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Back pay and the SSI limit: the nine-month exclusion

The unspent part of a back payment is set aside from the limit for nine months. Knowing which nine, and keeping the money easy to point to, is most of the job.

A printed calendar showing all twelve months of a year, held by a binder clip on a gray table beside a sprig of dried flowers.
Photo by Paico Oficial on Unsplash

When SSA pays benefits late, as back pay, the part you haven't spent doesn't count toward the SSI resource limit for the nine calendar months after the month it arrives. The rule covers back pay from SSI and from Social Security, and it's written into SSA's regulations at 20 CFR 416.1233.

Those months give you time to use the money for the person you're payee for. They also end on a date worth writing down, because after that, whatever is left counts like any other savings.

What counts as back pay

The regulation calls it a retroactive payment: one paid after the month it was due. SSA's policy draws the line a little differently for each program. SSI for January that's paid in February is retroactive. Social Security for January that's paid in February isn't; paid in March, it is.

Retroactive SSI includes any state supplement that SSA pays along with it.

Counting the nine months

The count starts with the month after the money arrives. Say back pay lands in March. The nine months are April through December.

As long as the money stays unspent, it's excluded for that whole stretch. From January on, what remains counts toward the limit, which is $2,000 for an individual and $3,000 for a couple, unless another exclusion covers it. SSA measures resources at the first moment of each month, so the balance at the start of January is the one that matters.

SSA is required to tell the person in writing about this exclusion and how long it lasts when it sends a retroactive payment. Keep that notice with the bank statement that shows the deposit.

The money, and what it buys

The exclusion belongs to the unspent money, and it stops at the register. The regulation says that once the back pay is spent, the exclusion "does not apply to items purchased with the money," even if the nine months haven't run out. Other exclusions may still cover what you buy.

Keeping it identifiable

Back pay doesn't need an account of its own. It does need to stay identifiable. The money can sit alongside other funds, but if it's mixed in so that the back pay can no longer be told apart, it counts toward the limit.

SSA's policy settles which money a withdrawal comes from. When money leaves an account holding both, SSA assumes the money that isn't excluded went first, leaving as much of the excluded money in the account as possible.

Say a savings account holds $500 of ordinary savings and $3,000 of back pay, and you take out $400 for a winter coat and boots. Under SSA's rule, the $400 comes from the ordinary savings. All $3,000 of the back pay is still excluded, and $100 of ordinary savings remains.

A short written note of the date the back pay arrived and how much it was, kept with the statements, makes the amount easy to show later.

When it comes in pieces

Large SSI back pay can arrive in installments. When past-due SSI is at least three times the maximum federal monthly SSI amount, plus any federally administered state supplement, SSA pays it in up to three installments, six months apart. There are exceptions, including for a person expected to live less than 12 months.

For a child under 18 who has a payee, past-due SSI over six times the federal monthly amount, plus any federally administered state supplement, goes into a dedicated account. That account has its own spending rules, and its own exclusion, which isn't limited to nine months.

How PayeeKit records it

If you move back pay into savings for someone on SSI, you can record it in PayeeKit as a transfer to savings and mark it as held where it's excluded. The resource watch then leaves that amount out of the countable total. PayeeKit doesn't decide whether the money qualifies or count the nine months for you, so when they end, turn the mark off and the watch counts what's left.

Sources

PayeeKit is an iPhone ledger for family representative payees and guardians. See how it works.

This post is general information, not advice about anyone's situation. SSA decides what counts toward the resource limit, and your notices and SSA's own pages are the final word.