Social Security In Jeopardy? How You Can Help

From AAPD (12.23.10):

What’s Up With Social Security?

By Daniel Dwyer, AAPD Policy Intern

On December 13, 2010, AAPD attended a briefing on Social Security held by the Consortium for Citizens with Disabilities (CCD). AAPD is a dues paying member of CCD and is pleased to disseminate information about a program that is essential to many people with disabilities and their families. The December 13 briefing was conducted by Virginia Reno, Vice-President of Income Security for the National Academy of Social Insurance (NASI). Her talk provided an overview of the current Social Security disability programs and included discussion of potential policy options and what they might mean for our community.

In summary, she said that Social Security is not in immediate jeopardy and changes to it should be considered cautiously.  She pointed out that the estimated cost of Social Security, as a share of the entire economy, is projected to rise only modestly over the next 75 years from the current 4.8% to about 6%.  This is in contrast to Medicare, which she said is unsustainable due to the soaring costs of healthcare.  Ms. Reno pointed out that Social Security has broad support across the political spectrum, by an overwhelming majority of Americans, and is vital to the survival of millions.  Therefore, she asserted, Social Security should be dealt with separately by a Commission focused solely on it, not just part of a debt-reduction commission like the President’s National Commission on Fiscal Responsibility and Reform.

Facts about the Social Security disability program presented at the briefing:

• One in four American households has someone who receives Social Security benefits, totaling about 58 million people (one in six Americans).

• About 8 million of those recipients are disabled workers and another 0.9 million (900,000 people) are adults who have been disabled since childhood.

• Social Security disability pays monthly benefits, based on a person’s past earnings, to people who are no longer able to work due to a significant illness or impairment that is expected to last at least a year or result in one’s death within a year.

• Disabled workers rely on Social Security for 75% of their total income, on average, and a majority of those receive at least 90% of their income from Social Security.

• In 2010, the average monthly benefit for a disabled worker was $1,064 or $12,768 per year.

• In families with a disabled worker, the average monthly benefit is $1,797 or $21,564 per year, and accounts for about half of the family income. 

The Social Security trust fund will have a surplus of $77 billion this year but according to current projections by the Social Security Administration, these trust fund reserves will run out by 2037 if changes are not made to the system because of the increase in the number of retirees from the ‘baby-boomer’ generation.

Proposals to close the gap, as presented at the briefing:
There are many proposals to close the gap.  Any changes to retirement benefits in Social Security could possibly affect disability benefits as well because they are both calculated according to the same formula.  Here are some under consideration:

• Reduce the annual cost of living adjustment (COLA).  The COLA is an increase in benefits each year, in order to keep pace with inflation.  One proposal is to reduce that amount by about 1%.

• Change the way the COLA is calculated by using a “chained” Consumer Price     Index (CPI) to gauge inflation instead of the more traditional CPI.  The   “chained” CPI rises slower, causing the COLA to increase slower as well.

• Note that there was no COLA in 2010, nor is there one scheduled for 2011.

• Increase Employee and Employer tax rates slightly.  The current 12.4% Social    Security tax rate, split evenly by employees and employers (6.2% each), could    be raised to 14.32% or paid at the rate of 7.16% each.

• Raise the $106,800 cap on earnings, above which no Social Security taxes are aid currently.

• Make contributions to employee “flexible spending accounts” and other   employee set-asides also subject to Social Security taxes as well, like 401(K)’s are currently.

The briefing came about because the CCD Social Security Task Force received a special grant from the National Academy of Social Insurance (NASI) to promote greater understanding of the importance of Social Security for people with disabilities and their families. This grant is especially timely because multiple proposals to address the national deficit propose ways to change the current structure and payment of Social Security benefits. These changes could have major implications for the economic security of people with disabilities and their families.

Action Steps:

1. NASI would like to hear personal stories from AAPD members and others about how important Social Security is to them. Please send to [email protected].

2. Please comment on any of the proposals discussed above either in the comment section below or to [email protected]

For instance:

(a) how do you feel about a reduction in the cost of living adjustment, especially if the economy does not expand?

(b) If Employees are expected to pay more into Social Security, up from 6.2% to 7.16%, how much of a bite is that out of people’s paychecks?

(c) If Employers are expected to pay more into Social Security, such as 7.16% instead of 6.2%, do you think that will have an effect on hiring of people or annual increases in wages?

(d) If the cap on earnings is raised beyond $106,800, do you think that might impact middle class families?

(e) How do you feel about contributions to Social Security also being taken from Flexible Spending Accounts (such as for Health costs or Education costs)? Do you think this will impact middle class families?

(f) Do you have other ideas about how the gap could be closed?

(g) Do you think a separate Commission on Social Security to look at the revenue gap is a good idea, rather than have this program included as part of a debt-reduction commission like the National Commission on Fiscal Responsibility and Reform.

For further information on the CCD Social Security Task Force, please visit their website at http://www.disabilityandsocialsecurity.org/  This website includes fact sheets and other information about Social Security and people with disabilities. A video clip of a similar briefing by Virginia Reno is on YouTube at http://www.youtube.com/watch?v=thfBaXGLCSk (not captioned!). For more on the National Academy on Social Insurance, visit http://www.nasi.org/  For more on the President’s National Commission on Fiscal Responsibility and Reform, visit http://www.fiscalcommission.gov/

Comments

[Phillip Perini]

It is no big secret that Washington Politicians have been raiding the SS trust fund for decades. The President along with Congress should act responsible , and pay back the raiding , with interest. Lets face reality , politicians and the corrupt enterprizes they have in their pockets , have very little compassion/ interest for those of us who payed into the ss trust fund for our working lives , prior to becoming disabled.

[Laura George]

It's funny society wants members of the Functional Needs Community to go out and return to being productive members of society. Social Security is a big part of that. I understand that funds have for Social Security have to come from somewhere, taking from the regular working class won't aide the economic growth any and simply would hurt those with disabilities who have managed to return to work fully to have an even harder time financially as they are required to purchase medical items in order to be successful.

I think an easy way to help those with Functional Needs be more financially productive is by "not" reducing their income even more. I cite a personal example: my husband is a tetraplegic with Complex Pain Syndrome. I take care of him and my daughter 24/7. I have no assistance. Our goal is to get the things my husband needs to be a productive member of society, get our daughter in school and then I can go earn funds as well. But my husband's LTD decided that "any" and "all" funds brought into the home are considered part of his income and therefore the SSB benefits my daughter and I were getting are now automatically cut...thus put a $1K monthly deduction into our finances. Now I cannot go get a job, nor can my husband...because we'll lose his benefits.

It seems to me that one area that works with SS is the long term disability programs should be encouraged to support those who (presumably) wisely chose ahead of time to get an LTD...should NOT be penalized for trying to get back into the work environment.