The number of working-age adults receiving benefits from Social Security Disability Insurance (SSDI) and the Supplemental Security Income (SSI) program has risen sharply in recent decades. Receipt of federal disability of benefits is predicated on long-term inability to engage in substantial gainful activity, and few beneficiaries exit the disability rolls because they engaged in work at that level. As a result, fiscal pressures on federal disability programs are mounting; actuaries at the Social Security Administration (SSA) project that the SSDI trust fund will be exhausted as early as 2016.

This pressure combined with a desire to help improve individual self-sufficiency and reduced dependency on cash benefits, has led to an emphasis on identifying promising strategies to help disability beneficiaries exit the rolls because they are working. The federal/state Vocational Rehabilitation (VR) program offers one such avenue, by providing employment services to individuals with significant disabilities. In 2010, the most recent year for which data is available, VR agencies received $3.0 billion in grant funding from the federal government, providing services to 1.4 million individuals.

In addition to their grant-based funding, VR agencies can also receive additional, direct payments from the Social Security Administration (SSA) for services provided to SSDI and SSI beneficiaries. Payments are predicated on work activity among beneficiaries that is sufficiently high and sustained that beneficiaries forgo their cash disability benefits, thereby reducing program costs. SSA provides payment to VR agencies under one of two payment systems; a cost-reimbursement system and another where monthly payments of preset amounts are made when employment outcomes are achieved. VR agencies can assign beneficiary clients to a payment system on a case-by-case basis. In each, payment from SSA to VR agencies is contingent on the achievement of specified beneficiary employment outcomes, provided the VR agency appropriately reports and documents these outcomes to SSA.

Despite this important intersection between SSA and VR, little is known about the extent to which such payments are made, whether certain types of beneficiaries are more likely to generate payments, and how payments compare to the benefit savings accrued by beneficiaries who return to work. We advance knowledge in this paper by considering these issues, using new information available in SSA’s 2012 Disability Analysis File (DAF12) linked to the VR Reimbursement Management System (VRRMS). We follow beneficiaries who applied for VR services from 2002 through 2006, starting from their VR application date for as few as 5 years and many as 9 years. During this period, we assess the extent to which beneficiaries successfully leave the disability rolls because of work, the amount of benefits forgone due to work, and whether work activity was sufficient to generate a payment from SSA to VR. In cases where payments are generated, we assess whether work activity among beneficiaries served by VR results in a net savings to the federal government, by comparing the dollar value of the SSA payment to the sum of beneficiary’s forgone monthly benefits.