Social Security Reallocation as Part of Budget Through 2022 - Melvin
Social security reallocation as part of the budget deal remains disability trust fund solvent in Utah. Reach the Salt Lake City Law Office of Mel A. Cook at 801.746.5075
Logo 801-746-5075
9571 South 700 East, Suite 104 Sandy, , UT 84070
Call: 801-746-5075

Social Security Reallocation as Part of Budget Deal Keeps Disability Trust Fund Solvent Through 2022

by Melvin Cook

  • Legacy of a Legal Icon

    Legacy of a Legal Icon 

  • COVID-19 and Religious Liberty -- A New Supreme court Case

    COVID-19 and Religious Liberty — A New Supreme court Case  Read more...

In the past I have posted several times regarding the two separate trust funds in the Social Security program.

Many people may not know it, but when payroll taxes are deducted from your paycheck, part of it goes to the Social Security Old Age and Survivors Insurance Trust Fund (OASI) and part of it goes to the Disability Insurance Trust Fund (DI).

The reason there are two separate trust funds is probably historical. The retirement and survivors’ trust fund was established in the 1930’s when FDR was president. Although many advocates of the social security program at the time wanted a disability component to social security, the disability program was not enacted until 1956.

A better known fact is that the social security trust funds are on a trajectory to become insolvent. Many people maybe did not realize that the DI fund was on track to be depleted by the end of 2016, at which time benefits would need to have been cut by 20%. The retirement trust fund is on a slower insolvency track, slated to become insolvent by 2036 at which time only 80% of benefits will be able to paid out unless reforms are made.

The average disability beneficiary receives about $1,165 per month in cash benefits, hardly luxurious but a helpful lifeline for people with serious impairments that prevent them from working. For about 80% of such beneficiaries, these benefits represent their only source of income. Thus, a 20% reduction would have represented a hardship.

In the past, when the two trust funds have gotten out of balance, Congress has reallocated funds between the two. This has happened about 11 times in the past. About half of the time reallocations have gone from the DI fund to the OASI fund and about half of the time reallocations have gone from the OASI fund to the DI fund.

In the 1980’s there was a reallocation from the DI fund to the OASI fund, which put the DI fund out of balance. The DI fund is now on a trajectory to become insolvent much sooner than the OASI fund.

As part of the recent budget deal negotiated between Congress and the White House, there will be a reallocation that will allow the DI fund to remain solvent through 2022.

One interesting question is whether or not the two funds should be combined, to avoid the problems that occur when they become out of balance. The two programs are intended to be fairly seamless. In fact, disabled workers, upon reaching retirement age, continue to receive the same amount of benefits. In many cases they do not even realize that their disability benefits have converted to retirement benefits. It used to be the case that all that changed was the color of the check – from green to blue. But now most people receive their benefits through direct deposit.

Information for this post was gleaned from an article in Salon online by Nancy Altman on November 1, 2015. I realized when I looked at the title that this is a liberal leaning magazine. But it did have some good information and  I tried to keep this post neutral. I try to post from a variety of sources and points of view.

This material should not be construed as legal advice for any particular fact situation, but is intended for general informational purposes only. For advice specific to any individual situation, an experienced attorney should be contacted.

Contact a Salt Lake City Attorney Committed to Protecting Your Rights

When it comes the family law and social security disability, each client and case is different. It is also important to select an attorney with the experience, skills and professionalism required to address your legal issues. To learn more, contact the Salt Lake City law offices of Melvin A. Cook and schedule an initial consultation to discuss your case.

    * fields are required