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July 01, 2014

Commission-Proposed Resolution Adopted by ABA House of Delegates

(Note: The pdf for the issue in which this article appears is available for download: Bifocal Vol. 35, Issue 6.)

The following Resolution, proposed by the Commission on Law and Aging, was adopted by the ABA House of Delegates at the ABA Annual meeting in August 2014.

Resolution 115: To urge Congress to reallocate payroll taxes between the Old Age and Survivors Insurance (OASDI) Fund and the Disability Insurance (DI) Fund to assure solvency of the DI program.

Without Congressional action, income and the disability trust fund will be insufficient to pay current disability insurance (DI) benefits sometime in 2016 and the SSA would be forced to cut DI benefits to less than 80% of current levels. A straightforward remedy to this problem is reallocation between the OASDI Trust Fund and the DI Trust Fund. Congress has done this 11 times in the past. While it has been a common method to resolve temporary imbalances in the funds, there is a great likelihood that polarized political agendas will target the current imbalance as an opportunity to attack the disability insurance program. This resolution will give the ABA a strong footing to play a constructive role in that debate before the next Congress begins.

Since the program’s establishment, the number of disabled workers receiving DI benefits has grown significantly. This growth was expected and projected as far back as 1994. Ninety-four percent of the growth in DI beneficiaries between 1980 and 2010 is the result of three factors:

  • substantial growth in the U.S. population;
  • the baby boomers aging into their high-disability years; and
  • women entering the workforce in large numbers.

Smaller drivers of growth in DI benefit recipients have been

  • the increase in the Social Security retirement age, and
  • the economic downturn, which according to the SSA’s The Chief Actuary, accounted for about 5% of the program’s growth. However, while the economic downturn boosted applications for benefits, the percentage of applicants awarded benefits has actually declined significantly during the economic recession, from 39% in 2007 to just 33% in 2011. These statistics suggest that applicants for benefits who did not meet the Social Security Act’s strict disability standard were screened out.

While the drivers for growth were predictable and reasonable, they nevertheless provoke political acrimony about long-term solvency of the Social Security system. The current need to reallocate funds is an issue of short-term solvency, not long-term solvency. Regardless of reallocation, the long-term solvency of the Social Security system will reach a crisis point in the mid-2030s. Congress will have to find a solution before then. Opposing the current reallocation need will only create an unnecessary, artificial crisis of solvency right now for the Disability Trust Fund.

The resolution urges Congress to reallocate payroll taxes between the OASDI Trust Fund and the DI Trust Fund to assure solvency of the DI Trust Fund past 2016. The way this would work is as follows:

  • Currently, of the 6.2% payroll tax that goes to Social Security, 5.3% goes to OASI and 0.9% goes to the DI trust fund. Shifting the allocation to 4.8% and 1.4%, respectively, for two years, and then tapering back to the current distribution over the next twelve years, would provide sufficient funding to pay full benefits in both programs through 2033. The reallocation to the DI Trust Fund will have two-year impact on the projected insolvency date of the OASI trust fund, moving the date from 2035 to 2033. Congress knows it must act before the 2030s to address the long-term solvency of the system. The reallocation does not significantly change that reality.

This proposed policy is consistent with existing ABA policy on Social Security. Of the ABA’s 15 Social Security policies, 12 address issues of eligibility and appeals and two address funding issues. The last two are directly relevant to this proposal and consistent with it:

  • A 2005 policy supports continuation of the federal Old Age, Survivors, and Disability Insurance program and preservation of the Social Security Trust Funds and long-term solvency of the program.
  • A 1990 policy opposes any legislation that would cut social security tax rates and convert the financing of social security to a “pay-as-you-go” system.

While these two policies address the importance of funding and the long-term solvency of the Social Security Trust Funds, they do not address the reallocation of payroll tax revenues, between the trust funds. The proposed policy builds upon and strengthens existing policies without changing them.

Read more about the approved Resolution 115 online. ■