This article proposes a different approach to providing work incentives to SSDI beneficiaries, one that involves benefit offsets but provides greater flexibility to beneficiaries in selecting their level of work activity.
The way to improve upon the benefit offsets offered to SSDI beneficiaries becomes clear once it is recognized that the $1-for-$2 benefit offset, albeit a better option compared to the current cash cliff, is itself a relatively poor work incentive because it involves a marginal tax on earnings of 50 percent.
These demonstrations replace the cash cliff with a more gradual reduction in benefits (a "benefit offset") as SSDI beneficiaries' earnings increase.
One reason for this may be that the benefit offset design does not provide a sufficiently robust work incentive to SSDI beneficiaries.
The sections that follow describe the results from the SSA's benefit offset demonstrations, provide analytical justification for GBO's new approach, and discuss how to operationalize GBO by introducing its benefit schedule several months after a claimant has been allowed onto SSDI's rolls.
Missing components that will have to be added relate to payment and taxation of benefits, benefit offsets
with other income sources, individual reserve valuation and general plan benefit calculation.
Many insurers that are not yet comfortable with the risks of stand-alone LTC insurance are exploring various flavors of products, which reduce those risks to the insurer, via death benefit offsets
in accelerated benefit features or via the use of long elimination periods inherent in independent LTC riders.