Social Security Disability Insurance Confrontation

John GarnerCompliance, Legislative Updates, Resources

The new Republican-controlled Congress has adopted a rule that prohibits the transfer of money from the Social Security Old-Age and Survivors Insurance (OAS) Trust Fund to the Social Security Disability Insurance (DI) Trust Fund unless Congress takes steps to improve the actuarial balance of both funds.  President Obama responded by including a provision in his proposed budget that would specifically allow transfers without any preconditions.

It is crucial that Congress take action soon.  The most recent annual report by the Social Security Board of Trustees indicates that the DI Trust Fund will become depleted in 2016, with 81 percent of benefits still payable after that date.  In other words, if Congress does not act, all Social Security Disability Insurance recipients will suffer a 19% cut in benefits.

Legislative action is needed as soon as possible to address the DI trust fund’s financial problems.  Congress also needs to act to ensure the solvency of the Old-Age and Survivors Insurance Trust Fund; however, there is more time available to address that problem.

In the past, funds have been transferred from the OAS Trust Fund to the DI Trust Fund nearly a dozen times.  Without another transfer and without Congress voting to increase taxes, which seems highly unlikely, Social Security disability benefits will have to be cut.

On the one hand, improving the actuarial balance of both funds is needed; on the other hand, cutting benefits would harm millions of the most vulnerable Americans.  The new Congressional rule is creating a confrontation that must be addressed soon.  The liberal Center for Budget and Policy Priorities claims that a transfer before the 2016 deadline would mean that both funds would be solvent until 2033.  Other commentators argue that there is no need for separate trust funds and that they should be consolidated.

Social Security disability recipients who also have long-term disability (LTD) insurance policies generally will not suffer if the Social Security disability benefits are cut because LTD benefits are typically integrated with Social Security disability benefits.  A cut in Social Security benefits would be offset by a corresponding increase in LTD benefits in most cases.  The increase in LTD claim payments will cause a spike in LTD premiums, some of which are paid by employers and others by employees.

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