Employer Contribution to Social Security Disability Insurance Debated

A recent article (found here: http://www.lifehealthpro.com/2013/03/14/could-employers-help-cut-ssdi-claims) discussed some of the various Social Security Disability Insurance cost-cutting measures currently being proposed and discussed.

According to Stephen Goss, chief actuary of the Social Security Administration, the Disability Insurance Trust Fund is expected to no longer be adequate by 2016.  At that point, without any changes, the program will only be able to pay 79% of promised benefits.  According to Goss, the budget problems are not necessarily systemic or permanent.

“[R]estoring sustainable solvency for the DI program will not require continually greater benefit cuts or revenue increases,” he said.  “A one-time change to offset the drop in birth rate and past shifts in other ‘drivers’ is all that is needed to sustain the DI program for the foreseeable future.”

Goss testified to Congress that the reason for the budget problems is simply the dramatic drop in the post-baby boomer generation birth rate—a demographic inequity that will right itself in time.

Until then, though, a number of creative changes have been proposed—ones that reach beyond simple benefit reductions or beneficiary premium (or worker tax) increases.

Currently, the SSDI program is funded through a flat-rate payroll tax on all employers and employees.  But one idea is to change that framework.  In the flat-rate system, “employers do not bear the cost associated with a disabled worker who stops working and becomes [an SSDI] beneficiary,” noted one policymaker.

He suggests requiring employers to pay a portion of their workers’ SSDI benefits, as is required in some countries.  Conceptually, this could encourage employers to keep workers at work—even those that might no longer be able to perform the same tasks as before—rather than pay benefits for former employees.  But critics of the proposal worry that this could discourage employers from hiring individuals with disabilities, or with higher risks of disability.

So, as the clock ticks down to the Trust Fund’s tipping point, lawmakers will have to balance all the policies in question, and come up with a solution that fixes the problem without unfairly harming workers.