Direct answer
SGA (substantial gainful activity) counts earned weeks; severance structure changes the test: lump sums stack, monthly continuation reads as wages, and retro payments hit the filing window. Report precisely (see the SSDI guide ). The comp archive is in the records guide , offsets in the offset guide , and the tax lines in the tax guide . The audit traps are in the audit guide .
Updated November 9, 2026 · Reviewed against US FTC — competition policy
SGA (substantial gainful activity) counts earned weeks; severance structure changes the test: lump sums stack, monthly continuation reads as wages, and retro payments hit the filing window. Report precisely (see the SSDI guide).
The Report Lines
- Lump sums: one-time income in the payment month; SGA spikes are judged on the month's total (see the structure guide).
- Monthly continuation: severance as wages each month, plus unemployment suspension in many states (see the claim guide and the weekly certifications guide).
- Retro pay: back pay settlements hit the SGA test in the filing year; the wage lines follow the FLSA test in the workweek guide.
The comp archive is in the records guide, offsets in the offset guide, and the tax lines in the tax guide. The audit traps are in the audit guide.
Put the rule into action
Write the letter with the free Severance Package Negotiation Letter generator. The state pages carry the local payout and notice windows, and the application tracker keeps the follow-up date in writing.
What The Agency Counts, And What It Does Not
Direct answer: substantial gainful activity is measured on work you actually do and the earnings attributed to it, so a severance payment is not automatically an SGA finding. It becomes a problem when the paperwork makes a payment week look like a work week. Your job is to describe each week accurately and to keep the description consistent across every filing you send.
- SGA is an earnings threshold that changes each year. Social Security publishes the current monthly amount; do not quote an old figure from a forum or a previous decision letter. Get the number from SSA before you argue about a month.
- Salary continuation reads like wages. Monthly severance reported on a W-2 with payroll tax looks like employment income in that month. That is the single most common reason a severance period gets misread.
- A lump sum is one event. It arrives in one month and does not repeat. A month with an unusually large amount still needs an explanation in your file: say what the payment is, which period it covers, and that no work was performed.
- Back pay and retroactive settlements are different again. A settlement for weeks you did not work should be described as back pay, with the period it replaces named. See the back pay entry for why the label drives both tax and reporting.
- Unemployment weeks are separate. Filing for benefits and certifying weeks creates its own record that SSA and the state agency can both read; the weekly wording matters, per the weekly certification entry.
The Week-By-Week Reporting Workflow
Build one log and reuse it everywhere. Agencies do not need your opinion about the job; they need dates, amounts, and sources that match.
- Mark the last day worked. That date ends the earnings record and starts every benefit clock that follows.
- List each payment with its date, amount, payer, and the period it covers. Note whether it arrived as a lump sum or as monthly continuation.
- List each week as one of four labels: unemployed and available, employed and working, working part-time, or disabled and not working. Use the same label in the state certification and in anything you send SSA.
- Keep the payment schedule from the severance agreement attached to the log. If the agency asks about a month, you answer with a document instead of a memory.
- Send corrections in writing the same week you notice a mismatch. A corrected certification costs you one letter; an uncorrected pattern can cost benefits and create a repayment notice.
Edge Cases That Trigger The Wrong Determination
Most bad SGA findings come from ordinary paperwork, not from real work. Watch these five situations.
- A consulting line inside the severance agreement. Post-signing services, transition work, or a priced non-compete obligation can be reported as wages. If you do nothing, the month looks like employment.
- Gig or contract income reported on a 1099. Self-employment income is evaluated on hours and duties as well as dollars, so a small payout can still be an activity finding. See the SGA entry.
- Rehire by the same employer during the payout. Some agreements stop payments on rehire; others keep paying while you work. Both the payer and the agency need the same story.
- Retroactive settlement money arriving months later. Report it as the period it replaces, not as current earnings, and say whether any of it was attorney fees paid directly.
- Work-incentive rules being assumed instead of checked. SSA's own programs for returning to work, including trial work and expedited reinstatement, apply to actual work. Confirm the current rules with SSA rather than relying on advice from a previous year.
Where your state's severance rule was not re-verified in this build, the state page shows it as not verified. Ask the workforce agency in writing and keep the reply in the same folder as the log; the Washington unemployment page is an example of an allocation rule that is stated plainly.
| Week Type | How It Reads | What To Record |
|---|
| Monthly severance continuation | Looks like wages on a W-2 | Payer, amount, period covered, no work performed |
|---|
| Lump sum severance | One-time income in one month | Agreement schedule and the weeks it replaces |
|---|
| Back pay settlement | Retroactive wages for past weeks | The period the settlement replaces |
|---|
| Gig or contract income | Self-employment activity | Hours, duties, and gross receipts |
|---|
| Unemployed and available | Claim weeks, not earnings | Same wording as your first claim statement |
|---|
These figures are arithmetic, not opinion: compute them with the Severance Package Calculator calculator, along with the Severance Pay definition and the severance layoff math guide hub. Those sources state the rule in full; this page only points at them.
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Frequently Asked Questions
- Does severance count as substantial gainful activity?
- Not automatically. SGA is about work you perform and the earnings tied to it. Salary continuation reported as wages can make a month look like employment, so describe the payment, the period it covers, and the fact that no work was performed in every filing.
- How should I report a lump sum settlement month?
- Report the date, amount, payer, and the period the payment replaces, and state plainly that you did not work that month. Attach the payment schedule from the agreement so the record matches what the payer reported to the government.
- Will filing unemployment hurt my disability claim?
- Filing is not itself work, but the certifications create a written record about availability and activity. Keep the wording identical to your disability filings, report every week accurately, and correct any mismatch in writing the same week.
- Where do I find the current SGA dollar amount?
- From Social Security, which adjusts the figure annually. Do not quote a number from an old decision letter or a forum post. Get the current amount before you argue about a specific month, and keep the date you checked it in your file.
Settlement weeks, garden-leave weeks, and stand-down pay all report as income lines, and the SGA level plus the offset model are decided by the agency, not by the settlement paper. Confirm the offset treatment with the state agency named on the state rule pages before you label the weeks, and report each week in writing in the unemployment claim statement generator so the certification matches the first statement.
Sources (official record — verify before filing)
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