The One-Third Reduction Provision, also known as the Value of the One-Third Reduction or VTR, allows the Social Security Administration (SSA) to reduce the Social Security Disability beneficiary’s applicable federal benefit rate by one third in certain situations. This means that the Social Security Disability beneficiary will receive a lower monthly benefit payment than they would have had the VTR not applied.
There are different instances in which the One-Third Reduction rule can be applied. One such instance is when a Social Security Disability beneficiary lives an entire month in the household of another person and receives food and shelter from the person without having to pay for that food and shelter. In such a case, the SSA can reduce the beneficiary’s monthly benefit by one-third.
For example, if a Social Security Disability beneficiary lives with a friend and does not pay rent or utilities or his or her pro-rata share, the beneficiary then becomes subject to the SSA’s VTR. This means that the individual’s benefit will be reduced by one-third because his or her living expenses were not paid for out of their own pocket. If, however, the individual receiving benefits paid rent to his or her friend or paid for his or her own food, the VTR would not apply because the beneficiary would be paying for their own living expenses.
It is important to note that when a Social Security Disability beneficiary is subject to the SSA’s VTR, no other income exclusions apply to the VTR. It is also important to note that the maximum amount that the beneficiary’s payment can be reduced by is 30 percent, which is why it is referred to as the Value of the One-Third Reduction.