I've been looking into the question of what happens if Congress is deadlocked, as it may be, on a fix for the possible exhaustion of the Social Security Disability Insurance Trust Fund. I'm encountering some interesting issues. If we actually go over the precipice and the Disability Insurance Trust Fund runs out of money, it's going to be a mess. The shortfall in the Disability Insurance Trust Fund will vary from month to month since FICA collections vary from month to month. One or two months a year there may be little or no shortfall and some other months there may be a 30% or greater shortfall. There is also the substitution problem. I'll go into this in much more detail later but recipients of Disability Insurance Benefits (DIB) who are 62 or older are also entitled to Retirement Insurance Benefits (RIB). They don't get paid both, just the higher amount. Normally, the DIB is higher than the RIB but if the DIB is reduced because the Disability Insurance Trust Fund is short of money, the RIB will often be larger. That would be a messy computational problem since the number of people affected by this would vary from month to month and because shifting them to RIB would itself have an effect upon the amount available to pay everyone eligible for DIB. I'm sure that computers could solve this problem but it wouldn't be easy since the computers have never been programmed for the task and the agency isn't brimming with computer programmers who have nothing else to do.
What I wonder is whether Social Security could start routinely charging benefits in a dual eligibility situation first against the Retirement Insurance Trust Fund and only paying the difference out of the Disability Insurance Trust Fund. That would significantly reduce the amount paid out of the Disability Insurance Trust Fund.
The interesting thing is that the Social Security Act really doesn't speak to the question of how benefits are to be charged between the Disability and Retirement Insurance Trust funds when a claimant is dually eligible. To this point, normally 100% has been charged to the Disability Insurance Trust Fund but I don't think the statute requires that result. This is the closest that the Social Security Act comes to dealing with the issue:
42 U.S.C.A. §402 ...
(k)(3)(A)
If an individual is entitled to an
old-age or disability insurance benefit for any month and to any other
monthly insurance benefit for such month, such other insurance benefit
for such month ... shall be reduced, but not below zero, by an amount equal
to such old-age or disability insurance benefit (after reduction under
such subsection (q) of this section)....
(k)(4): Any individual who, under this section [which has to do with benefits paid from the Retirement Insurance Trust Fund] and
section 423 [DIB], is entitled for any month to both an old-age insurance
benefit and a disability insurance benefit under this title shall be
entitled to only the larger of such benefits for such month, except
that, if such individual so elects, he shall instead be entitled to only
the smaller of such benefits for such month.
This section uses the word "entitled" in contradictory ways. It first talks of a person being "entitled" to both RIB and DIB but then says that such a dually "entitled" person is only "entitled" to one benefit. How can you be dually "entitled" if you're only "entitled" to one benefit? The only reasonable way to interpret this is that that the word "entitled" was used in two different ways, which is poor legislative drafting but we have to deal with the statute as it is. At first, the word "entitled' is used to mean "eligible for" but at the end it is used to mean "paid for." The intent is that a person does not receive both the RIB and the DIB, only the higher of the two benefits even though he or she is technically entitled to both.
Because the most the claimant can receive is the higher of the two benefits, does that mean that the benefits must be paid 100% out of the trust fund of the higher benefit? I don't think the statute speaks to this question. The statute speaks to how much the claimant is paid, not how is charged against each trust funds.
When Social Security first started to implement this provision,
mainframe computers were in their infancy. All of Social Security's computers at that time put together probably had less computing power than my cell phone does today. In the late 1950s, splitting the benefit payment between two different trust funds might have required manual computation on a case by case basis. The simpler thing to do was to charge the benefits solely against the Disability Insurance Trust Fund.
One might think that if an individual is paid reduced RIB before their full retirement age that they must receive reduced RIB for the rest of their life but that's not the way Social Security's has interpreted the Act. To the best of my knowledge, there's only one situation now in which the dually eligible are paid the RIB first. That's done where a person eligible for DIB is over 62 and has a workers compensation offset. The workers compensation offset would reduce the DIB but not the RIB. The claimant can take the early retirement benefit. We call this the
RIB-DIB election. The retirement benefit is 25% less per month than the full DIB but in most cases it's still more than the DIB would be after the workers compensation offset. After a claimant who has made the RIB-DIB election reaches full retirement age, they're no longer subject to the 25% reduction in their retirement benefits because they went on early RIB. The dual eligibility eliminates the 25% actuarial reduction. This has been Social Security's practice for decades.
If you're not really familiar with Social Security law, you might object that there's no way a person can be dually eligible for DIB and RIB without filing a claim for each benefit. However, this objection is easily dealt with. The claim form for DIB says at the top: "I apply for a period of disability and/or all insurance benefits for which I am eligible under Title II and Part A of the Social Security Act, as presently amended." Thus, a claim for DIB is also a claim for RIB. But what if the claimant was ineligible for a retirement benefit at the time he or she filed the claim for disability benefits because he or she was less than 62 at the time? The Social Security Act says:
42 U.S.C. §402(j)(2): An application
for any monthly benefits under this section filed before the first
month in which the applicant satisfies the requirements for such benefits
shall be deemed a valid application (and shall be deemed to have been
filed in such first month) only if the applicant satisfies the requirements
for such benefits before the Commissioner of Social Security makes
a final decision on the application ...
If a claim for DIB is also a claim for RIB and there has been no "final decision" on that RIB application, there's no problem with saying that the RIB claim remains alive and can be acted upon at a later date. The award certificate issued at the time a DIB claim is approved does say "This benefit is the only benefit you can receive from us at this time" but that's hardly a final determination denying a retirement claim. What I'm suggesting here is Social Security's practice. When a person who is drawing DIB reaches full retirement age, Social Security doesn't waste time contacting him or her to take a claim for RIB. The claimant is automatically transferred to RIB since they filed a claim for RIB at the same time they filed a claim for DIB. (By the way, there's an interesting technical question about whether a person remains entitled to DIB after achieving full retirement age but let's leave that issue for another day.)
The bottom line here is that this is simply a question of how one construes statutory language that's a lot less than crystal clear. When the statute uses the key word "entitled" in two different ways in the same sentence it's hard to say there's any plain meaning to that sentence. I don't think that what I'm talking about does any violence to the Social Security Act. It's just an interpretation. I won't belabor it but I've looked at the legislative history and I didn't see anything that explains how Congress intended that benefits would be charged to differing trust funds in dual eligibility situations.
What I'm suggesting can be done without changing any of Social Security's regulations since they don't speak to the issue. All that would be required would be some minor changes in Social Security's POMS manual, some changes in Social Security's bookkeeping programs which probably wouldn't be that difficult since something close to this is already being done when there's a RIB-DIB election, and a press release.
If Social Security did this, could Congress or someone else sue and get it overturned? They could try but they would have a real
standing problem, that is, the Courts would ask, in effect, "Who are you to sue over this? How have you been affected?" Merely saying "I don't like what you're doing" or "I think what you're doing is illegal" or "I'm a member of Congress" or "I'm on Social Security retirement benefits and maybe someday this will make the Retirement Trust Fund run out of money" probably won't enough to give one standing. Even if a Plaintiff gets past the standing issue, they have to get past an even bigger problem, the deference required under the
Chevron doctrine for an agency's reasonable interpretation of a statute. Is the interpretation I'm suggesting unreasonable or is it just one of at least two possible interpretations of an ambiguous statute? This wouldn't be easy to challenge.
Congress could try to pass a bill blocking this interpretation but such a bill could be filibustered in the Senate or vetoed by the President.
There's a real problem that I haven't discussed so far. It may not be enough to solve the Disability Insurance Trust Fund's problem. The predicted shortfall in the Disability Trust Fund under the
Intermediate projection is about 20% while only
24% of DIB payments are made to those between 62 and 66 (doublecheck my math since the only figures given are the number at each age and the average benefit amount for each age). However, paying the RIB first still leaves the Disability Trust Fund responsible for at least 25% of the total benefit paid for claimants who go on disability benefits at or before age 62. If they go on disability benefits after they turn 62, the reduction is less. However, what I've talked about so far isn't the only dual eligibility situation. There are other claimants who are eligible for DIB plus one or more other benefits paid out of the Retirement and Survivors Insurance Trust Fund, such as widows and widowers benefits, husbands and wives benefits, mothers and fathers benefits and disabled adult child benefits. I doubt that those other dual eligibility situations would completely take up the slack but I just don't know. I don't think anyone will know unless Social Security's actuaries run the numbers. Also, the Intermediate projection for the Disability Trust Fund is just that, a projection. Last year and so far this year, the numbers are a bit better than the projection. Even a modest improvement over the projection might be enough. Of course, any worsening of the numbers would take things in the opposite direction. There's also the issue of whether any change would be applied only prospectively. If the change I'm suggesting were applied retrospectively, even for a few years, the change in the Disability Insurance Trust Fund balance would be dramatic.
I can't say what the political effects would be if Social Security did this. Certainly, Congressional Republicans would protest but I don't know if even Fox News could get traction on this issue. It's so damned technical. I wonder how many readers have gotten this far in reading this blog post and can really follow what I'm saying. I wonder if Congressional Republicans would even be unhappy if this issue was taken off the table. It's not like it's an issue that their base really cares about. The ideas they have put forward so far on the Disability Insurance Trust Fund seem vague and confused.
I hope the Administration has the audacity to do this. The Disability Insurance Trust Fund may not be at the top of the agenda for the President or Congress at this moment but a year from now it probably will be. If you think about what a mess it will be if the Disability Insurance Trust Fund runs out of money, what I'm suggesting may start to sound reasonable.
