social security
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Social Security. Its Vital Role for Workers & Their Families. 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. - PowerPoint PPT PresentationTRANSCRIPT
Social Security
Its Vital Role for Workers & Their
Families
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
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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
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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
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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)
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 May 2011
Consortium for Citizens with Disabilities 6
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
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Disabilities 8
How Does Social Security Benefit
People with Disabilities & Their
Families?
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How to Earn Social Security
Insurance 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
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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
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Disabilities 11
Survivors Insurance
Minor children & spouses of deceased workers and retirees
Disabled widow(er)s Disabled adult children
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Disabilities 12
Disability Insurance
Disabled workers, their children & spouses
Disabled adult children
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Essential Protection
Millions of families face disability
Adults with serious disabilities have very low employment rate
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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
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Disabilities 15
Better Than Private Insurance
Adjusted for inflation Covers children of disabled
workers Available to workers with
disabilities & chronic health problems
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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
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 programMay 2011
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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
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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
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
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Disabilities 20
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Disabilities 21
Value of Social Security
Young workers with spouse and 2 children – approximate value
“Life” insurance = $476,000 Disability = $ 465,000
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Disabilities 22
How are Social Security & SSI Different?
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Disabilities 23
Social Security Act
Title II: Old Age, Survivors, & Disability Insurance (OASDI) (called Social Security)
Title XVI: Supplemental Security Income (SSI)
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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
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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
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How is Social Security Funded?
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Disabilities 27
Is There Enough Money?
Question everyone asks! Solvency = ability to pay legal
obligations Facts support no immediate crisis
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Source of Benefits
FICA (Federal Insurance Contributions Act) = Payroll Taxes
Creates Social Security Trust Fund
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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
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Paying Current Benefits
“Pay as you go” system Most money coming in pays
current beneficiaries Very low administrative costs
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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
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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!
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 May 2011
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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
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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
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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
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
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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
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Possible Options: Solvency
2 approaches, but could combine options from each:
Increase revenue Cut benefits
Possible Options: Solvency
Multiple choices within each approach
Different timelines Different target populations Will cover in more detail in
June 1 WebinarMay 2011
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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
bondsMay 2011
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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
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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
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Disabilities 44
A Checklist for People with Disabilities &
Their Families
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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
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 programsMay 2011 Consortium for Citizens with
Disabilities 46
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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?
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Our Message
Some change is necessary, but nothing drastic now or later
Protect basic design Require beneficiary impact
statement for each proposal
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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
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
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Join us for our next webinar
Current Social Security Reform Proposals: How Would They Affect People with DisabilitiesWednesday June 1, 2011 1:00 – 3:00 p.m. EDT email [email protected] with questions
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Webinar Sponsors
This webinar has been sponsored by the Consortium for Citizens with Disabilities. Funding was provided through a grant administered by the National Academy of Social Insurance and provided by the Ford Foundation.
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