June 4, 2014

If Trust Fund Runs Out, SSDI Recipients Still Get Partial Benefit

A recent story reported by CBS News helps shine the light on the financial reality for the Social Security trust funds—the Old-Age and Survivors Insurance (OASI) and the Disability Insurance (DI) trust funds.

On one hand, it’s true that the DI Trust Fund is expected to run out of reserves by 2016. But if that were to happen, there still would be enough revenue collected through FICA payroll taxes to continue funding about 80 percent of beneficiaries’ payments. This wouldn’t be an ideal solution—but people with disabilities would continue to receive most of their SSDI benefits.

As CBS writer Steve Vernon states, “As long as workers are paying FICA taxes, there will be money to pay for Social Security benefits.” And a reduction in SSDI benefits would only be necessary if Congress takes no action to restore the balance between the two trust funds.

The proposals Congress can choose from are diverse and include increasing taxes, reducing benefit calculations, lowering annual cost of living adjustment (COLA) calculations, increasing the retirement age, and reallocating a portion of tax revenue from the OASI fund to the DI fund, which has been done several times in the past and as recently as 1994.  As the chart below shows, the impact of the 1994 reallocation resulted in the DI Trust Fund experiencing a significant increase in tax revenue and extending its long-term solvency, without tax increases or benefit cuts.

DI Trust Fund 1957-2013 Image

Steve Perrigo
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Steve Perrigo

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