Plan Would Cut Addicts’ Disability Pay, Sources Say

A plan to permit people over 65 who work to keep more of their Social Security benefits would be financed by curtailing disability payments to alcoholics and drug addicts, sources said Thursday in disclosing details of a plan by President Clinton and the Republican Congress to give senior citizens an election-year gift.

More than 1 million people who draw retirement benefits and also have regular jobs would enjoy a relaxation of the rule that forces them to give up $1 in Social Security benefits for every $3 in wages and salaries above $11,520 in a year. The ceiling would be lifted to $14,000 this year and eventually to $30,000 for 2002 under a bipartisan proposal that will be attached to the debt-ceiling bill.

The liberalized rules would allow beneficiaries to keep more of their outside wages and collect an additional $7 billion in Social Security benefits. Social Security would get the funds by saving money in its other programs, primarily by ending disability payments and payments to low-income people whose main cause of disability is substance abuse (defined as alcoholism or drug addiction), according to congressional and administration sources.

White House officials on Wednesday had indicated their support for the overall proposal from congressional Republicans to allow working seniors to keep more of their benefits.

The plan, whose final details were still being negotiated Thursday, would address an issue that has been percolating for years as senior citizens have insisted they need to be able to earn more money to supplement often-inadequate benefits. However, the government has said it should not have to pay full shares of public benefits to those earning healthy salaries.

Senior citizens groups are enthusiastic about the change.

“We have been working on the earnings limit for many, many years,” said Evelyn Morton, legislative representative for the American Assn. of Retired Persons. “We have watched one house or the other pass an increase in the limit only to watch it die in conference,” she said.

The AARP, which has 32 million members, “believes middle-income beneficiaries should be able to earn more without losing benefits,” she said.

The change in the law is likely to be a “win-win” situation for beneficiaries and for the government, which will collect additional taxes from those who decide to work more because they could keep more of their Social Security benefits, predicted Martha McSteen, president of the 6-million-member National Committee to Preserve Social Security and Medicare.

Many older people are under economic pressure to work, she noted. These pressures range from rising health costs to helping their parents in nursing homes to helping grandchildren. “The time has come to recognize that lifting the earnings ceiling is a good thing to do,” McSteen said.

The House last year passed a bill to lift the ceiling, but there has been no Senate floor action. The debt ceiling legislation will include legislation by Sen. John McCain (R-Ariz.), called the Senior Citizens Freedom to Work Act, which has been approved by the Senate Finance Committee.

Under current law, the earnings ceiling for people ages 65 to 69 is $11,520 a year. Workers lose $1 in benefits for each $3 in wages and salary above the ceiling. The proposed legislation would raise the ceiling to $14,000 for this year and an additional $1,000 annually until the end of the century. It would rise to $25,000 in 2001 and $30,000 in 2002. Then it would be indexed each year, as it is now, to rise along with the average increase in U.S. wages.

The proposed change would not affect those under 65 who receive benefits, such as workers who retire early, or widows or other survivors. They can earn up to $8,280 and lose $1 in benefits for every $2 in earnings above the ceiling.

There is currently no restriction for people 70 and older. They receive full retirement benefits regardless of their earnings.

The measure applies only to wages and salaries. There would be no effect on money from private pensions, stocks, bonds and other investments.