Raising the roof: Congress should increase SSI asset limits now

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 This outdated requirement hurts both people enrolled in SSI and those on track to qualify due to health issues.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.