Social Security
Its Vital Role for
Workers & Their
Families
Social Security
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54.2 million people receive Social
Security benefits
But more than a retirement program
More than one-third all monthly
checks for non-retired individuals
Social Security = social & family
insurance
May 2011
Consortium for Citizens with Disabilities
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Social & Family Insurance
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Workers share risk of common
life events
Each worker’s record provides
benefits for different family
generations, even young workers
Guaranteed monthly payment
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Social Security Insurance
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Retirement - insures against
poverty after worker retires
Survivors - insures dependents
after worker dies or retires
Disability - insures against loss of
ability to work due to disability
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Current Design: The Positives
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Fixed monthly payment
Ability to move among 3 programs:
work history, age & eligibility category
Pays multiple family members based on
one worker’s earnings
Adjusted annually for inflation
(generally)
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Social Security & The Deficit
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National groups examining ways to reduce
deficit, including Social Security changes
Social Security did NOT cause the deficit
Cutting benefits will NOT solve budget crisis
Cutting benefits will deepen financial crisis
for many people with disabilities
May 2011
Consortium for Citizens with
Disabilities
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Social Security & The Deficit
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May 2011
Social Security did NOT cause the
deficit:
 It is self-funded
 By law, it can only spend money
dedicated to the program
 No borrowing authority
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Disabilities
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How Does Social Security
Benefit People with
Disabilities & Their
Families?
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How to Earn Social Security
Insurance Coverage
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Payroll Tax: Workers & employers pay
FICA (Federal Insurance Contributions
Act) taxes
Workers earn “credits” to become insured
Multiple generations receive benefits from
wage earner’s record when worker
becomes disabled, retires or dies
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Retirement Insurance
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Retirees with disabilities
Spouses, including those with disabilities
Disabled adult children
Examples of people with increased reliance on Social
Security retirement benefits:
 Workers with uneven work history who retire early due
to poor health
 Parents of children with disabilities with reduced
earnings and savings due to caregiving
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Survivors Insurance
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May 2011
Minor children & spouses of
deceased workers and retirees
Disabled widow(er)s
Disabled adult children
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Disability Insurance
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May 2011
Disabled workers, their children &
spouses
Disabled adult children
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Essential Protection
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May 2011
Millions of families face disability
Adults with serious disabilities have
very low employment rate
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Disability & Poverty
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Poverty rates among workers with
disabilities: twice as high as others
who get Social Security
Social Security equals half/more of
TOTAL family income for about half
of disabled worker beneficiaries
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Better Than Private Insurance
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May 2011
Adjusted for inflation
Covers children of disabled workers
Available to workers with
disabilities & chronic health
problems
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Disability Insurance:
Qualifying Groups
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More than 8.3 million disabled workers
(includes veterans)
More than 1.8 million children
160,000 spouses of disabled workers
More than 950,000 disabled adult children
More than 240,000 disabled widow(er)s
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Disabled Adult Children
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May 2011
Eligible all 3 types of benefits
Severe disability before age 22,
significant work limitations & single
Based on earnings record of parent who
is disabled, retires or dies
Rarely leave program
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Social Security Helps Young
Workers and Their Families
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May 2011
Disability or death can happen at any
time to people of all ages
Disability & survivors benefits provide
guaranteed income for spouse &
children
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Younger Workers: Eligibility
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Need fewer “credits” than older workers to
qualify
Disability: Must prove significant work
limitations
Benefit amount depends on worker’s
previous earnings
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Families of Younger Workers
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Benefits for spouse & children as
dependents of disabled worker or
survivors of deceased worker
Survivors: Benefit amount based on what
worker would have received if had
reached full retirement age
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Consortium for Citizens with
Disabilities
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Value of Social Security
Young workers with spouse and 2
children – approximate value
 “Life” insurance = $476,000
 Disability = $ 465,000
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How are Social Security &
SSI Different?
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Social Security Act
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May 2011
Title II: Old Age, Survivors, &
Disability Insurance (OASDI)
(called Social Security)
Title XVI: Supplemental Security
Income (SSI)
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Different Programs:
Title II & Title XVI
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Title II: OASDI
Social Security
payroll taxes
Workers
Other beneficiaries:
spouses & children
Medicare
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May 2011
Title XVI: SSI
General revenues
from federal budget
Aged & blind and
disabled adults &
children
Needs-based
Medicaid
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You Can Receive Both
Social Security and SSI
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May get Social Security disability &
SSI at same time – must have VERY
limited income & resources (for SSI)
May get one benefit now & another
later
Beneficiaries may work, but rules
about allowable earnings (“work
incentives”) differ for each program
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Disabilities
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How is Social Security
Funded?
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Is There Enough Money?
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Question everyone asks!
Solvency = ability to pay legal obligations
Facts support no immediate crisis
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Source of Benefits
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FICA (Federal Insurance
Contributions Act) = Payroll Taxes
Creates Social Security Trust Fund
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What Are the Trust Funds?
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Technically 2 trust funds:
 Old Age and Survivors Insurance
 Disability Insurance
People with disabilities get benefits
from both
Policymakers treat as one fund
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Paying Current Benefits
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“Pay as you go” system
Most money coming in pays current
beneficiaries
Very low administrative costs
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Paying Future Benefits
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Collect more now than need: build
surplus (reserve) for future benefits
Use surplus to buy U.S. Treasury bonds
Put bond interest in Trust Fund
Redeem bonds later when not enough
incoming payroll taxes to pay full
benefits
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Investing Surplus
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May 2011
U.S. Treasury bonds = safest
investment in world
Not invested in stock market
U.S. government bears risk, not
individuals
Program will NOT go bankrupt!
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Current & Future Surplus
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May 2011
Surplus = invested assets or Trust Fund
reserves
$2.6 trillion by end 2010
Will continue to grow 2011-2022
Projected to reach $3.7 trillion by 2022
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Projected Shortfall Over 75 Years
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May 2011
Less than 1 percent of Gross Domestic
Product (GDP)
Another measure = 2.22 percent of
taxable payroll
Previous Trustees’ forecasts = similar
projection
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No Immediate Problem
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May 2011
Long term planning = 75 years
Social Security Trustees project future
benefits based on payroll tax income &
reserves
Need to start addressing problem, but
no need to change basic program design
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Future Projections
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May 2011
Pay 100% of scheduled benefits
 2011 Trustees Report: until 2036
Pay reduced benefits (if no action
taken)
 2011 Trustees Report: 77% of
scheduled benefits starting 2037
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Future Projections –
DI Trust Fund
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2011 Trustees Report: DI Trust Fund
exhausted in 2018
Solution: Reallocation of payroll tax
rate between OASI and DI Trust Funds
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May 2011
Reallocation has occurred before
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Future Challenges
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What will it take to fix system’s long term
funding shortfall?
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Wide range of options to phase in gradually
Has Congress ever stepped in to strengthen
Social Security’s financial future?
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May 2011
YES. In 1983 to plan for retirement of “baby
boomers” which helped create current surplus
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Possible Options: Solvency
2 approaches, but could
combine options from each:
 Increase revenue
 Cut benefits
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Possible Options: Solvency
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May 2011
Multiple choices within each
approach
Different timelines
Different target populations
Will cover in more detail in June 1
Webinar
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Disabilities
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Increase Revenue:
Some Options
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Increase payroll tax for employers & employees
Raise limit on maximum taxable income (2011:
$106,800)
Tax earnings above taxable maximum
Extend covered employees (e.g. state & local now
excluded)
Earmark specific taxes for new funding stream
Diversify investments beyond U.S. Treasury bonds
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Disabilities
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Cut Benefits: Some Options
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May 2011
Modify cost of living adjustment: reduce
annually OR adopt new measure
Raise normal and/or early retirement age
Lengthen time period used to set level of
insurance benefits
Reduce payments for new beneficiaries
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What Lies Ahead?
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May 2011
Each potential change affects
Social Security’s future
No immediate crisis
Possible to meet long term needs
with modest adjustments over next
20-30 years
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A Checklist for People with
Disabilities & Their
Families
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Our Principles
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Do not change basic design based on
payroll taxes
Preserve as social insurance for disability,
survivors & retirement
Guarantee monthly benefits adjusted for
inflation
Preserve current & future benefits
Restore program’s long term funding
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More General Principles
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Social Security is NOT in crisis
Social Security changes should not be included in
deficit reduction legislation
The Social Security programs should not be included
in proposals that cap overall federal spending
Modest premium contribution adjustments, rather
than benefit cuts, should be used to address longterm solvency of the Social Security programs
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Our Questions
Do proposals:
 Change benefit formula?
 Change cost-of-living adjustments?
 Switch from “wage” to “price” index?
 Provide benefits for family members?
 Raise retirement age?
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Our Message
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Some change is necessary, but
nothing drastic now or later
Protect basic design
Require beneficiary impact
statement for each proposal
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Beneficiary Impact Statement
Analyze impact for each type of beneficiary
 Disabled workers/their dependents
 Retirees/their dependents
 Disabled adult children – dependents of
parents who retire, die or become
disabled
 Disabled widow(er)s
May 2011
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For More Information
To find fact sheets regarding Social
Security and disability, links to helpful
resources, or to access a recording of
this webinar, please visit
www.disabilityandsocialsecurity.org
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Join us for our next webinar
Current Social Security Reform
Proposals: How Would They Affect
People with Disabilities
Wednesday June 1, 2011
1:00 – 3:00 p.m. EDT
email lekman1@yahoo.com with
questions
May 2011
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Disabilities
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Webinar Sponsors
This webinar has been sponsored by the
Consortium for Citizens with Disabilities.
Funding was provided through a grant
administered by the National Academy
of Social Insurance and provided by the
Ford Foundation.
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Disabilities
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