About 15 percent of persons going onto the Social Security disability rolls in the future will get monthly benefits as high or higher than their average monthly salary in the five years before they become disabled, a new government study suggests.
The study, completed last month by the Social Security actuary's office, was based on a sample of 9,577 recent (1976) beneficiaries but recalculates their benefits to estimate the effect of new, lower benefit formulas which became operative for persons going on the rolls this year.
Even with the new formulas, the study indicates, 15 percent of the sample population would receive individual or family benefits equal to at least 100 percent of average earnings in the 60 months before disability.
If the sample holds true for the entire 2.9 million primary disability beneficiaries on the rolls, hundreds of thousands of disabled may be receiving tax-free benefits in excess of previous gross earnings.
Disability benefits are paid to persons so disabled that they cannot work at any job any longer, althougn some later become rehabilitated.
The figures are sure to fuel the drive by the Carter administration and the House Social Security subcommittee to put some form of "cap" on disability benfits so that they don't exceed prior earnings. Secretary of Health, Education and Welfare Joseph A. Califano Jr. has suggested a limit of 80 percent. Califano has said excessively high benefits discourage disabled persons from seeking to return to work and are an incentive to malingering.
Benefits can sometimes rise above prior gross earnings because the disabled worker, particularly if he had only moderate earnings, receives a payment equal to up to 90 percent of his prior average earnings over his working life, plus additional payments if he has a dependent child and wife.
The study showed that a third of the workers whose lifetime earnings before disability were under $2,400 a year, ended up with family benefits greater than the prior five-year earnings on a monthly basis. As average pre-disability income rose, the figure dwindled, but even a few workers whose lifetime earnings averaged more than $10,000 per year ended up with benefits higher than earnings in their five years before disability.
The Social Security actuary study is based on gross income prior to retirement and doesn't take into account the fact that working families pay Social Security and federal and state income taxes and therefore have less spendable income.
A study by the House Ways and Means Committee, which became available yesterday, says that if disability benefits for certain categories of workers are compared with aftertax pre-disability income instead of gross income, then benefits are even more out of proportion.
The study says that even some of the broposed "caps" won't succeed in cutting benefits below 100 percent of previous spendable income. For example, it said, in a family where the husband and wife each made $4,000 a year, net after-tax income would be $6,826.If one person became disabled, while the other kept working, that family would end up with net income of $7,637 under current law, and $6,988 under Califano's plan.
The House subcommittee is expected next week to start action on a bill capping disability benefits.