Jun.14

The SSDI “Benefit Offset” Experiment: Landing the Pilots

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Abstract:
The Social Security Disability Insurance (SSDI) program includes transitory incentives that promote the return to work by beneficiaries, but after these incentives end, beneficiaries lose their entire disability benefit for the first dollar earned above a monthly level termed “Substantial Gainful Activity” (SGA). It is widely presumed that this ―cliff‖ restrains employment among beneficiaries. Congress included requirements within the Ticket to Work and Work Incentives Improvement Act of 1999 for a demonstration project that examines the costs and benefits of replacing (―offsetting‖) the SGA cliff with a more gradual reduction in benefits: the SSDI benefit is to be reduced by $1 for every $2 earnings beyond that threshold. Skeptics questioned the ability of the Social Security Administration to administer such an experiment, and even SSA stakeholders acknowledged that conducting the experiment within the context of regular SSA operations posed substantial design and management challenges. SSA launched a pilot project intended to provide experience with new benefit offset administration procedures as well as with the conduct of a randomized trial of the new program. Volunteers for the experiment were recruited from beneficiaries likely to be in the process of returning to work in order to ensure that the pilot would produce experience administering the new program. However, this target group also poses the most serious cost issues because many of them would return to work even in the absence of the incentive and thus would receive a partial benefit under the new program instead of no benefit under the current program. This paper reviews challenges faced in implementing the pilot and the results. The pilot ―delivered‖: Random assignment was completed successfully and the revised benefits computation system was successfully performed for the treatment group, albeit with some informative missteps. The offset produced an increase in the prevalence of earnings above SGA. However, it also increased benefit payments because the savings generated from increases in employment above SGA were smaller than the costs of partial benefit payments to those who would have worked above SGA under the existing program rules. The outcomes underscore the need for a larger experiment that includes a representative sample of all SSDI beneficiaries. Such an experiment, called the Benefit Offset National Demonstration (BOND), will begin in 2011.

Suggested citation:
Wiseman, Michael, Weathers, Robert, and Hemmeter, Jeffrey. “The SSDI Benefit Offset Experiment: Landing the Pilots.” Paper prepared for the Fall 2010 Conference of the Association for Public Policy Analysis and Management, Boston, MA, November 4-6, 2010.

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About Michael Wiseman