Government Could Withhold up to 30% from Social Security Checks in 2016-Truth! & Fiction!
Summary of eRumor:
Those who receive Social Security will see a 30% reduction in benefits in 2016.
The Truth:
Reports that a 30% cut could be coming to Social Security benefits checks are both true and false.
First, many people have confused the difference between Social Security retirement benefits and Social Security disability benefits.
Social Security retirement benefits, which are paid to retired adults who paid into the Social Security system for long enough to qualify, are not in danger of being cut by 30% in 2016. The government collects a 6.2% payroll tax from employees and employers, and 5.3% of that tax goes into the Old-Age and Survivors Insurance (OASI) trust fund to pay Social Security retirement benefits.
The possible 30% cut in 2016 applies only to Social Security disability insurance (DI), which pays benefits to about 11 million Americans who are severely disabled. The DI trust fund receives about 0.9% of the payroll tax collected by the government, and the Social Security disability insurance trust fund is in danger of being depleted by the end of 2016, according to the Center on Budget and Policy Priorities:
When lawmakers last redirected some payroll tax revenue from OASI to DI in 1994, they expected that step to keep DI solvent until 2016 given anticipated economic and demographic trends. Despite fluctuations in the meantime, current projections still anticipate depletion of the trust fund in 2016 as forecast.
DI’s anticipated trust fund depletion does not indicate that the program is out of control or that it is “bankrupt;” if the trust fund were depleted and policymakers took no action, the program could still pay about 80 percent of benefits. But cutting benefits by one-fifth for an extremely vulnerable group of severely disabled Americans is unacceptable.
DI’s finances should ideally be addressed in the context of legislation to restore overall Social Security solvency. But even if policymakers make progress toward a well-rounded solvency package before late 2016, which seems unlikely, any changes in DI benefits or eligibility would surely phase in gradually and hence do little to fully replenish the DI fund by 2016. Consequently, policymakers would still need to reallocate payroll tax revenues between the two programs. There is nothing novel or controversial in such a step, and failing to take it would be irresponsible.
While some have predicted that Social Security disability benefit payments could be cut by as much as 30% if Congress doesn’t replenish the DI trust fund by the end of 2016, a report released in July 2016 found that the cuts would amount to about 19% in the fourth quarter of 2016, the New York Times reports:
The trustees of Social Security, including three cabinet secretaries, said the disability trust fund would be depleted in the last quarter of 2016. After that, they said, benefits would automatically be cut by 19 percent because revenues, largely from payroll taxes, would be sufficient to cover only 81 percent of scheduled benefit payments.
The report sets up a fight between President Obama and Republicans in Congress. Mr. Obama wants to replenish the disability trust fund by shifting some payroll tax revenues from Social Security’s retirement trust fund.
Republicans, however, want more significant changes to improve the program’s finances. These changes could include reductions in disability benefits, restrictions on eligibility, new measures to combat fraud or new strategies to help people return to work. In January, Republicans adopted a new rule in the House that could block a direct reallocation of money at the expense of the trust fund that provides benefits for retirees.
So, some of the claims about possible 30% cuts to Social Security disability insurance are true, and some are false. The exact amount of the cuts, which have been projected to be anywhere from 19-30%, is unknown. It’s also not known whether Congress will solve the problem before the Social Security disability insurance trust fund runs dry in 2016, which would trigger those cuts.