiaries who had completed a trial work period 
subsequently reduced their earnings below the SGA level so they could 
continue to receive DI benefits.[Footnote 13] Out of the 100 cases 
sampled, 18 beneficiaries who were capable of working had quit work or 
reduced their earnings to maintain DI benefits. In addition, an 
internal study conducted by SSA researchers examined how the earnings 
patterns of DI beneficiaries age 55 or older changed after they 
converted to retirement benefits at age 65.[Footnote 14] This study 
found that beneficiaries were more likely to return to work after 
converting to retirement benefits, which were subject to a more 
generous earnings limit. This evidence suggests that the SGA standard 
leads some beneficiaries to work less than they could. 

Despite the difficulties inherent in comparisons of different 
programs, studies of earnings limits in other programs may also 
provide some insights on the effect of the SGA. For example, studies 
of the retirement earnings test[Footnote 15] indicate that this limit 
probably caused some retirees to restrain their earnings in order to 
avoid having their benefits reduced. However, this “parking” effect 
appeared to be limited to only a relatively small proportion of the 
retiree population. For example, one study found that only about 2 
percent of insured workers aged 65-69 had earnings at or near the 
retirement earnings limit.[Footnote 16] 

A study of the Supplemental Security Income (SSI)[Footnote 17] program’
s 1619(b) provision[Footnote 18] also indicates that an earnings limit 
can result in beneficiaries limiting their work effort.[Footnote 19] 
As the 1619(b) earnings threshold was increased, some SSI 
beneficiaries increased their earnings in line with this threshold, 
which is consistent with the idea that beneficiaries restrain earnings 
in order to maintain program (in this case, Medicaid) eligibility. 
However, this “parking” behavior was limited to only those 
beneficiaries who had significant earnings-—a group comprising about 2 
percent of all adult, disabled SSI beneficiaries. 

The SGA Level Appears to Affect the Work Effort of Relatively Few 
Beneficiaries: 

Our analysis of SSA data indicates that the work patterns of most DI 
beneficiaries are unlikely to be affected by the SGA level. For 
example, from 1985 through 1997, on average, about 7.4 percent of DI 
beneficiaries who worked had annual earnings between 75 and 100 
percent of the SGA level. These beneficiaries comprised only about 1 
percent of the total DI caseload. This proportion of beneficiaries 
with earnings in this range of the SGA remained relatively small even 
though the number and proportion of DI beneficiaries who work rose 
dramatically during this period, increasing by almost 80 percent. 
Although almost one-fourth of working beneficiaries had earnings above 
the SGA level, most had very low earnings, well below the annualized 
SGA level. Even among those beneficiaries with earnings near the SGA 
level in a given year, most experience an eventual reduction in 
earnings in subsequent years. 

Nevertheless, some beneficiaries may change their work effort in 
response to the SGA level. For example, we found that about 13 percent 
of working beneficiaries who had earnings between 75 and 100 percent 
of the annualized SGA level in 1985 still had earnings near the SGA 
level in 1995, even though the SGA had increased from $300 to $500 a 
month during this period. In addition, about 7 percent of 
beneficiaries who did not have any earnings in the years immediately 
preceding their retirement earned income in the one or more years 
following retirement, when the SGA earnings limit no longer applied. 
However, while these findings are suggestive of a possible effect on 
work effort, our analysis could not definitively link beneficiary work 
patterns to the SGA level due in part to various limitations in SSA 
data, such as the lack of monthly earnings data. 

About 1 Percent of All DI Beneficiaries Have Annual Earnings Near the 
SGA Level: 

From 1985 through 1997, on average, about 7.4 percent of DI 
beneficiaries who worked-–comprising about 1 percent of the total DI 
caseload-–had annual earnings between 75 and 100 percent of the SGA 
level (see table 1).[Footnote 20] On an annual basis, the number of 
beneficiaries with incomes clustering at or just below the SGA level 
increased almost fourfold in absolute terms from 15,800 in 1985 to 
almost 60,000 in 1997. However, the annual percentage of working 
beneficiaries with earnings between 75 and 100 percent of the SGA 
level fluctuated from 8.5 percent in 1988 to 5.1 percent in 1990 to 
8.9 percent in 1997. 

Table 1: DI Beneficiaries with Earnings Between 75-100 Percent of the 
Annualized SGA Level: 

Year: 1985; 
Number with earnings between 75-100 percent of the SGA: 15,800; 
Percentage of working DI beneficiaries: 7.2%; 
Percentage of all DI beneficiaries: 0.6%. 

Year: 1986; 
Number with earnings between 75-100 percent of the SGA: 18,400; 
Percentage of working DI beneficiaries: 7.6%; 
Percentage of all DI beneficiaries: 0.7%. 

Year: 1987; 
Number with earnings between 75-100 percent of the SGA: 19,200; 
Percentage of working DI beneficiaries: 7.5%; 
Percentage of all DI beneficiaries: 0.7%. 

Year: 1988; 
Number with earnings between 75-100 percent of the SGA: 23,600; 
Percentage of working DI beneficiaries: 8.5%; 
Percentage of all DI beneficiaries: 0.9%. 

Year: 1989; 
Number with earnings between 75-100 percent of the SGA: 23,000; 
Percentage of working DI beneficiaries: 7.4%; 
Percentage of all DI beneficiaries: 0.8%. 

Year: 1990; 
Number with earnings between 75-100 percent of the SGA: 16,800; 
Percentage of working DI beneficiaries: 5.1%; 
Percentage of all DI beneficiaries: 0.6%. 

Year: 1991; 
Number with earnings between 75-100 percent of the SGA: 23,500; 
Percentage of working DI beneficiaries: 6.5%; 
Percentage of all DI beneficiaries: 0.8%. 

Year: 1992; 
Number with earnings between 75-100 percent of the SGA: 30,000; 
Percentage of working DI beneficiaries: 7.3%; 
Percentage of all DI beneficiaries: 0.9%. 

Year: 1993; 
Number with earnings between 75-100 percent of the SGA: 35,500; 
Percentage of working DI beneficiaries: 7.1%; 
Percentage of all DI beneficiaries: 1.0%. 

Year: 1994; 
Number with earnings between 75-100 percent of the SGA: 43,600; 
Percentage of working DI beneficiaries: 7.7%; 
Percentage of all DI beneficiaries: 1.1%. 

Year: 1995; 
Number with earnings between 75-100 percent of the SGA: 45,900; 
Percentage of working DI beneficiaries: 7.5%; 
Percentage of all DI beneficiaries: 1.1%. 

Year: 1996; 
Number with earnings between 75-100 percent of the SGA: 55,600; 
Percentage of working DI beneficiaries: 8.6%; 
Percentage of all DI beneficiaries: 1.3%. 

Year: 1997; 
Number with earnings between 75-100 percent of the SGA: 59,800; 
Percentage of working DI beneficiaries: 8.9%; 
Percentage of all DI beneficiaries: 1.4%. 

Note: The annualized SGA level was $3,600 from 1985-1989 and $6,000 
from 1990-1997. Sampling errors for the number of beneficiaries with 
earnings between 75-100 percent of the SGA from 1985 to 1993 do not 
exceed 17 percent of the value of those estimates. 

Source: GAO analysis of CWHS data. 

[End of table] 

The proportion of beneficiaries with earnings at or just below the SGA 
level remained small even though the proportion of DI beneficiaries 
who worked rose dramatically, increasing by almost 80 percent between 
1985 and 1997 (see table 2).[Footnote 21] The number of beneficiaries 
who worked increased from about 220,000 in 1985 to over 675,000 in 
1997 and increased as a percent of all DI beneficiaries in every year, 
including during the 199091 recession. 

Table 2: Number and Average Annual Earnings of DI Beneficiaries Who 
Worked: 

Year: 1985; 
Number of DI beneficiaries who worked: 220,300; 
Percentage of all DI beneficiaries: 8.7%; 
Mean earnings: $5,851; 
Median earnings: $2,061. 

Year: 1986 
Number of DI beneficiaries who worked: 241,100; 
Percentage of all DI beneficiaries: 9.3%; 
Mean earnings: $5,753; 
Median earnings: $2,022. 

Year: 1987; 
Number of DI beneficiaries who worked: 257,000; 
Percentage of all DI beneficiaries: 9.7%; 
Mean earnings: $5,477; 
Median earnings: $1,991. 

Year: 1988; 
Number of DI beneficiaries who worked: 278,100; 
Percentage of all DI beneficiaries: 10.3%; 
Mean earnings: $5,338; 
Median earnings: $2,061. 

Year: 1989; 
Number of DI beneficiaries who worked: 312,500; 
Percentage of all DI beneficiaries: 11.3%; 
Mean earnings: $5,216; 
Median earnings: $1,943. 

Year: 1990; 
Number of DI beneficiaries who worked: 331,600; 
Percentage of all DI beneficiaries: 11.4%; 
Mean earnings: $5,529; 
Median earnings: $2,019. 

Year: 1991; 
Number of DI beneficiaries who worked: 364,300; 
Percentage of all DI beneficiaries: 11.7%; 
Mean earnings: $5,425; 
Median earnings: $2,094. 

Year: 1992; 
Number of DI beneficiaries who worked: 410,600; 
Percentage of all DI beneficiaries: 12.1%; 
Mean earnings: $4,990; 
Median earnings: $1,968. 

Year: 1993; 
Number of DI beneficiaries who worked: 500,800; 
Percentage of all DI beneficiaries: 13.7%; 
Mean earnings: $4,697; 
Median earnings: $1,791. 

Year: 1994; 
Number of DI beneficiaries who worked: 567,600; 
Percentage of all DI beneficiaries: 14.6%; 
Mean earnings: $4,862; 
Median earnings: $1,968. 

Year: 1995; 
Number of DI beneficiaries who worked: 608,900; 
Percentage of all DI beneficiaries: 15.0%; 
Mean earnings: $5,035; 
Median earnings: $2,157. 

Year: 1996; 
Number of DI beneficiaries who worked: 645,100; 
Percentage of all DI beneficiaries: 15.3%; 
Mean earnings: $5,213; 
Median earnings: $2,314. 

Year: 1997; 
Number of DI beneficiaries who worked: 675,300; 
Percentage of all DI beneficiaries: 15.6%; 
Mean earnings: $5,386; 
Median earnings: $2,372. 

Note: Working is defined as having posted earnings greater than zero. 
Earnings are in constant 1997 dollars. The 95-percent confidence 
interval for the 1985 estimate of median earnings ranged from 1,812 to 
2,246. 

Source: GAO analysis of CWHS data. 

[End of table] 

Throughout the period, most working DI beneficiaries had very low 
earnings. For example, in 1995, the median annual earnings of working 
beneficiaries were about $2,157[Footnote 22] and the majority of 
working beneficiaries-—about 58 percent—-earned no more than 50 
percent of the annualized SGA level.[Footnote 23] Although median 
earnings of working DI beneficiaries were about 15 percent higher in 
1997 than they had been in 1985, they remained well below the 
annualized SGA level. While mean earnings for this group fluctuated 
between a high of $5,851 in 1985 and a low of $4,697 in 1993, figure 1 
indicates that even with the 67 percent increase in the SGA level in 
1990, the earnings distribution of DI beneficiaries did not change 
considerably from 1985 to 1997.[Footnote 24] 

Figure 1: Distribution of DI Beneficiaries’ Annual Earnings in 1985 
and 1997: 

[Refer to PDF for image: vertical bar graph] 

Graph depicts: 

Annual Earnings in Constant 1997 Dollars for Beneficiaries in 1985 and 
1987. 

Annual Earnings Categories depicted: 
0; 
1-300; 
301-600; 
601-900; 
901-1,200; 
1,201-1,500; 
1,501-1,800; 
1,801-2,100; 
2,101-2,400; 
2,401-2,700; 
2,710-3,000; 
3,001-3,300; 
3,301-3,600; 
3,601-3,900; 
3,901-4,200; 
4,201-4,500; 
4,501-4,800; 
4,801-5,100; 
5,101-5,400; 
5,410-5,700; 
5,701-6,000; 
Over 6,000. 

Note: For purposes of illustration, the bars indicating the number of 
beneficiaries are truncated at 200,000. The actual numbers estimated 
from the data for beneficiaries with no earnings are 2,306,400 in 1985 
and 3,665,500 in 1997. 

Source: GAO analysis of CWHS data. 

[End of figure] 

We also examined beneficiaries who had earnings above the SGA level to 
see if, over time, they tended to reduce their earnings to an amount 
less than but close to the SGA level in order to maintain eligibility 
for DI benefits. We found that the majority of beneficiaries in 1985 
who had earnings exceeding the SGA level eventually experienced a 
reduction to no earnings or to an amount less than 75 percent of the 
SGA (see table 3). 

Table 3: Subsequent Earnings of Beneficiaries Who Had 1985 Earnings 
Exceeding the SGA Level, 1986-97 

Year: 1986; 
Percentage of 1985 cohort with: 
Earnings above the SGA: 55.8%; 
Earnings between 75-100 percent of the SGA: 7.4%; 
Earnings between 1-74 percent of the SGA: 14.2%; 
No earnings: 22.6%. 

Year: 1987; 
Percentage of 1985 cohort with: 
Earnings above the SGA: 45.7%; 
Earnings between 75-100 percent of the SGA: 6.3%; 
Earnings between 1-74 percent of the SGA: 12.6%; 
No earnings: 35.8%. 

Year: 1988; 
Percentage of 1985 cohort with: 
Earnings above the SGA: 40.0%; 
Earnings between 75-100 percent of the SGA: 4.7%; 
Earnings between 1-74 percent of the SGA: 11.6%; 
No earnings: 43.7%. 

Year: 1989; 
Percentage of 1985 cohort with: 
Earnings above the SGA: 41.1%; 
Earnings between 75-100 percent of the SGA: 2.1%; 
Earnings between 1-74 percent of the SGA: 8.4%; 
No earnings: 48.4%. 

Year: 1990; 
Percentage of 1985 cohort with: 
Earnings above the SGA: 31.6%; 
Earnings between 75-100 percent of the SGA: 5.8%; 
Earnings between 1-74 percent of the SGA: 17.4%; 
No earnings: 45.3%. 

Year: 1991; 
Percentage of 1985 cohort with: 
Earnings above the SGA: 32.6%; 
Earnings between 75-100 percent of the SGA: 4.2%; 
Earnings between 1-74 percent of the SGA: 10.5%; 
No earnings: 52.6%. 

Year: 1992; 
Percentage of 1985 cohort with: 
Earnings above the SGA: 32.1%; 
Earnings between 75-100 percent of the SGA: 1.6%; 
Earnings between 1-74 percent of the SGA: 10.0%; 
No earnings: 56.3%. 

Year: 1993; 
Percentage of 1985 cohort with: 
Earnings above the SGA: 29.0%; 
Earnings between 75-100 percent of the SGA: 4.2%; 
Earnings between 1-74 percent of the SGA: 12.6%; 
No earnings: 54.2%. 

Year: 1994; 
Percentage of 1985 cohort with: 
Earnings above the SGA: 29.5%; 
Earnings between 75-100 percent of the SGA: 1.1%; 
Earnings between 1-74 percent of the SGA: 13.2%; 
No earnings: 56.3%. 

Year: 1995; 
Percentage of 1985 cohort with: 
Earnings above the SGA: 28.4%; 
Earnings between 75-100 percent of the SGA: 3.7%; 
Earnings between 1-74 percent of the SGA: 11.1%; 
No earnings: 56.8%. 

Year: 1996; 
Percentage of 1985 cohort with: 
Earnings above the SGA: 30.0%; 
Earnings between 75-100 percent of the SGA: 1.1%; 
Earnings between 1-74 percent of the SGA: 14.2%; 
No earnings: 54.7%. 

Year: 1997; 
Percentage of 1985 cohort with: 
Earnings above the SGA: 31.6%; 
Earnings between 75-100 percent of the SGA: 2.1%; 
Earnings between 1-74 percent of the SGA: 9.5%; 
No earnings: 56.8%. 

Note: For this analysis, we examined all 190 cases in the CWHS where 
DI beneficiaries had earnings above the SGA level in 1985 and remained 
on the rolls through 1997. We estimate that, in 1985, about 57,400 DI 
beneficiaries (comprising about 2 percent of all DI beneficiaries and 
about 26 percent of beneficiaries who worked) had earnings that 
exceeded the SGA level. We also estimate that about 19,000 of these 
beneficiaries remained on the DI rolls through 1997. 

Source: GAO analysis of CWHS data. 

[End of table] 

By 1989, 48 percent of these individuals had no earnings and only 2 
percent had earnings between 75 to 100 percent of the annualized SGA 
level. This indicates that most beneficiaries who at some point have 
earnings above the SGA level do not subsequently engage in “parking” 
to remain on the DI rolls. Nevertheless, the large shift that we 
observed from earnings above the SGA to no or very low earnings does 
suggest decreasing ability or motivation to work. 

However, as late as 1997, about 32 percent of these beneficiaries had 
earnings exceeding the SGA level, indicating that some beneficiaries 
maintain their ability to achieve relatively substantial earnings. It 
is unclear why these individuals are able to consistently earn above 
the SGA level while retaining eligibility for DI benefits. Although 
beneficiaries in a trial work period or an extended period of 
eligibility may have earnings that exceed the SGA level, these work 
incentive periods are time-limited. Only beneficiaries who are blind 
are permitted, on a continuing basis, to earn above the SGA level that 
applies to nonblind individuals. However, we could not determine the 
status of individuals who had earnings exceeding the SGA level because 
SSA’s principal program data do not reliably identify whether a 
beneficiary is in a trial work period or extended period of 
eligibility and do not contain an indicator denoting whether a 
beneficiary is blind. 

Most Beneficiaries with Earnings Near the SGA Level Do Not Maintain 
that Level of Earnings: 

Among beneficiaries who have earnings at or near, but not exceeding, 
the SGA level in a given year, most experience a reduction in earnings 
in subsequent years. For example, of beneficiaries in 1985 who earned 
between 75 to 100 percent of the annualized SGA level, 47 percent had 
no earnings by 1989, while the earnings of another 26 percent had 
fallen to between 1 and 74 percent of the annualized SGA level (see 
table 4). 

Table 4: Subsequent Earnings of Beneficiaries Who Had 1985 Earnings 
Between 75-100 Percent of the SGA, 1986-95 

Year: 1986; 
Percentage of 1985 cohort with: 
Earnings above the SGA: 15.7%; 
Earnings between 75-100 percent of the SGA: 27.1%; 
Earnings between 1-74 percent of the SGA: 34.3%; 
No earnings: 22.9%. 

Year: 1987; 
Percentage of 1985 cohort with: 
Earnings above the SGA: 12.9%; 
Earnings between 75-100 percent of the SGA: 14.3%; 
Earnings between 1-74 percent of the SGA: 35.7%; 
No earnings: 37.1%. 

Year: 1988; 
Percentage of 1985 cohort with: 
Earnings above the SGA: 20.0%; 
Earnings between 75-100 percent of the SGA: 12.9%; 
Earnings between 1-74 percent of the SGA: 25.7%; 
No earnings: 41.4%. 

Year: 1989; 
Percentage of 1985 cohort with: 
Earnings above the SGA: 15.7%; 
Earnings between 75-100 percent of the SGA: 11.4%; 
Earnings between 1-74 percent of the SGA: 25.7%; 
No earnings: 47.1%. 

Year: 1990; 
Percentage of 1985 cohort with: 
Earnings above the SGA: 4.3%; 
Earnings between 75-100 percent of the SGA: 8.6%; 
Earnings between 1-74 percent of the SGA: 40.0%; 
No earnings: 47.1%. 

Year: 1991; 
Percentage of 1985 cohort with: 
Earnings above the SGA: 2.9%; 
Earnings between 75-100 percent of the SGA: 11.4%; 
Earnings between 1-74 percent of the SGA: 34.3%; 
No earnings: 51.4%. 

Year: 1992; 
Percentage of 1985 cohort with: 
Earnings above the SGA: 4.3%; 
Earnings between 75-100 percent of the SGA: 8.6%; 
Earnings between 1-74 percent of the SGA: 32.9%; 
No earnings: 54.3%. 

Year: 1993; 
Percentage of 1985 cohort with: 
Earnings above the SGA: 5.7%; 
Earnings between 75-100 percent of the SGA: 10.0%; 
Earnings between 1-74 percent of the SGA: 31.4%; 
No earnings: 52.9%. 

Year: 1994; 
Percentage of 1985 cohort with: 
Earnings above the SGA: 5.7%; 
Earnings between 75-100 percent of the SGA: 7.1%; 
Earnings between 1-74 percent of the SGA: 32.9%; 
No earnings: 54.3%. 

Year: 1995; 
Percentage of 1985 cohort with: 
Earnings above the SGA: 2.9%; 
Earnings between 75-100 percent of the SGA: 12.9%; 
Earnings between 1-74 percent of the SGA: 31.4%; 
No earnings: 52.9%. 

Note: For this analysis, we examined all 70 cases from the CWHS where 
DI beneficiaries had earnings between 75-100 percent of the SGA level 
in 1985 and remained on the rolls through 1995. We estimate that, in 
1985, there were 15,800 DI beneficiaries (comprising less than 1 
percent of all DI beneficiaries and about 7 percent of beneficiaries 
who worked) who had earnings between 75 to 100 percent of the 
annualized SGA level. We also estimate that about 7,000 of these 
beneficiaries remained on the DI rolls through 1995. Percentages in 
this table have sampling errors not exceeding 12.4 percentage points. 

Source: GAO analysis of CWHS data. 

[End of table] 

Nevertheless, about 11 percent of these beneficiaries still had 
earnings in 1989 between 75 to 100 percent of the annualized SGA 
level, suggesting that at least some beneficiaries may be attempting 
to stay close to the SGA without exceeding it. Even after the SGA 
level was increased in 1990, a small proportion of these beneficiaries 
continued to have earnings between 75 to 100 percent of the new 
annualized SGA level. For example, in 1995 about 13 percent of 
beneficiaries who had earnings between 75 to 100 percent of the 
annualized SGA level in 1985 still had earnings within this range of 
the higher annualized SGA level. 

Small Number of Nonworking Beneficiaries Begin Employment After 
Initial Receipt of SSA Retirement Benefits: 

Our review of the earnings of former DI beneficiaries who were 
converted to retirement benefits at age 65 also indicates that the 
work patterns of only a small proportion of beneficiaries are affected 
by the SGA. For example, we looked at DI beneficiaries who converted 
to retirement benefits at age 65 between 1987 and 1993. Of those in 
this group who had no earnings in the 3 years preceding retirement, 
about 7 percent did have earnings in 1 or more years following 
retirement (between ages 66–68) when the SGA earnings limit no longer 
applied.[Footnote 25] While small, the proportion of beneficiaries 
returning to work after retirement is greater than the proportion of 
older beneficiaries who return to work while still on the DI rolls. 
For example, we found that of beneficiaries who had no earnings at 
ages 55-57, about 3 percent had earnings at ages 58-60. These data 
suggest that, at least for a limited number of beneficiaries, the SGA 
may serve as a disincentive to work. 

Data Limitations Suggest Caution in Ascertaining SGA’s Effects: 

For each analysis, the absence of key data elements made it difficult 
for us to determine the effects of the SGA level. For example, because 
SSA collects annual rather than monthly earnings data, we could not 
observe earnings relative to the SGA level on a monthly basis. 
However, many workers with disabilities may engage in only 
intermittent work throughout the year. The annual earnings data did 
not allow us to observe those individuals who only work several months 
out of the year and, in order to ensure receipt of benefits, “park” at 
the SGA level in those months. 

Another data limitation is the difficulty in identifying whether a DI 
beneficiary is in a trial work period. Without reliable information on 
the trial work period status of beneficiaries, we could not determine 
the full range of work incentives and disincentives potentially 
affecting the earnings of DI beneficiaries. In addition, neither the 
CWHS nor SSA’s principal administrative file for the DI program (the 
Master Beneficiary Record) contain data that identify whether a 
beneficiary is blind.[Footnote 26] Such a distinction is important to 
analyses relating to the SGA because blind beneficiaries are subject 
to a higher SGA limit than nonblind beneficiaries are. Distinguishing 
blind and nonblind beneficiaries may help explain why a substantial 
proportion of beneficiaries continue to earn above the nonblind SGA 
level while retaining DI eligibility. 

Effects Of SGA on Program Entry and Exit Rates Difficult to Isolate: 

Data and methodological limitations make it difficult to ascertain the 
effect of the SGA on DI program entry and exit rates.[Footnote 27] 
After 1990, the rate of program entry initially increased and then 
gradually declined. Although some researchers and policy makers 
believe that an increase in the SGA could encourage more people who 
are capable of working to enter the rolls, our analysis indicates that 
most new entrants were either not able or not inclined to increase 
their earnings or work at all. However, because of data limitations 
and the wide range of other possible factors affecting program entry, 
the link between the increase in the SGA level and these trends in 
entry is unclear. The analysis of program exits indicated that 
although the number of beneficiaries exiting the program rose over the 
7 years after the 1990 increase in the SGA level, the annual rate of 
exit generally declined. While beneficiary deaths and conversions to 
retirement benefits accounted for most program exits, the percentage 
of exits caused by medical improvement or a return to work increased 
gradually, from 1.9 percent in 1985 to 9.2 percent in 1996, and then 
rose sharply to 19.9 percent in 1997. However, the aggregation of 
medical improvement and return-to-work data prevent us from obtaining 
a full understanding of the link between the SGA and DI program exit 
behavior. 

Annual Program Entry Rates Varied from 1990 through 1997, but 
Limitations Prevent Assessment of Alternative Explanations: 

Our analysis showed that the rate of program entry varied between 1990 
and 1997, reaching a high of 19.3 percent in 1991 and then gradually 
declining, except for a slight upward movement in 1996, to a low of 
10.3 percent in 1997 (see figure 2). In 1990, there was a discernible 
jump in the rate of program entry, which continued into 1991. The 1990 
and 1991 rates were higher than the rates in any of the pre-1990 years 
we analyzed. 

Figure 2: Entry and Exit Rates for the DI Program: 

[Refer to PDF for image: multiple line graph] 

Graph depicts Percentage of DI Caseload for Entry Rate and Exit Rate 
for the years 2985 through 1997. 

Note: The entry rate was calculated by dividing the number of new 
beneficiaries in a given year by the total number of DI beneficiaries 
on the rolls at the end of the previous year. The exit rate was 
calculated by dividing the number of exiting beneficiaries in a given 
year by the total number of DI beneficiaries on the rolls at the end 
of the previous year. 

Source: GAO analysis of CWHS data. 

[End of figure] 

The 1990 increase in the SGA level could have encouraged additional 
program entry to the extent that individuals with disabilities whose 
earnings were between the pre-1990 SGA level and the 1990 SGA level 
could then qualify for benefits.[Footnote 28] Also, some individuals 
could have reduced their earnings in order to qualify for DI benefits 
and then increased their earnings once they became eligible. However, 
the data we examined indicate that most DI beneficiaries who entered 
the program between 1990 and 1995 were either not able or not inclined 
to increase their earnings or work at all after receiving benefits. 
Relatively few of these new DI beneficiaries—between 2 to 5 percent—
increased their earnings above the SGA level within the first 3 years 
after their initial year in the program and most new beneficiaries had 
no earnings during these first several years on the rolls.[Footnote 29] 

There are a number of factors other than the increase in the SGA level 
that likely affected the post-1990 DI program entry rates. For 
example, given that entry rates began to increase in 1988, prior to 
the 1990 SGA increase, the growth in program entry in 1990 and 1991 
may simply represent a continuation of this earlier trend. In our 
prior work, we described several program factors, such as changes in 
the criteria for evaluating mental impairment disabilities, that 
appear to have contributed to this trend.[Footnote 30] In addition, a 
general labor force response to the 1990-91 recession might also 
explain the increase in entry. The recession could have resulted in 
layoffs of individuals with disabilities, as well as other workers. In 
response, some of these individuals might have sought entry to the DI 
program, rather than continuing a job search, even though they were 
previously able to work and earn above the SGA level. From the data, 
we cannot differentiate the reason for entry by a beneficiary, and so 
have no way of determining whether the increase in entry was related 
to the increase in the SGA level or some other factor. Likewise, the 
ensuing economic expansion may have helped to ensure continuing work 
and significant earnings for some disabled workers, thereby reducing 
the number of workers seeking and receiving DI benefits. In addition, 
advances in medicine and medical care, along with advances in and 
increased use of assistive devices and equipment (for example, adapted 
computers/keyboards), may have allowed some disabled workers to remain 
gainfully employed. 

Program Exits Since 1990 Driven by Retirement and Death but Data Are 
Limited: 

Our analysis of DI program exits indicated that the yearly rate of 
exit generally declined over the 1990 to 1997 period[Footnote 31] even 
though the number of beneficiaries exiting the program was increasing 
(see figure 2). 

Program exit is largely driven by beneficiaries’ death or their 
conversion to retirement benefits, which together account for about 95 
percent of aggregate program exits between 1985 and 1997 (see table 
5).[Footnote 32] While medical improvement or return to work gradually 
increased from 2 to 9 percent of all exits between 1985 and 1996, 
there was a dramatic increase in the percentage of DI beneficiaries 
exiting the program in 1997 for these reasons. 

Table 5: Reasons for Exiting DI: 

Year: 1985; 
Conversion to retirement benefits: 57.4%; 
Death: 40.7%; 
Returned to work/medical improvement: 1.9%. 

Year: 1986; 
Conversion to retirement benefits: 55.8%; 
Death: 40.5%; 
Returned to work/medical improvement: 3.7%. 

Year: 1987; 
Conversion to retirement benefits: 55.4%; 
Death: 39.4%; 
Returned to work/medical improvement: 5.2%. 

Year: 1988; 
Conversion to retirement benefits: 51.5%; 
Death: 41.8%; 
Returned to work/medical improvement: 6.7%. 

Year: 1989; 
Conversion to retirement benefits: 56.0%; 
Death: 39.8%; 
Returned to work/medical improvement: 4.2%. 

Year: 1990; 
Conversion to retirement benefits: 52.6%; 
Death: 43.4%; 
Returned to work/medical improvement: 3.9%. 

Year: 1991; 
Conversion to retirement benefits: 53.1%; 
Death: 43.8%; 
Returned to work/medical improvement: 3.1%. 

Year: 1992; 
Conversion to retirement benefits: 51.0%; 
Death: 44.7%; 
Returned to work/medical improvement: 4.3%. 

Year: 1993; 
Conversion to retirement benefits: 50.4%; 
Death: 44.5%; 
Returned to work/medical improvement: 5.1%. 

Year: 1994; 
Conversion to retirement benefits: 47.7%; 
Death: 45.4%; 
Returned to work/medical improvement: 6.8%. 

Year: 1995; 
Conversion to retirement benefits: 48.3%; 
Death: 42.9%; 
Returned to work/medical improvement: 8.8%. 

Year: 1996; 
Conversion to retirement benefits: 49.5%; 
Death: 41.3%; 
Returned to work/medical improvement: 9.2%. 

Year: 1997; 
Conversion to retirement benefits: 44.6%; 
Death: 35.5%; 
Returned to work/medical improvement: 19.9%. 

Note: In cases where the data indicated that a person who had been 
eligible for DI benefits was no longer eligible, we looked to see 
whether a retirement or death indicator was recorded. In cases where 
neither of these indicators were shown, we inferred that the person 
had left the DI rolls due to either one of two other possible reasons; 
they were determined to have medically improved or they were engaged 
in substantial gainful activity upon returning to work . 

Source: GAO analysis of the CWHS data. 

[End of table] 

It is unclear what effect, if any, the SGA may have had on these 
program exits because, although the data indicate whether the 
beneficiary reached retirement age or died, they do not indicate 
whether the beneficiary returned to work or whether a continuing 
disability review determined that they had medically improved. The 
large increase in the percentage of beneficiaries returning to work or 
medically improving for 1997 may be related, in part, to an increase 
in the number of continuing disability reviews that occurred during 
1997.[Footnote 33] However, a strong economy that drew more DI 
beneficiaries into the labor force or other factors also may have 
played a role. 

Conclusions: 

Our analysis of DI beneficiary earnings from the mid-1980s to the mid-
1990s suggests that the SGA level may act as a work disincentive for 
only a small proportion of DI beneficiaries. This is generally 
consistent with studies of the SGA and of earnings limits in related 
programs, which indicate that such limits, at most, affect a 
relatively small proportion of beneficiaries. However, the limitations 
in the available data mean that our findings should be accepted with 
caution. The lack of data on monthly earnings; on beneficiaries who 
are blind or are in a trial work period; and on beneficiaries who 
return to work, to name only a few areas, all hampered our efforts to 
arrive at more definitive conclusions. In particular, the lack of data 
identifying whether a beneficiary is blind precluded us from analyzing 
the effect of different SGA levels on blind and nonblind DI 
beneficiaries. 

We place significance on our finding that the SGA’s effect remained 
small even as increasing numbers of DI beneficiaries entered the labor 
force. While the DI program had grown by almost 72 percent from 1985 
to 1997, the number of employed DI beneficiaries more than tripled. 
The number of working DI beneficiaries increased every year, even 
during the recession of the early 1990s. Yet it is unclear what has 
been driving this increase in employment. Given that most of these new 
workers have earnings far below the SGA level and remain at those low 
levels for many years afterwards, it is unlikely that this increase 
was caused by an increase in the SGA level. Other possible 
explanations include a buoyant economy throughout most of this period 
since 1985, enhanced employment protections for the disabled, 
increased availability of assistive technology, and a greater 
acceptance of hiring workers with disabilities by society in general. 
While this development has important implications for the DI program, 
the lack of data again makes it difficult for program officials, 
researchers, and policy makers to gain a better understanding of this 
phenomenon and reconfigure the DI program’s return-to-work incentives 
to reinforce this trend. 

Recommendations for Executive Action: 

The DI program, program beneficiaries, policy makers, and the general 
public could all greatly benefit from the collection of data that 
would facilitate a more comprehensive analysis of critical employment 
and program policy issues. Therefore, we recommend that the 
Commissioner of SSA take action to identify the full range of data 
necessary to assess the effects of the SGA on DI program 
beneficiaries, develop a strategy for reliably collecting these data, 
and implement this strategy in a timely manner, balancing the 
importance of collecting such data with considerations of cost, 
beneficiary privacy, and effects on program operations. In our study, 
we noted several key data elements that would be needed for a 
comprehensive assessment of the effects of the SGA level on program 
beneficiaries. These include data that identify the monthly earnings 
of beneficiaries and whether a beneficiary is blind, is participating 
in a trial work period, or has exited the DI program based on a return 
to work. Some of these data, such as information identifying whether a 
beneficiary is blind or is participating in a trial work period, is 
already collected by SSA but is not reliably recorded and maintained 
in SSA’s principal DI program data base. Other information, such as 
monthly earnings data, may be difficult to collect and involve data 
issues that extend beyond the DI program. There may also be additional 
information, beyond the data elements we discussed, that SSA may 
consider necessary for assessing the effects of the SGA. 

Agency Comments and Our Response: 

In commenting on a draft of this report, SSA agreed with our 
recommendation. The agency, while acknowledging that it currently does 
not have the capability in place to track the employment and earnings 
patterns of DI beneficiaries, noted that it has made a commitment to 
collecting and analyzing DI beneficiary data. SSA stated that it is 
currently reaffirming that commitment and is developing a strategy to 
improve its efforts to collect such data. (SSA’s comments appear in 
appendix II.) 

We believe that SSA’s stated commitment to developing improved data on 
DI beneficiaries’ earnings and employment represents a positive 
development. Such a commitment should include the development and 
implementation of a comprehensive strategy that would collect the data 
required for assessing the earnings and employment of all DI 
beneficiaries rather than just a subset, such as those who participate 
in particular programs initiated under the Ticket to Work Act. This 
strategy should also include additional data elements that would 
provide insight into our understanding of DI beneficiaries’ 
employment, such as data identifying beneficiaries who are blind or 
who are participating in a trial work period. 

SSA also provided some technical comments. The agency noted that 
although our report acknowledges various data limitations that 
affected our analysis, including limitations in SSA’s earnings data, 
we did not sufficiently emphasize the extent to which these earnings 
data might include income that is not related to current employment. 
In addition, SSA stated that our data on reasons for exit, or 
termination, from the DI program varied from those published by SSA’s 
Office of the Chief Actuary. Finally, SSA questioned our analysis of 
beneficiaries whose earnings consistently exceed the SGA level. 

With regard to our discussion of limitations in the earnings data, we 
agree with SSA that these limitations are considerable and have noted 
that throughout the report. In particular, SSA highlighted the 
potential for SSA earnings records to include income that may not be 
related to current work. It is unclear whether a substantial portion 
of the earnings data we analyzed was unrelated to current work. For 
example, an SSA study[Footnote 34] stated that the agency’s earnings 
data may include “certain payments from profit sharing plans.” 
However, the study also noted that few beneficiaries had actually 
participated in such plans. In addition, although this study indicated 
a sizeable discrepancy between SSA earnings data and earnings reported 
by some beneficiaries in a survey interview, it was unclear whether 
this discrepancy was due to limitations in SSA data or to limitations 
inherent in self-reported data. 

Regarding the differences between our data on the reasons for program 
exit, or termination, and the data reported by SSA, we acknowledge in 
the report that SSA data indicate somewhat higher exit rates due to 
reasons other than death and conversion to retirement benefits. We 
believe that these differences are likely attributable to the use of 
different sources of data on program exit. We used the CWHS because it 
was the most appropriate data set for conducting a longitudinal 
analysis of beneficiaries’ earnings in relation to the SGA level. 
Further, although the termination rates we report do differ from SSA’s 
data, the trends portrayed in our data on exits are, in fact, 
generally consistent with those indicated in the SSA data. For 
example, where SSA’s data indicate a 10.5 percentage point increase in 
program exit due to medical recovery or return-to-work from 1996 to 
1997 (from 12.3 percent to 22.9 percent), GAO’s data similarly 
indicate a 10.7 percentage point increase (from 9.2 percent to 19.9 
percent). Given that our discussion of program exits focuses primarily 
on trends rather than absolute numbers, we believe that our data 
adequately support our finding. 

Finally, regarding the issue of some beneficiaries being able to 
consistently earn above the SGA level, we identified in the report 
several reasons why some beneficiaries might do so. For example, such 
beneficiaries may be blind and thus subject to a higher SGA level than 
nonblind beneficiaries. We also note that without better DI program 
data, including data identifying whether a beneficiary is blind or in 
a trial work period, we could not provide a more definitive 
explanation of this phenomenon. Examination of individual case folders 
to determine why beneficiaries continued to earn above the SGA level—
an approach suggested by SSA--was not a viable option for us on this 
study given our resources and timeframes for completing the study. 

SSA also made a few other technical comments, which we incorporated 
where appropriate. 

We are sending copies of this report to the Honorable Jo Anne B. 
Barnhart, Commissioner of Social Security; appropriate congressional 
committees; and other interested parties. We will make copies 
available to others on request. This report is also available on GAO’s 
home page at [hyperlink, http://www.gao.gov]. 

If you or your staff have any questions concerning this report, please 
call me at (202) 512-7215 or Charles A. Jeszeck at (202) 512-7036. 
Other individuals making key contributions to this report include Mark 
Trapani, Michael J. Collins, and Ann Horvath-Rose. 

Signed by: 

Barbara D. Bovbjerg: 
Director, Education, Workforce, and Income Security: 

[End of section] 

Appendix I: Scope and Methodology 

To conduct our work, we analyzed data from the Social Security 
Administration’s (SSA) Continuous Work History Sample (CWHS). The CWHS 
consists of records representing a longitudinal 1 percent sample of 
all active Social Security accounts. It is designed to provide data on 
earnings and employment for the purpose of studying the lifetime 
working patterns of individuals. The data, drawn from SSA 
administrative data sets, contain information on an individual’s 
Disability Insurance (DI) eligibility, earnings,[Footnote 35] and 
demographic characteristics. We did not independently verify the 
accuracy of the CWHS data because they were commonly used by 
researchers in the past and they are derived from a common source of 
DI program information. 

Our Sample: 

From the total sample of 2,955,942 individuals, we selected a 
subsample of 92,662 individuals who were eligible for DI benefits at 
some point between 1984 and 1998. To obtain this sample, we excluded 
individuals whose Social Security record indicated a gap in DI 
entitlement, DI beneficiary status beginning before age 18 or 
continuing past age 64, a date of death before their DI beneficiary 
status, and those not identified as the primary beneficiary. We could 
not determine the exact date of eligibility because the CWHS only 
provides eligibility status as of December 31 of each year. Therefore, 
individuals were included in our analysis only as of their second year 
of DI eligibility to assure that the earnings we observed occurred 
only while an individual was in beneficiary status.[Footnote 36] In 
addition to our main sample, we selected another subsample of 9,990 DI 
beneficiaries who reached age 65 during the 1987 to 1993 time period 
for the purpose of analyzing DI beneficiaries who were converted to 
retirement benefits. 

Sampling Errors: 

All samples are subject to sampling error, which is the extent to 
which the sample results differ from what would have been obtained if 
the whole universe had been observed. Measures of sampling error are 
defined by two elements—the width of the confidence interval around 
the estimate (sometimes called precision of the estimate) and the 
confidence level at which the interval is computed. The confidence 
interval refers to the fact that estimates actually encompass a range 
of possible values, not just a single point. This interval is often 
expressed as a point estimate, plus or minus some value (the precision 
level). For example, a point estimate of 75 percent plus or minus 5 
percentage points means that the true population value is estimated to 
lie between 70 percent and 80 percent, at some specified level of 
confidence. 

The confidence level of the estimate is a measure of the certainty 
that the true value lies within the range of the confidence interval. 
We calculated the sampling error for each statistical estimate in this 
report at the 95percent confidence level. All percentage estimates 
from the sample have sampling errors (95 percent confidence intervals) 
of plus or minus 10 percentage points or less, unless otherwise noted. 
All numerical estimates other than percentages have sampling errors of 
10 percent or less of the value of those numerical estimates, unless 
otherwise noted. 

Analysis of the Effect of the SGA on Beneficiaries’ Earnings: 

To analyze the effects of the SGA on the earnings of DI beneficiaries, 
we attempted to determine whether DI beneficiaries engage in “parking,”
 that is, whether they limit their earnings to a level at or just 
below the SGA limit in order to maintain eligibility for benefits. If 
beneficiaries do indeed park, then we would expect to find a 
clustering of earnings just below the SGA level. The occurrence of 
such clustering would provide a fairly strong indication that 
beneficiaries are limiting their employment and earnings to stay in 
the DI program, thereby reducing program exit. In addition, to the 
extent that beneficiaries park or otherwise limit their earnings due 
to a work disincentive effect of the SGA, we would expect an increase 
in the SGA level to result in a corresponding increase in beneficiaries’
earnings. 

To determine if earnings clustered around the SGA level, we examined 
the distribution of earnings both before and after the 1990 increase 
in the SGA level to see what proportion of beneficiaries had annual 
earnings at or within 5 percent, 10 percent, and 25 percent of the 
annualized SGA level. We also tracked those beneficiaries who had 
earnings near the annualized SGA level in a given year to see if they 
maintained this level of earnings in subsequent years. In addition, we 
tracked those beneficiaries who were on the rolls and had no earnings 
or had earnings below the annualized SGA level prior to 1990 to see if 
they increased their earnings and clustered around the new annualized 
SGA level. Finally, we examined beneficiaries who, in a given year, 
had earnings above the annualized SGA level to see if, over time, they 
tended to reduce their earnings to an amount near, but below, the SGA 
to maintain program eligibility. 

To further analyze whether DI beneficiaries limit their earnings due 
to the SGA, we observed how these individuals behave once they are no 
longer subject to the SGA level. We did this by looking at the 
earnings of DI beneficiaries who reached age 65 and were converted to 
the Old Age and Survivors Insurance (OASI) program. Once DI 
beneficiaries reach age 65, they are converted to retired worker 
status and their benefits are paid from the OASI trust fund. Likewise, 
they are no longer subject to the SGA limit.[Footnote 37] If 
beneficiaries are limiting their earnings due to the SGA, then we 
would expect them to increase their earnings after retirement at age 
65. Therefore, a finding that a significant proportion of former DI 
beneficiaries return to work or increase earnings after conversion 
would serve as some evidence for the work disincentive effect of the 
SGA. For DI beneficiaries who had entered the DI rolls prior to age 
62, remained on the rolls until being converted to retirement benefits 
at age 65, and survived to age 68, we examined their earnings between 
ages 66–68 to determine whether there was an increase in earnings and 
employment after they left the DI program. 

Analysis Of the Effect of the SGA on Program Entry and Exit: 

To examine the effects of the SGA on DI program entry and exit rates, 
we looked at the rate of entry and exit both before and after the 
increase in the SGA.[Footnote 38] If people respond to the change in 
the SGA then we might expect the rate of entry to increase after the 
increase in the SGA level. With the higher SGA level, some individuals 
with disabilities would now qualify for benefits if their earnings are 
between the old and new SGA level.[Footnote 39] Likewise, some 
individuals with earnings just above the new SGA level may reduce 
their earnings in order to qualify and then increase their earnings 
after they become eligible. Therefore, we examined the earnings, 
through 1997, of new beneficiaries who entered the DI program between 
1990 and 1995 to see if they tended to increase their earnings after 
becoming eligible for benefits. 

In terms of program exit, we might expect exit rates to decrease after 
an increase in the SGA level since many working beneficiaries may now 
be further from the new level and some may even increase their 
earnings to an amount near the new level (but higher than the old 
level) without having their benefits terminated. We examined data 
indicating the reasons that beneficiaries’ exit DI to determine the 
extent to which program exits resulted from beneficiaries returning to 
work or medically improving versus retirements or deaths. 

Limitations in Our Analysis: 

The absence of key data in the CWHS and in other SSA data sets limited 
our ability to draw clear conclusions from our analysis. For example, 
while the SGA is a monthly level, the available earnings data are 
recorded only on a yearly basis. Therefore, we were not able to 
analyze DI beneficiaries’ monthly earnings in relation to the actual, 
monthly SGA limit. Instead, we examined beneficiary earnings in terms 
of the annualized SGA level; that is, we multiplied the monthly SGA 
amount by 12 to permit comparison of the monthly limit to the annual 
data. (For example, the SGA level in 1995 was $500 per month, so the 
annualized SGA level was $500 multiplied by 12, or $6,000.) As a 
result, we were not able to identify parking that might have occurred 
among beneficiaries who, for example, worked for only a few months 
during the year but limited their earnings to a level near, but not 
exceeding, the SGA level in each of those months.[Footnote 40] 
Nevertheless, our analysis did allow us to identify individuals who 
consistently have earnings at or near the SGA level. To the extent 
that beneficiaries are trying to maximize their income-–that is, earn 
as much as they can within a given year while maintaining DI 
eligibility–-there may be a significant number of beneficiaries who 
have sustained earnings up to the SGA level through much of the year. 

Another data limitation concerned beneficiaries who are in a trial 
work period. The trial work period allows beneficiaries to test their 
ability to work without penalty. Therefore, beneficiaries can earn any 
amount without being subject to the SGA limit. Neither the CWHS nor 
other SSA data sets provide a reliable means for identifying 
beneficiaries in a trial work period. As a result, in our parking 
analysis, we were not able to distinguish the earnings of 
beneficiaries who are subject to the SGA limit from those who are not 
subject to this limit. Although the trial work period allows 
beneficiaries to earn any amount, there is no reason to believe that 
all beneficiaries in a trial work period will have earnings greater 
than the SGA level. An individual’s disability may limit his/her 
earnings to well below the SGA level. However, we do not believe that 
this limitation affected our analysis to a great extent because it is 
unlikely that the earnings of beneficiaries in a trial work period 
would systematically fall at or near the SGA level and thereby skew 
our analysis. 

The identification of blind and nonblind beneficiaries also created a 
limitation in our analysis. The CWHS does not allow us to distinguish 
between blind and nonblind DI beneficiaries, which is important since 
blind beneficiaries are subject to a higher SGA limit. Some of the 
beneficiaries that we observe earning above the nonblind SGA limit may 
actually be blind individuals. In addition, if a substantial number of 
blind beneficiaries had earnings just below the nonblind SGA level, 
then our analysis could exaggerate the existence of parking. However, 
this limitation is not likely to have substantially impacted our 
analysis of parking among nonblind beneficiaries because blind 
individuals represent only about 2 percent of the DI caseload and 
therefore probably comprised a very small portion of our sample. 
Perhaps more importantly, the inability to identify blind 
beneficiaries means that we could not assess the extent to which they 
exhibit parking behavior. As a result, our analysis may be 
understating the extent of parking in the DI program. 

Finally, the lack of data on impairment-related work expenses (IRWE) 
also limited our ability to analyze the effects of the SGA level on 
employment. SSA deducts the cost of certain impairment-related 
expenses needed for work from earnings when making SGA determinations. 
The inability to identify IRWE could exaggerate the effect of the SGA 
on earnings since some beneficiaries near or above the SGA level may 
not have been at this level once IRWE was subtracted from their 
earnings. However, the inability to determine IRWE is not likely to 
have significantly impacted our analysis because SSA officials told us 
that IRWE was applied in only a very limited number of cases during 
the years of our analysis Despite these substantial limitations, the 
CWHS is the best available data set for identifying the basic program 
information needed to conduct our analysis within acceptable 
timeframes. The principal alternative data set within SSA—the Master 
Beneficiary Record—does not lend itself to easy analysis because it is 
designed to fulfill SSA’s administrative objectives. In particular, we 
did not choose to use this data set because it would not have provided 
the longitudinal data that we needed unless it was linked with other 
SSA administrative files containing DI program information. Linking 
these complex files would have raised many uncertainties regarding the 
ultimate quality of the data and would have added substantial time and 
complexity to our analysis. In addition, non-SSA data sets, such as 
the Census Bureau’s Current Population Survey, could not serve our 
needs because, among other limitations, we would not be able to 
adequately identify DI program participation for most of the years of 
our analysis. 

In addition to data limitations, our analysis was also constrained by 
the lack of any quantitative evaluation of other possible factors 
affecting the earnings of DI beneficiaries and disabled workers. For 
example, our analysis does not control for other factors in the 
economy such as recessions, implementation of the Americans With 
Disabilities Act (ADA), advances in medicine and medical care, and 
advances in and increased use of assistive devices and equipment. A 
recession may increase entry into the DI program, but implementation 
of the ADA and improvements in medical care and assistive devices and 
equipment may either decrease entry or increase exit. The inability to 
control for these factors limited our ability to make clear inferences 
from the data regarding the effects of the SGA. 

[End of section] 

Appendix II: Comments From the Social Security Administration 

Social Security: 
Office of the Commissioner: 
Social Security Administration: 
Washington D.C. 20254: 

January 14, 2002: 

Ms. Barbara D. Bovbjerg: 
Director, Education, Workforce, and Income Security Issues: 
U.S. General Accounting Office: 
Washington, D.C. 20548: 

Dear Ms. Bovbjerg: 

Thank you for the opportunity to review and comment on the draft 
report, "Social Security Administration Disability: Substantial 
Gainful Activity Levels Appear to Affect the Work Behavior of 
Relatively Few Beneficiaries, But More Data Needed" (GAO-02-224). Our 
comments on the report are enclosed. If you have any questions, please 
have your staff contact Trudy Williams at (410) 965-0380. 

Sincerely, 

Signed by: 

JoAnne B. Barnhart: 
Commissioner: 

Enclosure: 

Comments Of The Social Security Administration (SSA) On The General 
Accounting Office (GAO) Draft Report, "SSA Disability: Substantial 
Gainful Activity Levels Appear To Affect The Work Behavior Of 
Relatively Few Beneficiaries, But More Data Needed" (GAO-02-224): 

Recommendation: 

The Commissioner of the Social Security Administration (SSA) should 
take action to identify the full range of data necessary to assess the 
effects of substantial gainful activity (SGA) on disability program 
beneficiaries, develop a strategy for reliably collecting these data 
and implement the strategy in a timely manner, balancing the 
importance of collecting such data with considerations of costs, 
beneficiary privacy, and effects on program operations. 

Comments: 

In December 2000, SSA published a final regulation that provided 
automatic yearly indexing of the SGA monthly amount. In the preamble 
of that rule, SSA stated that it would periodically review the level 
to determine if it continues to be a reasonable and --meaningful--
indicator. As part of that review, the Agency committed to collection 
and analysis of Disability Insurance (DI) beneficiaries earnings data, 
including wages that exceed the SGA level, the duration of employment 
above the SGA amount and the average earnings of individuals achieving 
SGA. We are reaffirming that commitment and are developing a strategy 
to improve the Agency's data collection of DI beneficiaries' earnings. 

As part of that strategy and in response to the Ticket to Work and 
Work Incentives Improvement Act of 1999, we have developed software to 
track earnings on a monthly basis for individuals who will be 
participating in the Ticket program. This software provides the basis 
for more extensive tracking of work and earnings by disabled 
beneficiaries in the future. 

In addition, we are working on other measures for improving our data 
collection in this area such as gaining access to the Office of Child 
Support Enforcement earnings data. While we have access to these data 
for the Supplemental Security Income program, we do not yet have 
access for the DI program. 

Technical Comments: 

While GAO adequately discusses certain data limitations, such as the 
fact that the SGA test is a monthly test and only annual earnings are 
available, there are other limitations that do not receive adequate 
discussion. For instance, the fact that earnings posted to the SSA 
earnings record include amounts that are not related to current work 
(e.g., may include commissions, bonuses, sick pay and other payments) 
is relegated to a footnote in the appendix that does not fully discuss 
sources of earnings other than work. This issue of work vs. earnings 
should be made more prominent. (Prior review suggests that as much as 
half of earnings showing up in early post-entitlement years may not be 
related to work.) Also, Impairment-Related Work Expenses (IRWE), Blind 
Work Expenses, Subsidies, and other factors that affect how SSA 
establishes SGA should be more prominently cited in the main text, 
rather than relegated to the appendix. 

To conduct its work, GAO analyzed data from the Continuous Work 
History Sample (CWHS) and reported on terminations (recoveries) 
resulting from medical improvement or return to work. That data set 
does not contain adequate information to be used for that purpose, and 
the result could be misleading termination numbers. In fact, the 
numbers presented in the report vary considerably from those published 
by the Office of the Chief Actuary (OCACT) (source: Actuarial Study 
114: Social Security Insurance Program Worker Experience, June 1999). 
The GAO reports recoveries increasing from 1.5 percent of terminations 
in 1985 to 9.2 percent in 1996 and jumping to 19.7 percent in 1997. 
The OCACT data indicate recoveries increasing from 6.6 percent of 
terminations in 1985 to 12.3 percent in 1996 and jumping to 22.8 
percent in 1997. There is considerable difference in these numbers, 
and while recoveries increased as a portion of terminations, the rise 
is not as dramatic as suggested by GAO. In fact, recovery rates fell 
through the early to mid-1990s before increasing again in the late 
1990s. Also, while GAO attributes the sharp increase in recoveries in 
1997 to increased continuing disability reviews, OCACT cites the drug 
addiction and alcohol legislative change as the cause of the one-time 
spike (page 8 of Actuarial Study 114). 

The Report focuses on increases in the number of persons working with 
relatively low annual earnings and shows that the number has increased 
over time. SSI recipients who work under 1619 and earn quarters of 
coverage, and who eventually may become eligible for DI benefits, may 
to a certain extent contribute to increases in the number of 
individuals with low earnings on DI. 

On page 4 of the Report, GAO states that after a 9-month trial work 
period, "benefit payments are terminated once SSA determines... 
earnings exceed the SGA level." In fact, benefits are ceased, followed 
by a grace period of 3 additional months of benefits paid. Following 
the grace period, the beneficiary enters an extended period of 
eligibility (EPE) under which benefits are reinstated if earnings fall 
below SGA. Termination does not occur until the end of the EPE. 

Tables 3 and 4 (pages 13 and 15, respectively) raise the obvious issue 
of how benefits can continue for persons whose earnings exceed SGA 
level for an extended period. We suspect the numbers of cases in the 
table are relatively small and are probably anomalies: the blind, 
those with large IRWEs or subsidies and persons who continue to 
receive posted earnings that are not related to work (e.g., 
commissions). We believe that GAO should show the unweighted counts in 
each cell and ideally should have pulled folders to determine why no 
action was taken. Without further explanation of why benefits continue 
for 'workers with long-term earnings above SGA,' the tables cast doubt 
on the reports findings. 

Footnote 22 on page 11 should provide the series used for indexing the 
Consumer Price Index for prices, a wage index, etc. 

Page 16 refers to the "Master Beneficiary Earnings File," although we 
suspect the intended reference is to the Master Beneficiary Record or 
the Master Earnings File. 

[End of section] 

Footnotes: 

1. SSA collects annual, rather than monthly, earnings data. However, 
the SGA represents a monthly earnings limit. To permit comparison of 
the monthly limit to the annual data, we multiplied the monthly SGA 
amount by 12 to develop an annualized SGA. For example, the SGA level 
in 1995 was $500 per month and the annualized SGA level was $6,000 
($500 X 12). See appendix 1 for further details on our methodology. 

2. The trial work period allows a beneficiary to earn any amount for 9 
months (which need not be consecutive) within a 60-month period and 
still receive full cash and medical benefits. At the end of the trial 
work period, if a beneficiary’s earnings exceed the SGA level, cash 
benefits continue for an additional 3-month grace period and then 
stop. For 36 months after the trial work period ends, referred to as 
the extended period of eligibility, cash benefits will be reinstated 
for any month in which the person does not have countable earnings 
above the SGA level. 

3. SSA periodically conducts continuing disability reviews to verify 
that an individual on the rolls still has a disability that prevents 
that person from engaging in substantial gainful activity. Continuing 
disability reviews may be conducted when (1) substantial earnings are 
posted to a beneficiary’s employment record, (2) a report of medical 
improvement is received from a vocational rehabilitation agency, (3) 
the beneficiary provides a voluntary report indicating medical 
improvement or return to work, or (4) a medical reexamination is 
scheduled based on an expectation that a beneficiary’s impairment will 
improve. 

4. To be eligible for disability benefits, workers must be fully 
insured and, except for those who are disabled due to blindness, must 
also meet a test of substantial recent covered work. Under this test, 
workers aged 31 and older must have credit for work in covered 
employment for at least 20 quarters of the 40 calendar quarters ending 
with the quarter the disability began. Workers disabled before age 31 
may qualify for benefits under a special insured status requirement. 

5. In the same year, the DI program also paid about $5 billion in cash 
benefits to about 1.6 million spouses and children of disabled workers. 

6. To calculate countable earnings, SSA deducts from gross earnings 
the cost of items that, because of the impairment, a person needs to 
work (for example, attendant care services performed in a work 
setting, wheelchairs, or Braille devices). 

7. The AWI is a measure of average wages of all employees in the 
United States. 

8. The Social Security Act did not initially distinguish between the 
SGA levels for blind and nonblind DI beneficiaries. This was changed 
in 1977 when the Social Security Financing Amendments (P.L. 95-216) 
set the SGA level for individuals who are blind equal to the monthly 
earnings limit set for Social Security retirees aged 65-69 (a dollar 
level higher than the SGA for nonblind beneficiaries). The Senior 
Citizens’ Right to Work Act of 1996 (P.L. 104-121) removed the link 
between the retirement earnings limit and the SGA level for the blind. 
However, the act retained the higher SGA level for the blind that was 
in place at that time and allowed for continued annual indexing to the 
AWI. 

9. Blind and nonblind beneficiaries are also treated differently under 
several other DI provisions. For example, blind beneficiaries age 55 
or older whose earnings exceed the SGA level are evaluated differently 
than nonblind beneficiaries. If the work performed requires a lower 
level of skill and ability than work done prior to age 55, benefits 
are suspended rather than terminated and will be reinstated in any 
month that earnings fall below SGA. 

10. See Social Security Disability Insurance: Multiple Factors Affect 
Beneficiaries’ Ability to Return to Work [hyperlink, 
http://www.gao.gov/products/GAO/HEHS-98-39], Jan. 1998, and SSA 
Disability: Program Redesign Necessary to Encourage Return to Work 
[hyperlink, http://www.gao.gov/products/GAO/HEHS-96-62], Apr. 1996. 

11. Jonathan Gruber and Jeffrey D. Kubik, “Disability Insurance 
Rejection Rates and the Labor Supply of Older Workers,” Journal of 
Public Economics, Vol. 64, Issue 1, 1997, pp. 1-23; Brent Krieder, “
Social Security Disability Insurance: Applications, Awards, and 
Lifetime Income Flows,” Journal of Labor Economics, Vol. 17, No. 4, 
Pt. 1, 1999, pp. 784-827. 

12. Paula A. Franklin, “Impact of the Substantial Gainful Activity 
Level on Disabled Beneficiary Work Patterns,” Social Security 
Bulletin, Vol. 39, No. 8, 1976, pp. 20-29; Paula A. Franklin and John 
C. Hennessey, “Effect of the Substantial Gainful Activity Level on 
Disabled Beneficiary Work Patterns,” Social Security Bulletin, Vol. 
42, No. 3, 1979, pp. 3-17. 

13. HHS/OIG, Audit of the Effectiveness of Title II Disability Work 
Incentives, A-13-92-00223 (Washington, D.C., 1993). 

14. John C. Hennessey and L. Scott Muller, “The Search for Evidence of 
Labor Supply Response to a Benefit Offset,” unpublished manuscript, 
Nov. 1999. 

15. The retirement earnings test has undergone a number of changes 
over the years. For most of the 1980s, this test resulted in a $1 
reduction in Social Security benefits for every $2 in earnings above 
an exempt amount for recipients aged 65-69. In the 1990s, the 
reduction in benefits was changed to $1 for every $3 in earnings above 
the exempt amount for beneficiaries aged 65-69. The exempt amount—
which was automatically adjusted based on increases in the national 
average wage index—increased from $6,600 a year in 1983 to $15,500 in 
1999. The Senior Citizen’s Freedom to Work Act of 2000 (P.L. 106-182) 
eliminated the retirement earnings test for beneficiaries age 65 and 
older, effective for taxable years after December 31, 1999. 

16. Michael V. Leonesio, “Social Security and Older Workers,” Social 
Security Bulletin, Vol. 56, No. 2, 1993, pp. 47-57. This study 
examined 1988 earnings data. 

17. SSI is a means-tested income assistance program for disabled, 
blind, or aged individuals who have low income and limited resources. 
Unlike the DI program, SSI has no prior work requirement. Eligible SSI 
applicants generally begin receiving cash benefits immediately upon 
entitlement and, in most cases, receipt of cash benefits makes them 
eligible for Medicaid benefits. 

18. Section 1619 of the Social Security Act allows SSI beneficiaries 
to keep Medicaid coverage even when earnings exceed the SGA level. SSI 
beneficiaries may keep their Medicaid coverage until earnings increase 
to a point-–referred to as the threshold amount--that SSA considers 
high enough to replace the equivalent of SSI cash and Medicaid 
benefits. 

19. The Lewin Group, Inc., “Exploratory Study of Health Care Coverage 
and Employment of People with Disabilities: Final Report,” prepared 
for the Department of Health and Human Services, Office of the 
Assistant Secretary for Planning and Evaluation, July 1998. 

20. There are no clear criteria for identifying the cutoff point at 
which a beneficiary can be said to be earning “near” the SGA level. 
Therefore, we examined beneficiaries’ earnings at several increments 
between 75 and 95 percent of the SGA level. The increment reported 
here represents the broadest range (75 percent) that we examined. See 
appendix II for more information on our methodology. 

21. We considered a beneficiary to be working in a given year if SSA 
records for that individual indicated annual earnings greater than 
zero. See appendix I for further information on SSA’s earnings data 
and its limitations. 

22. 1997 dollars. Figures were adjusted based on the Bureau of Labor 
Statistics’ Consumer Price Index for All Urban Consumers. 

23. About 23 percent of beneficiaries who worked in 1995 had earnings 
above the annualized SGA level. 

24. We found that, from 1990 to 1997, only 1 to 2 percent of 
beneficiaries who had earnings less than the SGA level prior to 1990 
had increased their earnings to an amount between 75 and 100 percent 
of the new SGA level. For beneficiaries who had no earnings prior to 
1990, less than half of 1 percent had earnings between 75 and 100 
percent of the SGA level from 1990 to 1997. 

25. For this analysis, we examined beneficiaries who had entered the 
DI rolls prior to age 62, were converted to retirement benefits at age 
65 between 1987 and 1993 (the years from which we identified our 
cohort for this analysis), and survived to age 68. These beneficiaries 
comprised, on average, about 9 percent of all DI beneficiaries. About 
93 percent of these beneficiaries had no earnings in the 3 years 
preceding retirement. 

26. SSA does maintain data identifying whether a beneficiary is blind 
in another data set—the 831 Disability File. The 831 file contains 
data from initial medical determinations for individuals applying for 
DI or SSI benefits. However, we obtained information from SSA 
indicating that the data fields in this file that identify blindness 
may not be reliable in about 20% of the cases. 

27. The number of beneficiaries entering the DI program exceeded the 
number exiting the program in every year of our analysis. Therefore, 
the total number of DI beneficiaries increased from about 2.7 million 
to 4.5 million from 1985 to 1997. However, our discussion in this 
section deals separately with patterns of program entry and exit, 
rather than overall program growth. 

28. In assessing the effects of increasing the SGA from $500 to $700 
in 1999, SSA estimated that by fiscal year 2004, an additional 27,000 
individuals whose earnings exceeded the prior SGA level but were less 
than the new level would receive DI benefits as a result of this 
increase. 

29. We tracked the earnings, through 1997, of beneficiaries who 
entered the DI rolls between 1990 and 1995. For the years we analyzed, 
the percentage of these new beneficiaries who had no subsequent 
earnings ranged from about 76 to 88 percent. 

30. See Social Security: Disability Rolls Keep Growing, While 
Explanations Remain Elusive [hyperlink, 
http://www.gao.gov/products/GAO/HEHS-94-34], Feb. 1994. 

31. However, this trend in exit rates began prior to 1990, and a 
variety of factors, such as a decline in the average age of new 
beneficiaries, may have contributed to it. 

32. Our figures on the reasons for program exit, or termination, 
differ somewhat from those computed based on data reported by SSA (see 
Tim Zayatz, A.S.A., “Social Security Disability Insurance Program 
Worker Experience,” Actuarial Study No. 114, July 1999). In 
particular, SSA data indicate somewhat higher exit rates due to 
reasons other than death and conversion to retirement benefits. These 
differences are likely attributable, in part, to the use of different 
sources of data on program exit. However, despite these differences, 
the trends portrayed in our data on exits are generally consistent 
with those indicated in the SSA data. 

33. Congress authorized about $4.1 billion dollars to fund a 7-year 
initiative by SSA to conduct about 8.2 million continuing disability 
reviews during fiscal years 1996 through 2002. In fiscal years 1996 
and 1997, SSA conducted 1.2 million continuing disability reviews. 

34. L. Scott Muller, “Comparisons of Self-Reported Work Activity and 
Administrative Earnings Reports of Individuals Recently Entitled to 
Social Security Disability Insurance Benefits,” unpublished 
manuscript, Apr. 1990. 

35. Reports of earnings must be filed annually with SSA by every 
employer who is required to withhold income tax from wages and/or who 
is liable for Federal Insurance Contributions Act taxes—which are used 
to finance the Old Age and Survivors Insurance and Medicare Hospital 
Insurance programs. While almost all jobs in the U.S. are covered by 
these reporting requirements, there are several excluded categories of 
workers, such as federal civilian employees hired before 1984 and 
certain state and local government employees who participate in 
alternative retirement systems. In addition, some earnings reported to 
SSA may actually represent income derived from work activity in a 
previous year, such as commissions or bonuses from prior work. 

36. The one exception to this “two-year rule” occurred in our analysis 
of new program entrants where we identified DI eligibility as the 
first year that such eligibility was indicated in the data set. 

37. Although they were, until January 2000, subject to the retirement 
earnings limit, which was much higher than the nonblind SGA level 
during our period of analysis. 

38. We calculated entry rates by dividing the number of new 
beneficiaries in a given year by the total number of DI beneficiaries 
on the rolls in the previous year. Similarly, we calculated exit rates 
by dividing the number of exiting beneficiaries in a given year by the 
total number of DI beneficiaries on the rolls in the previous year. 

39. Assuming they also meet other DI eligibility criteria. 

40. It is also possible that some beneficiaries who worked only 
intermittently during the year had annual earnings at or near the 
annualized SGA level. However, while earnings at or near the SGA level 
may be suggestive of parking behavior, we could not identify whether a 
beneficiary with earnings in this range was truly parking or had 
limited earnings due to other reasons. 

[End of section] 

GAO’s Mission: 

The General Accounting Office, the investigative arm of Congress, 
exists to support Congress in meeting its constitutional 
responsibilities and to help improve the performance and accountability 
of the federal government for the American people. GAO examines the use 
of public funds; evaluates federal programs and policies; and provides 
analyses, recommendations, and other assistance to help Congress make 
informed oversight, policy, and funding decisions. GAO’s commitment to 
good government is reflected in its core values of accountability, 
integrity, and reliability. 

Obtaining Copies of GAO Reports and Testimony: 

The fastest and easiest way to obtain copies of GAO documents at no 
cost is through the Internet. GAO’s Web site [hyperlink, 
http://www.gao.gov] contains abstracts and fulltext files of current 
reports and testimony and an expanding archive of older products. The 
Web site features a search engine to help you locate documents using 
key words and phrases. You can print these documents in their entirety, 
including charts and other graphics. 

Each day, GAO issues a list of newly released reports, testimony, and 
correspondence. GAO posts this list, known as “Today’s Reports,” on its 
Web site daily. The list contains links to the full-text document 
files. To have GAO e-mail this list to you every afternoon, go to 
[hyperlink, http://www.gao.gov] and select “Subscribe to daily E-mail 
alert for newly released products” under the GAO Reports heading. 

Order by Mail or Phone: 

The first copy of each printed report is free. Additional copies are $2 
each. A check or money order should be made out to the Superintendent 
of Documents. GAO also accepts VISA and Mastercard. Orders for 100 or 
more copies mailed to a single address are discounted 25 percent. 
Orders should be sent to: 

U.S. General Accounting Office: 
441 G Street NW, Room LM: 
Washington, D.C. 20548: 

To order by Phone: 
Voice: (202) 512-6000: 
TDD: (202) 512-2537: 
Fax: (202) 512-6061: 

To Report Fraud, Waste, and Abuse in Federal Programs Contact:
Web site: [hyperlink, http://www.gao.gov/fraudnet/fraudnet.htm]: 
E-mail: fraudnet@gao.gov: 
Automated answering system: (800) 424-5454 or (202) 512-7470: 

Public Affairs: 

Jeff Nelligan, managing director, NelliganJ@gao.gov: 
(202) 512-4800: 
U.S. General Accounting Office: 
441 G Street NW, Room 7149:
Washington, D.C. 20548: 

[End of document]