January 9, 2015

Congress Blocks Trust Fund Reallocation

The U.S. House of Representatives has enacted new rules for the 114th Congress that essentially block one of lawmakers’ simpler alternatives for addressing the shortage facing the Disability Insurance (DI) Trust Fund in 2016.

The House rules contain language restricting the transfer of funds from the Old-Age and Survivors Insurance (OASI) to the DI Trust Fund. An interfund loan has been outlined as one of Congress’ options for addressing the shortage of reserves in the fund that supplies Social Security disability benefits to millions of people with disabilities and their dependents.

Unless Congress acts, the DI Trust Fund is set to run out of reserves in 2016, meaning that tax income would cover 81 percent of scheduled benefits. In this scenario, recipients would receive an automatic 19 percent cut of their monthly benefits.

Interfund loans have been enacted 11 times in the history of the two Social Security retirement and disability programs. Some estimates are that an interfund loan could extended the DI fund by 17 years while reducing the OASI fund reserves by 1 year—to coincide in 2033.

With the House rules in place, lawmakers will not have this straightforward option.

Instead, it is likely the House and Senate may need to enact either higher taxes and/or cut benefits for Social Security retirees and disability beneficiaries, who total about 59 million people in the U.S.

Steve Perrigo
Written by

Steve Perrigo

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