On July 11, the National Organization of Social Security Claimants’ Representatives (NOSSCR) published an online article entitled, “Social Security Disability Insurance: A Bedrock of Security for American Workers.” The article discussed the past, present, and future of our nation’s SSDI program, praising its success and the help it offers millions of people each year.
As the article discusses, Social Security Disability Insurance is paid for by two “trust funds”—trust funds that are made possible by the income of working Americans. Workers and employers both pay for Social Security through payroll taxes. Roughly 6.2 percent of wages are taken out of paychecks and placed into the two Social Security trust funds. 5.3 of this 6.2 percent is allocated to the Old Age and Survivors insurance (OASI) trust fund, and 0.9 percent is allocated to the Disability Insurance trust fund. Through these two technically-separate funds, there is enough money to make Social Security benefits possible. Over the years, the percentage of wages going into each trust fund has shifted in order to accommodate population changes and the needs of the American people.
“A Bedrock of Security for American Workers” focused largely on the current financial state of the Social Security system. The article stated:
“As expected, the program has grown in recent years as a result of well-understood demographic and labor-market changes: Baby Boomers aging into their high-disability years, the increase in women’s labor-force participation, and population growth. The growth of the program has leveled off and is projected to decline further in the coming years as Baby Boomers retire. While the Disability Insurance trust fund currently faces a financing shortfall, re-balancing the two Social Security trust funds will put the entire Social Security system on sound footing until 2033. Re-balancing has served as routine housekeeping to keep both trust funds on sound footing amid demographic shifts and has occurred 11 times in the program’s history, about equally in both directions. Several policy options exist to ensure the long-term solvency of the overall Social Security system thereafter.”
What exactly does this “re-balancing” refer to? According to the article, in the past, Congress has reallocated the percentage of payroll taxes that go into each trust fund in order to equalize the wealth of each. There is now a proposed plan to reallocate funds once more. The article states, “The reallocation plan outlined by Social Security’s chief actuary in the 2013 Trustees Report would ensure that both funds remain fully solvent until 2033. Reallocation would have essentially no impact on the financial health of the overall Social Security system. Under current law, as well as under reallocation, the combined trust funds will be able to pay all scheduled benefits until 2033, after which they will be able to pay about 77 percent of promised benefits.”
As legislators look past the next several decades and think about the long-term survival of Social Security Disability Insurance, several options are being considered. These options include raising the current payroll tax percentage of 6.2 to ensure everyone pays slightly more money into the system, as well as eliminating the cap on taxable earnings. Currently, the 6.2 payroll tax can only be applied to the first $117,000 a person earns. Under a system with no cap on taxable earnings, the 5 percent of American workers who currently earn more than $117,000/year would pay into Social Security with every paycheck.
While the exact future of our Social Security system is unknown, Congress has never allowed a drop in scheduled benefits to occur, according to the article. For now, the millions of Americans dependent on Social Security Disability Insurance can rest easy.