V I R G I N I A P . R E N O V I C E P R E S I D E N T F O R I N C O M E S E C U R I T Y P O L I C Y

N A T I O N A L A C A D E M Y O F S O C I A L I N S U R A N C E

D I S A B I L I T Y P O L I C Y S E M I N A R A P R I L 1 6 , 2 0 1 3

Social Security Disability Insurance: Current Issues

Overview

Topics for today: � Who receives Social Security disability

benefits? � Current DI financing issues and options � Is the recent increase in DI beneficiaries a

surprise? � What do the American people want?

2

Who Receives Social Security Disability Insurance?

3

Who receives Social Security disability benefits?

Disability Insurance (DI) pays benefits to: �  8.8 million disabled workers �  1.9 million of their minor children �  0.2 million of their spouses TOTAL: 10.9 million beneficiaries (in Jan. 2013)

4

Who are disabled worker beneficiaries?

�  7 in 10 are over age 50, including 3 in 10 who are over age 60.

�  All meet a very strict test of work incapacity: “Unable to do any substantial work activity due to a

medically determinable physical or mental impairment that is expected to last a year or result in death.”

�  Many have had arduous jobs, lack skills for other work.

�  Some are very ill: 1 in 5 men and nearly 1 in 6 women die within 5 years after receiving benefits.

5

Disabled Adult Children (DACs)

�  1 million adults whose disabilities began in childhood receive benefits.

�  Based on work record of a parent who is retired, disabled or deceased.

�  Most have intellectual or developmental disabilities. �  They are adults of all ages:

¡  41% are under 40 ¡  45% are between 40 and 60 ¡  14% are 60 and older

6

Current DI Financing: Issues and Options

7

Who pays for Social Security?

�  Workers and employers pay for Social Security. �  They each pay 6.2% of earnings up to a cap

($113,700 a year in 2013).

8

Two separate trust funds

Of the 6.2% tax from workers and employers: �  The OASI trust fund gets 5.3%

¡  (OASI = Old-Age and Survivors Insurance)

�  The DI trust fund gets 0.9% ¡  (DI = Disability Insurance)

By law the two trust funds are separate

9

Status of the trust funds

�  The OASI fund is sufficient until 2035, then covers 74% of benefits.

�  The DI fund is sufficient until 2016, then covers 79% of benefits.

�  The OASDI funds, combined, are sufficient until 2033, then cover 75% of benefits.

10

Legislation needed to pay full DI after 2015

11

Congress could: �  Raise the DI tax rate by 0.2% (from 0.9 to 1.1%) for workers

and employers each. (i.e., raise the overall Social Security rate from 6.2% to 6.4%); OR

�  Reallocate part of the OASI rate to DI, so both funds can

cover all benefits until 2033.

Congress has never failed to act to ensure that

scheduled Social Security benefits continue.

Has Congress reallocated funds before?

12

Yes: Since DI began in 1957, Congress has reallocated between DI and OASI 11 times. �  Last time (1994), shifted from OASI to DI. �  Before that (1983-4), shifted from DI to OASI. Reallocation has been routine and without

controversy.

13

Is the Recent Increase in DI Beneficiaries a Surprise?

No. It was expected

�  In 1994, when Congress reallocated funds from OASI to DI, that change was expected to extend DI until 2016 – and it has.

�  Yes, the number of disabled workers receiving DI has increased: ¡  From 4.2 million in 1995 to 8.8 million in 2013

�  But that increase is not a surprise.

14

Reasons for the increase

More people are receiving DI now, because: �  More workers are insured, especially women. �  Boomers are in their high disability years. �  Higher retirement age means people age 65 stay on

DI, not shifting to OASI (retirement) yet. �  Recession and high unemployment eliminate many

work opportunities for people with significant impairments.

15

16

Public Opinion on Social Security

Strengthening Social Security: What Do Americans Want?

17

�  National survey of public opinion on Social Security

�  Americans don’t mind paying for Social Security and are willing to pay more, if needed, to keep it strong.

�  Republicans, Democrats and independents agree

18

�  The most favored package of policy changes would: ¡  Gradually increase taxes in two ways – for top earners

and for all workers; and ¡  Increase benefits in two ways – for low earners

and for all beneficiaries via the COLA.

�  Eliminates Social Security’s 75-year financing gap (including DI) and leaves a small surplus.

�  7 out of 10 Americans preferred this package over the status quo – across income and age groups.

Strengthening Social Security: What Do Americans Want?

1

Questions?

Virginia Reno

vreno@nasi.org 202-243-7282

www.nasi.org

20