Disability Benefits and Private Accounts -- Can They Co-exist?

The Boston College Center for Retirement Studies has published a research paper entitled "Financing Disability Benefits in a System of Individual Accounts: Lessons From International Experience." The study indicates that there are three predominate methods for dealing with disability benefits when private accounts are carved out of a Social Security system:

1. The Chilean Model, under which the capital in a newly disabled individual’s account is augmented by additional capital provided by a private insurer, such that the combined account balance is sufficient to finance a lifetime defined benefit stream prescribed by law.

2. The Swedish Model, under which government-financed disability benefits are paid up to a particular cut-off age (e.g. the retirement age, or an age close to the retirement age), and, in addition, the government finances contributions to each disabled individual’s account. Upon reaching the cut-off age, the disability benefit ceases, and the assets of the individual account are used to finance a stream of retirement income. A disabled individual’s replacement rate may increase or decrease upon reaching the retirement age, because disability benefits are defined by a formula, while old age benefits are a function of interest rates and mortality rates.

3. The Hungarian Model, under which the assets of a newly disabled person’s individual account are transferred to the PAYG system, and, in return, the PAYG system finances a lifetime defined benefit stream.

Grassley: "I have no plans to pursue these proposals"

The Chairman of the Senate Finance Committee, Charles Grassley, did not mince words in reacting to the proposals in the President's Budget Proposal to end the Lump Sum Death Payment and to cut off child's benefits to children age 16 to 18 who are not in school. Here are some quotes from the Associated Press:

The administration didn't consult with me on these proposals. Even if someone had, I'd be hard-pressed to give them a second look ... I can't see how ending a pittance for widows and widowers, and modest benefits for kids who have lost a parent, would be good policy decisions. ... I have no plans to pursue these proposals

Bush Wants to Cut Kid's Benefits

Deeply hidden away in President Bush's FY 2007 Budget is a proposal to eliminate children's benefits for children ages 16-18 who are not in school.

Bush Not Done With Privatization

According to Allan Sloan at the Washington Post Social Security privatization lurks hidden away in the President's FY 2007 budget. The budget assumes that Congress will pass the "personal" accounts that were the centerpiece of Bush's grand plan for Social Security, a plan that received little public support and a huge amount of criticism.

McCrery's Chances for Ways and Means Chair Increases

Jim McCrery is on the House Ways and Means Committee and the Chairman of the Social Security Subcommittee. From today's Washington Post:

Rep. Jim McCrery (La.) : McCrery took a major gamble by supporting Boehner [for House Majority Leader], as backing the wrong horse probably would have cost him the Ways and Means Committee chairmanship when Rep. Bill Thomas (Calif.) is term-limited out of the post after this Congress. Boehner's victory strengthens McCrery's status as the front-runner for the powerful chairmanship come 2007, assuming the GOP keeps its majority this fall.

SSA To Lose 1,900 Employees Under Bush Budget

The Baltimore Sun reports that the President's proposed budget for fiscal year 2007 would pare Social Security's workforce by 1,900 employees, at a time when the agency's workload is increasing rapidly.

CLE in Atlanta

The Institute of Continuining Legal Education in Georgia is sponsoring a CLE in Atlanta on March 2-3, 2006 at the Westin Hotel.

FY 2007 Budget: Workers Comp Offset To Change and LSDP To End

The President's Budget Proposal for Fiscal Year (FY) 2007 is out. The proposed budget would give a 5% increase in funding for Social Security's administrative budget. Despite this increase, the proposal projects that the average length of time to get a hearing decision from SSA will increase from 443 days to 467 days even though the proposal assumes a 2% productivity gain at OHA, which is probably unrealistic in any case but especially given implementation of E-DIB and the Commissioner's proposal.

The President proposes a number of changes in Social Security law, some of which will be controversial. The Proposal would alter worker's compensation offsets dramatically:

One proposal would replace the current, complicated reduction to DI benefits for beneficiaries in some States who also receive Workers Compensation benefits with a uniform offset that would affect all such beneficiaries for not more than five years. This simplified offset will reduce erroneous DI payments and the burden on claimants in making large repayments, and will save SSA $7 million a year in administrative costs.

The Budget Proposal would end the Lump Sum Death Benefit:

A third proposal will eliminate the lump sum death benefit that currently goes to surviving spouses and children who receive benefits under a deceased worker’s Social Security record. This one time payment of $255 no longer provides meaningful monetary benefit for survivors and is normally less than one month’s widow/widower benefits and children’s benefits. This small payment costs SSA $15 million to administer annually, which will be redirected to higher priority activities beginning in 2007.

Less controversially, SSI recipients would be allowed to save money for certain purposes:

The Budget promotes the Administration’s Ownership Society agenda among the low-income disabled. In 2007, SSA will launch the Disability Freedom Account demonstration project to help disabled Supplemental Security Income (SSI) beneficiaries save more money to pay for their first home, education, or other services needed to get back to work, or for assistive technologies to make their lives easier. Current SSI asset limits will be waived for these individuals. Certain SSI recipients who also receive Medicaid and self-direct their long-term care support services may also be eligible to participate in this demonstration.