Questionable Future of the Social Security Disability Fund

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Old woman hands with caneSince the trustees of the Social Security trust funds reported in July that the Social Security disability insurance trust fund reserve will run out of funds by the end of 2016, many news stories, including this story published in the New York Times, have addressed what could happen if the fund shortage is not addressed and remedied.
Essentially, the fund has not been able to keep up with the claims made and benefits paid over time.  According to the Social Security Administration’s data, in 1970 only 2.6 million Americans were collecting disability benefits, while that population has grown to 10.9 million in 2014.  Currently, the Social Security disability program costs $142 billion, which, accounting for inflation, is double what it cost in 1998.

Cuts in Benefits Expected if No Action Taken

The trustees have asked Congress to attack the issue of the disability reserve fund depletion by finding a remedy before the expected depletion occurs in the last quarter of 2016.  If no action is taken and no remedy is implemented, then recipients of Social Security disability benefits could see a 19 percent decrease in the amount of their benefits.
One can think of the disability trust fund like a simple, personal checking account.  Expenses cannot exceed income.  In other words, if you earn $1,000.00 per month, you have $1,000.00 to spend on rent, food, clothing, telephone bill, etc. per month.
In the case of the Social Security disability fund, payroll taxes come into the fund from employers.  The payroll taxes pay for benefits that are paid out.  Any excess income (payroll taxes) is invested to earn interest.  The interest is deposited back into the trust fund to help pay benefits.
The trustees estimate a 19 percent cut in benefits because the income coming into the fund (payroll taxes) would only be sufficient to pay 81 percent of scheduled benefits in the fall of 2016 when the reserves (extra earned interest) come to zero.

The Democrats’ Proposal

Just as there is a trust fund for Social Security disability benefits, there is a like and separate trust fund for Social Security retirement benefits.  President Obama and democrats have proposed that the disability fund borrow money from the retirement fund.  This cannot be done unless Congress passes a law that specifically allows this kind of transaction; legally the two funds are separate and distinct and sharing or transferring funds between the trusts is legally not allowed.

The Republicans’ Proposal

The republicans have proposed more wide-sweeping reforms.  Republicans have suggested decreasing benefits, restricting eligibility for benefits, cracking down on fraudulent claims, and establishing new programs to help and encourage disabled people to get back to work more quickly.

Speak with a Social Security Disability Attorney Now

While we cannot predict what will happen in the future and how this Social Security disability crisis will be averted, we will be monitoring this important issue.  If you have become disabled and cannot work or you have questions about your current disability benefits, you should speak with J. Robert Surface, an experienced Social Security disability attorney.  Contact us now for a free consultation.