Social Security Disability Insurance

The Social Security Act was signed into law in 1935. It established a system of retirement benefits for older persons and their survivors. With respect to a disability program, despite discussion about the need for a disability insurance program at that time, it was not included in the original Social Security Act. For twenty years there was a long discussion in both Congress and the executive agencies regarding a program for disabled workers. A series of incremental, compromise laws in 1952 and 1954 paved the way for the final passage of SSDI in 1956, which in itself was a compromise; the legislation limited benefits to individuals fifty and older, and included benefits for adult disabled children of retired or deceased insured workers, if the child was disabled before age 18; it did not, however, include benefits for the dependents of disabled workers. Other provisions in the 1956 amendments included a 6-month waiting period for receipt of disability benefits and an insured status requiring a recent and substantial attachment to the work force, both of which still exist today.

The Social Security Amendments of 1958 expanded Social Security coverage to include benefits for dependents of disabled workers and is known as Title II. Further changes were made with the enactment of the Social Security Amendments of 1960. These amendments removed the minimum age requirement of 50 years for disability insurance beneficiaries. The amendments also established a 9-month trial work period during which a disabled beneficiary could test his/her ability to work without suffering a loss of benefits.

The next major change that occurred in the program was a liberalization of the definition of disability. The Social Security Amendments of 1965 deleted the requirement that the impairment be of “long-continued and indefinite duration” and substituted in its place a requirement that the impairment “be expected to last for a continuous period of not less than 12 months.” With these changes and an increasing public awareness of the disability insurance program, the size and complexity of the program grew significantly.

The Social Security Administration, an independent federal agency, administers the SSDI program.

The Social Security system is funded through payroll taxes, known as the Federal Insurance Contributions Act (FICA), which is imposed on both employees and employers. The employer pays 6.2% and the employee pays 6.2% on the first $110,100 in 2012 of an individual’s earned income in a calendar year. This limit, known as the Social Security Wage Base, goes up each year based on average national wages. Self-employed individuals pay the full 12.4%. Everyone pays an additional 1.4% for Medicare coverage, for which there is no earned income limit.

Note: In 2011 only the amount workers pay into the Social Security trust fund will temporarily drop from 6.2% of taxable wages to 4.2%. For self-employed workers, the Social Security tax rate will drop from 12.4% to 10.4%. Currently, this reduction will continue through the end of 2012. By law, the trust fund will receive taxes as if the tax rates were 6.2 percent for employees and employers each, and 12.4 percent for self-employed workers. The reduction in 2011 tax revenue due to lower tax rates will be made up by transfers from the general fund of the Treasury to the trust funds. The reduction will end March 2012.

A special trust fund, the Social Security Trust Fund, was created for these dedicated tax revenues. The Social Security Trust Fund has two separate components: the retirement trust fund and the disability trust fund. Contrary to popular belief this money is not put in trust for the individual employees who are paying into the system, but is used to pay existing beneficiaries. Any excess is invested in U.S. Treasury bonds and is in reserve in the Social Security Trust Fund, which will be used to pay future benefits.

Social Security Disability Insurance provides a monthly cash benefit to the disabled or blind worker and his/her dependents. Eligibility is based on whether the worker is insured under the Social Security system (has earned sufficient Social Security credits or quarters of coverage) and whether the worker meets Social Security’s disability or blindness standard. These criteria are detailed below under Qualifying for Social Security Disability Insurance.

Benefits are based on payroll tax contributions that the worker makes during his/her working life. Application for SSDI is made at local Social Security offices, see below, Applying for Social Security Disability Insurance, Where to Apply. In addition, beneficiaries are required to prove they continue to meet the disability standard through periodic Continuing Disability Reviews, see below, Recertifying for Social Security Disability Insurance, Continuing Disability Reviews.

In addition to cash benefits, disabled beneficiaries are entitled to vocational rehabilitation services, employment services and benefits planning through the State vocation rehabilitation agency (VESID in NYS) or with a private sector Employment Network provider who contracted with SSA. See below Returning to Work,Vocational Rehabilitation Services and Ticket to Work and Self Sufficiency Program for more information.

In addition, after 24 months of entitlement to SSDI cash benefits, beneficiaries are entitled to Medicare. See below, Description of Social Security Disability Insurance, Benefit Package.