Slide 1 What is Plan for Achieving Self-Support? Molly Sullivan, Associate Griffin-Hammis Associates Interviewer: Today we are fortunate to have with us Molly Sullivan. She is going to be explaining what a PASS is. Slide 2 What is a PASS? • Plan for Achieving Self-Support (PASS) • Social Security Work Incentive • A way to support people who are interested in working and becoming self-sufficient • Allows a person to set aside money while still being eligible to receive benefits Interviewer: Molly can you tell us what a PASS is? Molly: I’d be happy to share with you what a PASS is. PASS is actually an acronym. It stands for Plan for Achieving Self-Support. It is a Social Security Work Incentive, which means essentially it is a program that Social Security created. Actually, when Social Security created Supplemental Security Income (SSI) back in 1974, it created this special work rule called Plan for Achieving Self-Support as a way to support people who are interested in working and becoming self-sufficient. The idea behind a PASS is that it allows a person to set aside money that they have, money other than Supplemental Security Income (SSI). By setting that money aside, they then get to receive more SSI, or they become eligible for Supplemental Security Income. Slide 3 PASS & Starting a Business: Where might I look for the money to set aside into a PASS plan? Example Person eligible for SSI and SSDI $420/month SSDI + $237/month SSI (reduced amount) = $657/month (benefits total) Interviewer: Molly, let’s say that I am an individual who is on SSI, and I would like to start my own business. I have heard that a friend of mine has a PASS plan, so I know that is possible. Where might I look for the money to set aside into a PASS plan? What money could I use if I cannot use my SSI to put into the bank? Molly: That’s a great question. I think the best way for me to answer that is to give you an example. Let’s say that you are not only eligible for SSI, but you are also eligible for Social Security Disability Insurance, sometimes referred to as SSDI or SSD. You are eligible for $420 a month of SSDI. Because the SSI system is financial needs based, the amount of SSI you get will depend on how much SSDI you receive. If you receive $420 of SSDI each month, that would reduce your SSI payment to $237 a month. All together, in this example, you end up having $657 total in your pocket. Slide 4 Continued • Can set aside $400/month from SSDI check $420 SSDI - $400 (PASS set aside in the bank) = $20 • New Monthly Benefits Income $637 (full SSI) + $20 (SSDI) = $657 (benefits total) • $657/month for living expenses + $400/month set aside If you are considering self-employment, you may be wondering what kind of tools can help pay for some of the startup expenses and work related expenses that you will have. You may consider using a PASS. In this example, you could take $400 of the $420 that you receive from SSDI and set it aside in a separate bank account. You will be able to use that $400 to pay for expenses related to your work goal, if it is all approved in the PASS. Once you set aside the $400, you now only have $20 in your pocket from the SSDI check where you used to have $420 to pay for your living expenses. The SSI system determines that you have set aside $400 to pay for your work goal. They want to support that because it is helping you reach economic self-sufficiency. Social Security is not going to count the $400 set aside in the bank. They also will not count the first $20 of your SSDI money. This means that in their eyes you no longer have any money to live on, so instead of giving you $237 in your SSI check, you will be eligible for the full $637 SSI check each month. Now the total in your pocket is $657 from the $20 of SSDI and the $637 of SSI. So that can be used to pay for your food, your shelter, and basic living needs. You also now have $400 a month in your bank account to help pay for startup expenses. Slide 5 What do I need to do to get started with PASS? • Application form SSA Form 545 (www.ssa.gov) suggested but not required Submitted to your regional PASS specialist • For self-employment Include a business plan Work goal + business details Reviewed by an expert (i.e.- SBDC counselor, microenterprise counselor, or banker) Interviewer: Let’s say that this hypothetical person we are talking about is me. Can I just go and put that money aside in the bank and Social Security just automatically says that I am eligible for PASS? How does that actually work? What do I need to do to get this started? Molly: There is an application form that Social Security has for requesting a PASS. They don’t require that you use the application form, but it is helpful if you do. It is form SSA 545. You can get that form on Social Security’s website at www.ssa.gov. There are some important questions that have to be filled out and answered. That information then gets submitted to a specific person at Social Security. At Social Security, years ago they had people submit their PASS applications to the local offices. Folks at the local offices were charged with making the decision about a PASS. In the 1990s, Social Security realized that that was not the best process. They really needed people who were designated to be the PASS specialists. All across the country there are regions. No matter what state you are in, you have a region that your PASS specialist is assigned to. There is going to be at least one person at the regional office that is going to need to get your PASS application. Then they will make a decision on it. When you decide to use a PASS to pursue self-employment, the PASS needs to have a business plan attached to it. That is an important thing. For the PASS specialists at Social Security to make a decision about your PASS application, they need to have information about your work goal. When your work goal is self-employment, they need to understand and have some information about the business itself. It is a best practice to have your business plan reviewed by someone who is an expert in business planning, whether that is someone from the Small Business Development Center (SBDC) or someone from a Microenterprise Center. Even a banker is someone who looks at business plans and financials and can take a look at the business that you have identified. The banker can see if there is anything that is missing or any information that needs to be added to your business plan. Slide 6 Continued • PASS application should include (ideally): SSA Form 545 Business plan • The process Submit application Review by PASS specialist PASS specialist sends application status letter Can appeal if not approved When you request a PASS you need to provide some information to Social Security, ideally it is the form 545 and also a business plan. Once Social Security gets that, the PASS specialists will review it. They will send you a letter. The letter will either tell you, your PASS has been approved, or it will tell you there is more information that they need from you, and there will be a list of things that you need. If they decide not to approve the PASS, they would tell you in the letter. Then you would have the opportunity to appeal that decision. Slide 7 Where can I go to get help writing my PASS? • PASS specialist • Work Incentive Planning and Assistance (WIPA) Projects Community Work Incentive Coordinators Can assist with understanding and filling out the application • Ask the PASS specialist for a list of local resources and supports Interviewer: Would the PASS specialist be able to help me write my PASS plan? Where can I go to get help? Molly: The PASS specialist at Social Security can definitely give you some assistance in understanding what needs to be done to fill out the information on the PASS application. There are some other resources that you may want to look to. It depends on how much support you are going to want to have in filling out the PASS application. One place you may want to look for some support is in every state there are what are called Work Incentive Planning and Assistance (WIPA) Projects. Through those projects there are experts on Work Incentives who are called Community Work Incentive Coordinators. You can contact a Community Work Incentive Coordinator in your area. You can explain to them what your goal is and that you are interested in using the PASS. You can ask for their help and assistance in understanding what needs to be filled out on the PASS application as well as getting some assistance filling out the PASS application. You can also ask the PASS specialist at Social Security if they have a list of people in your area that can provide support in writing PASS plans. Some PASS Cadres have a list of resources in different parts of their region that you can also ask about. Slide 8 Have we missed anything you think people may be thinking about? • PASS cannot go on indefinitely • List some milestones and measurements on the application • PASS must ending date • For self-employment The SSA expects a minimum of 18 months to become stable Can be shorter or greater- must be justified in writing Interviewer: I think I have a pretty good idea of who can use a PASS. Have we missed any explanation around anything that you think people might have or be thinking about? Molly: I think it is important for people to understand that when you pursue a PASS, it cannot go on indefinitely. When you fill out the PASS application, part three asks when you want your PASS to begin (month and year) and when you want your PASS to end (month and year). They want you to list out some of the milestones, some measurements for you and the PASS specialist to know things are moving forward as you go along. A PASS cannot go on indefinitely. It has to have an end date. When it comes to a PASS for self-employment specifically, it says in the PASS policies that the expectation is that the PASS will be for a minimum of 18 months. It can be less or it can be more. It just needs to be justified why the time limit is any different. But, the expectation inherent in the policy is that when a person is pursuing self- employment, it is going to take at least 18 months for the business to get up and going and the person to be stable. Slide 9 Continued • End date is based on: Reaching the earning goal paying for all the expenses needed to reach that earning goal • In the rules there is no time limit Based on the person and his/her needs • For self-employment Business plan needs to include financial projections both with PASS and after it ends Generally, when the PASS ends, the end date of the PASS would be tied to the month and year where the person has done both things. A person has reached their earning goal, and they have been able to finish paying for all the expenses they needed to reach that earning goal. When both of those factors have been reached, that is the natural place where a PASS comes to an end. Years ago, there was a time limit to PASS. Those rules changed in the mid 1990s. There is still some misunderstanding out there a little bit about that. I think it is important for people to know in the rules there is not any limit in the length of time. Instead, the time limit is meant to be based on how much time the person needs to reach their work goal. Another thing that I think is important to mention about a PASS that is for self-employment is that in addition to having a business plan, a part of that business plan needs to include some financial projections. It is really important that the financial projections be fairly comprehensive for a couple of reasons. It is important that the financial projections identify the profit that you expect to have each year while the PASS is active. Then you want to have the financial projection for a year after the PASS comes to an end. You want to be able to demonstrate to the PASS specialist how the business is going to do once the PASS plan is all over. They can see that the business has a plan for being stable and that the expectation is that you will have profit to become economically self-sufficient. That is an important part of PASS as well. Slide 10 What can PASS pay for? • Any expenses related to your work goal • Examples Inventory Vehicles Support Impairment related work expenses • Cannot pay for debts that were incurred before a PASS began Interviewer: First, I would like to know what a PASS can pay for, because you said expenses related to startup. Then, I would like to know if there are any limits as to how much money I might be able to set aside in my PASS. What can it pay for? And, can I put as much money as I want to in a PASS related to starting up a business? Molly: A PASS essentially can pay for any expenses related to your work goal. For example, for you to reach your work goal, you need an initial $5000 worth of inventory. Without that inventory you would not be able to reach your work goal. That is an example of an expense that is needed to help you reach your work goal. That can be considered an expense that PASS could potentially be approved for. It can be a variety of things. If for the sake of operating your business, you need a vehicle, a PASS could help with that. If for the sake of operating your business, you have some expenses that are associated with helping you that provide you some support in getting up and going. For example, if I experience a cognitive impairment, it is important for me to have a business coach the first couple of months to help get things going and help me get that stuff settled so that all of the systems are in place. I have the business coach helping me learn those things that a PASS can help pay for. That is an example of a PASS paying for an impairment related work expense. PASS can pay for that as well. PASS can pay for pretty much anything that’s work related. It cannot pay for debts that were incurred before a PASS began. That is an important thing to keep in mind. Slide 11 Are there any limits as to how much money I can set aside? • In a PASS account you slowly build up money over a series of months • Amount is based on: How much you can set aside monthly How long your PASS plan lasts There is no maximum limit • Not a lump sum but an accumulation of funds • Can access monthly or after a number of months Molly: How much money can you get from a PASS? That’s a really important question to ask. This is actually a question that a lot of people have a hard time wrapping their brains around. I am going to bring you back to that example that I gave you in the beginning, which is the example of the person who has $420 of SSDI. They set aside $400 a month of that SSDI. When that happens, let’s say that my PASS is going to last for 20 months. If my PASS is going to last for 20 months, then I am going to set aside $400 each month into my PASS, right? In return each month, I am going to get the extra SSI to live on. In that PASS account, I am slowly building up some money. I could over the course of 20 months, 20 times $400 a month is $8000, over the length of my PASS, I end up accessing $8000. The amount of money that you can have in a PASS is based on two important things: 1) how much can you set aside each month and 2) how long is your PASS. It varies from person to person. There is not any limit on a maximum amount. It has to do with how long a person’s PASS is, and how much they can set aside each month. An important thing for people to understand is the way PASS works. The majority of the time the way PASS works is that you end up with a little bit of money each month. Even though I have identified that over 20 months, I am going to have $8000, that does not mean that I will have all the $8000 in the first month. It means that I have $400 coming in each month. Depending on what my expenses are, I may end up, if I have a need to use all $400 each month, then I will use all $400 each month. If I do not need to access that money for six months, I could wait several months and then use some of it. There is an important cash flow planning piece to PASS. The neat thing about combining PASS and business planning is that with the business plan, you need to create a cash flow for your business anyway. There is a real natural way to build PASS into planning for your business using the business cash flow statement. Slide 12 Do I need to spend all of that money in the PASS plan before it ends? • YES • Money set aside is specifically for expenses that are approved by the PASS specialist • PASS is approved for a specific work goal Can request a change in the PASS for anything but the work goal Interviewer: If I have been setting aside money in the PASS and my PASS comes to an end, do I need to spend all of that money before the time that I say my PASS is going to end? Molly: Yes. The money that you are setting aside is specifically for you to use for expenses that are approved by the Social Security PASS specialist. If you end up at the end of your PASS, and let’s say it is month 19. You have $2000 sitting in your PASS account, and you do not have any other expenses that you need. When that PASS comes to an end, they are going to want you to give back the $2000. It is important to plan for whether there may be some additional things that you need help paying for. I think it is important to mention here that when you get a PASS approved, you get a letter and the letter says, "Congratulations, your Plan for Achieving Self-Support has been approved!” It has been approved for this specific work goal. Let's say it’s been approved for Molly’s Coffee Shop. That’s my work goal. I can request changes to my PASS as needed. The one thing I cannot ask to have changed in my PASS is my work goal. That has to remain the same for the life of the PASS. If in six months, I decide I don’t want to do Molly’s Coffee Shop anymore, I cannot amend my PASS to go become a graphic artist. I would have to end my PASS and start a new one. Slide 13 Continued • Items that can change: Allocation of money set aside Length of PASS Put changes in writing and submit to the PASS specialist There are some things you can change in a PASS. For example, my PASS gets approved for Molly’s Coffee Shop. In the past I have asked to set aside $400 a month over 20 months, which is a total of $8000. I have asked to use $4000 for startup equipment and $4000 for operating expenses like some inventory - cups, coffee beans, and sugar. I have these two items that have been approved: $4000 for equipment and $4000 for operating expenses. Let’s say, ten months into it my business is going along just great, but I find that I have not needed the full $4000 for operating expenses. Even though I have used $4000 on equipment already, I need to buy another machine that is going to cost about $1000. I have only been approved to spend $4000 on equipment. I cannot spend any more of my money of my PASS on equipment right now. But, I can contact my PASS specialist and let them know that things are going great here, but what I really need to do is revise my PASS. I want to have $3000 approved for operating expenses and $5000 approved for equipment so that I could use an extra $1000 to pay for equipment. I am asking amend the PASS. It is simply a matter of putting it in writing and providing to the PASS specialist what I need to have changed in my PASS. Another thing that can be changed in my PASS is the length of the PASS. If my business does so well that I do not need it to go as long as I planned, it can end early. Or, if I had not expected some bumps in the road, and it is going to need to go an extra 6 months or 12 months, then I would simply request an extension of the PASS. Slide 14 What money could I set aside in a PASS to start a business? • Earned income SSA only looks at a portion of earned income wages and adjusts SSI check accordingly You can set aside that income in a PASS You can continue to receive an SSI benefit • Resources Limits- $2000 (individual), $3000 (couple) • Unearned income SSDI, adoption subsidy, and veterans benefits Interviewer: We have only used one example of money that can be set aside in the PASS and that is SSDI. Let’s say I am a person who does not receive SSDI. What money could I set aside in a PASS to start a business? Molly: There has to be some money other than SSI that you receive that is causing your SSI cash check to go down. For example, maybe you are working a few hours a week and you have some earned income. It is a wage job and you have some gross wages. You have $285 of gross wages coming in each month. You have no other money, just $285 of gross wages. The way the SSI system works, they are not going to look at, in this example, the first $85 of my earning. This brings it down to $200. Then they only count half of that. That means that they look at $100 of my earnings so my SSI check will go down by $100. If I took and set aside $100 of my wages each month in my PASS account, then they would not reduce my SSI check. They would let me keep the full SSI check. I get to keep the full amount of SSI, and I have the $100 in my PASS account. Wages are something you can set aside in a PASS. You could also set aside resources in a PASS. Just to clarify, with SSI they have a resource limit, if you are an individual, $2000, if you are a couple, $3000. For example, I had $5000 that I had saved over time sitting in an account. It was preventing me from being eligible for SSI. If I were to take that $5000 and decided to use it for my business, then I could deposit that into my PASS and that $5000 then is not counted anymore. It is excluded, which means that I could become eligible for SSI potentially at that point. You could set aside earned income. You could set aside unearned income such as SSDI, adoption subsidy, veterans' benefits, or resources. You can set aside earned income, unearned income, and resources in a PASS. Then that could allow you to receive more SSI. Slide 15 Who would I go see to talk about setting aside that money into an account? • Get the PASS approved first • The approval letter will designate a beginning time and amount for setting money aside • Based on the PASS application Interviewer: Let’s say that I did have some money that exceeded the $2000 limit. For example, I have $5000, and I am not getting SSI. Who would I go to? Do I go to a benefits specialist to talk about setting aside that money into an account? How would I initiate that process? Molly: In terms of setting aside the money in the PASS, whether it is a chunk of money in a savings account resource or it is your SSDI money, you are not going to want to set anything aside until the PASS gets approved. Let me just talk you through the steps. You work with someone, a Community Work Incentive Coordinator or have a conversation with your PASS specialist. You fill out the PASS application form, and you submit it. You still do not do anything with your money at this point. You keep everything the same, and you wait to hear back. You get the letter back and it is April 17th that you get the letter. The letter says, “Congratulations, your Plan for Achieving Self-Support has been approved! It is approved to be effective May 1st.” They will spell out specifically in the letter generally what you are going to set aside. It is based on whatever you put in your PASS application. If in my PASS application, I said I would set aside $5000 of my savings or if I said I would set aside $400 of my SSDI or $100 of my earnings, it would spell that out in the letter. It will say, “We expect that you will start doing this May 1st.”The next paragraph will say that you will start receiving the full SSI check, however much SSI calculates out for you to receive. Slide 16 Continued • After approval you should: Set up a separate bank account for PASS funds Begin setting aside the money Ask for help if separating the money is confusing • PASS specialists and Community Work Incentive Coordinators are happy to help The letter will tell you when to begin setting aside the money. You do not want to do anything until you receive the notice that a Plan for Achieving Self-Support has been approved. Once it is approved, then there is some action you need to take. That action would involve setting up a separate bank account if you do not already have one set up for the PASS. Then begin to set aside the money. It can be kind of confusing; figuring out the system of what money goes where at first. It is important that you do ask for help if you are not sure which money you set aside in the PASS account and which you put in your personal account. You always want to feel comfortable contacting your PASS specialist to ask those questions. It is a really good idea to get in touch with your local Community Work Incentive Coordinator to assist with that as well. For some people, they just need a month, or two, or three with someone talking it through with them about where the money goes and then they feel comfortable doing it. Everybody is a little different in the level of support they need in getting a game plan together. Slide 17 Can you give us an example? • Joe Steffy SSDI cash benefit Set aside to pay for start-up costs Other resources: Developmental Disabilities Council grant Vocational Rehabilitation services Interviewer: We have been talking hypothetically so far. It would be great if you could give us an example of a real person who has used a PASS plan to start a business. Molly: I can give you an example of a couple of people who have used PASS to start their own business. There are actually a couple of business owners, noted on the entrepreneurial leadership network who have used PASS to start up their business. I will share a couple of examples there. Joe Steffy is an example of somebody who used a Plan for Achieving Self-Support to start his business. He had a small amount of Social Security Disability Insurance. He was actually receiving a cash benefit based on his father’s work record. He set aside those funds into a PASS. He was able to use those funds to pay for the initial startup operating expenses. He utilized some other resources. For example, he utilized a DD Council grant in his state, to pay for some equipment. He utilized some VR services as well. What the PASS paid for that was really helpful is that it paid for some of the basic expenses of the business over the course of the first twelve months, which is a pretty unique thing to find in terms of resources. A lot of the financial resource programs that are out there are not necessarily going to be available for that length of time. For example, Vocational Rehabilitation can help someone who wants to pursue self-employment. They are not necessarily going to be involved for the 18 months as the business starts. Their role is to help somebody get up and going and then the person takes over and is on their own a bit more. Slide 18 Continued • PASS is unique • PASS could potentially pay for all expenses for the first 18 months • All sales and earnings could accumulate and be a cushion for after PASS ends • PASS is also used for equipment Example Engraver- bought equipment for working PASS is unique in that there is the expectation, as I mentioned earlier in the PASS rules, that it is going to take 18 months to get the business started. That means PASS can essentially pay for rent, inventory, and the costs of your phone and Internet for the first 18 months. If PASS is paying for all of those expenses, then there is a pretty neat thing that happens. What happens is you are going along, and you are making sales. You are bringing money into your business account with your sales. Your PASS money is paying for your expenses, which means that you don’t have to use your sales at first to pay for your expenses. Your sales can just sit in your business account and get bigger, a little bigger, and a little bigger. As a result, what ends up happening is that when a PASS comes to an end, ideally what you have done is created a little cushion, a little financial cushion in your business account. For a lot of businesses, you have to be able to make sure that you have enough money in your bank account to pay for the basic expenses of your business when the time hits where sales are low. If you are running too thin on cash in your business, you can run out of funds. If you cannot pay your bills, you cannot run your business. The neat thing about PASS is that it can help cover the initial operating expenses for a period of time. You can just let your sales build up in your business, so you have a cushion there when your business comes to an end. That’s how Joe used the Social Security Plan for Achieving Self-Support. Other people have used the Plan for Achieving Self-Support to purchase things like equipment. I worked with a woman who used a Plan for Achieving Self-Support to purchase an engraver, the item that would actually allow her to do the work. It does not necessarily have to be operating expenses. It could also be something like equipment. A part of what will define what PASS can pay for will in part is based on how much money you have available for the PASS at that point in time. Slide 19 Do you have any advice for people who are interested in using a PASS? • Contact a Community Work Incentive Coordinator during the discovery stage Ask about the feasibility of a PASS If feasible, continue to work with the coordinator on PASS details • Community Work Incentive Coordinators need: General information and details about your plans As you go along the process and you get more details about your business, they can give you more details about how PASS can work. Interviewer: I think you may have answered all my questions at this point. I am curious if you have any advice for people who are interested in using a PASS or any closing thoughts? Molly: I think that it is important when you are in the very beginning stages of thinking about self-employment when you are in that discovery or exploration stage get yourself connected with a Community Work Incentive Coordinator. Ask them based on the kind of income I have, is it even possible financially? Would it work for me to use a PASS? You have that sitting in the back of your head. As you move forward in your business, you have an idea that might help. As your business planning progresses, you want to bring the Community Work Incentive Coordinator back in to help revisit whether PASS makes sense once you have more details. I would just caution you that for Community Work Incentive Coordinators to figure out if a PASS is going to make sense for you, they are going to need some details to give you details. When you first start out, you are going to be in a position to give them general information such as: what you think you are going to do; what potentially you want PASS to pay for; and what your benefits are. In return, they can give you general information. But as your business planning process progresses, you are going to have more details about your business. You could bring those details back and say, it looks like I am going to have $3000 of profit in the first year, $12,000 in the second year, and $24,000 in the third year. Will you help me figure out what this means to my benefits? Help me understand, how much money I should set aside with the PASS? As you can see, these are all the expenses I need help paying for to help me figure out which one I can get PASS to pay for. You need those details to give to them so that they can give you details back. It is a good idea at the beginning to get some general information. You want to keep in mind that it is not a one-time discussion that you want to have with that Community Work Incentive Coordinator. As you go along the process and you get more details about your business, they can give you more details about how PASS can work.