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Social Security Disability Program Solvency Update

By Scott B. Elkind, Esq.

As of May, 2012, it was reported that the Social Security Disability program would become insolvent by 2016.  This is two years earlier than previously predicted in the last report issued in 2011. This projection places the disability program in more dire need of address than both the Medicare and Social Security Retirement programs.  If the program becomes insolvent, a 21% percent cut in benefits in benefits to the 11 million persons on disability and their dependents will occur automatically as the program is not allowed by law to run at a deficit.

The reason given for this problem is the burgeoning costs due to the 77 million baby boomers projected to swamp the federal retirement programs as nearly all baby boomers have reached the age of 50 at this time.  Growing costs are also attributed to the bad economy which has forced people to apply for disability benefits for assistance once their job benefits cease.
Applications to the disability have risen more than 30% since 2007 with the number of Americans receiving benefits up 23%.

Despite less physically demanding jobs performed by workers as done in the past, improved health care, and the enactment of the Americans with Disabilities Act,  more people receive disability now than 20 years ago.  Once a person becomes eligible for disability benefits, the chances for him or her to return to work is only 1%.

These numbers only become worse when the backlog of 1.4 million cases is considered.  The Social Security Administration has stated that it does not have sufficient funding to perform the necessary reviews to address this backlog and was not given requested funding by Congress as requested for this purpose.  For example, initially cases are processed through Disability Determination Services (DDS) administered through the separate states.  DDS staffing has been cut by 10% in the past year.  Further, technology alone cannot make disability decisions as it is a human process.

The saving grace is the government’s ability to funnel revenue from other areas in the government to cover any program shortfalls.  Even if payments are reduced to only 75% of current, the fund would not exhaust itself until 2033.  But, eventually, the Social Security crisis will need to be addressed by Congress whose members are loathe to touch the proverbial “third rail of politics.” Such measures such as increasing the payroll tax (FICA) for employers and employees would be required. Currently there is a 6.2% tax with only 0.9% going to the disability program.

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