Sunday, January 27, 2013
"Trust fund" for SSDI reported down to 40 months, although the actual mechanism is very complicated
Fox News is reporting that Social Security’s disability trust fund could run out of money (relative to what is necessary to pay promised benefits) in 40 months. The story was mentioned on George Stephanopoulos’s ABC Sunday morning “This Week” show on ABC Jan. 27, although the fact that it referred to disability was conveniently left out. Jim Angle’s story on Fox is here.
The SSDI disability fund provides an income supplement to people who meet certain disability requirements and who have paid into the system through FICA taxes. The system is set up in such a way that eventual retirement benefits would not be reduced. It is all explained at Wikipedia here. The benefit is somewhat complicated in structure and can lead to earlier Medicare eligibility. The SSD payments currently are not reduced by other income. Note that while it is FICA-funded, it is a separate benefit from normal retirement (essentially) and could obviously attract attention of politicians for entitlement reform. Because the funding source is shared with retirement, it certainly sounds like it can be politically sensitive in budgeting.
On the other hand The Supplementary Security Income (SSI) is based strictly on financial need (an “ultimate” means test), and is administered by Social Security but not financed by the Trust Fund (linked from wiki above).
“My Social Security Attorney” has a video explaining the two programs (which are very different) here.
The familiar retirement trust fund will begin to redeem assets in 2020, and current calculations call for it to run short in 2033, in just twenty years. There was some mechanism to reimburse Social Security for some of the revenue lost by the two-year payroll tax holiday, which has expired. The best account of the details is still here and appears to be recently updated. But because Social Security is reported to use outdated actuarial formulas, the year of reckoning even for the retirement fund could come much sooner, perhaps by 2025.
Note, on my GLBT blog yesterday, I mentioned the Social Security reference explaining when legal spouses can start Social Security benefits based on spouses's earnings. As of yet, this is not possible for same-sex couples.