Millions of Americans rely on Social Security Disability Insurance (SSDI) benefits. With the Disability Insurance (DI) Trust Fund on course to become insolvent by the close of 2016, numerous policy changes have been proposed to ensure that the SSDI program continues to serve eligible applicants. Some proposals would result in an increase in the number of funds entering the DI Trust Fund. Here is a brief look at a few of those proposals.

Payroll Tax Rate and Taxable Earnings Cap

The Social Security program is funded by payroll taxes deducted from employee paychecks and matched by employers. The current payroll tax rate is 6.2% on wages up to $118,500. Many proposals suggest increasing the tax rate, immediately or gradually over time, or increasing the taxable earnings cap.

Reallocation of Revenue Between Social Security Trust Funds

There are two different Social Security trust funds that are financed from FICA payroll taxes; the Old Age and Survivors Insurance (OASI) Trust Fund, which pays retirement and survivors benefits, and the Disability Insurance (DI) Trust Fund, which pays disability benefits. Currently 5.3% of payroll taxes are allocated to the OASI Trust Fund and 0.9% to the DI Trust Fund.

Congress reallocated the payroll tax revenue between the OASI and DI trust funds eleven times in the past. Some propose that reallocation is once again the best solution. Research suggests that a 0.5% reallocation, which would be gradually decreased through 2024, could keep the DI Trust Fund solvent until 2033.[1]

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Cover All Newly Hired State and Local Government Workers

As the Social Security program now stands many State and local government employees are exempt from paying the Social Security portion of FICA taxes. Mandating that newly hired State and local government employees pay the Social Security portion of FICA taxes would result in a new source of funds to the DI Trust Fund.

Other proposed policy changes include increasing the retirement age, lowering the cost of living adjustment and taxing all salary reduction plans. It is essential that all proposals be examined, and the most efficient combination of reforms implemented, to allow the SSDI program to continue to serve eligible beneficiaries for years to come.

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[1] Social Security Administration, Office of the Chief Actuary, “Potential Reallocation of the Payroll Tax Rate Between the Disability Insurance (DI) Program and the Old-Age and Survivors Insurance (OASI) Program – INFORMATION,” July 28, 2014,

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