What Social Security Reform Could Mean for Your Disability Benefits

In August, Social Security turned 87 years old. And by the estimation of some, America’s most popular government program is a little creaky and showing its age.

Social Security benefits have not been expanded in 51 years. A bill to inject new life into the program by expanding Social Security benefits and shoring up the program’s finances may come up for a vote in the U.S. House of Representatives before the end of the year.

Authored by John Larson (D-CT), Social Security 2100: A Sacred Trust seeks to enhance Social Security benefits in a number of ways:

Increased Benefits

• Benefit bump for current and new Social Security beneficiaries. The bill provides an increase for all beneficiaries (those receiving retirement, disability or dependent benefits) equivalent to an average of 2% of benefits to make up for what Larson calls “inadequate Cost-of-Living Adjustments (COLA) since 1983.”
• Protection against inflation. The Social Security 2100 act would change the annual cost-of-living-allowance formula to what is known as the Consumer Price Index for the Elderly (CPI-E), rather than the current index that the Social Security Administration (SSA) uses for its calculation—the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Social Security advocates say the CPI-E lines up more precisely with the spending habits of those earning Social Security benefits.
• Protection for low-income workers. “Five million seniors currently live in poverty. No one who paid into the system over a lifetime should retire into poverty,” Larson says. The new minimum benefit will be set at 25% above the poverty line and would be tied to wage levels to ensure that the minimum benefit does not fall behind.
• Improves Social Security benefits for widows and widowers.
• Ends the 5-month waiting period to receive disability benefits, so workers with impairments would no longer have that wait. This is especially important for those with severe disabilities.
• Provides caregiver credits toward Social Security wages to ensure caregivers are not penalized in retirement for taking time out of the work force to care for children or other dependents.
• Extends Social Security dependent benefits for students to age 26.
• Increases access to Social Security dependent benefits for children who live with grandparents or other relatives.
• Requires the SSA to mail annual statements to all workers. The bill mandates that the SSA mail annual statements showing the FICA contributions workers make from their paychecks and projections for their benefits in the future. Currently the Social Security Administration only makes this information available on its website.
• Prevents unwarranted closures of SSA field offices. The bill will improve customer service by making it more difficult to close field offices, which many Americans rely on to file claims and discuss questions about their benefits.
• Improves access to legal representation for people seeking disability benefits.

Strengthening the Trust Fund

• Everyone would pay the same payroll tax rate regardless of income. At present, payroll taxes are not collected on an individual’s wages over $147,000. This legislation would apply the payroll tax to wages above $400,000 so a high income earner would pay the same rate as someone earning $50,000 a year. This would make a significant contribution toward the program’s solvency, making up more than half of the projected shortfall in the Social Security Trust Funds.
• Establish a Single Social Security Trust Fund. At present there are technically two trust funds. The Old-Age and Survivors (OASI) Fund pays retirees, and the Disability Insurance (DI) Fund pays Americans who have disabilities. Social Security 2100 would combine the OASI and DI trust funds into one Social Security Trust Fund “to ensure that all benefits will be paid,” Larson says.

Larson’s bill has ambitious goals and is sure to meet with resistance from conservatives in Congress. However, it appears that members of both political parties agree that Social Security needs attention after more than eight decades.

It remains to be seen what fixes both sides can agree on.