Effective July 12, 2020, the economic disadvantage criteria for the 8(a) Business Development Program administered by the U.S. Small Business Administration (SBA) will be the same for initial and continued eligibility. In addition, all qualified retirement accounts, regardless of the individual’s age, will be excluded for the purposes of SBA’s calculation of the net worth of an individual claiming economic disadvantage.

Under the current version of the SBA’s rule (13 C.F.R. §124.104) to qualify as economically disadvantaged, an individual must show:

1. An averaged adjusted gross income over the past three years that does not exceed $250,000 (with some exceptions for “spike” years seeing unusually high income);
2. A net worth of less than $250,000 (excluding the ownership interest in the business, equity in the primary personal residence, and funds invested in an official retirement account “that are unavailable to an individual until retirement age without a significant penalty”); and
3. A Fair Market Value of all assets (except funds in a qualified IRA account, but not all similar retirement accounts) of less than $4 million.

Under the revised version of the rule becoming effective in July, the criteria will change as outlined below, and will be the same for initial and continued 8(a) BD Program eligibility:

1. An averaged adjusted gross income over the past three years that does not exceed $750,000 (with the same exceptions for “spike” years seeing unusually high income);
2. A net worth of less than $750,000 (excluding the ownership interest in the business, equity in the primary personal residence, and funds invested in an official retirement account, regardless of whether the individual can access those funds without a significant penalty); and
3. A Fair Market Value of all assets (except funds in a qualified IRA account, but again, not all similar retirement accounts) of less than $6 million.

The most significant impact of the new eligibility criteria will be an expansion of the pool of individuals who will be able to claim economic disadvantage and thus initially qualify for the 8(a) BD Program. However, these changes will also standardize the 8(a) BD Program’s economically disadvantaged criteria to match the economically disadvantaged criteria for the SBA’s set-aside programs for economically disadvantaged woman owned small businesses (EDWOSBs).