The Social Security Administration recently released data highlighting the striking difference in outcomes depending on whether the claimant was represented or not. In 2018 80% of all claimants were represented for Social Security disability benefits. 58.7% of claimants received a fully or partially favorable decision compared to only 17.4% of those without representation. This illustrates the overwhelming value of having representation in a Social Security disability claim. Please see statistics below*.
Covid-19 is Wreaking Havoc on the Future Solvency of Social Security
The Social Security program was signed into law in 1935 by Franklin D. Roosevelt during the Great Depression. It was created as an insurance program for workers, providing a safety net of income when you are no longer able to work either due to retirement and later, broadened to include disability. When the program was created there was not enough time to build up a surplus of funds to finance it, so it was designed as a pay as you go system. The people working today and paying into the program through FICA taxes are paying for the benefits being received by current retirees, survivors, and disabled individuals. The key component to this type of system working is having a much larger base of people paying into the program than receiving.
Social Security has become strained in recent years due to the aging of the baby boomer generation (people born between 1946 and 1964), which has started to tip the scales by increasing the number of people receiving benefits versus those working and paying into the system. However, this was not unexpected, and the Greenspan Commission in the 1980’s was tasked with creating changes to address the shortfall. They were largely successful and in the 2020 annual report the trust fund collectively (the Old Age Survivor trust fund and the Disability trust fund) was predicted to remain solvent through 2035. However, nobody anticipated the Covid-19 global pandemic which would hit the world in 2020.
Covid-19 has already greatly impacted Social Security with high unemployment rates. There were nearly 13 million fewer people working in July 2020 than in February. This is 13 million fewer people and their employers paying into Social Security, resulting in a net of more funds being drawn from the trust fund in 2020 than actuarially predicted. Experts suspect this will cause the trust fund’s life expectancy to decrease by several years.
So how do you make an already precarious situation worse? You stop the payments of those that are still working. On Saturday, President Trump signed an executive action deferring and possibly forgiving the 6.2% payroll tax and the 1.45% Medicare tax, the employee portion, for those making under $100,000 annually. At this point the “tax holiday” is just a deferral, and the money would still be due from employees in early 2021. The President has also stated that if he is re-elected the change could become permanent. This would in essence defund the Social Security program.
Congress will likely be forced to address this deficit, which is something that they have continually put off for years. The fix is likely a combination of benefit cuts and tax increases. Potential options include the following:
- Raise the payroll tax
- Raise the ceiling on which Social Security taxes must be paid, or eliminate the payroll tax cap
- Change the way the annual cost of living adjustments are calculated
- Raise the full retirement age (however, this pushes more people onto Social Security disability)
- Tax Cafeteria plans
- Cover all government employees under Social Security
- Reduce benefits for higher earners
- Tighten SSDI eligibility
- Invest Social Security trust funds in the stock market
There is no question that the Social Security program needs to be tweaked, it needed to be addressed prior to the current Covid-19 impacts, but the bottom-line is it is not bankrupt. If there is no fix benefits can still be paid but at a reduced amount. Social Security currently pays monthly benefits to 65 million people, at 90 billion dollars per month. Social Security is vital to our economy and the individuals receiving it. Social Security is too big to fail and it is not too late to save it, but the sooner Congress acts the easier the fix will be.
If this topic is of interest to you and your team, Barbara Mountain and Christopher Doherty are available to speak to groups to delve into the specifics of how Social Security is being affected by Covid-19 impacts, and how Social Security is likely to be change in the future to remain solvent. Please contact firstname.lastname@example.org to inquire.
Social Security in the age of Covid-19
Effective March 17, 2020, the Social Security Administration closed all of its offices to the Public.
Like many businesses in the United States and around the world, effective March 17th, the Social Security Administration (SSA) closed to the public its 1230 field offices around the country and its 165 sites where Administrative Law Judges’ hearings are held. They were then faced with the daunting task of getting roughly 60,000 employees set up to work from home. This included not only field office and payment center employees, but also Disability Determination Services (State employees who make the medical decision for Social Security disability applicants at the initial and reconsideration levels), and the hearing office employees.
The good news is that roughly 12,000 SSA employees had experience with working remotely. In a rather ironic twist of fate, Commissioner Andrew Saul rescinded telework for all SSA employees beginning in November 2019 and all were back in their offices effective March 1st, 2020. A mere two weeks later the Administration was faced with setting up all employees with the ability to work from home. From our perspective it appears that the transition has gone relatively well and SSA is still processing claims and is even showing signs of increased productivity. The 800 number is experiencing significant wait times, but the local field offices have opened more phone lines to their staff allowing for quicker and better services than under normal circumstances. Field office employees have increased their response rate to claimants to 95% compared to 70% when they worked in the office, and their backlog of pending cases has been reduced by 11%. Under normal conditions, field office employees are interviewing claimants all day handling walk in traffic and scheduled appointments, leaving little time to process the work, but now that their days have only scheduled telephone appointments they have more time to process claims and respond to telephone calls.
SSA is still taking applications telephonically and through online filing. Disability Determination Services, (DDS), was slower to get all of their employees functional from home, but now we estimate upwards of 95% of DDS offices are open and are making medical determinations at the initial and reconsideration levels. However, there are a few workloads that SSA has currently suspended, the following was taken from https://www.ssa.gov/coronavirus/
- We will not start or complete any current medical continuing disability reviews.
- If you have a medical continuing disability review pending, please do not request medical information from your doctors at this time. We will follow up with you for any medical evidence once the COVID-19 pandemic subsides.
- If you are waiting for a hearing on your continuing disability review decision and you continue to receive benefit payments, we will schedule your hearing once our offices reopen to the public. Note: If you are waiting for a hearing on your continuing disability review decision but you are not currently receiving benefits, we will proceed with your hearing.
- We will not conduct any non-disability hearings.
- Where possible, we are suspending our processing and collection of overpayments.
- We are not conducting organization or individual representative payee accountings.
- We will not be able to process a third-party request for information, except from appointed representatives and representative payees.
- We will not process any Freedom of Information Act (FOIA) requests.
The hearing level is where we have seen the biggest change for claimants and representatives. Hearings have always been predominantly done in person, but given that many Administrative Law judges are over age 65 and all hearings involve a disabled individual, this group is comprised of the most at-risk segment of the population and therefore it is imperative to allow hearings to be done telephonically. The transition with this group took the longest, and we saw roughly 50% of our hearings initially postponed, but it has significantly improved as the judges have become more facile with the telephonic process. All claimants still have the option to opt out of the telephone hearing and wait for an in-person hearing, but this will likely cause a significant delay. At this point SSA is saying telephonic hearings will continue through August 2020, but our opinion is that it is likely telephonic hearings will last much longer than this date. One positive trend we have noticed is an increase in the number of on the record hearing awards. On the record decisions are when the attorney submits a brief presenting the case to the judge seeking a fully favorable decision without the need for a hearing. If the on the record brief is not awarded the telephonic hearing continues as scheduled.
The one area of great concern for SSA is going to become evident next year when the trustees report is issued regarding the solvency of the Social Security program. Social Security is a pay as you go system, where the employees that are working today are paying for those that are receiving today. 88% of Social Security is funded by FICA payroll taxes and with currently 33 million people out of work and therefore not paying into Social Security the trust funds are being significantly impacted. It has been estimated that if payroll tax revenue is decreased by just 12% from March 2020 through the end of the year this would be a loss of 100 billion dollars to the trust fund. On April 22nd, 2020, the Trustees report stated that the combined trust funds would be solvent until 2035 at which time only 79% of scheduled benefits could be paid. When this was published the impact of the current economy and the likelihood of an increase in disability applications had not been factored into this outcome. We can expect next year that the 2035 date is likely to move up significantly forcing politicians to address what is commonly referred to as the third rail of politics. A task no politician has ever wanted to touch.
In summary, the good news is SSA is still processing and paying claims. In addition, we have seen improvement in responsiveness and productivity at the field office level. While we do expect there to be some impact to our decision volumes based on the ramp up period to get all levels of SSA effectively working from home, overall, the transition and ongoing operations are working well. The current environment is still very fluid, and we expect the situation to continue to evolve and change, but as of right now SSA is continuing to operate effectively.
Covid-19 and Social Security
During these unsettling and unprecedented times, we at Doherty, Cella, Keane LLP want to update you on how we and the Social Security Administration are handling the Covid-19 pandemic. Our highest order of business is to ensure the safety of both our employees and the claimants we represent.
At the moment Social Security is still operating under the official position of full capacity. Local offices are open, most hearings are still being held and the payment center is business as usual. However, some Offices of Hearings Operations have closed and some judges are not available. In appropriate cases after consultation with our clients we are requesting that telephonic hearings be held. There is no official Social Security policy on whether to hold hearings via telephone or not and thus far it seems to be up to each individual office or judge. We are continuing our practice of writing On The Record (OTR) requests on all cases and are following up more forcefully than normal asking for their strong consideration. Cases which would never have been granted an OTR on in the past may just be granted under this environment.
Doherty, Cella, Keane LLP is operating at full strength. As always we have a mix with some folks working in the office and some remotely. All of our attorneys and our managerial staff were already set up to work remotely as needed but over the past few weeks we have taken steps to enable nearly our entire staff to be equipped to also work remotely. Certainly everything we do which is within our control we can continue to do whether it be in our office or remotely. Should SS shut down and stop processing claims and stop holding hearings this would be a significant impact to our business and to our claimants and carriers. However we would still be able to fully operate on our end.
In the meantime we are hoping for the best and please stay healthy. We will update you with any further developments.
Social Security Benefits Increase in 2020
69 million Americans will see a 1.6 percent increase
The following was taken from the Social Security Administration blog, Social Security Matters posted on October 10, 2019 by Darlynda Bogle, Assistant Deputy Commissioner.
When we announce the annual cost-of-living adjustment (COLA), there’s usually an increase in the Social Security and Supplemental Security Income (SSI) benefit amount people receive each month. Federal benefit rates increase when the cost of living rises, as measured by the Department of Labor’s Consumer Price Index (CPI-W).
The CPI-W rises when inflation increases, making your cost of living go up. This means prices for goods and services, on average, are a little more expensive, so the COLA helps to offset these costs.
As a result, nearly 69 million Americans will see a 1.6 percent increase in their Social Security and SSI benefits in 2020.
January 2020 marks other changes that will happen based on the increase in the national average wage index. For example, the maximum amount of earnings subject to Social Security payroll tax, as well as the retirement earnings test exempt amount, will change in 2020.