Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI) are two federally-funded programs that provide financial assistance to individuals experiencing hardship from a long-term disability that limits an individual’s ability to work. Funding for your Social Security disability benefit payments comes from a combination of payroll taxes and tax revenues that are then deposited into a special U.S. Treasury trust. Disability payments you receive ultimately come from this trust, ensuring your benefit payments are received at the same time each month and are insulated to any fallout from external factors like a government shutdown. Understanding how your benefits are funded reinforces your confidence in the strength and stability of the system that supports you.
Key Terms
FICA: The Federal Insurance Contributions Act (FICA) requires employers and employees to contribute a portion of wages through payroll taxes to fund Social Security and Medicare programs. These taxes help finance benefits such as retirement, disability (including Social Security Disability Insurance or SSDI), and health care for the elderly.
Government Trust Fund: A special account used by the government to collect and manage money for a specific purpose such as paying Social Security retirement, survivor, or disability benefits.
Disability Insurance (DI) Trust Fund: A U.S. Treasury account that uses payroll tax revenue to fund Social Security Disability Insurance (SSDI) benefits for disabled workers and their families.
Old-Age and Survivors Insurance (OASI) Trust Fund: A U.S. Treasury account that pays Social Security retirement and survivor benefits using payroll tax contributions.
How Is Social Security Disability Insurance (SSDI) Funded?
FICA, the Federal Insurance and Contributions Act, requires employers and employees to contribute a portion of wages through payroll taxes to fund Social Security disability benefit payments. These collected contributions are deposited into the Disability Insurance (DI) Trust Fund which is a special account devoted exclusively to funding payments for the Social Security Disability Insurance program. Each month, your SSDI benefit payments come directly from this specific trust fund, ensuring a predictable and timely payment system.
How Is Supplemental Security Income Funded?
Unlike Social Security Disability Insurance (SSDI), Supplemental Security Income (SSI) is funded by general tax revenues. These tax revenue streams for funding SSI come from income taxes, corporate taxes, and other federal tax collection programs. While SSI does not have a specific trust fund that its payments are derived from, these funds are part of the annual federal budget process ensuring adequate funding for current SSI recipients.
How Are Retirement and Survivor Social Security Benefits Funded?
Like SSDI, retirement benefits and survivor benefits are funded by FICA. A portion of your payroll taxes are sent to a different and distinct U.S. Treasury trust fund, the Old-Age and Survivors Insurance (OASI) Trust Fund, which is another special account that is part of the Social Security system. The OASI Trust Fund is responsible for holding and dispersing the funds for Social Security retirement benefits and payments made to individuals receiving Social Security survivor benefits.
Your Social Security Disability Benefits: Specially Funded And Securely Backed
While SSDI comes from a specially managed U.S. Treasury trust fund and SSI comes from the annual federal budgeting process and general tax revenues, both assistance programs are designed to ensure reliable funding and timely benefit payments. Whether financed through payroll taxes or general revenue, these critical programs serve as essential safety nets for millions of Americans struggling with long term disabilities and financial hardship. Understanding how your benefits are funded reinforces your confidence in the strength and stability of the system that supports you.