Social Security Reform Fact Sheet

Background

People with severe disabilities are eligible for cash benefits under the Social Security Act: Title II includes the Old Age, Survivors, and Disability Insurance programs and Title XVI includes the Supplemental Security Income (SSI) program. Generally, Title II disability beneficiaries are eligible for the Title XVIII Medicare program; SSI beneficiaries are eligible for the Title XIX Medicaid program. Over 6 million people with disabilities receive Title II benefits. Over 5.4 million people with disabilities receive SSI benefits. Many people rely on their cash benefits for their daily needs and rely upon the medical benefits also available to them.

Solvency of the Social Security Trust Funds

The disability community has consistently raised concerns about Social Security reform proposals to address the long term solvency of the Social Security Trust Funds. Numerous bills have been introduced in several Congresses. In January 2001, the General Accounting Office issued a report that addressed some of the disability community’s concerns about the negative impacts many of the reform proposals would have on people with disabilities. In addition, in December 2001, the President’s Commission to Strengthen Social Security issued its final report which only briefly addressed issues regarding the Social Security Disability Insurance (DI) program and the SSI program. Throughout, the disability community has sought to educate Members of Congress and other policymakers about the importance of the Title II Old Age, Survivors, and Disability Insurance (OASDI) programs to people with disabilities and the potential impact of reform proposals on Title II beneficiaries with disabilities.

More than one-third of all Social Security benefit payments are made to over 17 million people who are non-retirees, including over 5 million disabled workers, nearly 1.5 million children of disabled workers, and over 750,000 disabled adult children covered by the survivors, retirement, and disability programs. Other non-retirees include non-disabled survivors and dependents. People with disabilities draw benefits from all parts of the Title II trust funds:

• Disabled workers and their dependents, including their disabled adult children, draw benefits from the Disability Insurance program;
• Retirees with disabilities draw retirement benefits;
• Disabled dependents of retirees, including disabled adult children, draw their benefits from the retirement program; and
• Disabled survivors, including disabled adult children and disabled widow(er)s, draw their benefits from the survivors program.

The Title II programs are insurance against poverty and are essential to the protection of people with disabilities. The programs are unique in providing benefits to multiple beneficiaries and across multiple generations under coverage earned by a single wage earner's contributions. Workers earn coverage for themselves and their family members through payment of Social Security taxes during their working years. The insurance protection they receive is targeted to prevent poverty in old age, in case of disability, or where there are dependent survivors after the death of the worker or retiree. Proposals that would partially or fully eliminate the current broad-based sharing of risk (social insurance) and replace it with the risks of private investment would be harmful to people with disabilities, because most privatization proposals result in substantial Social Security benefit cuts. Beneficiaries could no longer count on a guaranteed amount of benefits adjusted for inflation annually. Privatization would shift the risks of investment from the federal government back to the individual, resulting in a devastating impact on people with disabilities and their families. The basic safety nets of retirement, survivors, and disability insurance must be maintained.

In June 2004, the Congressional Budget Office released a report on the financial state of the Social Security Trust Funds, finding that the program will remain solvent longer than previously estimated. According to the report, the long-range deficit in Social Security is only about half as large as projected by the Social Security Trustees earlier in the year. In addition, the Social Security Trust Funds will be able to pay full benefits for almost 50 years, until 2052, a decade longer than previously projected.

Action Taken by Congress and the Administration

In his 2005 State of the Union address, President Bush argued that the Social Security system is in crisis and revealed some of the details of his proposal for privatizing a portion of the Social Security trust funds by creating private accounts for individuals. He indicated that, under his plan, workers would be allowed to put 4 percent of their wages into private retirement accounts rather than into the Social Security trust funds. He did not indicate how the losses from the trust funds would be paid for and he made no mention of what would happen to the benefits of the more than 1/3 of beneficiaries who are not retirees, including people with disabilities. Earlier that day, a senior Administration official had indicated that the losses of trust fund dollars from the diversion of funds into private accounts would result in benefit cuts for those workers. In addition, the official admitted that the private accounts would do nothing to restore solvency to the trust funds over the 75-year period. Further, Vice President Cheney acknowledged that the proposals would cost trillions of dollars over several decades, in transition and other costs.

Subsequently, the White House has indicated that the private accounts would be voluntary and would start gradually. The accounts would be invested in a mix of conservative bond and stock funds and a "life-cycle portfolio" would be available to shift investment allocations to lower-risk investments when individuals near retirement age. There would be fees for record keeping, which would be done by the government. Private accounts would not be available until retirement and individuals could not borrow against the funds in the account. Funds in the accounts could not be withdrawn all at once at retirement, but would have to be paid out over time. Individuals who do not choose personal accounts would receive traditional Social Security retirement benefits, "reformed to be permanently sustainable." The adjustments needed to make the system solvent could mean significant benefit cuts. Although President Bush was quoted in a Washington Post article on January 16 that he has no intention of making changes that would affect people who receive Social Security disability or survivor benefits, no further details are included in the White House fact sheet on the issue.

Further details of the proposal have not been released and the costs of the private accounts proposal were not included in the President’s budget proposal for FY 2006. The Center on Budget and Policy Priorities has estimated that the President’s proposal would add about $5 trillion to the federal debt by 2028.

Some Congressional Committees have begun hearings on the Social Security solvency issues. There has been no other Committee action on Social Security solvency issues in this Congress.

Recommendations

The Congress should carefully assess the possible impact of any Social Security reform proposals on people with disabilities who rely on Title II programs. Advocates believe that changes necessary to bring the trust funds into long-term solvency must not be so drastic as to undermine or dismantle the basic social insurance structure of the program. Eligibility and benefit levels for people with disabilities throughout must be protected. Congress should request a beneficiary impact statement on every major proposal, or component of a proposal, under serious consideration.

Relevant Committees

House Ways and Means Committee
Senate Finance Committee

For more information, please contact The Arc and UCP Disability Policy Collaboration at 202-783-2229.

Revised 2/2005

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