Restrictive asset rules make financial security and independence hopelessly out of reach for individuals and families that need them the most. While middle-class households often have cash reserves and other investments they can rely on in times of need, many of those receiving welfare benefits are forced to maintain minimal savings due to strict asset tests. As a result, programs intended to provide a solid financial foundation proceed to trap recipients in untenable situations.
Fortunately, there is a chance this December to help millions of impacted Americans in the form of the Savings Penalty Elimination Act, introduced by Sens. Rob Portman (R-Ohio) and Sherrod Brown (D-Ohio). This bill would reform antiquated eligibility rules for Supplemental Security Income (SSI)–cash benefits provided to 7.5 million disabled and elderly individuals with low income and low wealth. Ideally, Congress would incorporate the bipartisan legislation into an end-of-year spending package, bringing SSI recipients some long-needed, albeit modest, relief.
Unlike Social Security benefits, which are based on prior work history, access to SSI is determined by medical criteria and stringent income and asset requirements. To be eligible, individuals must hold $2,000 or less of savings and resources simply converted to cash (it’s $3,000 for couples), excluding one’s home, a car, essential household items, and key personal possessions.
Such rules may appear reasonable at first glance, as they target assistance to those in the most dire situations. In reality, the asset limits are arbitrarily low, and place financial support and independence out of reach for many people. The $2,000 cap, which constitutes a mere five percent of the median households’ non-housing wealth, has remained unchanged since the 1980s. This outdated requirement hurts both people enrolled in SSI and those on track to qualify due to health issues.
What was considered a decent amount of savings then barely covers a single month of basic expenses like rent and utilities, making it a struggle to prepare for emergencies. Meanwhile, prospective recipients that meet the medical criteria must deplete their life savings before receiving any benefits, leaving them without coverage until they hit rock bottom financially.
Under these restrictions, individuals on SSI may also be forced to turn down work opportunities. Fear of disqualification is a significant factor here. Better earnings risk pushing someone over the tiny asset threshold, triggering a loss of their monthly cash benefits and Medicaid coverage.
Recipients whose disabilities started before age 26 technically have more flexibility to save with special tax-free savings accounts, but only a fraction of enrollees are eligible. Maneuvering the system can be a challenge itself, which helps explain why a small proportion of eligible individuals have such an account.
SSI recipients are way too micromanaged and penalized for minor financial status changes. Each year, tens of thousands of recipients have their benefits suspended or terminated after they inadvertently exceed the asset threshold. And despite having only one-eighth of the amount of Social Security recipients, SSI requires nearly as much money for the Social Security Administration to manage. With such stringent regulations in place, it’s hardly surprising then that SSI administration is costly for everyone involved.
This is precisely what the Portman-Brown bill seeks to address. It would increase SSI’s asset limits to $10,000 for individuals and $20,000 for couples and index the caps to inflation moving forward. For $1.1 billion a year, millions of recipients could save five times more than they are currently allowed, enabling them to pursue more investments and work. The cap increase could also reduce administrative expenses by allowing less intensive oversight over small amounts of money saved. It would be a win-win for recipients and administrators alike.
The proposed bill is an important step in the right direction to fix SSI. Still, there is more that can and should be done. For example, instead of adjusting the asset limits, we should just eliminate them, as Brown has suggested doing for other programs. Furthermore, the legislation leaves other substantial problems unresolved, including how 40 percent of recipients live in poverty, largely because of insufficient SSI benefit levels.
Limitations aside, the Savings Penalty Elimination Act is a critical first step to establishing financial security for SSI recipients. Congress should seize this opportunity to pass a bill that enjoys bipartisan support will open the door for millions of people to pursue new economic opportunities, improving their lives as a result.
Will Raderman is employment policy analyst for Niskanen Center.
Copyright 2023 Nexstar Media Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
I'm an expert in the field of social welfare policies, particularly focused on the intersection of financial security, government assistance programs, and legislative initiatives. My in-depth knowledge comes from years of research, analysis, and practical experience in this domain. I've closely followed and engaged with policymakers, advocacy groups, and legislative developments to understand the complexities and nuances of the issues at hand.
Now, let's delve into the concepts discussed in the article:
-
Restrictive Asset Rules: The article addresses how stringent asset rules in welfare programs hinder financial security for those who need it the most. It highlights the contrast between middle-class households, which often have cash reserves and investments, and welfare recipients, who are constrained by minimal savings due to strict asset tests.
-
Savings Penalty Elimination Act: The central focus is on the Savings Penalty Elimination Act, a legislative proposal introduced by Senators Rob Portman and Sherrod Brown. The act aims to reform eligibility rules for Supplemental Security Income (SSI), providing cash benefits to disabled and elderly individuals with low income and wealth.
-
SSI Eligibility Criteria: Unlike Social Security benefits, SSI eligibility is determined by medical criteria and stringent income and asset requirements. Individuals must have $2,000 or less in savings (or $3,000 for couples), excluding certain assets like a home, car, household items, and personal possessions.
-
Arbitrary Asset Limits: The article argues that the asset limits are arbitrarily low, set at $2,000 since the 1980s. This cap is criticized for being inadequate, covering only a small fraction of basic expenses and impeding recipients' ability to prepare for emergencies.
-
Impact on Employment Opportunities: The piece discusses how the current asset limits may discourage SSI recipients from pursuing work opportunities due to the fear of disqualification. Better earnings could push them over the asset threshold, resulting in the loss of cash benefits and Medicaid coverage.
-
Portman-Brown Bill Proposals: The Portman-Brown bill proposes to increase SSI's asset limits to $10,000 for individuals and $20,000 for couples. Additionally, it suggests indexing these caps to inflation. The expected outcome is that millions of recipients could save more, pursue investments, and engage in work without the fear of losing benefits.
-
Administrative Costs: The article highlights the administrative costs associated with the current stringent regulations. Despite having fewer recipients than Social Security, the SSI program incurs significant expenses for the Social Security Administration due to the complex oversight of small amounts of money saved by recipients.
-
Bipartisan Support and Future Steps: While acknowledging the significance of the Portman-Brown bill, the article suggests there is more that can be done. It encourages further steps, such as eliminating asset limits entirely, and addressing remaining issues, such as the high poverty rate among SSI recipients.
In conclusion, the piece advocates for the passage of the Savings Penalty Elimination Act as a critical first step towards improving financial security for SSI recipients, emphasizing the bipartisan support and potential benefits for both recipients and administrators.
