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May 27, 2015

Let The Private Sector Reform Social Security's Disability Program


DALLAS – Social Security's disability program is in poor financial shape, but a new publication explains how a private sector reform, modeled after a program that's been around for nearly 35 years, would provide the disabled and survivors with better benefits while helping remove some of the strain from Social Security.

In “The Private Sector Can Reform Social Security’s Disability Program,” Institute for Policy Innovation (IPI) resident scholar Merrill Matthews, Ph.D., says raising the retirement age or cutting benefits won’t solve Social Security’s long-term financial problems.  Turning to the private sector for disability insurance and survivorship benefits would financially strengthen Social Security while providing better benefits.

Matthews explains how three Texas counties opted out of Social Security almost 35 years ago and created a personally owned retirement program mirroring all three of Social Security’s functions, only with significantly better benefits for workers.

“Under the Alternate Plan, county employees and their employer still pay the same as the FICA payroll tax, but a portion of it goes toward a private sector disability insurance policy,” writes Matthews.

Matthews explains how current workers could choose from several federally qualified, private sector disability insurers, and a portion of their payroll tax which covers disability benefits would then pay the cost of a private sector disability policy. Insurers choosing to participate would have to accept those already receiving disability benefits, just as Obamacare required private health insurers to accept any applicant regardless of health status.

“The Alternate Plan provides significantly better benefits for disabled workers,” said Matthews. “And those workers who die have a life insurance policy that pays four times the worker’s salary, up to $215,000. While Social Security provides survivorship benefits in certain cases, the standard death benefit is $255.”
“The boldest reform proposal would transition all three Social Security programs to the private sector,” said Matthews. “But at least starting with disability and survivorship would be a good first step.”


The Institute for Policy Innovation (IPI) is an independent, nonprofit public policy organization based in Dallas. IPI resident scholar Merrill Matthews, Ph.D. is available for interview by contacting Erin Humiston at (972) 874-5139, or Copies of “A Proven Plan for Privatizing Social Security’s Disability and Survivorship Benefits” are available at




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