March 10, 2000
Improvements Needed in The Asset Test For The
Supplemental Security Income Program
Center on Budget and Policy Priorities
The National Dialogue on SSI Childhood Disability Conference
The Supplemental Security Income program is a means-tested cash assistance program that forms an integral part of the safety net for the elderly, blind, and disabled. But some aspects of the program have not been kept current and are in need of revisions to better shield these communities from poverty. One aspect of SSI in need of improvement is the restriction placed on the amount of assets individuals may own and still be eligible for the program. This improvement is important to disabled children since the resources of their parents are counted when determining the eligibility of children. The following is a discussion of some shortcomings of the current asset test and ways in which this requirement can be improved.
Adjust the Asset Limit for SSI
In general, eligibility for the SSI program is limited to individuals with no more than $2,000 in assets and couples with no more than $3,000.(1) Not all resources are counted against these thresholds, however. Some assets are categorized as "specified exclusions" and include resources such as the beneficiary's home; reasonably valued household goods and personal items; a car used for employment, to obtain medical care, or to transport a disabled individual; and life insurance with a face value of less than $1,500. Other assets are considered inaccessible to the individual and, therefore, are not defined as resources for the purposes of SSI. Pensions fall into the latter category.
In determining the SSI eligibility of a child, most types of the parents' countable resources are taken into account. Retirement accounts such as IRA and 401(k) accounts are an exception. While these accounts are considered resources for adult SSI applicants, the parents' IRAs and 401(k) accounts are not deemed to a disabled child.(2) Additionally, only the value of the parents' countable assets that exceed the resource limit is deemed available to the child.(3) For example, if the value of the countable assets for a single parent equals $2,500, the value of the resources deemed available to the child equals $500 and the child meets the asset test.
Limits for countable resources for SSI have risen by a relatively modest amount since the program's inception. The limits were set at $1,500 for individuals and $2,250 for couples in 1972 when legislation establishing the program was passed. These limits took effect in 1974 when the program was implemented. In 1984, Congress enacted legislation that raised the thresholds incrementally based on the schedule in Table 1.
January 1, 1987
January 1, 1988
January 1, 1989 & Thereafter
Source: Social Security Administration, 1997 Social Security Handbook, Washington, DC: U. S. Government Printing Office, 1997, § 2167.
There has not been an increase in the resource limits in more than a decade, although the cost-of-living climbed approximately 38 percent between 1989 and 2000. An adjustment could be made in one of two ways. The resource limit could be increased by a flat amount, as was done in the past. Alternatively, the asset limit could be increased each year based on the change in the Consumer Price Index (CPI). This would be consistent with the treatment of SSI benefits, which are updated using the CPI. If these thresholds were adjusted for inflation since 1989, the resource limit for individuals would rise to $2,765 and the limit for couples would be $4,147.(4) Adjusting for inflation since 1989, however, would not entirely correct for inflation that occurred since 1972 when the asset limits were first established. If the thresholds were adjusted for inflation since 1972, the asset limit for individuals would be about $5,791 and the limit for couples would be $8,686.(5)
Raising the resource limit to compensate for inflation would be consistent with the treatment of SSI benefit levels. In 1972, Congress selected maximum benefit levels of $130 for individuals and $195 for couples. These benefit levels were intended to go into effect in 1974 when the program was implemented. However, provisions were passed in 1973 that created two benefit increases for 1974. Maximum benefit levels were raised to $140 for individuals and $210 for couples effective January 1, 1974. The second increase took effect July 1, 1974 raising benefit levels to $146 for individuals and $219 for couples. Congress established a cost of living adjustment for SSI benefits in 1974 that is indexed to the Consumer Price Index. Thus, maximum benefit levels rise each year. No similar adjustments were made for resource limits. Increasing the resource limit would make it possible for more low-income disabled children to qualify for SSI and further reduce poverty among these children.
Legislation limiting the level of resources that are counted in determining SSI eligibility has not kept pace with the cost of living. Nor is the treatment of resource levels consistent with the treatment of benefit levels. A necessary step in improving the economic status of low-income disabled children is to revise the asset test by raising the resource threshold at least by an amount equal to the rise in inflation since 1989. This change should enable more low-income families with disabled children to secure the assistance they need for their children without having to spend down their limited resources to gain eligibility.
1. Conditional payments may be made to individuals who have excess resources, if some of the resources are nonliquid and require time to be converted to cash. Individuals may receive these SSI payments if their countable liquid resources do not exceed an amount equal to three times the federal benefit rate (i.e., three times the maximum benefit) and the individuals agree in writing to convert the excess nonliquid assets within nine months and repay the amount received in benefits. See Social Security Administration, 1997 Social Security Handbook, Washington, DC: U. S. Government Printing Office, 1997, § 2165.
2. Committee on Ways and Means, U.S. House of Representatives, 1998 The Green Book, Washington, DC: U.S. Government Printing Office, 1998, pp. 269 and 272.
3. The Code of Federal Regulations, § 416.1202.
4. Social Security Administration, Annual Statistical Supplement to the Social Security Bulletin, 1998. Washington, DC: The Government Printing Office, November, 1998, Table 2.B, p. 86 and Table 2. B1, p. 92.
5. These estimates are based on the CPI-U-XI (Consumer Price Index experimental series created by the Bureau of Labor Statistics, U. S. Department of Labor) rather than the CPI. The CPI-U-X1 more accurately captures housing prices and mortgage rates prior to 1983. See U.S. Census Bureau, Money and Income in the United States: Current Population Reports, Consumer Income, 1998, Washington, DC: U. S. Government Printing Office, September 1999, Appendix D.