For years, actually decades, people have been concerned about Social Security funding and a future lack of the agency being able to meet 100 percent of benefits obligations. Understanding the problem is part of their solution, so it is important to get accurate information about the problem. The Center on Budget and Policy Priorities released a study, which can be seen below, on the important financing issues facing the Social Security Disability Insurance (SSDI) program.
What Financing Issues Does SSDI Face?
SSDI costs have leveled off, but the program faces a long-run funding gap. SSDI costs have stabilized as the baby boomers move from their peak disability-prone years to their peak retirement years. (Disabled workers are converted to retired workers at the full retirement age — currently 66 and scheduled to rise to 67 — and the oldest baby boomers are fast reaching that milestone.) But SSDI’s costs will still exceed its revenues. Over the next 75 years, its shortfall is projected to be about 6 percent of the program’s costs or income.
SSDI has financial challenges but doesn’t face “bankruptcy.” The payroll taxes that workers contribute out of every paycheck fund most of SSDI’s costs. In addition, SSDI has built up trust fund reserves, which Social Security’s trustees estimate will last until 2052. At that point, tax revenues will be enough to pay for 91 percent of benefits — even if policymakers do nothing to strengthen Social Security’s financing (though they always have in the past).
Though the SSDI trust fund has enough funding for more than three decades, policymakers must address overall Social Security financing before then. Overall, Social Security can pay full benefits for 16 more years, the trustees’ annual report shows, but then faces a significant, though manageable, funding shortfall. Policymakers should address Social Security’s long-term shortfall primarily by increasing Social Security’s tax revenues. Social Security will necessarily require an increasing share of our nation’s resources as the population ages, and polls show a widespread willingness to pay more to strengthen the program.
SSDI benefits are modest. The average disabled-worker benefit is about $1,236 a month, and 90 percent of beneficiaries get less than $2,000 a month. Most beneficiaries — especially unmarried ones — rely on SSDI for most of their income. SSDI benefits replace about half of past earnings for a median beneficiary.
Most other advanced countries spend more than the United States on disability benefits. U.S. eligibility rules are strict, and benefit levels are modest. The Organization for Economic Co-operation and Development (OECD) reports that the United States has some of the most stringent eligibility criteria for disability benefits among advanced economies. OECD statistics confirm that, as a corollary, the United States spends less on disability benefits (as a share of the economy) than most other advanced countries.
Social Security’s administrative funding is inadequate. The Social Security Administration’s administrative funding (which, unlike Social Security benefits, is subject to annual appropriation) has declined in real terms since 2010, even as enrollment has climbed. That has impaired customer service by increasing wait times at field offices and on the phone. Staff cutbacks have also led to growing delays in processing applications or changing benefits when a beneficiary’s circumstances change.
Another consequence of the cuts is that about 700,000 people await a final decision on their application for SSDI — after paying into Social Security their entire career — or their application for disability benefits from the Supplemental Security Income program. They wait an average of about a year and a half for decisions on their appeals.
