Social Security Disability Insurance is expected to exhaust its fund reserves by 2016. After that, payroll tax revenues would only cover about 80 percent of promised benefits, according to data from the Social Security Administration analyzed by the National Academy of Social Insurance, or NASI.
To prevent this from happening, the NASI, a nonpartisan think tank studying social insurance risk, suggests that a greater percentage of the payroll tax be used to pay Social Security disability and less used for Social Security retirement benefits.
Right now, of the 6.2 percent of earnings that workers and employers each pay for Social Security, 5.3 percent goes to the Old-Age and Survivors Insurance Trust Fund, and the remaining 0.9 percent goes to the disability insurance trust fund. An additional 0.2 percent contribution annually pulled from the retirement pool and deposited in the disability pot would make disability insurance solvent for 75 years, the academy says.
The change also would reduce the solvency of the retirement program by two years from 2035 to 2033, when the retirement program would only be able to cover 75 percent of benefits if nothing is done to shore it up.
Virginia Reno, vice president for income security at NASI, says that previously the percentage of taxes allocated to disability insurance has been altered 11 times without controversy. This time, some people think such a change deserves a second look.
Critics of the disability insurance program say some disability insurance recipients don't need it. They point to the increase in claimants since the economy soured in 2008 and suggest that more people are applying for disability because they can't get a job. Reno says these critics are misinterpreting the numbers.
"Some people can work despite extraordinary odds against them in terms of their physical health because they have a good support system. If they lose that job, their prospects for finding another are very poor. A bad economy works against people with disadvantages," she says.
A report in 2009 from the National Bureau of Economic Research, a competing nonpartisan think tank, blames the increase in the number of people receiving disability on the relaxation of rules during the Reagan administration, which placed more emphasis on an applicant's pain -- something that's hard to quantify -- and also made it easier to qualify because of mental disorders. This report calls for re-tightening qualification standards.
It's a tough retirement planning dilemma. Few of us are interested in booting the truly handicapped off the disability rolls, but siphoning money from the retirement program, which is already underfunded, doesn't seem like a very good idea either.
What do you think?