Social Security

1. Social Security Its Vital Role for Workers & Their Families

2. Social Security • 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 Consortium for Citizens with Disabilities

3. Social & Family Insurance • Workers share risk of common life events • Each worker’s record provides benefits for different family generations, even young workers • Guaranteed monthly payment Consortium for Citizens with Disabilities

4. Social Security Insurance • 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 Consortium for Citizens with Disabilities

5. Current Design: The Positives • 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) Consortium for Citizens with Disabilities

6. Social Security & The Deficit • 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 Consortium for Citizens with Disabilities

7. Social Security & The Deficit • 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 Consortium for Citizens with Disabilities

8. How Does Social Security Benefit People with Disabilities & Their Families? Consortium for Citizens with Disabilities

9. How to Earn Social SecurityInsurance Coverage • 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 Consortium for Citizens with Disabilities

10. Retirement Insurance • 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 Consortium for Citizens with Disabilities

11. Survivors Insurance • Minor children & spouses of deceased workers and retirees • Disabled widow(er)s • Disabled adult children Consortium for Citizens with Disabilities

12. Disability Insurance • Disabled workers, their children & spouses • Disabled adult children Consortium for Citizens with Disabilities

13. Essential Protection • Millions of families face disability • Adults with serious disabilities have very low employment rate Consortium for Citizens with Disabilities

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 Consortium for Citizens with Disabilities

15. Better Than Private Insurance • Adjusted for inflation • Covers children of disabled workers • Available to workers with disabilities & chronic health problems Consortium for Citizens with Disabilities

16. Disability Insurance:Qualifying Groups • 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 Consortium for Citizens with Disabilities

17. Disabled Adult Children • 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 Consortium for Citizens with Disabilities

18. Social Security Helps Young Workers and Their Families • Disability or death can happen at any time to people of all ages • Disability & survivors benefits provide guaranteed income for spouse & children Consortium for Citizens with Disabilities

19. Younger Workers: Eligibility • Need fewer “credits” than older workers to qualify • Disability: Must prove significant work limitations • Benefit amount depends on worker’s previous earnings Consortium for Citizens with Disabilities

20. Families of Younger Workers • 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 Consortium for Citizens with Disabilities

21. Value of Social Security Young workers with spouse and 2 children – approximate value • “Life” insurance = $476,000 • Disability = $ 465,000 Consortium for Citizens with Disabilities

22. How are Social Security & SSI Different? Consortium for Citizens with Disabilities

23. Social Security Act • Title II: Old Age, Survivors, & Disability Insurance (OASDI) (called Social Security) • Title XVI: Supplemental Security Income (SSI) Consortium for Citizens with Disabilities

24. 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 Different Programs: Title II & Title XVI Consortium for Citizens with Disabilities

25. You Can Receive Both Social Security and SSI • 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 Consortium for Citizens with Disabilities

26. How is Social Security Funded? Consortium for Citizens with Disabilities

27. Is There Enough Money? • Question everyone asks! • Solvency = ability to pay legal obligations • Facts support no immediate crisis Consortium for Citizens with Disabilities

28. Source of Benefits • FICA (Federal Insurance Contributions Act) = Payroll Taxes • Creates Social Security Trust Fund Consortium for Citizens with Disabilities

29. 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 one fund Consortium for Citizens with Disabilities

30. Paying Current Benefits • “Pay as you go” system • Most money coming in pays current beneficiaries • Very low administrative costs Consortium for Citizens with Disabilities

31. Paying Future Benefits • 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 Consortium for Citizens with Disabilities

32. Investing Surplus • 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! Consortium for Citizens with Disabilities

33. Current & Future Surplus • 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 Consortium for Citizens with Disabilities

34. Projected Shortfall Over 75 Years • Less than 1 percent of Gross Domestic Product (GDP) • Another measure = 2.22 percent of taxable payroll • Previous Trustees’ forecasts = similar projection Consortium for Citizens with Disabilities

35. No Immediate Problem • 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 Consortium for Citizens with Disabilities

36. Future Projections • 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 Consortium for Citizens with Disabilities

37. Future Projections – DI Trust Fund • 2011 Trustees Report: DI Trust Fund exhausted in 2018 • Solution: Reallocation of payroll tax rate between OASI and DI Trust Funds • Reallocation has occurred before Consortium for Citizens with Disabilities

38. Future Challenges • What will it take to fix system’s long term funding shortfall? • Wide range of options to phase in gradually • Has Congress ever stepped in to strengthen Social Security’s financial future? • YES. In 1983 to plan for retirement of “baby boomers” which helped create current surplus Consortium for Citizens with Disabilities

39. Possible Options: Solvency 2 approaches, but could combine options from each: • Increase revenue • Cut benefits Consortium for Citizens with Disabilities

40. Possible Options: Solvency • Multiple choices within each approach • Different timelines • Different target populations • Will cover in more detail in June 1 Webinar Consortium for Citizens with Disabilities

41. Increase Revenue: Some Options • 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 Consortium for Citizens with Disabilities

42. Cut Benefits: Some Options • 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 Consortium for Citizens with Disabilities

43. What Lies Ahead? • 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 Consortium for Citizens with Disabilities

44. A Checklist for People with Disabilities & Their Families Consortium for Citizens with Disabilities

45. 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 program’s long term funding Consortium for Citizens with Disabilities

46. More General Principles • 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 long-term solvency of the Social Security programs Consortium for Citizens with Disabilities

47. 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? Consortium for Citizens with Disabilities

48. Our Message • Some change is necessary, but nothing drastic now or later • Protect basic design • Require beneficiary impact statement for each proposal Consortium for Citizens with Disabilities

49. 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 Consortium for Citizens with Disabilities

50. 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 Consortium for Citizens with Disabilities