Feds warn of impending SSDI shortfall

Social Security cards and cash
SSA Board Calls on Congress to Take Funding Action

The Social Security Administration’s Board of Trustees released its annual report [PDF] July 20, calling on Congress to take swift action, or risk cutting disability benefits by nearly 20 percent in 2016.

“The Social Security’s Disability Insurance Trust Fund now faces an urgent threat of reserve depletion, requiring prompt corrective action by lawmakers if sudden reductions or interruptions in benefit payments are to be avoided,” said Carolyn W. Colvin, acting commissioner of Social Security Administration, in a news release.

Under current projects, the reserve fund for SSDI, which serves about 10.9 million people nationwide, will run out in the fourth quarter of 2016 at current funding levels. Therefore, without changes to benefits or the system’s revenue stream, the SSA will only be able to pay out benefits at a rate of 81 percent of current levels at the start of next year.

Traditionally, the SSA has accounted for such shortfalls by reallocating funds between the SSDI and the far larger Old-Age and Survivors Insurance systems, which provides monthly benefits to about 48 million retirees and survivors of deceased workers. If Congress did so, the trustees estimate that benefits could continue at current rates until 2035, which is actually one year longer than last year’s projection.

However, in January 2015, the House of Representatives passed a bill blocking the SSA from transferring such funds between the programs. Multiple presidential contenders have already vowed to take similar action, setting up a political battle as election season moves into full force.

In the past year, President Obama, as well as multiple legislators, have proposed that the SSA save funds by preventing SSDI recipients from concurrently receiving unemployment benefits, a proposal strongly opposed by most disability rights organizations [PDF].

The Consortium for Citizens with Disabilities, the nation’s largest coalition of disability advocacy groups, urged Congress to make the necessary changes.

“The modest but vital insurance payments that Social Security provides make it possible for many seniors and people with disabilities to live independently, keep a roof over their heads and food on the table, and pay for needed, often life-sustaining medications and other basic expenses,” the CCD said in a statement [PDF]. “The alternatives, if benefits were cut or eliminated, are often unthinkable.”

The Supplemental Security Income (SSI) program, which provides benefits to more than eight million low income elderly individuals and people with disabilities, is not affected by the funding shortfall because it is supported by income taxes and other sources of revenue collected by the Treasury Department, as opposed to special payroll taxes for SSDI and the OASI funds.