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What can be done to keep SSDI solvent

On Behalf of | Dec 14, 2012 | Social Security Disability

While the fiscal cliff does not directly affect Social Security disability insurance (SSDI) benefit payment, as they have their own funding source, the program is facing its own financial problems, the most pressing of which is the exhaustion of the trust fund.

A longer term issue could be cuts to the program if Congress avoids the “fiscal cliff” and embarks on the process of a budget reconciliation that will take months to complete and may restructure benefit and entitlement programs, like SSDI, as they attempt to cut $300 billion from health spending.

The 2011 Trustees Report projects that the Disability Insurance Trust Fund will be exhausted by 2018 and possibly earlier, due to a large COLA in 2011. The trust fund provided part of the benefits paid by the program, but this is not the same as being completely out of funds.

The majority of the benefits are paid out of revenue derived from taxes, and that will provide the program with the ability to pay 86 percent of scheduled benefits.

These numbers are based on the current situation, but Congress could amend the revenue scheme. Steve Goss states, “Sustainable solvency can be restored for the Disability Insurance program with a 16-percent reduction in benefits, a 20-percent increase in revenue, or some combination of these changes.”

Source: House Committee on Ways and Means, Subcommittee on Social Security, “Securing the Future of the Social Security Disability Insurance Program,” Testimony by Steve Goss, Chief Actuary, Social Security Administration, December 2, 2012