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Measures to shore up Social Security Disability Insurance — a lifeline for workers who suffer a catastrophic accident or illness — are needed “soon” as the DI Trust Fund reserves are projected to run out late in 2016, the Social Security Administration’s chief actuary, Stephen Goss, warned senators Thursday.
Goss told members of the Senate Finance Committee that in 2016, continuing tax income will be sufficient to cover only 80% of scheduled DI benefits.
Indeed, Sen. Ron Wyden, D-Ore., chairman of the Senate Finance Committee, said Congress anticipated the 2016 shortfall due to “growth” in those applying for SSDI over the last 20 years based on the “shifting winds of demographics.”
“Policymakers – including many former members of this Committee – planned for a fresh look at the SSDI program in 2016,” Wyden said during his opening remarks at the hearing titled “Social Security: A Fresh Look at Workers’ Disability Insurance.” Wyden added that more women are now earning disability insurance.
The latest information on the SSDI program, released by the Congressional Budget Office, found that in 2011, the DI program provided benefits to 8.3 million disabled workers, nearly six times the 1.4 million disabled workers who received benefits in 1970.
Including the dependent spouses and children of those workers further increases the number of people receiving support from the program in 2011 to 10.3 million, CBO said.
The growth in the program can be attributed to changes in multiple factors, including demographics, the labor force, federal policy, opportunities for work, and compensation (earnings and benefits) during employment.
Over the past 40 years, inflation-adjusted outlays for benefits from the DI program have grown by more than nine times, CBO found.
Marianna LaCanfora, acting deputy commissioner for the Social Security Administration’s Office of Retirement and Disability Policy, told lawmakers during the hearing that the United States has the “strictest” qualification standards for granting disability insurance.
LaCanfora stated that workers must prove their “inability to engage in any substantial gainful activity (SGA) due to a physical or mental impairment that has lasted or is expected to last at least one year or to result in death.”
SGA, she continued, “is defined as significant work, normally done for pay or profit. Under this very strict standard, a person is disabled only if he or she cannot perform a significant number of jobs that exist in the national economy, due to a medically determinable impairment. Even a person with a severe impairment cannot receive disability benefits if he or she can engage in any SGA.” Moreover, she said, workers cannot receive short-term or partial disability benefits.
LaCanfora responded: “No. We award 33% of applicants. We deny more than half of them. The criteria is strict in comparison with other nations. We know it’s strict.”
Sen. Sherrod Brown, D-Ohio, noted the importance of SSDI to a male constituent in Cincinnati who suffered a “major stroke” and ended up “depleting” his IRA. “If he didn’t have SSDI, his family wouldn’t have known what he would have done,” Brown said.
Indeed, Rebecca Vallas, associate director of the Poverty to Prosperity Program at the Center for American Progress Action Fund, stated the SSDI benefits are “vital” to many, yet the benefits remain low.
For workers receiving disability insurance, it’s usually more than half of their income. The average SSDI benefit for a disabled worker is $1,146 a month, which is just above the individual poverty level.
“There could be room for having a conversation to strengthen this [benefit payout amount] so that workers would not be living in poverty,” Vallas said.
The other option, which Congress has chosen 11 times on a bipartisan basis, is to reallocate funds to the disability trust fund.
Goss stated that the projected shortfall in the DI trust fund “requires that either scheduled revenues be increased by 25%, or cost be reduced by 20%, or some combination of these approaches. Because the trust finds cannot by law borrow, adjustments before reserve depletion are essential if abrupt cuts in benefits are to be avoided.”
He added that “given the immediacy of the need, one option to avoid sudden cuts in DI benefits is to enact a temporary tax-rate reallocation between the [Old Age and Survivors Insurance] and DI Trust Funds.” Such reallocations have been enacted “numerous times” in the past, he added, “most recently in 1994 when the DI Trust Fund was just 8 months away from reserve depletion.”
LaCanfora added that the Obama administration supports reallocation of funds to the DI trust fund.
She added that Obama’s FY 2015 budget also includes three “early intervention” strategies that aim to “slow entrance of individuals onto the DI rolls” by helping them find work. “We would like to get the funding to runs these programs, so people can stay in the workforce before they come onto the DI rolls,” she said.
Check out Got a Disability? Here's How to Get Benefits on ThinkAdvisor.