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									Using Work Incentives to Fund
  Presenter: David Hammis, Senior
Partner Griffin - Hammis Associates,
& Micro-Enterprise

I.    Overview: Key SSI/SSDI, Work Incentives, VR, WIA,
      Housing, etc…. Opportunities, Issues, & Interactions
      with Self Employment Income and Small Business
      Start-Up Funding

II.   Example: Blending & understanding multi-level
      financial resources available through Social Systems,
      Families and Communities
& Micro-Enterprise

III.   Recommendations: Providing all prospective
       business owners with disabilities self employment
       funding options & choices
I. Overview
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
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
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
(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.

• 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.

• 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.

• 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
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
Other Self-Employment
Social System Startup

• 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
Other Self-Employment
Social System Startup

• 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
Other Self-Employment
Social System Startup

• SBA Guaranteed Loans, Bank Loans & Non-
  Bank Loans – follow typical business

• 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

• 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
Self-Employment & DD
Experiential Assumptions

• Families Taking the Lead – Highest Use

• Is Self-Employment a “Cop-Out” Concerns

• Training and Technical Assistance is Needed
II. Example
Nick’s Business

                   Video Analysis

                   $18,000 VR

                   $10,000 PASS

                   Medicaid Waiver
$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
$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
Without a PASS
Scenario 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)
Scenario 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
With a PASS
Scenario 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
With a PASS
Scenario 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
III. Recommendations

1. Directive to Disability Employment
   Service Providers:

     Provide Self Employment as an employment
     Participate in Training and T/A

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

3. National/State Grant Sponsored Self
   Employment Efforts

     Initial Demonstration & coordinated data &
     Followed by Systems Change Policies

4. Develop “Capital” (CASH) Loans
   Guaranteed Employment & Self
   Employment Loans

     VR Guarantee Principal Payments
     Similar to Guaranteed Student Loans
     Ticket to Work Long Term Payment

5. Develop a Professional National Trade

     To provide structure to professional
      development & credibility

6. Provide Blended Funding On-going
   Training and T/A

     Within Social Services
     Including SBDC, SCORE, Banks and Non-
      Banks, Corporations, Chambers, et al

7. Develop a Medicaid Waiver Task Force

     To review all existing & new waivers for self
      employment support authority, and
      concurrence with SSA policies

8. 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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