Many older Americans have a straightforward plan for affording retirement: Work longer, or never stop working at all. But in fact, about 40 percent of the employed population will quit their jobs earlier than expected — and one of the main reasons is an unexpected disability.
The results can be devastating for economic security in retirement — lost income can force these early retirees to live off whatever savings they have accumulated, and to claim Social Security at the youngest possible age, 62, foregoing the higher benefits that come from delayed claiming.
But older workers who become disabled do have an important option to avoid that outcome. They can apply for Social Security Disability Insurance, a program that provides a substantial portion of their full retirement benefit.
Although retirees are by far the largest pool of Social Security beneficiaries, Social Security Disability Insurance serves a substantial group, 8.2 million people, with physical limitations or conditions like intellectual or mental disorders. About three-quarters of those workers are 50 or older, and they are disproportionately low-income. Disability income acts as a bridge to retirement that keeps a sizable share of those recipients out of poverty.
But the insurance program is at a crossroads. For years, applicants have faced very long backlogs before receiving a decision. And there has been debate in policy circles about the best way to modernize the decision-making process used by the Social Security Administration to decide whether to award benefits.
That debate spilled into public view recently, with reports that the S.S.A. had put the brakes on a plan to revamp the disability application process. The proposal would have made it more difficult for people over age 50 to be approved, and would have modernized an outdated occupational database that the agency uses to determine whether jobs are available that an applicant could perform.
A representative for the Office of Management and Budget told The New York Times last month in a statement that the administration is not working on changes to the way age is considered in weighing applications. But two people with direct knowledge of the effort said that soon after President Trump took office in January, Social Security was directed by the budget office to restart work on the plan, which was developed during his first administration. In addition, a notice about the rule-making process is still on the office’s website. The people requested anonymity because they were not authorized to speak about it.
Some experts believe the work will be resumed at some point — especially on the jobs database.
“What the administration is contemplating isn’t just a tweak, it’s a fundamental restructuring of the disability insurance system,” said Michelle Aliff, a vocational expert who testifies frequently in disability appeal hearings and, until earlier this year, served on an advisory committee to the Bureau of Labor Statistics.
The contemplated rule change — which would raise the minimum age where age is considered from 50 to 60 — set off alarm bells for disability insurance experts, who worry that would result in more rejections of vulnerable older Americans. Thirty-eight percent of the people who are denied Social Security disability are poor, according to research by David Weaver, an economist and a former associate commissioner at the Social Security Administration.
“If you get more benefit denials in the system, people are headed for hardship,” he said. “This idea that when they’re denied disability benefits, that somehow they’ll overcome all their health challenges and go back into the labor force and work at a high level, that’s really not the case.”
The occupational database hasn’t had a major update since the late 1970s. Until recently, it included now-obsolete jobs such as “directory assistance operator” and “pneumatic tube operator.” The update would add many new job types, especially in the services and technology sectors, and better reflect a trend toward less physical work across the economy.
An update to the database would improve the odds of approval for some disabled workers, and reduce those odds for others, experts say. For example, a worker with a mental illness might have better odds of receiving benefits if she has difficulty interacting with others in public. Meanwhile, a younger worker with a physical disability might be more easily denied, because more unskilled, sedentary clerical jobs are available in today’s economy.
“Truck drivers, tradespeople, factory workers and warehouse staff could be denied benefits because the data says there are jobs that match their abilities,” Dr. Aliff said. “It’s blue-collar workers that are going to be hit the hardest.”
Qualifying for disability is already difficult. One out of every three applicants is awarded benefits, according to S.S.A. data analyzed by the Center on Budget and Policy Priorities, a nonpartisan research institute. There has long been a very large backlog of applications — about 859,000 people were waiting for an initial decision on their application or an appeal hearing in November, according to the agency.
The earlier version of the rule-making plan also would have made it more difficult for applicants younger than age 60 to qualify, according to Mark Warshawsky, who spearheaded the proposal then as the S.S.A.’s deputy commissioner for retirement and disability policy. (The contemplated change would not affect current disability beneficiaries.)
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Trying to keep poverty at bay
Social Security was signed into law 90 years ago, in 1935, to replace lost wage income for seniors. In 1956, disability benefits were added for applicants age 50 or older; Congress removed the age restriction in 1960.
Disability benefit amounts are calculated using the same formula that determines retirement benefits. The monthly check is based on the recipient’s wage history; if workers become disabled before qualifying for full retirement benefits at age 67, they receive a benefit based on the full benefit that they have earned up to that point, as if they were retiring at their full retirement age. When they reach full retirement age, that benefit amount continues seamlessly as a retirement benefit. They also receive Social Security’s valuable annual cost-of-living adjustments. Another important benefit: S.S.D.I. recipients qualify for Medicare after receiving disability for at least two years.
Disability is funded mainly by a 1.8 percent payroll tax split between employers and employees; that money goes into a disability trust fund. The average disability benefit this year is $1,582 per month, substantially less than the $2,008 average for a retired worker, Social Security Administration data shows.
A separate program, Supplemental Security Income, provides disability benefits to very low-income people who are unable to work.
The disability program underscores the importance of Social Security’s protections that go beyond retirement income, Dr. Weaver said. Along with helping retired workers and disabled workers, Social Security may also pay benefits to their spouses and children; it also pays benefits to the surviving spouses and children of workers who have died.
“The program really is designed to help individuals who suffer a loss of earnings or family income at different points in their lives,” he said.
People who don’t get disability benefits tend to spend down whatever retirement savings they have and then claim retirement benefits at the earliest age possible — 62. That results in a permanent reduction of 30 percent in their monthly benefits, compared with a claim at full retirement age. Even when they receive disability benefits, 26 percent of beneficiaries live in poverty, according to the Center on Budget and Policy Priorities.
“It turns into a cascading series of problems,” said Kathleen Romig, director of Social Security and disability policy at the center.
The Social Security Administration could update the occupational database without taking on the question of age qualification directly, said Jack Smalligan, a senior policy fellow at the Urban Institute.
But his research finds that the overall proposed rule could decrease eligibility by 20 percent overall, and up to 30 percent among workers over age 50.
“Hundreds of thousands of disabled people could lose access to benefits over the next decade,” he said.
Dr. Warshawsky, an economist who is now a senior fellow at the American Enterprise Institute, argues that the U.S. labor market has evolved away from physically demanding occupations. That shift, he said, makes it possible for many disabled people younger than 60 to resume working.
“There really is no reason why people at age 50 or 55, if their disability is not severe and there’s no mental impediment, shouldn’t be able to return to work,” he said.
The revised age qualifications may be off the table for now, but some experts see the transition to a new occupational database as a necessity. The project has been underway for more than a decade at a cost of hundreds of millions of dollars.
Frank Bisignano, responding to questions during the Senate Finance Committee’s confirmation hearings for his nomination as the S.S.A. commissioner in March, said he was committed to making that project “a high priority.” The S.S.A. did not respond to requests for an interview with Mr. Bisignano.
“I’m not convinced that this is over,” Dr. Aliff said. “They may have stepped back for now, but they do have to do something about modernizing the vocational data.”
The decision to drop the plan for now may have been driven by political headwinds. Public opinion polling released this year by the National Academy of Social Insurance found strong recognition of the importance of disability benefits across political party lines, incomes and education levels.
“Social Security remains one of those rare issues that transcends partisan divides, even in divided times,” said Rebecca Vallas, the academy’s chief executive officer.
The post Social Security Disability, a Protection for Some Workers, Is at a Crossroads appeared first on New York Times.
