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Getting Earned Income Right

Getting Earned Income Right. FOOD STAMP Earned Income. Ever sit down to do a FS budget on earnings and not know where to start? Ever get an error on a Supervisory Review and have NO IDEA how to fix it?. Why is Earned Income such a “Hot Topic”?. Top QC Error Element for Georgia

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Getting Earned Income Right

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  1. Getting Earned Income Right

  2. FOOD STAMP Earned Income • Ever sit down to do a FS budget on earnings and not know where to start? • Ever get an error on a Supervisory Review and have NO IDEA how to fix it?

  3. Why is Earned Income such a “Hot Topic”? • Top QC Error Element for Georgia • Top Accuracy Review Error Element

  4. Earned Income is any money received by the AU in the form of wages, salaries, commissions, or payments for services rendered. Any other money received is considered unearned income.

  5. What about the earnings of a child? Corrective Action Alert! Even though earnings of a child may be excluded, policy requires that we verify all earnings. To prevent errors, also verify school attendance if you are excluding wages because a child with earnings claims to be in school.

  6. Earned income must be verified at each initial application and each review. • ( Reported changes in earned income will be addressed later )

  7. What about verification? • Pay stubs are the preferred form of verification for wages. Do not use a general statement from Employer such as 30 hours per week at $6 per hour unless it is a New Job or other unusual circumstance! Policy requires we verify actual pay. If you must use employer statement, DOCUMENT why!

  8. How much verification is needed: Section 3600 – See chart 3605-1 • If paid weekly, bi-weekly, or semi-monthly and income is stable, received on a regular, predictable basis-you need to verify at least one full month’s income (4 or 5 weeks) • If paid monthly - minimum verification is 2 months of income

  9. How much verification is needed: • If income fluctuates in amounts…you must obtain four consecutive weeks of verification: • for weekly pay: 4 consecutive pay periods • for biweekly pay: 2 consecutive pay periods • for semi-monthly pay: 2 consecutive pay periods • for monthly pay: 2 consecutive pay periods

  10. IMPORTANT THINGS TO REMEMBER WHEN LOOKING AT PAY STUBS • When determining which amount to use for your budget…..always use the GROSS pay!! • Look at PAY DATE (date pay is received) instead of the pay period ending date. • Look at and discuss the PAY RATE on each check. Has AR received an increase in pay or do they expect to receive an increase? • Look at and discuss HOURSshown on each check.What are AR’s normal working hours? • Are checks CONSECUTIVE? • Are checks for the most CURRENT pay dates?

  11. Remember to check pay stubs carefully!! Look for discrepancies! • Remember also that many employees receive tips, commissions, bonuses, vacation pay, etc Are these normal and representative of expected pay? • Watch out for ‘travel reimbursements’ , laundry or meal allowances, training pay, rate of pay changes, EITC, etc

  12. A word about tips: • The key to correctly budgeting tip income is: • 1. Careful discussion of the situation with the customer • 2. Detailed documentation • 3. Obtaining written statements as necessary.

  13. SO WHAT DO YOU DO WITH ALL OF THIS VERIFICATION ONCE YOU GET IT? • A BUDGET

  14. Steps in determining a budget: • STEP 1: We must establish a “representative pay”. This is a figure reflecting what the A/R will NORMALLY expect to receive during the average pay period.

  15. Steps in determining a budget: • STEP 2: This representative pay is then used in “prospective budgeting” to establish a figure that accurately portrays the A/R’s monthly income.

  16. Representative Pay • Determining “Representative Pay” is usually done by averaging pay stubs. • After obtaining the required number of stubs determine whether or not each is “normal” or “representative” of what the A/R will NORMALLY be paid. • If the customer states that one or more isnot normal, then do not use them to calculate Representative Pay.

  17. 3 Factors Used In Determining Representative Pay: • Available Verification: What verification does the AU provide? • Client’s Explanation: What does the client say about this verification? Does it reflect current work pattern? Is it expected to continue? Why are some checks more than others? • Worker Judgement: Does what the AU said compare favorably to the verification? Does it make sense? Document your decision Why did you use what you used as representative?

  18. Let’s look at an example: • Susan Smith provides pay stubs showing that she consistently works 25 hours per week x $5.50 per hour earning $137.50 weekly. She is paid weekly on Fridays. Each check provided is for $137.50 • Determine her Representative Pay per week.

  19. ANSWER: Since her income does not vary from week to week, her Representative Pay would be $137.50 weekly.

  20. Examples (continued) • Jean Jones works for Kroger. She applies on May 9 and provides the following stubs. She is paid weekly on Fridays. She states that the April 21st pay was not normal because she was out a few days with a sick child. • May 5 $350.00 • April 28 $365.00 • April 21 $210.00 • April 14 $362.00 • What is her representative pay?

  21. ANSWER: Do not use the April 21st check as it is not “normal”. Average the others shown. $350.00 + $365.00 + $362.00 = $1077.00 $1077.00  by 3 pays = $359.00 weekly

  22. Examples (continued): • What if a customer applies on April 7th and tells you that she has been working between 20-22 hours per week at $5.00 per hour but she states that her hours are going to be increased to 40 per week effective April 10? She provides the following stubs: • March 16 $111.00 • March 23 $115.50 • March 30 $121.00 • April 6 $ 45.00 • What would you use for representative pay?

  23. ANSWER: The pay stubs shown are not “representative” of what she expects to be earning from now on. You cannot use them to determine representative pay. Instead, multiply the new number of hours x salary rate. 40 hrs per wk x $5.00 per hr = $200.00 per wk $200.00 weekly is therepresentative paythat you should use.

  24. Prospective Budgeting • In Food Stamps, Prospective Budgeting is used to convert representative pay (either weekly, biweekly, semi-monthly) into monthly figures. The monthly figure is entered into the budget. • To do this, we use conversion factors: • If paid weekly, multiply the rep pay by 4.3333 • If paid biweekly, multiply the rep pay by 2.1666 • If paid semi-monthly, multiply the rep pay by 2

  25. Examples: • Mrs. Jackson applies on February 8 and provides the following pays from her job with Marriott. She is paid weekly on Wednesdays. She states that all the pays are normal. What is her monthly budgeted income? • January 15 $302.00 • January 22 $310.00 • January 29 $298.00 • February 5 $306.00

  26. ANSWER: • Step 1; Use all four pays to determine rep pay. • Total of the 4 pays = $1216.00 • $1216.00 ÷ by 4 pays = $304.00/wk • REP PAY = $304.00 per week • Step 2: Use prospective budgeting • $304.00 x 4.3333 = $1317.32 monthly • For FEB. and ONGOING (March) budget $1317.32 per month.

  27. Examples (continued) • Mr. Green applies for FS on May 3 and provides pay stubs from Target as follows. He states that he is paid bi-weekly on Mondays and that the stubs given are NORMAL. Determine his monthly income to be budgeted. • May 1 $555.00 • April 17 $567.00

  28. ANSWER: • Step 1: Use the two pays to determine rep pay. • Total of the 2 pays = $1122.00 • $1122.00 ÷ by 2 pays = $561.00 • REP PAY = $561.00 bi-weekly • Step 2: Use prospective budgeting/convert to a monthly amount. • $561.00 x 2.1666 = $1215.46 monthly • For May and ongoing (June) budget $1215.46 per month.

  29. Example (continued) • Mr. Silvers applies on Feb. 14. He works 27 hours per week for AMC Theatres. He is paid semi-monthlyon 15th & last day of month and provides the following stubs which he claims are normal. • Feb. 15th $270.00 • Jan. 31st $268.33

  30. Answer • Step 1: Determine representative pay • Total of pays $270.00 + $268.33 = $538.33 • $538.33 ÷ by 2 pays = $269.16 semi-mo Step 2: Determine monthly pay using conversion factor. • $269.16 X 2 = $538.33 monthly • For February and March budget $538.33 per month.

  31. EARNED INCOME • Sometimes it is necessary to calculate biweekly or semi-monthly income when all you have are weekly figures. • For biweekly pay you take the weekly number of hours times the hourly amount (this gives you a weekly income) multiply by 2 (to get a biweekly pay) then multiply by 2.1666. • For semi-monthly income you take the weekly number of hours times the hourly amount (this gives you a weekly income) multiply by 4.3333 to get a monthly amount) and then divide by 2 to get the amount paid at each pay period. NOTE: It is OK to use the representative monthly amount and enter the frequency as monthly on ERN2. It may be less confusing this way. The pay & frequency can be changed at the next review when actual pay stubs are available.

  32. EXAMPLE Weekly hours = 25 Rate of pay = $6.00 Determine Monthly Rate 25hrs x $6.00 = $150.00wk x 4.3333 = $649.99mo Determine Semi-Monthly Rate 25hrs x $6.00 = $150.00wk x 4.3333 = $649.99mo $649.99mo ÷ 2 = $324.99semi-mo {NOTE: You have to determine monthly income before you can convert to semi-mo income} Determine Bi-Weekly Rate Rate 25hrs x $6.00 = $150.00wk x 2 = $300.00bi-wkly $300.00bi-wkly x 2.1666 = $649.98mo

  33. Sometimes, however, it is necessary to look at the ACTUAL pay received. Section 3605 of the FS Manual states the following: “A full months income, if earned, is defined as receipt of or expected receipt of income at each regular pay date during a calendar month.” This is correct as long as the income is expected to be received at the same rate of pay, source, frequency, and/or hours for every pay date of the benefit month. • Remember the client who had been working between 20-22 hours per week and called to state that her hours were going to increase to 40 per week effective April 10? • We determined that her “new” rep pay would be 40 hours x $5.00 per hour = $200.00 per week

  34. She provided the following stubs and stated all but the April 6 check was representative until her hours increased effective with her April 10 pay check. She states the April 6 check is not rep because she was sick and missed 3 days of work: (application date April 7th) • Mar. 16 $111.00 (rep) • Mar. 23 $121.00 (rep) • Mar. 30 $115.50 (rep) • April 6 $ 45.00 ( not rep)

  35. Total wages AR will receive in April: • April 6 $ 45.00 (actual) Total Wages For • April 13 $200.00 (rep) April • April 20 $200.00 (rep) $645.00 • April 27 $200.00 (rep) Should we budget $645.00. YES! AR’s hours increased from part-time to full time (20-22 hours weekly to 40 hours weekly). Per policy do not convert. Use actual for dates that have already occurred AND representative for future dates in that month. We would determine the monthly pay for May and ongoing as follows: Use Rep Pay x weekly conversion factor $200.00 x 4.3333 = $866.66

  36. Let’s change the scenario and say that she reported that her employer has gone out of business and the April 6 check is the very last check she will receive from the company. The wages verified at application were: • Mar. 16 $111.00 (rep) • Mar. 23 $121.00 (rep) • Mar. 30 $115.50 (rep) • April 6 $ 45.00 (not rep) Since the only check AR received in April is the one received on April 6, we will use her actual income for April. WAGES BUDGETED FOR APRIL = $45.00

  37. EXAMPLES: • Mr. Garrett applies for FS on Sept. 27. He works for Taco Bell approx. 25 hours per week x $5.75 per hour and is paid weekly on Fridays. He states that his pay rate will increase to $6.25 per hour effective in his Sept 22nd check. He provides the following stubs which are all normal. • Sept 15 $141.50 • Sept 8 $143.25 • Sept 1 $145.00 • Aug 25 $139.75 • What should be budgeted for Sept. and on-going?

  38. Answer: • Step 1: Since his pay rate will be changing, the stubs given are no longer normal and will not be used to determine representative pay. Instead, use the new pay rate: • 25 hours x $6.25 = $156.25 per week $156.25 is the weekly Rep Pay • $156.25 is the rep weekly amount he will receive on Sept 22nd & Sept 29th.

  39. Answer continued: • For September: • Sept 1 $145.00 (actual) ACTUAL WAGES FOR • Sept 8 $143.25 (actual) SEPTEMBER • Sept 15 $141.50 (actual) $742.25 • Sept 22 $156.25 ( rep ) • Sept 29 $156.25 ( rep ) Should we budget $742.25. YES! AR’s rate of pay increased from $5.75 to $6.25 per hour Per policy do not convert. Use actual for dates that have already occurred AND representative for future dates in that month. We would determine the monthly pay for October and ongoing as follows: • $156.25 weekly x 4.3333 = $677.07 monthly

  40. New Employment • If a job is started and a full month’s income ISreceived, then you would use prospective budgeting to determine the monthly amount. • FOR EXAMPLE ……..

  41. EXAMPLE: • Morticia Adams applies for FS on Oct. 20 and is approved on Nov. 7. She has a new job and received her first check on Oct. 6 for a full weeks pay. • She earns $6.00 an hour for 30 hours per week and is paid weeklyon Fridays. She provides the following stubs which she claims are all normal. • Oct. 6 $181.25 • Oct. 13 $176.50 • Oct. 20 $185.00 • Oct. 27 $177.75

  42. Example continued: • Step 1: Determine rep pay • Total of pays= $720.50 ÷ by 4 pays = $180.13 weekly. • Step 2: Because a full month of income wasreceived for October, use prospective budgeting. • $180.13 weekly x 4.3333 = $780.56 monthly • This amount will also be prospectively budgeted for November and ongoing (December).

  43. Let’s look at Ms. Adams again but change the scenario. Instead of reporting that the October 6 check is for a full pay period, let’s say that she reports her 1st check will not be received until October 13th. She will not receive a pay check for every pay date. Actual wages for October will be budgeted as follows: Oct. 6 $ 0.00 Actual wages for Oct. 13 $176.50 October = $539.25 Oct. 20 $185.00 Oct. 27 $177.75 The new weekly rep pay for NOV and ongoing will be $176.50 + $185.00 + $177.75 = $539.25 ÷ 3 =$179.75 $179.75 X 4.3333 = $778.91

  44. New Employment • If a job is started during a month but a full month of income is NOT received, income will not be converted to a monthly figure using prospective budgeting. • You will use the actual number of pays to be received to determine the amount to be budgeted. • For example …..

  45. EXAMPLE: • Susan Sullivan applies for FS on July 6 and is approved on July 27. She has a new job and will receive her first paycheck on July 15. She will earn $5.25 per hour for 25 hours per week. What is the monthly income figure that should be budgeted? • Rep pay = 25 hours x $5.25 = $131.25 weekly • A full months income will not be received in July so we will not use prospective budgeting. We use rep pay for anticipated pay dates. • July 15 $131.25 (rep) TOTAL BUDGETED FOR JULY • July 22 $131.25 (rep) 131.25 X 3 = $393.75 • July 29 $131.25 (rep) • For August and ongoing, she will receive a full month’s pay, so we will budget prospectively: • $131.25 x 4.3333= $568.75 monthly

  46. Terminated Employment: • Likewise, if a job is terminated during a month and the last pay is not normal, income is not converted to a monthly figure ……. • In these cases, you use the actual amount earned for the month in the budget.

  47. EXAMPLE: • Richard Scott applies for FS on June 10. He is approved on June 29. He lost his job and he received his final pay on June 19th. He was paid bi-weekly on Mondays and provided the following stubs which he states are normal. • Because income is being terminated we do not use prospective budgeting! We do not use conversion factors to convert his income to a monthly amount. Use the actual number of checks received. • For June • Use the total of wages received: • $273.00 + $301.00= $574.00 • For July and ongoing: • Budget zero wages

  48. The bottom line on conversion is this….. • If the A/R receives a full month of income and the income is expected to continue, we convert the Representative Pay per pay period to a monthly figure. • If the A/R does NOT receive a full month’s income or the income is terminated during the month, we do NOT convert the Representative Pay per pay period to a monthly figure.

  49. What about after the case has been approved?

  50. When completing a FS review, verify:__all income __new income __terminated income • Between reviews: • When a client reports terminated earned income and the report will result in an increase in benefits, verify all information at the time of the report. (Verify last day worked as well as date and amount of final pay.) • When a client reports new earned income, add the income to the budget, and verify at the next review.

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