The following are examples of whether to consider certain types of income as earned or unearned.
Example 1: Temporary Disability Insurance
- Are temporary disability insurance payments considered earned or unearned income?
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- Temporary disability insurance payments are considered earned income if the payment is paid directly by the employer AND the household remains employed.
- Temporary disability Insurance payments are considered unearned income if the payment is paid through a third party and/or the household member is no longer an employee of the company.
Example 2: Worker’s Compensation
- Are worker’s compensation payments considered earned or unearned income?
- Worker compensation payments are always considered unearned income.
Example 3: Leave Benefits
- Client is off work due to an extended illness and has exhausted all of her leave benefits; however, some of her co-workers have donated leave benefits to her. The leave pay is the only income she is receiving from the employer at this time. Is this considered earned or unearned income?
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- Leave benefits are only issued to those who are considered an employee of an organization. In this instance, it would not matter that the leave is being donated by others. This would be considered earned income.
Example 4: Severance Pay
- Is severance pay considered earned or unearned income?
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- Normally, with severance pay, the company no longer considers the person a current employee of the company as the employee has been terminated or released from the job. If the employer no longer considers the client to be an employee, then the severance pay is looked at as unearned income as long as it will be paid on a recurring basis for a certain period of time. If the severance pay is paid in a lump sum and not going to recur, then the payment is considered a non-recurring lump sum payment and a resource in the month received.
Example 5: Rental Income
- Is rental income considered earned or unearned income?
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- Rental income is considered earned income if the household member is actively managing the rental property an average of at least 20 hours per week.
- Rental income is considered unearned income if the household member is NOT actively managing the rental income an average of at least 20 hours per week.
- Whether the income is considered earned or unearned, the income is still considered self-employment, and the client is allowed to claim business expenses.
Example 6: Longevity
- How do we consider longevity payments?
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- Longevity payments are considered earned income.
- Longevity payments are considered bonus income and the same guidelines for bonus income are followed.
- If the longevity payment is given annually then the income is annualized by dividing by 12 months and is coded as a second employer in MICAL.
Example 7: FMLA
- How do we consider income received from the employer during unpaid leave connected with the Family and Medical Leave Act?
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- Any accumulated annual, sick, compensatory time, or shared leave income the employee chooses to receive is considered earned income.
- Income amount is the amount they are currently receiving. Not annualized.
- The income is removed from the case once the leave is exhausted.
Example 8: Panhandling
- Client reports that he receives income from panhandling. Is this considered earned or unearned income?
- Income from panhandling is treated as self-employment income.
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