The Social Security Administration (SSA), through the U.S. Department of the Treasury, maintains multiple accounts for funds held in trust to pay benefits under various programs. Benefits payable through the Social Security Disability Insurance (SSDI) program are held in the SSDI Trust Fund. This account is running out of money, and it is expected to be depleted by the end of 2016. At that point, the SSA would have no choice but to make substantial cuts in SSDI benefit payments.
People have been calling on Congress to address this problem for years, but it seems as though Congressional leaders are only just beginning to recognize the need for action. What they have done so far does not seem to be enough, and what they should do instead is a matter of much dispute.
What Is the SSDI Trust Fund?
The SSDI Trust Fund is an account in the U.S. Treasury that receives funds from payroll taxes withheld from employee paychecks and paid by employers under statutes like the Federal Insurance Contributions Act (better known as FICA). The SSA has automatic spending authority, without needing periodic Congressional approval, to disburse SSDI benefits from this account.
The trust fund came into existence on January 1, 1957. At the end of that year, it had asset reserves of $649 million. The fund is considered to be in “actuarial balance” when the annual amount received from payroll taxes exceeds the amount expended on benefits and other costs. The fund has fallen out of actuarial balance several times since 1957, but it was in balance from 1994 to 2008. Its asset reserves reached their highest point in 2008, at more than $215.7 billion. Over the next six years, the fund lost about 72 percent of its asset reserves, falling to $60.2 billion by the end of 2014.
What Is the Problem with the SSDI Trust Fund?
According to the Social Security Board of Trustee’s 2014 annual report, the SSDI Trust Fund’s annual expenditures have exceeded its non-interest income since 2005. The “trust fund ratio,” which expresses asset reserves as a percentage of annual costs, has been declining since 2003. The report states that the SSDI Trust Fund has the most urgent needs of all the SSA’s financial accounts.
If no other action is taken to balance the income and expenditures in the fund, the SSA will have to reduce payments to SSDI beneficiaries by nearly 20 percent. It will wait until the last possible moment to do this, before the account goes into the red.
How Did This Happen?
This issue has caused quite a bit of finger-pointing in Washington, DC and all over the country, with opinions on the cause of the problem often depending on one’s individual political stance. The SSA states that a substantial part of the problem is demographic. As more people are reaching retirement age, the “beneficiary to worker” ratio is increasing. To put it another way, the number of people claiming benefits from the Social Security system is increasing at a greater rate than the number of workers paying into the system.
In a report published in 2006, the SSA’s Office of Policy noted that, for every 100 workers paying into the Social Security system in 1970, there were fewer than three beneficiaries receiving payments. That ratio had increased to 4.8 beneficiaries per 100 workers by 2004, and it was expected to increase by another 40 percent by 2030, to 6.8 per 100.
What Is Being Done About It?
Congress has dealt with shortfalls in the SSDI trust fund at various times over the years, most recently in 1994, by reallocating funds from the Social Security retirement account. It has also, on occasion, reallocated money in the other direction. This is no longer an option, however.
At the beginning of the current Congressional session in January 2015, the House of Representatives adopted a new rule, H. Res. 5, that effectively prevents any proposal to reallocate funds from the retirement account to the SSDI Trust Fund unless the reallocation would improve the 75-year actuarial balance of both accounts. This means that Congress must either take more direct action to preserve the trust fund or allow drastic benefit cuts next year.
To learn more about filing an SSDI claim, contact the Law Offices of Russell J. Goldsmith today at 1-800-773-8622 to schedule a free and confidential consultation.
More Blog Posts:
What is SSDI? An Overview for Residents of Massachusetts and Other States, Social Security Disability Lawyer Blog, June 24, 2015
Qualifying for Social Security Disability Insurance, Social Security Disability Lawyer Blog, June 17, 2015
Defining a Medical Disability for Purposes of Obtaining SSDI Benefits in Maine, Massachusetts and New Hampshire, Social Security Disability Lawyer Blog, June 10, 2015