Modelling the Incentive Structures Created by Earnings Limits in Social Security Disability Insurance Policy for the Blind

Abstract

Social Security Disability Insurance (SSDI) in the United States is an insurance program offering financial support to workers who become disabled. There are limits placed on how much a disabled person can earn while receiving SSDI. If any SSDI beneficiary earns past the Substantial Gainful Activity (SGA) threshold, they lose their entire SSDI cash benefit, thus creating a cash cliff and a disincentive for earning. The National Federation of the Blind has been advocating in the United States Congress for the Blind Americans Return to Work Act (BARWA), a reform bill that will amend the Social Security Act. BARWA will remove the cash cliff and replace it with a 2-for-1 phase-out so that each dollar earned above SGA results in a $0.50 reduction in SSDI benefits. To inform the policy debate, this project mathematically models the incentive structure created by current SSDI rules and the proposed reforms. SSDI earnings limit policies for non-blind recipients are controlled by the Social Security Administration, so neither Congressional action nor bill is applicable to that program. Data for this analysis applies specifically to SSDI for the blind.