Social Security and Disability Benefits: An Overview

The Social Security Administration (SSA) administers two important financial assistance programs that provide benefits for people that become disabled and are unable to work. The SSA offers benefits under the Social Security Disability Insurance (SSDI) program to U.S. workers that have contributed to Social Security through payroll taxes under the Federal Insurance Contributions Act (FICA). The SSA also manages the Supplemental Security Income (SSI) program. SSI is funded by general funds from the U.S. Treasury. The program provides financial assistance to persons that have suffered a disability and have limited resources. Social Security also affords retirement benefits to persons 65 years of age or older according to their earnings and the number of years they have worked.

According to the SSA, a twenty-year-old American worker has a three-in-ten chance of becoming disabled before he/she reaches retirement age.

Social Security Disability Insurance (SSDI)

SSDI is funded from taxes collected by Social Security from U.S. employees, employers, and self-employed persons. A worker becomes eligible for this Social Security program and the benefits it affords by earning an adequate amount of insurance credits based on his/her taxable work. To be eligible to receive SSDI a disabled workers must meet the requirements set forth by the SSA.

Persons eligible to receive SSDI benefits include:

  • Blind or disabled workers
  • Widows/widowers of disabled workers
  • Adult children that become disabled before the age of 22 can qualify on their parent’s earnings record
  • A divorced spouse can qualify based on the earnings record of the disabled spouse if:
    • The couple was married for a minimum of 10 years
    • The divorced spouse is not currently married
    • The divorced spouse is at least 62 years of age.

    The benefits paid to a divorced spouse will not reduce the benefits of the insured worker or any benefits owed to his/her present spouse or children.

    The insured worker’s Social Security earnings record is what will ultimately decide the amount of the monthly benefit payment.

    The SSA relies on two different earnings tests when considering qualifications for SSDI benefits, they include:

    • The Recent Work Test based on the age of the candidate at the time he/she became disabled
    • The Duration of Work Test used to determine whether the worker has worked long enough under Social Security regulations

    Supplemental Security Income (SSI)

    SSI is a Federal income supplement program created to provide financial assistance to disabled persons that have limited income and resources. It provides money to help individuals and families meet basic needs for food, clothing, and shelter. The program is financed through general tax revenues and not by Social Security taxes. Persons or families of disabled individuals must meet financial and living arrangement requirements to be eligible for SSI. Some state supplement SSI benefits payments so the amount may vary from one state to the next.

    Persons eligible to receive SSI benefits include:

    • Disabled adults or children
    • Blind adults or children
    • Adults over the age of 65

    The SSA does not consider all the income a person earns when deciding if a candidate qualifies for SSI.

    The SSA excludes the following sources of income when considering the financial qualifications of a candidate:

    • The initial $20 of most forms of monthly income
    • The initial $65 of monthly income earned through employment
    • Half of the monthly amount over the initial $65 earned from employment income
    • Food stamps
    • Shelter from private nonprofit organizations
    • The majority of home energy assistance

    It can take three to five months for the SSA to reach a decision on a disability claim. The nature of the disability, the response time from the claimant’s physician, whether the SSA requires supporting evidence of the disability, or if the SSA requires a quality assurance review of the decision can all add to the claim evaluation time.

    Social Security Retirement Benefits

    Social Security retirement benefits are paid to people that have paid into Social Security through the FICA program. The amount of benefit payment is based on the individual’s earnings averaged over most of the worker's lifetime. The benefits are available to persons 62 years of age or older.

    The worker’s actual earnings are indexed or adjusted to reflect changes in the average of wages received by the worker since the beginning of his/her earnings. The SSA will then calculate the average monthly indexed earnings during the highest grossing 35 years of the worker, when he/she earned the most. The SSA applies a calculated formula to determine the primary insurance amount (PIA) or the basic benefit amount.

    The PIA is what a worker will receive if he/she retires at full retirement age. Full retirement age varies depending on the year you were born. Anyone born in 1937 or earlier reaches full retirement age at 65. After that, full retirement age gradually increases until it reaches the age of 67 for anyone born after 1959. If a person chooses early retirement at age 62, they will receive 75% of the total monthly benefit payment. Benefits for a spouse at full retirement age are 50% of the full benefits paid to the qualifying spouse but benefits for a spouse at early retirement age are 35% of the full benefits paid to the qualifying spouse.

    Medicare Benefits

    Medicare offers healthcare coverage to people with certain disabilities, most persons age 65 or older, and anyone suffering from permanent kidney failure that requires regular dialysis treatments or a kidney transplant (End-Stage Renal Disease).

    The four basic parts of Medicare are:

    • Medicare Part A - Hospital Insurance – Provides insurance coverage for hospital inpatient care, skilled nursing facility, hospice, and home health care if the claimant meets the conditions set forth by the SSA and the Centers for Medicare & Medicaid Services (CMS) of the U.S. Department of Health and Human Services (HHS).
    • Medicare Part B - Medical Insurance - Helps cover necessary medical services such as some services performed by doctors, outpatient care, certain preventive care services, and other medical services not cover by Medicare Part A.
    • Medicare Part C - Medicare Advantage (MA) Plans – These plans offer different ways of getting Medicare benefits. It combines Part A, Part B, and some aspects of Part D, the prescription drug coverage. Private insurance companies that have been approved by Medicare administer MA Plans but different plans can have different charges, copayments, coinsurance, or deductibles. MA Plans work similar to HMOs and PPOs. They provide coverage options approved by Medicare and run by private insurance companies. Medicare pays a monthly amount for the healthcare of Medicare members in these private health plans. These Plans may offer benefits like coverage for vision, hearing, dental, and/or health and wellness programs.
    • Medicare Part D - Medicare Prescription Drug Coverage – This program is designed to help cover the costs of prescription drugs and lock in prices at a cheaper rate. This coverage may protect against higher medication costs in the future. Private insurance companies and other private healthcare companies approved by Medicare offer these services. The drug plans covered by this program vary according to the company offering the plan, the specific drugs involved, and the type of coverage. Each plan can differ in coverage and costs. You should consider joining as soon as you are eligible because if you choose to join later you may be charged a late enrolment penalty.

    Even though these benefits have been designed to help people in need, the SSA scrutinizes claims for Social Security benefits and in the process refuses some well deserving applicants. Ramped corruption and abuse of these benefits have led to the stringent review process now in place.

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