Congressional Research Service Issues In Focus White Paper on Social Security Disability Insurance

WASHINGTON, April 16 -- The Congressional Research Service issued the following In Focus white paper (No. IF10506) on April 15, 2024, by income security analyst and social policy analyst Emma K. Tatem.

Here are excerpts:

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Social Security Disability Insurance (SSDI)

Overview

Social Security Disability Insurance (SSDI) is part of the Old-Age, Survivors, and Disability Insurance (OASDI) program, commonly known as Social Security. OASDI is a federal social insurance program that provides monthly cash benefits to insured workers and their eligible family members in the event of the worker's retirement, disability, or death. Workers obtain insurance protection by working for a sufficient period in jobs covered by Social Security and its payroll tax. The program's SSDI component provides benefits to insured workers who are below full retirement age and experience long-term, work-limiting disabilities (often referred to as disabled workers or SSDI worker beneficiaries). It also provides benefits to their eligible spouses and children. The Social Security Administration (SSA) administers OASDI.

Eligibility Requirements

To qualify for SSDI, a worker must (1) be below Social Security's full retirement age (FRA), which is 65-67, depending on year of birth; (2) be insured in the event of disability; (3) meet the statutory definition of disability; and (4) have filed an application for benefits.

To be insured in the event of disability, workers must have worked in Social Security - covered jobs for about a quarter of their adult lives and for at least five of the 10 years before disability onset. However, younger workers may qualify with less work experience based on their age. In 2023, about 160 million workers had sufficient work experience to qualify for SSDI in the event of disability.

To meet the statutory definition of disability, a worker must be unable to engage in any substantial gainful activity (SGA) due to any medically determinable physical or mental impairment that (1) is expected to result in death or (2) has lasted, or is expected to last, for at least 12 consecutive months. SSA uses an earnings limit to determine if a person's work activity constitutes SGA, which for 2024 is $1,550 per month for most workers and $2,590 per month for blind workers. These amounts are generally adjusted annually for average wage growth. In general, workers must have severe impairments that prevent them from doing any substantial work that exists in significant numbers in the national economy, taking into consideration their age, education, and work experience. The work need not exist in the immediate area in which the worker lives, nor must a specific job vacancy exist for the individual. Unlike workers' compensation (WC) or veterans' disability compensation, SSDI does not pay benefits for partial or short-term disabilities.

Spouses of disabled workers qualify for SSDI benefits if they are (1) age 62 or older, or (2) any age and care for eligible children who are under age 16 or have qualifying disabilities. Children of disabled workers generally qualify for SSDI benefits if they are unmarried and (1) under age 18, (2) age 18 to 19 and full-time students in grade 12 or below, or (3) age 18 or older and have qualifying disabilities that began before age 22.

Cash and Medical Benefits

In February 2024, Social Security provided $11.8 billion in benefits to about 8.4 million SSDI beneficiaries, including 7.3 million disabled workers, 86,000 spouses of disabled workers, and 1.1 million children of disabled workers (Table 1). The average monthly SSDI benefit was about $1,537 for workers, $419 for spouses, and $493 for dependent children.

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Table 1. SSDI Beneficiaries, February 2024

Source: SSA, "Monthly Statistical Snapshot, February 2024," Table 2.

Notes: Components may not sum to totals due to rounding.

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Workers' initial SSDI benefits are based on their career-average earnings in covered jobs, indexed to reflect changes in national wage levels. The benefit formula is progressive, replacing a greater share of career-average earnings for low-wage workers than for high-wage workers. The benefit for a spouse or child of an SSDI worker beneficiary is up to 50% of the worker's basic benefit amount. Following entitlement, SSDI benefits are generally adjusted each year to account for inflation through cost-of-living adjustments.

SSDI dependent benefits are subject to family maximum provisions, which limit the total amount of benefits that can be paid on a worker's earnings record. SSDI benefits may be offset if disabled workers also receive WC or certain other public disability benefits and the combined amount of their SSDI and other disability benefits exceeds 80% of their average current earnings before their disabilities began.

SSDI benefits begin five full consecutive months after a worker's disability onset date. This requirement is known as the five-month waiting period and does not apply to workers with amyotrophic lateral sclerosis (ALS). Disabled workers also qualify for Medicare after 24 months of entitlement to SSDI (29 full consecutive months after their disability onset dates). This requirement is known as the 24-month waiting period and does not apply to disabled workers ages 65 to FRA or to workers below age 65 who have ALS or end-stage renal disease.

Termination of Benefits

In general, SSDI benefits continue until a worker (1) dies, (2) attains FRA, (3) medically improves, or (4) returns to work (i.e., earns above the SGA limit). Most disabled workers who leave the SSDI rolls do so because they attain FRA. Disabled workers who attain FRA are transitioned automatically from SSDI to OASI; however, this change generally does not affect the amount of Social Security benefits paid to them or their dependents.

Working While on SSDI

SSDI worker beneficiaries are generally afforded a trial work period (TWP), which allows them to test their ability to work for up to nine months (not necessarily consecutive) within a rolling 60-month period without having their benefits suspended or terminated. During the TWP, SSDI worker beneficiaries may earn any amount and receive full benefits, even if their earnings exceed the SGA limit. In 2024, any month in which a worker's earnings exceed $1,110 is counted toward the cumulative nine-month TWP. This amount is adjusted annually for average wage growth.

Disabled workers who exhaust the TWP enter an extended period of eligibility (EPE), during which they can continue to receive benefits for months in which their earnings are at or below the SGA limit. During the first 36 months of the EPE, known as the reentitlement period, benefits are effectively suspended for months in which earnings exceed the SGA limit. SSDI worker beneficiaries who earn above the SGA limit after the 36-month reentitlement period are considered no longer disabled, and their benefits are terminated. Under a three-month grace period, benefits are paid for the first month in which earnings exceed the SGA limit during the EPE and the next two months. Disabled workers who are terminated due to earnings above SGA but continue to have qualifying impairments retain Medicare coverage for at least 57 months following the end of the 36month reentitlement period (93 months after the TWP).

Program Integrity

SSA periodically reevaluates the medical status of SSDI worker beneficiaries by conducting continuing disability reviews (CDRs). Workers with impairments that may improve are scheduled for CDRs at least once every three years, and those with the most severe impairments are scheduled for CDRs at least once every five to seven years. SSA also performs work CDRs to determine if SSDI worker beneficiaries are earning above the SGA limit and if their benefit entitlement should continue.

Financing

Social Security benefits and administrative costs are financed primarily by payroll taxes levied on covered workers' earnings, which are credited to the Disability Insurance (DI) and Old-Age and Survivors (OASI) Trust Funds. The total Social Security payroll tax rate is 12.4% of a worker's earnings: 1.8% for the DI Trust Fund and 10.6% for the OASI Trust Fund. The payroll tax is levied on earnings up to an annual limit, which for 2024 is $168,600. The trust funds also receive income from the taxation of a portion of some Social Security benefits and from interest earned on U.S. securities credited to the trust funds for years in which total income exceeded total cost.

In 2023, total Social Security trust fund income was $1.351 trillion, with about $184 billion (or 14%) credited to the DI Trust Fund. That same year, total trust fund cost was $1.392 trillion, with $155 billion (or 11%) debited from the DI Trust Fund. The trust funds held a combined $2.788 trillion in asset reserves at the end of 2023, with $147 billion (or 5%) credited to the DI Trust Fund. The Social Security trustees project that the trust funds on a hypothetical combined basis will be able to pay benefits in full and on time until 2034. Individually, the OASI Trust Fund reserves are projected to be depleted in 2033, while the DI Trust Fund is projected to have sufficient income and reserves to pay benefits in full and on time through at least 2097.

Characteristics of Disabled Workers

SSDI provides benefits primarily to older workers. In December 2022, about 79% of disabled workers were ages 50 to FRA. The most common diagnostic group for disabled workers ages 50 to FRA was musculoskeletal disorders, while the most common diagnostic group for those below age 50 was mental disorders (Figure 1).

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Figure 1. SSDI Worker Beneficiaries, by Diagnostic Group and Age Group, December 2022

Source: SSA, Annual Statistical Report on the Social Security Disability Insurance Program, 2022, Table 24.

Notes: "Nervous System" includes sense organ diseases; "Musculoskeletal Disorders" includes connective tissue diseases.

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For more information on SSDI, see CRS Report R44948, Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI): Eligibility, Benefits, and Financing.

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The white paper is posted at: https://crsreports.congress.gov/product/pdf/IF/IF10506