State policies aim to mitigate benefits cliffs, maintain public assistance benefits
By Trisha Douin and Dr. Dakota Thomas
For more than 37 million low-income families, public assistance benefit programs help meet their basic needs and serve as an economic safety net. However, public assistance benefits are often conditional on specific income levels and assets.
When individuals or families see an increase in their income or assets — even a small increase — they may find themselves suddenly disqualified from certain programs. This can ultimately result in families placing themselves in a worse situation, despite receiving higher pay. This sudden disqualification is called a benefits cliff.
An individual receiving a small raise at work, with wages increasing from $10 to $10.50 per hour, may become ineligible for public benefits or experience a sudden loss or decrease in benefits. As a result, they must pay out of pocket for expenses associated with these benefits. Left unaddressed, benefits cliffs can result in the stagnation of an individual’s career. In certain situations, individuals may be forced to turn down higher paying work to maintain access to benefits.
A benefits cliff may impact individuals and families and their access to programs that assist with food costs, cash assistance benefits, child care, health care and housing. Oftentimes, these programs have unique eligibility requirements. A family can remain eligible for one program and be disqualified from another. Given the complexity of eligibility, families may not know whether an increase in their income will trigger a loss in benefits.
Several states have begun addressing benefits cliffs through policy reforms, including providing individuals with additional resources on benefit eligibility, passing legislation permitting transition off public benefits rather than immediate disqualification, and modifying eligibility requirements for individuals receiving public benefits.
State Eligibility Requirements for Public Assistance Programs
The federal government funds several public assistance programs, such as Medicaid, Temporary Assistance for Needy Families, the Supplemental Nutrition Assistance Program, and the Special Supplemental Nutrition Program for Women, Infants, and Children, otherwise known as WIC. States administer these programs and have a great amount of discretion in how to set up public benefits, in addition to sometimes adopting different thresholds for income or other eligibility requirements for different programs.
Medicaid, a federal- and state-funded health coverage program, determines eligibility by the total income of the family. Depending on the state and size of the family, the maximum income allowed varies considerably. For example, families with children younger than age 5 may have different income requirements as compared to adult individuals seeking coverage. To qualify for assistance, a family of two with one child between ages 1-5 is allowed to maintain a total income of no more than $27,000 to $50,000 per year.
Eligibility guidelines for participants of the Temporary Assistance for Needy Families and the Supplemental Nutrition Assistance Program, or SNAP, are largely at the discretion of their states, where programs are administered and may be modified. Applicants of the Temporary Assistance for Needy Families grant may qualify as long as they earn no more than 1,500 per month. SNAP applicant are allowed to earn monthly assistance ranging from $1,500 to $2,150.
The Special Supplemental Nutrition Program for Women, Infants, and Children, or WIC, is a federally-funded discretionary nutrition program for eligible pregnant women, new mothers and children aged 5 years or younger.
“WIC income eligibility guidelines are adjusted annually to reflect 185% of the federal poverty guidelines. In Michigan, the increased income levels were implemented June 1 to allow more families to qualify for WIC,” said Bagya Lakshmi V. Kodur, the Michigan WIC program’s section manager of data and system management. “Michigan has seen a steady increase in caseload and redemption of benefits since the beginning of this year. Some of this increase could be attributed to the changes in the renewal requirements for Medicaid, SNAP or other public assistance programs that make a client adjunctively eligible for WIC.”
Generally, individuals participating in programs such as SNAP, Medicaid or Temporary Assistance for Needy Families automatically meet the income eligibility criteria. However, states may slightly vary in eligibility requirements and income thresholds, with one example for WIC participation including between 100% to 185% of the federal poverty guidelines. Depending on the state of residence, WIC participants’ average yearly income may vary, and range anywhere from $8,000 to $29,000 per year.
State Policy Reforms to Address Benefits Cliffs
Since 2021, 15 states and the District of Columbia enacted legislation to address the benefits cliff issue (see Table 2). Some states developed policies to support families and individuals through increasing economic stability and sufficiency during transitional periods when a program beneficiary no longer qualifies for participation. Such policies can help mitigate the detrimental effects of benefits loss on a beneficiary’s financial, physical and mental well-being. Adoption of new public assistance eligibility requirements, expansion of job training, and improving access to information about benefits and their requirements are a few examples of approaches states have used to mitigate benefits cliffs.
More specifically, 10 states have eased or aligned eligibility levels across programs. In Indiana, public assistance programs like the Child Development Fund and Temporary Assistance for Needy Families are subject to less restrictive income and asset requirements. States have also focused on relieving the burden by educating those impacted directly, bringing awareness of the issue to employers and the public, researching causes and effects, and working with employers and lawmakers to decrease the prevalence of benefits cliffs.
As states address the benefits cliff issue, legislation has emerged to help provide transitional benefits. Texas legislators created a “self-sufficiency fund” within their general fund to be used by colleges, organizations and extension agents to help provide job training programs for low-income individuals.
Program-specific policies adopted by states have provided additional help as individuals transition to self-sufficiency. In Nebraska, those who experience loss of child care benefits due to income increases are eligible for transitional child care assistance through LB 485 (2021). The bill, which was approved by the governor in May 2021, increased income eligibility limits of both the Child Care Subsidy program — increasing from 130% to 185% of the federal poverty level — and transitional child care — increasing from 185% to 200% of the federal poverty level.
Ahead of the bill’s advancement from general file in April 2021, Nebraska Sen. Tony Vargas voiced his support for it to the state Legislature’s Health and Human Services Committee.
“Many working families are not in a position where we can voluntarily choose to have a parent leave the workplace to stay home with the kids,” Vargas said. “Nebraska has an opportunity to make sure that we’re getting back in competition with states like Colorado and Kansas, both of which have adopted the 185% threshold.”
In several states, policies have been implemented to help those who receive SNAP benefits and Temporary Assistance for Needy Families. For instance:
- Washington — Those no longer eligible for Temporary Assistance for Needy Families can receive up to five months of transitional assistance through the grant.
- Virginia — Individuals participating in the Full Employment Program are eligible to receive Temporary Assistance for Needy Families benefits.
- Maine — The use of “asset tests” was eliminated for SNAP applicants. The state discovered that providing families with the Earned Income Tax Credit at the state and federal levels helped ease the cliff effect.
- Massachusetts — All program rules and requirements were simplified and aligned to reduce the cliff effect when individuals experience a transition away from public benefits.
- District of Columbia — As a response to the economic effects of the COVID-19 pandemic, the Career Mobility Action Plan pilot program was established to aid in career development and mobility.
Organizations have also worked to help states address the benefits cliff issue. The Federal Bank of Atlanta conducted thorough research to develop a tool for individuals receiving or eligible for public assistance. The Career Ladder Identifier and Financial Forecaster tool allows individuals to see predicted results of career changes on income and benefit eligibility. Several states have adopted this tool or similar calculator tools to help individuals understand their benefit eligibility.
Public Assistance Benefit Programs
Medicaid
Medicaid is a federal- and state-funded health coverage program, providing health coverage benefits to millions of low-income Americans. The Medicaid program is administered by the states using federal guidance. States use federal poverty guidelines to determine eligibility, but they may modify their income eligibility requirements. States are required by federal law to provide coverage for eligible children. Under the Affordable Care Act of 2010, eligibility for children was extended to at least 133% of the federal poverty level in every state. States may choose to cover children at higher income levels, which can depend on a child’s age.
Temporary Assistance for Needy Families
Temporary Assistance for Needy Families is a federally-funded block grant that states can use to provide cash assistance to needy families with children, though spending for other purposes is allowed. States have adopted a variety of definitions for who qualifies as “needy,” as well as other eligibility requirements for applicants and recipients. The total dollar amount of assets applicants are allowed to maintain in order to qualify for assistance varies from $1,000 to $7,000, while some states have no limit on assets at all. The total monthly income grant applicants are allowed to earn while still qualifying for assistance varies from less than $500 to more than $1,500 per month (see Map 1).
Supplemental Nutrition Assistance Program
The Supplemental Nutrition Assistance Program, which is also known as SNAP, EBT or “food stamps,” is a federal program that provides funds to individuals to purchase food. Nearly two-thirds of SNAP recipients are families with children. SNAP eligibility is established at the federal level through federal poverty guidelines, but at the state level — where it is administered — there is opportunity to adjust qualification standards for benefits. Although SNAP eligibility is mostly uniform across the nation, states can tailor specific aspects of their program. For SNAP applicants, states income guidelines vary for applicants and recipients. The total dollar amount of gross monthly income a SNAP applicant is allowed to earn while still qualifying for assistance varies from $1,500 to $2,150 per month (see Map 2).
Women, Infants, and Children
The Special Supplemental Nutrition Program for Women, Infants, and Children, or WIC, is a federally-funded discretionary nutrition program for eligible pregnant women, new mothers and children aged 5 years or younger. Participants in the program receive vouchers for specific WIC approved foods, which seek to help individuals at “nutritional risk,” according to the U.S. Department of Agriculture Food and Nutrition Service. States may opt to use the maximum federal income guidelines but may also set lower income standards for participation (see Map 3).
