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Leveraging Work Incentives to Enhance Micro-Enterprise Funding for Individuals with Disabilities

This presentation by David Hammis, Senior Partner at Griffin-Hammis Associates, LLC, explores how various work incentives under SSI, SSDI, and other social support systems can be utilized to fund micro-enterprises. It discusses the integration of financial resources and provides insights into self-employment opportunities for individuals with disabilities. Topics include the importance of detailed business plans, the impact of PASS funding on cash flow, and strategies for leveraging community resources and social systems to empower aspiring business owners.

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Leveraging Work Incentives to Enhance Micro-Enterprise Funding for Individuals with Disabilities

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  1. Using Work Incentives to Fund Micro-Enterprises Presenter: David Hammis, Senior Partner Griffin - Hammis Associates, LLC

  2. Self-Employment& Micro-Enterprise • Overview: Key SSI/SSDI, Work Incentives, VR, WIA, Housing, etc…. Opportunities, Issues, & Interactions with Self Employment Income and Small Business Start-Up Funding • Example: Blending & understanding multi-level financial resources available through Social Systems, Families and Communities

  3. Self-Employment& Micro-Enterprise • Recommendations: Providing all prospective business owners with disabilities self employment funding options & choices

  4. I. Overview

  5. NESE for SSI & SSDI purposes: • (Gross Sales – IRS Deductible Business Expenses) x .9235 • Ex.: $20,000 Sales & $10,000 Expenses • ($20,000 - $10,000) = $10,000 • $10,000 x .9235 = $9,235 NESE

  6. Property Essential to Self Support (PESS): • SI 01130.501 Essential Property Excluded Regardless of Value or Rate of Return: (A) 2. Trade Or Business Property • Property essential to self-support used in a trade or business is excluded from resources regardless of value or rate of return effective May 1, 1990 • (C) 5. Liquid Resources Used In A Trade Or Business • Effective May 1, 1990, all liquid resources used in the operation of a trade or business are excluded as property essential to self-support

  7. Plan for Achieving Self-Support (PASS) • PASS Funding: • PASS directly infuses operating cash into a business, assuming PASS is paying for business operating or capital expenses • PASS does not influence Profit & Loss (P&L) • PASS significantly influences Cash Flow

  8. Related PASS POMS (Program Operations Manual System) covering small businesses: • SI 00870.006A.10. Self-Employment Goals • A PASS with a self-employment goal must include a detailed business plan. • The lack of a business plan should not delay an individual's submittal of a request for a PASS. • As with a VR Evaluation, the PASS could initially cover any costs associated with the person developing a business plan, a Business Plan Evaluation.

  9. Related PASS POMS • SI 00870.006B.4. Start-up Costs:For someone opening a business, the start-up costs include the expenses to start the business through the first 18 months, or longer if needed, of the business' operation. • The use of an item as a business expense in determining net earnings from self-employment does not preclude its use as a PASS expense during the calendar years (or fiscal years) that encompass the start-up period of a business.

  10. Related PASS POMS • SI 00870.006D.4. Self-Employment • A business will be given a minimum start-up period of 18 months unless the individual indicates that less time will be needed for the business to sustain its operations. • A request for a start-up period of a longer duration than 18 months must be justified.

  11. Related PASS POMS • SI 00870.025B.5.b. Business Start-up Costs • Treat all expenses, including ongoing costs, to be incurred during the first 18 months, or longer if warranted, of a PASS that involves starting a business as excludable start-up costs if the expenses meet the necessary and reasonable criteria.

  12. Related Work Incentives • Impairment Related Work Expenses, - same effect as wages employment – yet not as common in small business • Blind Work Expenses – powerful when applicable • All SSI Work Incentives apply (1619(b), Student Earned Income Exclusion, etc. • SSDI has two additional work incentives – UnPaid Help and Unincurred Business Expenses for self employment

  13. Other Self-Employment Social System Startup Resources • VR – Direct Purchases of Equipment and other possible expenses • VR Retains ownership of equipment typically – for some time frame that varies by state • VR purchases of deductible business expenses directly impacts P&L • VR funding tends to artificially inflate profits

  14. Other Self-Employment Social System Startup Resources • WIA – WIA Direct Purchases of Equipment and other possible expenses • WIA to date does not retain ownership of equipment typically – via innovation and/or customized employment grants • WIA purchases of deductible business expenses directly impact P&L • WIA funding often artificially inflates profits

  15. Other Self-Employment Social System Startup Resources • SBA Guaranteed Loans, Bank Loans & Non-Bank Loans – follow typical business interactions • Medicaid funding – has been used to fund business expenses, and again, similar to VR, artificially inflates profits • Other grants, Native American, Developmental Disability Planning Council, etc… artificially inflate profits

  16. Self-EmploymentResearch • High Success Rate: 80 – 90%, Iowa and Rural Institute • High preference rate when presented as an informed choice (20 to 30%) • Very Limited Choice currently in Developmental Disability Employment Services – perhaps less than 1% (no clear data), VR at roughly 4 to 5% • Wide variance in VR Policies nationally

  17. Self-Employment & DDExperiential Assumptions • Families Taking the Lead – Highest Use • Is Self-Employment a “Cop-Out” Concerns • Training and Technical Assistance is Needed

  18. II. Example

  19. Nick’s Business • Video Analysis • $18,000 VR • $10,000 PASS • Medicaid Waiver

  20. $564 per month SSI Monthly Check & Medicaid • Issues: After High School – no employment for 2 years • VR initial resistance to self employment • Medicaid Supported Living Waiver, fears of losing SSI and Medicaid • Low Assets (Cash below $2000), no Community Rehab Provider would consider Self Employment

  21. $564 per month SSI Monthly Check & Medicaid • Solution: Self Employment Family Developed Business Plan – VR & SSA funded • Unlimited Cash and Property Assets • $64,000 Net Profits and Still Medicaid Eligible (1619(b) Policies via Individualized Medicaid Threshold

  22. Without a PASSScenario 2004 Totals Gross Sales: $32,703 - Business Expenses: $10,742 Net Profit: $21,961 Starting Cash $ 255 - Capital Expenses - $ 3,300 + Depreciation Adjustment: +$ 1,950 Owner’s Draw: - $21,961 Ending Cash: - ($1,095)

  23. WITH a PASSScenario 2004 Totals Gross Sales: $32,703 - Business Expenses: -$10,742 Net Profit: $21,961 Starting Cash $ 2,121 - Capital Expenses -$3,300 + Depreciation Adjustment: +$1,950 + PASS +$8,828 - Owner’s Draw: -$21,961 Ending Cash: +$ 9,599

  24. With a PASSScenario 2004 • Highlights: • SSI Only and no other income prior to PASS and Business NESE Projections • Higher Starting Cash in 2004 – due to PASS effects in 1st 7 Months of Startup in 2003 • Higher Ending Cash – Directly due to PASS – without a PASS = Negative $1,095 vs. with a PASS = Positive $9,599

  25. With a PASSScenario 2004 • Highlights: • Both scenarios (with or without a PASS) assume that the owner is paid all the net earnings of the business as an owner’s draw • The IRS, SSI, Medicaid, Section 8, & Food Stamps all use the net earnings of the business to calculate taxes owed to the IRS, to reduce SSI, to increase rent and to decrease food stamps – even if not paid to the owner

  26. III. Recommendations

  27. Recommendations • Directive to Disability Employment Service Providers: • Provide Self Employment as an employment option • Participate in Training and T/A

  28. Recommendations • Coordinate with SSA BPAO Funded local outreach staff, and VR & Medicaid, Food Stamps, Section 8 Housing

  29. Recommendations • National/State Grant Sponsored Self Employment Efforts • Initial Demonstration & coordinated data & research • Followed by Systems Change Policies

  30. Recommendations • Develop “Capital” (CASH) LoansGuaranteed Employment & Self Employment Loans • VR Guarantee Principal Payments • Similar to Guaranteed Student Loans • Ticket to Work Long Term Payment Approach

  31. Recommendations • Develop a Professional National Trade Organization • To provide structure to professional development & credibility

  32. Recommendations • Provide Blended Funding On-going Training and T/A • Within Social Services • Including SBDC, SCORE, Banks and Non-Banks, Corporations, Chambers, et al

  33. Recommendations • Develop a Medicaid Waiver Task Force • To review all existing & new waivers for self employment support authority, and concurrence with SSA policies

  34. Recommendations • Create Baseline data quickly and then clear goals to increase less than 1% usage suspected by targeted increases to research verified 20 to 30% desired • Within Existing Employment Services

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