Who Pays for Social Security Disability?
Social Security disability benefits are financed through payroll taxes paid by employees and employers calculated as a specific percentage of employee wages. These taxes are used to finance programs that pay cash and health benefits to people who are eligible for old age, survivors and/or Social Security disability programs.
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History
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President Franklin D. Roosevelt (FDR) signed the Social Security Act of 1935, during the Great Depression, to pay benefits to U.S. workers who were no longer able to work due to old age or infirmity. In 1956, Congress added eligibility for individuals with disabilities.
Significance
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According to the Social Security Administration 2009 Annual Performance Plan, as much as 75 percent of the U.S. population participates in Social Security programs, either as one of the 165 million wage earners or the 60 million beneficiaries. Social Security disability programs provide an economic safety net to U.S. citizens not able to work due to old age or disability.
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Types
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Social Security Old Age and Survivors Insurance (OASI), Disability (SSDI) and Medicare programs are considered entitlements to "insured" U.S. citizens who are wage earners and are "entitled" to receive benefits. Supplemental Security Income (SSI) and Medicaid are a combination of State and Federal programs that pay benefits to individuals who do not qualify for the entitlement programs but who meet eligibility requirements based on disability and low income earning potential.
Qualification
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Qualification for Medicare health benefits begins at 65 years of age or when an individual is determined eligible for Social Security Disability Insurance (SSDI) based on: (1) individual payroll tax contributions; and, (2) an individual's inability to earn wages due to a severe disability. Qualification for Supplemental Security Income (SSI) and Medicaid does not require previous tax contributions but is based on an individual's disability, old age or care for a disabled dependent who are not able to work for earned wages.
Benefits
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SSDI cash benefits are progressively reduced as an individual earns taxable wages up to the annual maximum amount of earnings, at which a person may lose eligibility for both income and Medicare health benefits. SSI cash income and Medicaid benefits are discontinued for individuals who earn wages or acquire assets up to a maximum amount in the preceding month.
Future
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According to government and economic experts, current Social Security benefits are not sustainable as the baby-boom generation reaches retirement age. Tax revenues from wage earners compared to benefit expenditures is expected to result in deep deficits for Medicare by 2019 and for Social Security by 2041.
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