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Monday, October 1, 2012

Primer on Disability Benefits: Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI)

Umar Moulta-Ali
Analyst in Disability Policy

Generally, the goal of disability insurance is to replace a portion of a worker’s income should illness or disability prevent him or her from working. Individuals may receive disability benefits from either federal or state governments, or from private insurers. This report presents information on two components of federal disability benefits, those provided through the Social Security Disability Insurance (SSDI) and the Supplemental Security Income (SSI) programs. The SSDI program is an insured program that provides benefits to individuals who have paid into the system and meet certain minimum work requirements. The SSI program, in contrast, is a meanstested program that does not have work or contribution requirements, but restricts benefits to those who meet asset and resource limitations.

The SSDI program was enacted in 1956 and provides benefits to insured disabled workers under the full retirement age (and to their spouses, surviving disabled spouses, and children) in amounts related to the disabled worker’s former earnings in covered employment. The SSI program, which went into effect in 1974, is a needs-based program that provides a flat cash benefit assuring a minimum cash income to aged, blind, and disabled individuals who have very limited income and assets.

To receive disability benefits under either program, individuals must meet strict medical requirements. For both SSDI and SSI disability benefits, “disability” is defined as the inability to engage in substantial gainful activity (SGA) by reason of a medically determinable physical or mental impairment expected to result in death or last at least 12 months. Generally, the worker must be unable to do any kind of work that exists in the national economy, taking into account age, education, and work experience.

Both programs are administered through the Social Security Administration (SSA) and therefore have similar application and disability determination processes. Although SSDI and SSI are federal programs, both federal and state offices are used to determine eligibility for disability benefits. SSA determines whether someone is disabled according to a five-step process, called the sequential evaluation process, where SSA is required to look at all the pertinent facts of a particular case. Current work activity, severity of impairment, and vocational factors are assessed in that order. An applicant may be denied benefits at any step in the sequential process even if the applicant may meet a later criterion.

The SSDI program is funded through the Social Security payroll tax and revenues generated by the taxation of Social Security benefits, portions of which are credited to a separate Disability Insurance (DI) trust fund. In contrast, the SSI program is funded through appropriations from general revenues.

Date of Report: August 31, 2012
Number of Pages: 11
Order Number: RL32279
Price: $29.95

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