Understanding Difference Between Back Pay And Retroactive Pay

Government assistance programs can serve a great purpose, but they are not the easiest to understand. Unfortunately, a lot of people do not fully know the different benefits they could receive. Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI) are two federal assistance opportunities that can help those who are financially struggling. It can be a bit challenging to understand these programs, but there is basic information that you should keep in mind about these programs that explain how you can benefit from them.

What are the SSDI and SSI Programs?

Before you dive deep into the different kinds of benefits you can get, you should know what these programs are. We are going to start with the SSDI Program, which is an assistance option that can help people with a qualifying employment background and an eligible disability. Another assistance option that can support people is the SSI program, which helps people that meet wage requirements on top of age requirements or disability requirements. It is easy to distinguish the differences between both programs. The SSI program highlights income restrictions on top of age or disability. The SSDI program concentrates on disability and employment. Similar as they are, there are major differences between each program.

The Difference Between Back Pay and Retroactive Pay

When you figure out more about these two programs, you will most likely find the terms “retroactive pay” and “back pay.” The differences between these two terms are crucial since both of these benefits affect these programs differently.

Retroactive Pay

In terms of SSDI retroactive pay, it is the kind of assistance that the Social Security Administration (SSA) will offer recipients for a qualifying amount of time. This qualifying amount of time refers to the period of time where the applicant of SSDI was dealing with a disability before actually submitting an application. There are situations when an applicant will not apply immediately.

A person can delay applying for several reasons. The most important thing to remember is that an eligible disability must last for at least one year. Some applicants wait until their disability lasts for a year and then apply for SSDI benefits. No matter what the situation is, if an applicant is eligible for benefits before they apply, they can receive retroactive pay. There are three aspects that define the amount of retroactive pay someone can receive, which are:

  • When You Apply
  • Date of Disability Onset
  • Waiting Period of Five Months

When You Apply

The day a person applies affects how much they can receive. Retroactive pay serves as compensation for the amount of time they could receive SSDI benefits before they applied. To figure out your application date, you need to find out when you applied to the SSDI program. That date is important, so write it down.

Date of Disability Onset

According to the disability definition of the SSA, the disability onset date refers to the day that you were diagnosed with a disability that meets the definition the SSA has set. This could either be the date that you claim to have a disability or the date the SSA stated that you have a disability. This will not always be the same date because when you send in your SSDI application, you will need to offer your Alleged Onset Date (AOD). The SSA will use this as a reference to figure out the duration of your disability.

The SSA will focus on your medical diagnosis and other documents. They do this to see if you can offer evidence that the AOD you presented was true. If the SSA accepts your AOD after looking through the documents you present, it will transform into your Established Onset Date (EOD). On the other hand, in the case you find that your documents do not provide accurate information about your AOD, the SSA determines your EOD for you. No matter what, the EOD is an important factor in retroactive pay.

Waiting Period of Five Months

The final component is the waiting period of five months which will be taken into account when figuring out your retroactive pay. Once the date of disability onset is officially an EOD, people will be required to wait for five months to be eligible for benefits. The waiting period of five months is applicable for all SSDI recipients. For instance, if your EOD is on March 1st, 2022, then you will not qualify to get benefits until five months after.

The Amount You Can Receive From Retroactive Pay

12 months is the limit of time to receive retroactive pay, according to the SSA. You cannot assume that the SSA will pay for the whole time you were waiting to apply. For instance, if you were disabled and sent in your SSDI application five years later, the SSA will not compensate for the entire five years. In the case that you want to receive the maximum amount of retroactive pay, then you should be disabled for at least 17 months and then apply for the SSDI. This is because the SSA would remove the waiting period of five months and pay for 12 months, at most. The SSA will not compensate for any time over the one-year limit and the waiting period of five months (amounting to a total of 17 months).

Back Pay

Now that you have an idea of retroactive pay, you should know what back pay is in the SSDI program. Applying for the SSDI program can take a while. Unfortunately, this is why many people that apply for SSDI benefits are entitled to back pay once they receive approval of their application. Back pay is how much SSDI benefits a person can receive from the application date until the month the program approves the application. On average, an SSDI application takes about three to six months to process. Because it takes time to process an application, applicants are entitled to back pay. How much back pay you receive is based on three aspects:

  • When You Apply
  • Date of Disability Onset
  • Waiting Period of Five Months

When You Apply

Finding out when you apply is both important and easy. This is the date that you sent in your SSDI application. The application date is important to determine your back pay because this type of pay offers compensation from the date of your application until the date you get approval.

Date of Disability Onset

The date of your disability onset focuses on the day you were disabled. However, this should be in accordance with the disability definition that the SSA sets. This could be the date that you claim to have a disability. It could also be the date the SSA states that you have a disability. That will not always be the same date because when you send in your SSDI application, you will need to offer your Alleged Onset Date (AOD). The AOD is the reference the SSA will use to figure out the duration of your disability.

The SSA will focus on your medical diagnosis and other documents. This is because they want to figure out if you can offer evidence that the AOD you presented was true. If the SSA accepts your AOD after looking through the documents you present, it will transform into your Established Onset Date (EOD). On the other hand, in the case you find that your documents do not provide accurate information about your AOD, the SSA determines your EOD for you. No matter what, the EOD is an important factor in back pay.

Waiting Period of Five-Month

The final component for back pay is the waiting period of five months which will be taken into account. Once the date of disability onset is officially an EOD, people will be required to wait for five months to be eligible for benefits. The waiting period of five months is applicable for all SSDI recipients. For instance, if your EOD is on March 1st, 2022, then you will not qualify to get benefits until five months after.

The Amount You Can Receive from Back Pay

The best thing about back pay is that there is no maximum. The time to get your back pay comes in payment of a lump sum. Most of the time, people need to wait from one to two months before receiving their back pay.

The SSI, Back Pay, and Retroactive Pay

Everything we discussed above such as retroactive pay and back pay refers to the SSDI program. On the other hand, things work a little differently with the SSI program. The main difference is that SSI does not offer any retroactive pay. This is due to the fact that the starting date of the application affects when eligible people can get benefits. However, the SSI program offers back pay to recipients. The SSI program refers to your application date to determine back pay. Since there is no waiting period for SSI benefits, calculating back pay is different. Additionally, if the back pay amount is more than the maximum benefit per month of $841 (this amount is for 2022), then recipients will not receive the payment in a lump sum. Instead, recipients will receive back pay in the span of three installments. The program offers back pay over the course of six-month periods.

Overall

Many assistance options are out there to help people who are financially struggling. These options include Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI), which offer assistance differently. With the SSDI program, there are two benefits that can help people: retroactive pay and back pay. On the other hand, the SSI program offers back pay. It does not offer retroactive pay.

Retroactive pay means offering benefits for a specific time frame when you had a disability before you applied. Back pay focuses on a specific time frame between your application date and when you received approval for benefits. This difference is important to keep in mind especially since it can impact how you benefit from different support opportunities!