Concerns of reduced benefits rise over depleting SSDI trust fund

Social Security Cards Representing Finances and RetirementSocial Security Disability Insurance provides essential financial support to people whose disabilities prevent gainful employment. In August 2014, 8 million Americans received disability benefits, according to the Social Security Administration. Alarmingly, reports indicate the SSDI trust fund is two years away from depletion. This may result in reduced SSD benefits and other consequences for recipients.

Fund shortages

The SSDI program has expanded significantly since its creation, according to a Heritage Foundation analysis. From 1966 to today, the proportion of working-age people receiving SSD benefits increased from about 1 in 100 people to 1 in 20 people. The program’s recipiency rate has doubled since 1991. Since 2000, inflation-adjusted costs have also doubled.

Various factors may explain these changes. The older retirement age, the growth of the elderly population and the increased presence of women in the workforce account for an estimated 43 to 56 percent of the increase. The rest may be due to expanded definitions of disability or shifts in the economy and job market.

Incoming program contributions no longer match demand. In 2013, the SSDI program ran at a deficit for the fifth straight year. Only 75 cents in payroll taxes contributions came in for every dollar of benefits paid out. The remaining fund value fell from $122.7 billion to $90.4 billion. Without action by Congress, the following is expected to happen:

  • The SSDI trust fund will run out at the end of 2016, given the current rate of depletion.
  • Without the trust fund, incoming contributions will only cover 80 percent of benefit payments.
  • Barring other measures, such as increases in payroll tax contributions, each benefit payment will fall 20 percent.
  • The current average disability benefit of $1,146 will drop to $928, a figure that is below the federal monthly poverty level.

This could place a significant financial burden on the millions of people who rely on SSD benefits.

Potential solutions

To prevent trust fund depletion, Congress could borrow money from the Old Age and Survivors Insurance trust fund. However, this might not be a permanent solution. In 1994, Congress redirected Social Security payroll tax revenue to keep the SSDI trust fund solvent. Payroll tax contributions increased 50 percent. However, two decades later, the program faces depletion.

Reform of the SSDI program could also address depletion. Changes to the disability evaluation process and Continuing Disability Review policies could reduce distribution of funds to people who do not meet the strict definition of disability. This could preserve benefits for the most severely disabled population. However, stricter policies could also make securing or maintaining benefits more difficult for people with legitimately disabling conditions.

By |2014-10-16T20:10:41+00:00October 16th, 2014|SSI|Comments Off on Concerns of reduced benefits rise over depleting SSDI trust fund