Senate Hearing Contrasts Near-Term Urgency With Long-Term Dilemma For Social Security Trust Funds
Wednesday’s hearing by the U.S. Senate Budget Committee illustrated the broad array of concerns from lawmakers about the future of the Disability Insurance (DI) and Old-Age & Survivors Insurance (OASI) trust funds.
While the topic was “The Coming Crisis: Social Security Disability Trust Fund Insolvency,” several Senators relayed greater concerns about the long-term health of both trust funds and the impact of Congressional action, or inaction, in 2015.
But participants were in general agreement that a 20 percent cut in Social Security Disability Insurance (SSDI) income for beneficiaries would be unacceptable. This is the estimated benefit reduction beneficiaries would experience if the DI Trust Fund were to reach exhaustion of its fund reserves in 2016, according to the Social Security Administration’s Office of the Chief Actuary.
Discussion followed partisan lines, with Republicans focusing on reducing the costs of the SSDI program and Democrats emphasizing options for increasing revenue. Some discussion centered on altering the FICA tax cap on wages, which is currently limited to the first $118,500 in earnings in 2015. An estimate was shared that 90 percent of earnings fell under the Social Security FICA cap in the 1980s compared to only about 80 percent of earnings today.
Lawmakers discussed full medical continuing disability reviews (CDRs) and fraud investigations through the Cooperative Disability Investigation (CDI) units as methods for reducing costs to the trust fund. In response, SSA Acting-Commissioner Carolyn Colvin said she had diverted funds from customer service efforts toward creating more CDI units—35 by the end of the year.
Other solutions mentioned included means testing for benefits, early intervention for workers who experience disabilities, changing the full retirement age for Social Security benefits, and altering the cost-of-living adjustment (for example, to use a chained consumer price index (CPI).
Colvin repeatedly deflected attempts by Republican Senators to outline details from the Obama Administration toward addressing the 2033 solvency timeline for both programs. She directed the committee to the President’s Fiscal Year 2016 Budget, which proposed to reallocate FICA tax revenue so a greater percentage would be move from the OASI fund to the DI fund, and therefore address the near-term DI Trust Fund shortage.
When pressed to provide long-term solutions, she outlined principles that were included in the president’s budget (page 42):
- Any reforms should strengthen retirement security for the most vulnerable, including low-income seniors.
- Any reforms should maintain robust disability and survivors’ benefits.
- The administration will oppose any measures that privatize or weaken the Social Security system.
- The administration will not accept an approach that slashes benefits for future generations.
- It will not accept an approach that reduces basic benefits for current beneficiaries.
The hearing may be the first of many as Congress focuses its attention on the approach of 2016 and the anticipated shortage of reserves in the DI Trust Fund.
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