The Social Security Disability Insurance program (SSDI) is funded through a trust fund, with SSDI and old age retirement programs having different trust funds. Payroll taxes are collected to fund both disability and old age retirement benefits. The collected taxes are put into these trust funds, which are also kept separate from other federal funds, so the money is available to pay out claims for each program.
Unfortunately, the SSDI trust fund was scheduled to run out in 2016, and the program would have become pay-as-you-go. This means benefits could be paid out only from the money coming in through current payroll taxes. This would have resulted in 11 million people facing a 20 percent across the board cut in Social Security disability benefits.
Fortunately, reform has occurred and cuts have been prevented as part of the bipartisan budget deal created by federal legislatures.
The New Federal Budget Deal Helps to Prevent SSDI Benefit Cuts
The new budget deal allows for a shift of funds from the old age retirement program into the disability fund. Beginning next year, .57 percent of the 12.4 percent payroll taxes that are collected will be diverted from Social Security's retirement fund into the disability fund. This means the disability fund will now receive 2.37 percent total from payroll taxes collected. This change was sufficient to provide money for benefits until 2022.
The budget also imposes some potential reforms to SSDI that aims to make the program solvent for longer. The reforms include expanded use of investigation units to track down fraud, and an increase in penalties for fraud. Additionally, a medical review of applications will now be required before benefits are awarded.
This change marks a big shift, and is the first significant reform since 1983. While it is good news that the benefit cuts were prevented, however, it is bad news that lawmakers made it even more difficult for people to collect Social Security benefits. Getting approved is already extremely difficult for applicants, and now the additional medical review requirement presents yet another hurdle. Los Angeles Social Security disability lawyers should be consulted for advice about what the medical review will entail and for assistance in successfully completing applications so you can maximize the chances of being awarded benefits.