Saving Disability Insurance for Future Workers
A Rutgers School of Management and Labor Relations scholar recommends ways to make the federal disability insurance program financially viable
Social Security’s Disability Insurance Trust Fund was running out of money, heading toward depletion by the end of 2016. In October, Congress and President Obama reached a budget agreement that temporarily – until 2022 – reallocates Social Security payroll tax revenue from the trust fund for retired workers to the trust fund that pays disability benefits.
Crisis averted, but not solved long term.
That’s why the McCrery-Pomeroy SSDI Solutions Initiative, a project by a bipartisan, nonprofit budget education organization, released a volume this week filled with ideas on how to improve and strengthen the federal disability insurance program from experts nationwide, including John F. Burton Jr., a Rutgers School of Management and Labor Relations professor emeritus.
Burton has long studied the connection between federal disability insurance and workers’ compensation programs. In a study that tracks the increase in SSDI payments (financed by employer and employee contributions) and the decrease of payments via workers’ compensation (financed by insurance premiums paid by employers), Burton suggests ways to rebuild SSDI funds and stem a significant shift since 1990 away from workers’ compensation payments to more SSDI payouts.
“The pressure is off, but there is still an SSDI dedicated tax that is not generating enough income to cover ongoing benefit payments,” Burton said. “Clearly, there are reasons to get this straightened out.”
In the report, Burton and co-author Xuguang (Steve) Guo, an assistant professor of management at Cal Poly Pomona and a Ph.D. graduate from Rutgers School of Management and Labor Relations, suggest a few ways to ensure that workers’ compensation programs are tapped more widely for employees with disabilities that result from injuries in the workplace. The proposals also aim to help strengthen the financial health of the SSDI program, which helps workers with disabilities, whether or not their disabilities resulted from work injuries. Here are two key recommendations in their paper, “Improving the Interaction Between the SSDI and Workers’ Compensation Programs”:
Experience rate the SSDI program. Workers’ compensation and unemployment insurance rates for employers rely on experience rating formulas. That means if an employer has more injuries on the job for which it pays out workers’ compensation benefits, the premiums for those benefits go up. “It’s an incentive to improve safety,” Burton said.
However, there is no experience rating for federal disability payments, and Burton and Guo argue that a similar experience rating formula be established to encourage safer workplaces. In response to concerns that such a test would lead employers to avoid hiring workers with past injuries and illnesses, employees with previous injuries and diseases due to the workplace or military service would not be included in experience rating formulas, Burton said.
“It’s not clear why employers wouldn’t want to do it,” Burton said. “They support it under workers’ compensation and get rewards when they improve their record.”
Change the qualifying rules. Qualifying tests, also known as offset provisions, used to coordinate workers’ compensation and SSDI benefits vary in states. For example, reverse-offset rules that allow a reduction of workers’ compensation benefits for workers also receiving federal disability insurance remain in 15 states, including California, Florida and New Jersey.
Many states have made it more difficult to qualify for workers’ compensation payments, resulting in federal disability insurance covering more injured workers. Burton and Guo suggest when workers qualify for both workers’ compensation and SSDI that workers’ compensation be the primary payer if the injury or illness is the result of a work injury. They recommend:
- eliminating the reverse-offset provision
- requiring all states workers’ compensation programs to provide the Social Security Administration with electronic data for all cases that pay workers’ compensation benefits to ensure a fair allotment of both workers’ compensation and SSDI payments to eligible workers
Burton and Guo’s study is among 12 in the McCrery-Pomeroy SSDI Solutions Initiative volume released this week. Former Congressmen Jim McCrery (R-LA) and Earl Pomeroy (D-ND) launched the McCrery-Pomeroy SSDI Solutions Initiative, a bipartisan effort to identify potential improvements to the SSDI program. It is a project of the Committee for a Responsible Federal Budget, a bipartisan, nonprofit organization committed to educating the public about fiscal policy that affects everyone.
“Though the bipartisan budget act of Congress in October 2015 punted the issue down the field, there still are a number of areas ripe for improvement within the SSDI program,” said Corbin Evans, the committee’s legislative and engagement associate. “The hope is we can encourage government to actually govern when there’s not a crisis and make improvements before they are absolutely needed.”
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