It's time to raise the SSI asset limits or remove the cap

The Supplemental Security Income asset limits are currently at a paltry $2,000/individual and $3,000/couple, the limits set since 1989. There are efforts to either raise the limit or abolish them entirely.

Jonquilyn Hill at Vox (04.03.2024):

Saving is hard. Whether for emergencies, special occasions, or retirement, a lot of us fall short. In fact, almost half of Americans don’t have three months worth of expenses saved.

And for some, it’s partly because they aren’t allowed to.

Imagine you have to stop working for whatever reason, but legally you’ve only been allowed to build up $2,000 in savings.

Could you make it through one month — let alone more? First, you have rent. Let’s say it runs you $1,109 (that’s an average monthly rent for Michigan, one of the cheaper states in the US).

That leaves you with $891. After utilities and internet and groceries and any other bills, there’s not much left for day-to-day life or unexpected emergencies. And rent the next month would be impossible.

But this isn’t a pretend “let’s learn personal finance” moment. This is a real financial barrier that millions of Americans have to live with.

Americans like Tyler Lima-Roope, a popular TikToker from California who raises awareness about living with a disability and who receives Supplemental Security Income, or SSI.

[…]

According to her, when the program was founded in 1972, it was — and still is — considered a last resort: You receive it after applying for all the other social safety nets you qualify for. Qualifying requires specific medical and vocational criteria, meaning that in order to receive the benefit, you not only need to be living with a disability, but the disability must also prevent you from earning $1,500 a month.

[…]

But in order to qualify for SSI, individual beneficiaries can’t have assets worth over $2,000 and couples can’t have assets over $3,000. And that’s not just checking accounts: it takes things like mutual funds, retirement, and even car values into account. If you go over that limit, you lose that month’s check.

The asset cap hasn’t been updated since the 1980s — and not for any particular reason. When it was created, it wasn’t enacted to be automatically adjusted for inflation; if it had been, the SSI cap would be about six times what it is right now.

SSI has fallen by the policy wayside, leaving the 7.5 million Americans who rely on the program between a rock and hard place: lose health care and other benefits, or forgo opportunities like saving for the future and getting married.

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Is there any way out?

Given that not much has changed for SSI in the past 40 years, the obvious answer is raising the asset cap. But that can’t happen short of an act of Congress.

The good news? There’s bipartisan legislation proposed in the House and Senate that would raise the limit to $10,000 per individual and $20,000 per couple. This would allow individuals to save more and also rids the program of its marriage penalty.

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The better news is that there is a possible workaround: ABLE accounts.

These are state-run tax-advantaged accounts, similar to 529 accounts that parents use to save for a child’s education. ABLE account limits can be as high as $550,000, depending on the state, and don’t count toward the asset limit.

At its inception, it was for people who had a disability before the age of 26, but a new provision in the 2020 appropriations bill raised the qualification age by 20 years, starting in 2026.

The Center on Budget and Policy Priorities makes the case to raise the asset limit (09.20.2023):

The Supplemental Security Income (SSI) program for low-income elderly and disabled people has the strictest savings limits of any federal program. Eligibility is limited to people who have only $2,000 (or $3,000 for couples). This is not enough for beneficiaries to weather an emergency, let alone provide stability or save for the future. Administering the resource limit, often referred to as an asset test, is burdensome for both Social Security Administration (SSA) staff and for claimants. Policymakers should increase or even eliminate SSI’s resource limit amid growing bipartisan support to do so.

The resource limit is the leading cause of erroneous payments in the SSI program and leads to churn because beneficiaries who go even slightly over the outdated limit are suspended and then terminated. Beneficiaries who exceed the limit typically rack up thousands of dollars in overpayments that are extremely difficult to repay from their meager benefits. Additionally, SSA employees must administer these complex and inefficient rules amid a customer service crisis they are in due to underfunding. Because the value of the limit is not indexed to inflation — and hasn’t been updated in decades — its value erodes each year due to inflation. It is now only one-sixth of its 1972 value.

A higher limit would encourage — rather than penalize — saving and allow people to retain savings to use when they really need those resources. Research shows that having a financial cushion leads to greater economic security. A higher limit would also reduce administrative burdens, payment errors, and churn. And easing or eliminating the asset test would mean that more very low-income seniors and people with disabilities could get the income support they need to afford the basics and not be forced to first deplete modest savings. Policymakers have recognized the case for allowing greater savings and have increased or eliminated resource limits in other economic security programs, including the Supplemental Nutrition Assistance Program (SNAP) and Medicaid.

In this brief we analyze several ways to increase SSI’s resource limits, including raising them to $10,000 per beneficiary (as proposed in 2022 by Sens. Sherrod Brown (D-OH) and Rob Portman (R-OH) in S. 4102), raising them to $100,000 per beneficiary (consistent with the limits in ABLE accounts, which don’t count against SSI’s resource limits), and eliminating resource limits (as other economic security programs have done). We also examine excluding retirement savings from SSI’s resource limits (as proposed in the SSI Restoration Act), in combination with each of these options.

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When policymakers created the program in 1972, they set resource limits of $1,500 for individuals and $2,250 for couples. Policymakers then gradually raised these resource thresholds between 1985 and 1989 to $2,000 for individuals and $3,000 for couples — the only resource increase since SSI was enacted over 50 years ago. Still, it only partially accounted for the effects of inflation up to that point. Had resource limits been indexed to inflation since 1972, when the law first passed, they would be $9,929 for an individual and $14,893 for a couple in 2023 — about five times as high as they are today.^[5]

Most SSI beneficiaries are well under the resource limit. More than two-thirds of SSI beneficiaries have no savings at all, and about 92 percent have less than $500 in savings, according to our analysis. Few people with incomes low enough to qualify for SSI have many resources, because they have little margin for saving, research shows.

Investopedia on ABLE Accounts as a workaround against the SSI Asset Limit (10.27.2023):

Both Haddad and Ehlert point to ABLE accounts as a potential way for beneficiaries to work around the income and asset limits for SSI benefits. ABLE accounts were created under the same part of the tax code as 529 plans, and beneficiaries who do find themselves with extra funds—which may put them over either the asset or income limit—can stash those funds in an ABLE account where they won’t be counted until the account contains more than $100,000.

Lorie Konish at CNBC (05.10.2024):

The Social Security Administration is set to implement new rules to make it easier for beneficiaries to access certain benefits and increase the payments some may receive.

The new changes affect Supplemental Security Income, or SSI, which provides more than 7 million Americans with monthly benefit checks. Those benefits are for seniors ages 65 and up, or adults and children who are disabled or blind, and who have little or no income or resources.

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Updates to definition of public-assistance household

The agency on Thursday announced a new rule to expand the definition of a public-assistance household. Now, households that receive Supplemental Nutrition Assistance Program, or SNAP, payments and those where not all members receive public assistance will be included.

With the change, more people may qualify for SSI, current beneficiaries may see higher payments and individuals who live in public-assistance households may have fewer reporting requirements, according to the Social Security Administration.

The previous policy required all household members to receive public assistance.

A public-assistance household will be defined as one with both an SSI applicant or beneficiary, as well as at least one other member who receives one or more forms of means-tested public income maintenance payments.

I say it’s long past time to either raise the SSI asset limit significantly or abolish them completely, as the SSI asset limit as currently defined is hurting efforts to lift people out of poverty.