The Social Security Disability Insurance (SSDI) program is a part of the Old Age, Survivors, and Disability Insurance (OASDI) program administered by the Social Security Administration (SSA). Enacted in 1956, SSDI pays benefits to millions of disabled workers and their dependent family members, providing a crucial source of financial security for people who are severely limited in their ability to work because of a disabling illness or injury. The SSDI program is financed through worker payroll taxes contributed to the SSDI Trust Fund, one of the two trust funds established for Social Security. The other fund is the Old-Age and Survivors Insurance (OASI) Trust Fund.
In addition to being disabled, an individual must have worked long enough in Social Security-covered employment to be insured for benefits. There are two insured-status tests that must be met. First, an individual has to have worked long enough to be considered “fully insured” for benefits. For older workers, this means having at least 40 quarters of coverage. Since a worker can earn no more than four quarters in a year, an individual must have worked at least 10 years to meet this test. Younger workers need fewer quarters to qualify.
The second insured-status test looks to see whether an individual has a recent connection to the work force. This test also varies according to the age of the individual. For older adults, an individual must have worked for at least 5 of the 10 years preceding the date the worker becomes disabled. Stated another way, a worker has to have earned at least 20 quarters of coverage during the 40 quarters preceding the date the disability begins. Workers under the age of 31 need fewer quarters in order to meet this test. Generally, they must have credit in one-half of the quarters during the period between age 21 and when they become disabled, with a minimum of six quarters being required.
Disability is defined as the inability to engage in substantial gainful activity by reason of a medically determinable physical or mental impairment that is expected to last at least 12 months or end in death. Generally, a worker must be unable to do any kind of work that exists in the national economy, taking into account age, education and work experience.
Once an individual’s application for SSDI benefits has been approved, he or she will receive benefits after a five-month waiting period from the time the disability began and will receive Medicare coverage 24 months after SSDI eligibility begins. Disability benefits will continue as long as the individual remains disabled, or until he or she reaches the full retirement age when the benefits automatically convert to retired-worker benefits.
Size and Scope of the Social Security Disability Program
The SSDI is an important source of insurance for the 173 million workers and self-employed individuals who contribute to the program.
Disability benefits are paid to 10.4 million people, including:
• 4.5 million men
• 4.2 million women
• 8.7 million disabled workers
• 1.6 million children of disabled workers
• 0.1 million spouses of disabled workers
In 2017, payments to disabled beneficiaries totaled about $143 billion.
The Value of Social Security Disability Insurance in 2017
The average monthly benefit for a disabled worker is $1,197.
The average monthly benefit for a disabled worker who has a spouse and children is approximately $2,054.
For the average wage earner with a family, SSDI benefits are equivalent to a $580,000 disability insurance policy. For low-wage earners, SSDI replaces approximately 54 percent of past earnings if the worker is single and 80 percent of earnings if the worker has dependents. For medium-wage earners, the replacement rate is approximately 43 percent if single and 60 percent with dependents.
Profile of Disabled-Worker Beneficiaries
Today, just over 1 in 4 of today’s 20 year-olds will become disabled before reaching age 67.
For most beneficiaries, SSDI is the primary source of income. Almost half of disabled workers rely on Social Security for 90 percent or more of their total income.
For families with a disabled worker, Social Security provides about half of the family income.