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disability-insuranceSince the OASDI (Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds) annual report to Congress was released last month, the Social Security Disability Income (SSDI) program has been in the headlines. The report suggested that under two scenarios disability reserves would be insufficient to pay full benefits beginning late 2016 and continuing through sometime in 2023.

Projected shortfall

According to the high cost and intermediate cost scenarios, and without other action, in 2016 payments to SSDI beneficiaries will be reduced to 81 percent of the full benefit. The trustees estimate that by 2023, due to additional reserve interest earnings, reserves would once again be sufficient to restore full benefit amounts.

More beneficiaries than predicted

There are more SSDI recipients (11 million) today than what actuaries projected in the 1970s. The increase is due to demographics and program administration. Women have a higher incidence of disability than men. Additionally, a higher percentage of women are in the workforce now than was originally projected. That combination of events contributes to more disability beneficiaries. Social Security trustees projected four percent of working adults would be disability beneficiaries however in 2014 almost six percent of working adults were collecting disability benefits.

Administratively, lawmakers mandated that the disability program apply a broader definition of eligibility and gives greater weight to the evaluation of an applicant’s medical providers than to the judgments of Social Security medical experts when evaluating a claim for benefits.

Solutions

It is highly unlikely beneficiaries will see the projected benefit reduction, especially in an election year. But the solution may be a patch rather than a reform. Social Security trustees have repeatedly requested reforms rather than relying on temporary measures that only delay the inevitable problem.

President Obama requested that some funds from the retirement program be transferred to sustain the disability program. Another temporary fix is to reallocate a portion of the payroll tax from the retirement program to the disability program as Congress did in 1994, the last time the disability program was in a similar position.

More permanent solutions include financially rewarding employers to retain employees with disabilities and requiring occupational rehabilitation as a condition to applying for disability benefits.

The SSDI controversy is likely to come up when discussing individual disability income insurance with your clients. With the lack of long-term political action to fix the SSDI program, individual disability insurance continues to be fundamental to a complete and secure financial plan. DIS offers disability products from top carriers. Working with a DIS representative, you can confidently present affordable products and benefit configurations that work for your client. Request a disability insurance quote today.

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