By Scott B. Elkind, Esq.

As you may have heard, the Social Security Disability Program is on the verge of insolvency. The system was not prepared for a nearly 50% increase in applications due to the unprecedented number of job losses. As it turns out, many people were able to sustain their jobs by virtue of their hard to replace experience and accommodations from their employers. Once laid off, these individuals are not readily employable from the general pool of individuals who are, for the most part, younger and fitter.

Due to this large influx of applications and the general projected increase in claims due to the aging Baby Boom generation, the Social Security Disability program is expected to run out of funds by 2017 with the retirement fund running dry 20 years later.

This problem was addressed in The Hamilton Report by the Center for American Progress in December, 2010. The authors of the report concluded that early intervention was required to keep workers in the workforce. Otherwise, Social Security Disability benefits become a disincentive to returning to work as claimants are barred from seeking employment during the extended claim determination process. This report also emphasized that SSA needed to get involved in assisting disabled persons with return to work by offering: (1) workplace accommodations, rehabilitation services, partial income support, and other services to workers who suffer work limitations, with the goal of enabling them to remain employed and (2) financial incentives to employers to accommodate workers who become disabled and minimize movements of workers from their payrolls onto the SSDI system. None of these proposals have been addressed by SSA or Congress.

This SSA funding problem is not an easy fix with Congress considering raising the retirement age, means-testing for wealthier retirees, and/or imposing more stringent standards for disability. No matter what, simply reallocating funds from the retirement system to the disability system will be insufficient at this point, although done in the past as a temporary fix for a similar projected shortfall.

Small, temporary adjustments have been made as follows:

• Active collection of $1.4B in overpayment to disability beneficiaries, most of whom were able to return to work but kept receiving disability benefits although no longer qualified to do so
• An Inspector General investigation into a West Virginia Administrative Law Judge who was granting large numbers of claims (although no such investigation ever into ALJs who pay very few claims)
• Closing field offices a half hour early each day
• Continuation of a hiring freeze which means no replacement for aging, retiring employees (3500 expected to leave in the next year)
• Delays in opening new offices
• Diversion of funds from information technology projects which would have improved productivity

This measure will have little effect on the expected $10B budget cut expected to be approved by Congress for the SSA budget in 2012.

Meaningful proposals such as increasing the payroll tax by at least 1%, taxing all wages (not just the limited, statutory amount), and reducing cost of living increases by 1% annually potentially could fix the entire SSA budgetary shortfall. Unfortunately, any of these proposals would require acts of will which a deeply divided Congress does not have the political courage to discuss.

The dire situation at SSA occurs in the backdrop of a study which disputes the claims by the Administration that is has made progress in reducing its infamous backlog of cases. The Transactional Records Access Clearinghouse, an independent research organization at Syracuse University, that pending cases has actually increased this year rather than decreased as SSA has claimed. Although SSA points to the new influx of claims, it does not excuse the backlog of existing claims in the system. SSA touts its claim that about 214,000 claimants have been waiting more than 270 days to have their appeals resolved. Less than 270 days is considered by SSA to be “normal processing.”

The increased pressure on Claimants has resulted in an increase in threats of violence to ALJs who are, unfortunately, on the tail end of the waiting period and become the focus of claimant anger. This has resulted in several judges being assaulted by claimants and single gun battle resulting in the death of a claimant.

In the end, the future of SSA is rather clear: increased claims serviced by fewer workers with outdated technology resulting in increased backlogs......noting but bad news for disabled Americans who should expect better treatment in their time of need.