Last month, Health and Human Services Secretary Sylvia Mathews Burwell told those attending a news conference that the Social Security disability program is nearly broke. While the long-term solvency of both Medicare and the Social Security program has seen some improvements in recent years, it is the “imminent depletion of a fund for disabled workers” that’s in trouble and it highlights the risks that must no longer be delayed. Addressing the rising costs of the government programs is one of the biggest problems, according to Burwell.
Last week, an annual report cemented the earlier claims. Released via the trustees of both programs, problems that the long-term deficits associated with the two largest benefit programs would be slightly smaller than forecast last year are alarming. The report also warns that the Social Security disability-insurance program will exhaust its reserves late next year. This will immediately trigger a 19% cut in benefit payments.
For his part, Treasury Secretary Jacob Lew insists the shortfall be addressed by Congress by reallocating the share of payroll taxes that fund the disability-insurance trust fund and the much larger retirement-benefit reserves. “It is vital that Congress move forward to maintain the integrity of this critical program sooner rather than later,” said Mr. Lew. For their part, Republicans in Congress have made it clear that no transfers will be made unless other steps are simultaneously made in order to improve Social Security’s finances. Increasing eligibility among women and an aging workforce have contributed to an increase in the number of disability beneficiaries. Close 6 percent of workers who were eligible for disability insurance claimed those benefits in 2013, which is an increase from 4% in 2001.
Charles Blahous, a Republican trustee for the programs, is not surprised. He said the crisis facing the disability-insurance program simply illustrated the dangers of waiting to act to address the intermediate solvency of Social Security. He said, “there are no real big surprises. We have lost another year to inaction.”
As it stands now, the program is projected to run a deficit of 1.3% this year, the largest ever faced by the program. Worse, trustees project that by 2022, the retirement-benefit program will run a deficit even after accounting for interest earnings, leading it to exhaust its reserves by 2035.
Once those trusts run out of reserves, the government can only pay benefits only from revenues it collects, largely from taxes, which would result in benefit cuts or delayed payments.
Further complicating matters is the directed attention of those in Congress. With the ongoing Iran Nuclear deal testimony and a host of other “right now” problems, this is not likely to get the attention it richly deserves until the crisis worsens.
If you’re concerned about your benefits, contact our team of estate planning lawyers today. We can provide guidance and show you solutions that you may be unaware of.