Many of America’s most vulnerable families cannot build up savings without risking their livelihood because of an obsolete technicality. While the middle-class can enjoy the advantages of cash reserves and investments, low-income families receiving welfare support are often subject to “asset tests” that mandate limiting their savings to a few thousand dollars. Rather than program benefits giving financial footing to recipients as intended, such strict asset limitations run the risk of simply trapping those households in poverty.
Ohio Senators Sherrod Brown (D) and Rob Portman (R) recently released a bill titled the Savings Penalty Elimination Act addressing this issue. The legislation would update a key eligibility rule for Supplemental Security Income (SSI), monthly benefits distributed to those with inadequate income and wealth who are disabled or over 65, and unlike Social Security benefits, SSI eligibility is not tied to one’s work history. Instead, there are financial requirements for income, wealth, and rigid medical criteria. The proposed change would raise the level of assets that recipients can maintain, which has not been updated in over three decades.
Individuals only qualify for SSI if they possess $2,000 or less of countable resources, while couples can save up to $3,000. However, not all possessions are counted. One’s home, primary vehicle, household items, and important personal items (like a wedding ring) do not count as assets for SSI eligibility, while cash and other investments do.
SSI’s eligibility rules are a serious burden on recipients, who must actively maintain minimal assets or face a disqualification cliff if they go over. These strict, nuanced restrictions are also part of why SSI administration is so expensive. Eight times more people receive Social Security than SSI, but SSI still costs 80 percent of what Social Security takes to administer.
Brown and Portman seek to raise the asset limits to $10,000 for individuals and $20,000 for couples and index those new limits to inflation. This change would allow SSI recipients to accumulate more savings without fear of losing their long-overdue eligibility. The elderly and disabled should not be forced to risk insolvency to qualify for benefits offering baseline financial security.
The increased amounts may seem large relative to the current limits but are modest in the context of typical household wealth (as seen in the figure below). The median household has a net worth of $118,000, while households receiving SSI benefits have a median net worth of about $3,000. When excluding the invested equity in one’s own home, the median household’s net worth is shown to be approximately $41,000. In contrast, the median SSI recipient household has a worth of $700. The proposed allowable assets for individuals and couples on SSI are equivalent to about 25 percent and 50 percent of the median household’s net worth minus housing, respectively.
If enacted, prospective recipients could maintain more savings while being less compelled to exit the labor force to qualify. More SSI recipients interested in working could pursue jobs without fear of disqualification. Raising the permitted asset levels could reduce program churn and administrative costs since moderate increases in recipients’ savings would be less necessary to address. It’s a win-win.
Yet, the proposal does not go nearly far enough. Rather than updating the cumbersome asset limits, the asset rules could be eliminated like Senator Brown has proposed with other public assistance programs. And while the asset caps haven’t been adjusted since the late 80s, other problematic rules have gone untouched for even longer.
The regrettable reality is that this tweak only addresses one of several significant issues with SSI. Many beneficiaries are frequently in poverty even with access to the program given its similarly constricted income rules and benefit determinations. The proposed change by Senators Brown and Portman is a positive one but is the bare minimum of what should be done. Hopefully, the Savings Penalty Elimination Act is one of many improvements.
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