Social Security Changes

1
Social Security Changes

• How Might They Affect People with Disabilities
  Their Families?

2
Social Security Insurance

• Retirement - insures against poverty in
  retirement
• Survivors - insures dependents when worker dies
  or retires
• Disability - insures against loss of ability to
  work due to disability

3
People with Disabilities

• May receive all 3 types of Social Security
  benefits
• Family members also eligible
• Disabled adult children often move among
  programs

4
Disabled Adult Children

• Severe disability before age 22, significant work
  limitations single
• Qualify when parent is disabled, retires or dies
• Rarely leave program

5
Retirement Insurance

• Retirees with disabilities converts at normal
  retirement age
• Spouses, including those with disabilities
• Disabled adult children
• Also
• Workers with uneven wages due to poor health
• Parents of children with disabilities

6
Survivors Insurance

• Minor children spouses of deceased workers and
  retirees
• Disabled widow(er)s
• Disabled adult children
• For young families life insurance when worker
  dies at young age

7
Disability Insurance

• Disabled workers, their children spouses
• Disabled adult children
• For young families disability insurance beyond
  what they can afford to buy

8
Current Design The Positives

• Once eligible, beneficiaries receive set monthly
  payment
• Adjusted yearly for inflation
• Move among 3 programs work history, age,
  eligibility category
• Same benefit formula all programs

9

• How Does Social Security Help People with
  Disabilities Their Families?

10
Not just retired workers

• Over 1/3 monthly benefit payments for 17 million
  non-retirees

11
Social Family Insurance

• All workers share risk of common life events
• Each workers record provides benefits for
  different generations of family even young
  workers
• Guaranteed monthly payment

12
Essential Protection

• Millions of families face disability
• Adults with serious disabilities have very low
  employment rate
• Families of workers who become disabled need
  guaranteed income

13
Why not private insurance?

• Generally NOT
• Adjusted for inflation
• Designed to cover children of disabled workers
• Available to workers with disabilities other
  health problems

14
Disability Poverty

• 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

15

• How Does Social Security Protect Young Workers
  Their Families ?

16
Benefits Available Now

• Disability survivors benefits are guaranteed
  income for spouse children
• Both life events can happen at any time to people
  of all ages

17
Value of Social Security

• For young workers with spouse and 2 children
• Life insurance policy 403,000
• Disability policy 353,000

18
How to earn insurance

• Workers employers pay FICA Federal Insurance
  Contributions Act taxes
• Workers earn credits for eligibility
• Multiple generations receive benefits off wage
  earners record when worker becomes disabled,
  retires or dies

19
Younger Workers Disability

• Need fewer credits than older workers to
  qualify
• Must prove significant work limitations
• Amount depends on workers previous earnings
• Benefits for both spouse children

20
Younger Workers Survivors

• Need fewer credits than older workers to
  qualify
• Amount based on workers average lifetime
  earnings
• Benefits based on what worker would have received
  if reach normal retirement age
• Benefits for both spouses children

21

• How is Social Security Funded?

22
How are benefits paid?

• FICA Federal Insurance Contributions Act
  payroll taxes
• FICA goes into Social Security Trust Fund

23
What are the Trust Funds?

• Technically 2 trust funds
• Old Age and Survivors Insurance
• Disability Insurance
• People with disabilities get benefits from both
• Policymakers treat as 1 fund

24
Paying Current Benefits

• Pay as you go system
• Most money coming in pays current beneficiaries
• Very low administrative costs

25
Whats big concern?

• Is there enough money to pay future Old Age,
  Survivors Disability Insurance benefits?
• Solvency ability to pay legal obligations
• NOT issue for Supplemental Security Income SSI

26
Paying Future Benefits

• Collect more now than need build surplus for
  future benefits
• Use surplus to buy U.S. Treasury bonds
• Put bond interest in Trust Fund
• Redeem bonds later when not enough payroll taxes
  to pay benefits

27
Investing Surplus

• Treasury bonds safest investment in world
• Not invested in stock market
• Government has risk, not individuals
• Program will NOT go bankrupt!

28
Is problem immediate?

• Long term planning 75 years
• Need to start addressing problem, but no need
  change basic program design
• Congressional Budget Office CBO projections
  full reduced benefits

29
Congressional Budget Office

• Pay full benefits using payroll tax income until
  2020
• Pay full benefits using payroll tax income
  redeeming Trust Fund bonds until 2052
• Pay reduced benefits using payroll tax income
  starting 2053

30
Future Challenges

• What will it take to fix systems long term
  funding shortfall?
• Fewer workers in future paying taxes to support
  each person getting retirement benefits
• In past, Congress improved strengthened Social
  Securitys financial future able to do so again
  without changing current design

31

• How Will Individual Private Accounts Affect
  Social Security?

32
The Issue

• Should people be allowed to divert portion of
  taxes from Trust Fund for private accounts?
• Even proponents say private accounts will NOT fix
  programs long term funding

33
Social Security The Facts

• Pays multiple family members beneficiaries
  across generations
• Entitles eligible beneficiaries to guaranteed
  monthly payments
• Calculates benefits based on one workers
  earnings
• Makes automatic cost-of-living-adjustments to
  protect against inflation

34
Private Accounts The Facts

• Increase personal risk
• Reduce guaranteed benefits
• Increase government borrowing
• Increase national debt
• Will not fix Social Securitys long term funding

35
How to fix Social Security

• Some ideas
• Increase payroll taxes
• Raise current retirement age
• Reduce monthly benefits
• Ask Congress for money

36
What lies ahead?

• Each potential change affects Social Securitys
  future
• No immediate crisis
• Possible to meet long term needs with modest
  adjustments over next 20-30 years

37

• A Checklist Effect of Proposed Changes on People
  with Disabilities Their Families

38
Our Principles

• 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 programs long term funding

39
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?

40
Private Accounts People with Disabilities

• Who will have access? When?
• Will adequate income remain for dependents
  survivors?
• Must people buy private disability insurance?

41
Private Accounts People with Disabilities

• Government Accountability Office, January 2001
  GAO-01-35
• Studied 5 plans to change Social Security
• Conclusion compared to current program, people
  with disabilities would get much lower benefits
  under plans using payroll taxes to create
  individual private accounts
• Disabled retired workers would find it more
  difficult than most nondisabled retired workers
  to replace lost benefits with other sources of
  income such as earnings.

42
Our Message

• Some change is necessary, but nothing drastic
• Protect basic design
• Require beneficiary impact statement for each
  proposal

43
Beneficiary Impact Statement

• Analyze impact for each type of beneficiary
• Disabled workers/their dependents
• Retirees/their dependents
• Disabled adult children dependents of parent
  who retire, die or become disabled
• Disabled widow(er)s

44

• How are Social Security SSI Disability Programs
  Different?

45
Social Security Act

• Title II Old Age, Survivors, Disability
  Insurance Social Security
• Title XVI Supplemental Security Income SSI

46
Different Programs Title II Title XVI

• Title II OASDI
• Social Security payroll taxes
• Workers
• Other beneficiaries spouses children
• Medicare

• Title XVI SSI
• General revenues from federal budget
• Aged blind and disabled adults children
• Needs-based
• Medicaid

47
Receiving Different Benefits

• May get Social Security disability SSI at same
  time must have very limited income resources
• May get 1 benefit now another later
• Beneficiaries may work, but rules about allowable
  earnings differ for each program