How the Budget Deal Impacts Social Security Disability

How the Budget Deal Impacts Social Security Disability

A last-minute congressional budget deal will spare 11 million Social Security Disability beneficiaries from a 20 percent cut sometime in 2016 by transferring funds from the retirement and survivors’ trust fund.

The agreement also lifts the debt ceiling until March 2017 and averts a government shutdown – benefits which were enough for advocacy groups to reluctantly accept the deal.

The bill comes with provisions that tweak Social Security Disability, and eliminates a program that was allowing 20 states to award disability to certain applicants without requiring an independent medical evaluation.

According to the Congressional Budget Office, the Social Security provisions will save about $4 billion over the next decade. Congressional aides said that the savings will come from the medical evaluation requirement that slightly delays the receipt of new benefits for some applicants.

Paul Van de Water, of the Center on Budget and Policy Priorities, a liberal think tank, said that they’re pleased that they no longer have to worry about a big benefit cut at the end of 2016. Van de Water called the package a “reasonable compromise” given where everyone started out.

Reallocation of the Social Security Payroll Tax

Under the budget deal, a percentage of the revenue from the Social Security payroll tax is being reallocated to the disability insurance program.

The reallocation is about one-half of percentage point of the 12.4% payroll tax, counting the employer and employee shares from 2016 to 2018, which will extend the disability reserve until 2022, if not longer.

Without the changes, disability recipients were facing about a 20 percent benefit cut once the reserves ran out. Additionally, the deal expands Social Security’s anti-fraud programs, namely a program that roots out disability fraud.

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