Do Foster Care Services Constitute SGA?

To determine whether a claimant is disabled, the first step for the adjudicator is to analyze whether the claimant has engaged in substantial gainful activity (SGA) since his or her onset date. Substantial gainful activity typically involves significant physical or mental activity done for pay or profit (20 CFR §404.1572). In many cases, parenting a child can involve substantial activity, though typically not for pay or profit. However, claimants enrolled as providers in a foster care system will typically receive payments to cover the needs and/or difficulty of care for their foster children. In years past, courts have adopted divided approaches as to whether foster care services constitute SGA. For example, in Damon v. Secretary of Health Education and Welfare, (2d Cir. 1977), the Court of Appeals held that foster care payments are not to be treated as support to the child but as property of the foster parents. In response, Social Security issued an Acquiescence Ruling effective 5/20/86, applying at all adjudicative levels in Connecticut, New York, and Vermont (AR 86-16(2)). However, in Masink v. Astrue (D. Minn. 2012), the District Court distinguished Minnesota Statutes from Vermont law and affirmed the ALJ's finding that the claimant's foster care services constituted SGA under the three part test for self-employment set forth in 20 CFR §404.1575(a)(2). The most recent policy adopted by Social Security, effective 8/19/14, is generally that foster care payments made on behalf of a foster child are not income to the provider, though amounts paid to the provider in excess of the foster care payment are still income (POMS § SI 00830.410C1b) (emphasis added). Careful tracking and documentation of your payments and spending can help distinguish foster care payments from other income.

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