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The Social Security program pays monthly cash benefits to retired or disabled workers and their family members, and to the family members of deceased workers. Program income and outgo are accounted for in two separate trust funds authorized under Title II of the Social Security Act: the Federal Old-Age and Survivors Insurance (OASI) trust fundTrust Fund and the Federal Disability Insurance (DI) trust fund. Current projectionsTrust Fund. Projections show that the OASI fund will remain solvent until 2035, whereas the DI fund will remain solvent only until the end of 2016until 2023, meaning that each trust fund can pay benefits scheduled under current law in full and on time up to that point. Following the depletion of trust fund reserves (20162023 for DI and 2035 for OASI), continuing income to each fund is projected to cover 81% of benefits paid from the DI fund and 77% of benefits paid from the OASI fund. While the89% of DI scheduled benefits and 77% of OASI scheduled benefits. The two trust funds are legally distinct and do not have authority to borrow from each other. However, Congress has authorized the shifting of funds between OASI and DI in the past to address shortfalls in a particular fund. Therefore, this CRS report discusses the operations of the OASI and DI trust funds on a combined basis, referring to them collectively as the Social Security trust funds. On a combined basis, the trust funds are projected to remain solvent until 2034, at which point. Following depletion of combined trust fund reserves at that point, continuing income is projected to cover 79% of program costs. (For details on the DI fund, see CRS Report R43318, Social Security Disability Insurance (DI) Trust Fund: Background and Solvency Issues.)
Social Security is financed by payroll taxes paid by covered workers and their employers, federal income taxes paid by some beneficiaries on a portion of their benefits, and interest income from the Social Security trust fund investments. Social Security tax revenues are invested in federalU.S. government securities (special issues) held by the trust funds, and these federal government securities earn interest. The tax revenues exchanged for the federalU.S. government securities are deposited into the general fundGeneral Fund of the U.S. Treasury and are indistinguishable from revenues in the general fundGeneral Fund that come from other sources. Because the assets held by the trust funds are federalU.S. government securities, the trust fund balance represents the amount of money owed to the Social Security trust funds by the general fundGeneral Fund of the U.S. Treasury. Funds needed to pay Social Security benefits and administrative expenses come from the redemption or sale of federalU.S. government securities held by the trust funds.
The Social Security trust funds represent funds dedicated to pay current and future Social Security benefits. However, it is useful to view the trust funds in two ways: (1) as an internal federal accounting concept and (2) as the accumulated holdings of the Social Security program.
For internal accounting purposes, certain accounts within the U.S. Treasury are designated by law as trust funds to track revenues (and expenditures) dedicated for specific purposes (as well as expenditures). There are a number of trust funds in the U.S. Treasury, including those for Social Security, Medicare, unemployment compensation, and federal employee retirement.
By law, Social Security tax revenues must be invested in U.S. government obligations (debt instruments of the U.S. government). The accumulated holdings of U.S. government obligations are often viewed as being similar to assets held by any other trust on behalf of the beneficiaries. However, the holdings of the Social Security trust funds differ from those of private trusts because (1) the types of investments the trust funds may hold are limited and (2) the U.S. government is both the buyer and seller of the investments.
This report covers how the Social Security program is financed and how the Social Security trust funds work. It will be updated annually to reflect current projections of the financial status of the Social Security trust funds.
The Social Security program pays benefits to retired or disabled workers and their family members, and to the family members of deceased workers.1 As of June 2015May 2016, there were nearly 6060.5 million Social Security beneficiaries. Approximately 67% of those beneficiaries were retired workers and 15% were disabled workers. The remaining beneficiaries were survivors,the survivors of deceased insured workers or the spouses and children of retired or disabled workers.2
Social Security is financed primarily by payroll taxes paid by covered workers and their employers. The program is also credited with federal income taxes paid by some beneficiaries on a portion of their benefits, reimbursements from the general fundGeneral Fund of the Treasury for various purposes, and interest income from investments held by the Social Security trust fund investmentsfunds. Social Security tax revenues are invested in federalU.S. government securities (special issues) held by the trust funds, and these federal government securities earn interest. The tax revenues exchanged for the federalU.S. government securities are deposited into the general fundGeneral Fund of the U.S. Treasury and are indistinguishable from revenues in the general fundGeneral Fund that come from other sources. Because the assets held by the trust funds are federalU.S. government securities, the trust fund balance represents the amount of money owed to the Social Security trust funds by the general fundGeneral Fund of the Treasury. Funds needed to pay Social Security benefits and administrative expenses come from the redemption or sale of federalU.S. government securities held by the trust funds.3
The Secretary of the Treasury (as the Managing Trustee of the Social Security trust funds) is required by law to invest Social Security revenues in securities backed by the U.S. government.4 The purchase of U.S. government securities allows any surplus Social Security revenues to be used by the federal government for other (non-Social Security) government spending needs at the time.5
The Social Security trust funds are both designated accounts within the U.S. Treasury and the accumulated holdings of special U.S. government obligations. Both represent the funds designated to pay current and future Social Security benefits.
The Social Security program is financed primarily by revenues from Federal Insurance Contributions Act (FICA) taxes and Self-Employment Contributions Act (SECA) taxes. FICA taxes are paid by both employers and employees, but it is employers who remit the taxes to the U.S. Treasury. Employers remit FICA taxes on a regular basis throughout the year (for examplee.g., weekly, monthly, quarterly or annually), depending on the employer's level of total employment taxes (including FICA and federal personal income tax withholding). The FICA tax rate of 7.65% each for employers and employees has two components: 6.2% for Social Security and 1.45% for Medicare Hospital Insurance. The SECA tax rate is 15.3% for self-employed individuals, with 12.4% for Social Security and 2.9% for Medicare Hospital Insurance. The respective Social Security contribution rates are levied on covered wages and net self-employment income up to $118,500 in 2015.62016.5 Self-employed individuals may deduct one-half of the SECA taxes for federal income tax purposes.76 SECA taxes are normally paid once a year as part of filing an annual individual income tax return. In 20142015, Social Security payroll taxes totaled $756794.9 billion and accounted for 8586% of the program's total income.8
In addition to payroll taxes, the Social Security program receives income from other sources. First, certain Social Security beneficiaries must include a portion of their Social Security benefits in taxable income for the federal income tax, and the Social Security program receives a portion of those taxes.98 In 20142015, revenue from the taxation of benefits totaled $3031.6 billion, accounting for 3% of the program's total income. Second, the program receives reimbursements from the general fundGeneral Fund of the Treasury for a variety of purposes.109 General fundFund reimbursements totaled $0.53 billion, accounting for 0.0503% of the program's total income.10 Finally, the Social Security program receives interest income from the U.S. Treasury on its investments in special federalU.S. government obligations. Interest income totaled $9893.3 billion, accounting for 1110% of the program's total income.11
The Internal Revenue Service (IRS) processes the tax returns and tax payments for federal employment taxes and federal individual income taxes. All of the tax payments are deposited in the U.S. Treasury along with all other receipts from the public for the federal government.
Within the U.S. Treasury, there are numerous accounts established for internal accounting purposes. Although all of the monies within the U.S. Treasury are federal monies, the designation of an account as a trust fund allows the government to track revenues (and expenditures) dedicated for specific purposes (as well as expenditures). In addition, the government can affect the level of revenues and expenditures associated with a trust fund through changes in the law.12
Social Security program income and outgo are accounted for in two separate trust funds authorized under Title II of the Social Security Act: (1) the Federal Old-Age and Survivors Insurance (OASI) trust fundTrust Fund and (2) the Federal Disability Insurance (DI) trust fundTrust Fund.13 Under current law, the two trust funds are legally distinct and do not have authority to borrow from each other. This is important given current projections showing that the asset reserves held by the OASI fund will remain solvent untilbe depleted in 2035, whereas the DI fund will remain solvent only until the end of 2016asset reserves held by the DI fund will be depleted in 2023. Following the depletion of trust fund reserves (20162023 for DI and 2035 for OASI), continuing income is projected to cover 8189% of DI scheduled benefits and 77% of OASI scheduled benefits. In the past, Congress has authorized temporary interfund borrowing and payroll tax reallocations between OASI and DI to address funding imbalances. Therefore, thisThis CRS report discusses the operations of the OASI and DI trust funds on a combined basis, referring to them collectively as the Social Security trust funds. On a combined basis, the Social Security trust funds are projected to remain solvent until 2034, at which point continuing income is projected to cover 79% of program costs. (For a detailed discussion of the status of the DI trust fund, see CRS Report R43318, The Social Security Disability Insurance (DI) Trust Fund: Background and Solvency IssuesCurrent Status.)
The Social Security trust funds receive a credit equal to the Social Security payroll taxes deposited in the U.S. Treasury by the IRS.14 The payroll taxes are allocated between the OASI and DI trust funds based on a proportion specified by law.15 Currently, of the 6.2% payroll tax rate, 5.3% is allocated to the OASI trust fund and 0.9% is allocated to the DI trustA provision included in the Bipartisan Budget Act of 2015 (P.L. 114-74) temporarily directs a larger share of total payroll tax revenues to the DI fund. For 2016 to 2018, the 12.4% payroll tax rate is allocated as follows: 10.03% for the OASI fund and 2.37% for the DI fund. Beginning in 2019, the allocation reverts back to 10.6% for the OASI fund and 1.8% for the DI fund.16
The U.S. Treasury makes Social Security benefit payments to entitled individuals on a monthly basis, as directed by the Social Security Administration (SSA) as to whom to pay and the amount of the payment. When benefit payments are made by the U.S. Treasury, the Social Security trust funds are debited for the payments. Periodically, the Social Security trust funds are also debited for the administrative costs of the Social Security program. These administrative costs are incurred by several government agencies, including SSA, the U.S. Treasury, and the IRS.
The annual revenues to the Social Security trust funds are used to pay current Social Security benefits and administrative expenses. If, in any year, revenues are greater than costs, the surplus Social Security revenues in the U.S. Treasury are available for spending by the federal government on other (non-Social Security) spending needs at the time. If, in any year, costs are greater than revenues, the cash flow deficit is offset by selling some of the accumulated holdings of the trust funds (U.S. government securities) to help pay benefits and administrative expenses.
There are two measures of Social Security trust fund operations: the annual cash flow operations and the accumulated holdings (or trust fund balance).17 The annual cash flow operations of the Social Security trust funds are a measure of current revenues and current costs. The cash flow operations are positive when current revenues exceed costs (a cash flow surplus) and negative when current costs exceed revenues (a cash flow deficit). In years with cash flow deficits, the Social Security program (unlike other federal programs that operate without a trust fund) may use the accumulated holdings of the Social Security trust funds from prior years to help pay benefits and administrative expenses.18
Although Social Security is a pay-as-you-go system, meaning that current revenues are used to pay current costs, changes made to the Social Security program in 1983 began a sustained period of annual cash flow surpluses through 2009.19 Since 2010, however, Social Security has had annual cash flow deficits (program costs have exceeded tax revenues). The 20152016 annual report of the Social Security Board of Trustees20 projects that, under their intermediate assumptions, annual cash flow deficits will continue throughout the 75-year projection period (2015-2089) under the intermediate assumptions.
The 2015 Annual Report projects that the Social Security trust funds will remain solvent until 2034.2016-2090).20
At the end of 2015, the Social Security trust funds had accumulated holdings (asset reserves) of more than $2.8 trillion. The 2016 annual report projects that the trust funds will have asset reserves (a positive balance) until 2034, meaning that Social Security benefits scheduled under current law can be paid in full and on time until then. This is one year later than projected in the previous three Annual Reports. In addition, the average 75-year actuarial deficit for the trust funds is projected to be equal to 2.68% of taxable payroll. This is a decrease of 0.20 percentage point from the projection in the 2014 Annual Report. With respect to the change in the projected 75-year actuarial deficit, the trustees state,
If the assumptions, methods, starting values, and the law had remained unchanged from last year, the actuarial deficit would have increased by about 0.06 percent of payroll due to advancing the valuation date by one year and including the year 2089. Changes in methods (for example, improved earnings projections for future beneficiaries), updated starting values, and revised economic assumptions (for example, an increased average real wage differential) account for most of the net decline in the actuarial deficit.21
As noted above, on a combined basis, the Social Security trust funds are projected to remain solvent until 2034. Separately, however, the OASI trust fund is projected to remain solvent until 2035 (one year later than last year's projection) and the DI trust fund is projected to remain solvent until 2016 (the same year projected in the previous three Annual Reports). Under current law, therefore, DI benefits could not be paid in full and on time following DI trust fund exhaustion in 2016. With respect to the status of each of the trust funds (OASI and DI), the trustees state,
The imminent depletion of Social Security's Disability Insurance (DI) Trust Fund reserves is but the first financing crisis arising from program cost growth trends that have been evident for the past few decades. Social Security DI faces unique policy challenges that lawmakers should address, distinct from those facing the OASI Trust Fund. At the same time, however, the projected imbalance of the OASI Trust Fund is larger in both absolute and relative terms than that facing the DI fund and arises from many of the same sources.
Conflicting considerations arise from these factors. At this late date, it is impracticable to reduce DI costs sufficiently to prevent imminent Trust Fund depletion ... without at least a temporary increase in DI Trust Fund resources, irrespective of its source or combination with other measures. But on the other hand, DI already receives a higher share of the Social Security payroll tax relative to its projected obligations, than does OASI. Moreover, past DI income increases have generally been enacted in the context of legislation affecting projected program outlays, the sole recent exception in 1994 being preceded by a Trustees' warning that a further reallocation to DI from OASI "would ultimately raise concern about the financial viability of the retirement and survivors program." Any necessary resource reallocation that does occur should not be regarded as a substitute for action to sustain the finances of DI and Social Security as a whole, nor enacted in a manner that has the effect of further postponing those required corrections.22
Table 1 shows the annual cash flow operations of the Social Security trust funds (non-interest income, costs, and cash flow surpluses/deficits) for the historical period 1957 to 2014. From 1957 to 1983 (the last time Congress enacted major amendments to the program), the Social Security trust funds operated with a cash flow deficit (costs exceeded non-interest income) in 19 of the 27 years. Since 1984, the trust funds have operated with a cash flow deficit in 5 of the past 31 years (2010 to 2014).
Year |
|
Costs |
In addition, the 2016 annual report shows the 75-year actuarial deficit for the Social Security trust funds. The actuarial deficit is the difference between the present discounted value of scheduled benefits and the present discounted value of future taxes plus asset reserves held by the trust funds. It can be viewed as the amount by which the payroll tax rate would have to be increased to support the level of benefits scheduled under current law throughout the 75-year projection period (or, roughly the amount by which the payroll tax rate would have to be increased for the trust funds to remain fully solvent throughout the 75-year period). The 2016 annual report projects that the 75-year actuarial deficit for the trust funds is equal to 2.66% of taxable payroll,21 a small decrease of 0.02 percentage point from last year's report.22 With respect to the change in the projected 75-year actuarial deficit, the trustees state, A 0.06 percentage point increase in the OASDI actuarial deficit would have been expected if nothing had changed other than the one-year shift in the valuation period from 2015 through 2089 to 2016 through 2090. The effects of recently enacted legislation, updated demographic and economic data, and improved methodologies decrease the actuarial deficit by 0.08 percent of taxable payroll, causing the small net improvement in the actuarial balance.23 As noted above, on a combined basis, the Social Security trust funds are projected to have asset reserves sufficient to pay full scheduled benefits until 2034. Separately, however, the OASI Trust Fund is projected to have sufficient asset reserves until 2035 (the same year projected in last year's report) and the DI Trust Fund is projected to have sufficient asset reserves until 2023 (seven years later than projected in last year's report). The improvement in the DI fund's outlook is attributed largely to a temporary (three-year) reallocation of the combined 12.4% Social Security payroll tax rate between the OASI and DI funds, as required under Section 833 of the Bipartisan Budget Act of 2015 (P.L. 114-74). Under this provision, the DI fund receives a larger share of total payroll tax revenues for calendar years 2016 through 2018.24 With respect to the status of each of the trust funds (OASI and DI), the trustees state, "While legislation is needed to address all of Social Security's financial imbalances, the need remains most pressing with respect to the program's disability insurance component."25 ($ in billions) Year Cost |
||
1957 |
$7.5 |
$7.6 |
|
||
1958 |
8.5 |
8.9 |
|
||
1959 |
8.9 |
10.8 |
|
||
1960 |
11.8 |
11.8 |
|
||
1961 |
12.3 |
13.4 |
|
||
1962 |
13.1 |
15.2 |
|
||
1963 |
15.6 |
16.2 |
|
||
1964 |
16.9 |
17.0 |
|
||
1965 |
17.2 |
19.2 |
|
||
1966 |
22.7 |
20.9 |
|
||
1967 |
25.5 |
22.5 |
|
||
1968 |
27.5 |
26.0 |
|
||
1969 |
32.0 |
27.9 |
|
||
1970 |
35.2 |
33.1 |
|
||
1971 |
38.9 |
38.5 |
|
||
1972 |
43.4 |
43.3 |
|
||
1973 |
52.4 |
53.1 |
|
||
1974 |
59.4 |
60.6 |
|
||
1975 |
64.7 |
69.2 |
|
||
1976 |
72.3 |
78.2 |
|
||
1977 |
79.5 |
87.3 |
|
||
1978 |
89.6 |
96.0 |
|
||
1979 |
103.7 |
107.3 |
|
||
1980 |
117.4 |
123.5 |
|
||
1981 |
140.2 |
144.4 |
|
||
1982 |
146.5 |
160.1 |
|
||
1983 |
163.0 |
171.2 |
|
||
1984 |
183.2 |
180.4 |
|
||
1985 |
200.8 |
190.6 |
|
||
1986 |
212.9 |
201.5 |
|
||
1987 |
225.7 |
209.1 |
|
||
1988 |
255.3 |
222.5 |
|
||
1989 |
276.7 |
236.2 |
|
||
1990 |
298.2 |
253.1 |
|
||
1991 |
307.8 |
274.2 |
|
||
1992 |
317.2 |
291.9 |
|
||
1993 |
327.7 |
308.8 |
|
||
1994 |
350.0 |
323.0 |
|
||
1995 |
364.5 |
339.8 |
|
||
1996 |
385.8 |
353.6 |
|
||
1997 |
413.9 |
369.1 |
|
||
1998 |
439.9 |
382.3 |
|
||
1999 |
471.1 |
392.9 |
|
||
2000 |
503.9 |
415.1 |
|
||
2001 |
529.1 |
438.9 |
|
||
2002 |
546.7 |
461.7 |
|
||
2003 |
547.0 |
479.1 |
|
||
2004 |
568.7 |
501.6 |
|
||
2005 |
607.5 |
529.9 |
|
||
2006 |
642.5 |
555.4 |
|
||
2007 |
674.7 |
594.5 |
|
||
2008 |
689.0 |
625.1 |
|
||
2009 |
689.2 |
685.8 |
|
||
2010 |
663.6 |
712.5 |
|
||
2011 |
690.7 |
736.1 |
|
||
2012 |
731.1 |
785.8 |
|
||
2013 |
752.2 |
822.9 |
|
||
2014 |
786.1 |
859.2 |
|
2015 |
826.9 |
897.1 |
(70 | .2) |
Source: Table prepared by the Congressional Research Service (CRS) from data provided in the 20152016 Annual Report, Table VI.A3, pp. 158-159162-163, at httphttps://www.ssa.gov/oact/tr/2015/VI_A_cyoper_hist.html#293711OACT/TR/2016/tr2016.pdf.
a.
Non-interest income is equal to total income minus net interest. Stated another way, non-interest income includes net payroll tax contributions, reimbursements from the general fundGeneral Fund of the Treasury to the Social Security trust funds, and federal income tax revenues from the taxation of Social Security benefits.
Table 2 shows the projected annual cash flow operations of the Social Security trust funds (non-interest income, costscost, and cash flow deficits) for the 20152016 to 2033 period, as projected by the Social Security trustees in the 2015 Annual Report2016 annual report (under the intermediate assumptions). The trustees project that the Social Security trust funds will operate with a cash flow deficit each year throughout the current projection period.
Yeara |
Non-Interest Incomeb |
Costs |
Cash Flow |
2015 |
$ |
$ |
($83.9) |
2016 |
872.9 |
940.6 |
|
2017 |
935.5 |
1,006.8 |
( |
2018 |
995.9 |
1, |
( |
2019 |
1, |
1, |
( |
2020 |
1, |
1, |
( |
2021 |
1, |
1, |
( |
2022 |
1, |
1, |
( |
2023 |
1, |
1, |
( |
2024 |
1, |
1, |
( |
2025 |
1, |
1, |
( |
2026 |
1, |
1, |
( |
2027 |
1, |
1, |
( |
2028 |
1, |
1, |
( |
2029 |
1, |
2,065.3 |
( |
2030 |
1, |
2, |
( |
2031 |
1, |
2, |
( |
2032 |
1, |
2, |
( |
2033 |
2,021.8 |
2, |
( |
Source: Table prepared by CRS from data provided in Table VI.G8 (intermediate assumptions), Supplemental Single-Year Tables Consistent with the 20152016 Annual Report, at http://www.socialsecurity.gov/oact/tr/2015https://www.ssa.gov/OACT/TR/2016/lr6g8.html.
a.
Projections for years after 2033 are not shown because the asset reserves held by the Social Security trust funds are projected to be exhausteddepleted in 2034 under the intermediate assumptions.
b.
Non-interest income is equal to total income minus interest income.
One way to measure the cash flow operations over timeof the trust funds is to take the ratio of current non-interest income to current costscost for each year. A ratio greater than 100% indicates positive cash flow (a cash flow surplus); a ratio less than 100% indicates negative cash flow (a cash flow deficit). Figure 1 shows the ratio of current non-interest income to current costscost for the Social Security trust funds each year over the historical period 1957 to 20142015 and over the 20152016 to 2033 period, as projected by the Social Security trustees in the 2015 Annual Report2016 annual report (under the intermediate assumptions).23
As shown in the figure, in 2009, non-interest income of $689.2 billion divided by costsa cost of $685.8 billion results in a ratio just over 100% (100.5%), indicating a cash flow surplus for the Social Security trust funds that year. By comparison, in 20142015, non-interest income of $786.1826.9 billion divided by costs of $859.2a cost of $897.1 billion results in a ratio of 91.592.2%, indicating a cash flow deficit for the Social Security trust funds. In the 2015 Annual Report. In the 2016 annual report, the Social Security trustees project that the ratio of current non-interest income to current costscost will remain below 100% for the remainder of the projection period75-year projection period (2016-2090), with the gap between non-interest income and costscost increasing over time (under the intermediate assumptions).
Figure 1. Ratio of Current Non-Interest Income to |
Source: Figure prepared by CRS from data provided in the Notes: Non-interest income excludes interest on accumulated holdings of U.S. government obligations. A ratio above 100% indicates a cash flow surplus for the year. A ratio below 100% indicates a cash flow deficit. |
When the Social Security trust funds operate with annual cash flow deficits, the U.S. Treasury can continue to pay benefits at levels scheduled under current law as long as the accumulated balance in the trust funds is sufficient to cover the costs. This is because the Social Security program has budget authority to pay benefits in full and on time as long as there is an adequate balance in the Social Security trust funds (the designated accounts). When current Social Security revenues are not sufficient to pay benefits, however, the U.S. government must raise the funds necessary to honor the redemption of U.S. government obligations held by the Social Security trust funds as they are needed to pay benefits. If there are no surplus governmental receipts, the U.S. government may raise the necessary funds by increasing taxes or other income, reducing othernon-Social Security spending, borrowing from the public (i.e., replacing bonds held by the trust funds with bonds held by the public), or somea combination of these measures.
The Secretary of the Treasury is required by law to invest Social Security revenues in securities backed by the U.S. government.2428 In addition, the Social Security trust funds receive interest on its holdings of special U.S. government obligations. Each U.S. government security issued by the U.S. Treasury for purchase by the Social Security trust funds must be a paper instrument in the form of a bond, note, or certificate of indebtedness.2529 Specifically, Section 201(d) of the Social Security Act states,
Each obligation issued for purchase by the Trust Funds under this subsection shall be evidenced by a paper instrument in the form of a bond, note, or certificate of indebtedness issued by the Secretary of the Treasury setting forth the principal amount, date of maturity, and interest rate of the obligation, and stating on its face that the obligation shall be incontestable in the hands of the Trust Fund to which it is issued, that the obligation is supported by the full faith and credit of the United States, and that the United States is pledged to the payment of the obligation with respect to both principal and interest. The Managing Trustee may purchase other interest-bearing obligations of the United States or obligations guaranteed as to both principal and interest by the United States, on original issue or at the market price, only where he determines that the purchase of such other obligations is in the public interest.
Any interest or proceeds from the sale of U.S. government securities held by the Social Security trust funds must be paid in the form of paper checks from the general fundGeneral Fund of the Treasury to the Social Security trust funds.2630 The interest rates paid on the government securities issued to the Social Security trust funds are tied to market rates.27
For internal federal accounting purposes, when special U.S. government obligations are purchased by the Social Security trust funds, the U.S. Treasury is shifting surplus Social Security revenues from one government account (the Social Security trust funds) to another government account (the Treasury's "general fund" accountGeneral Fund). The special U.S. government obligations are physical documents held by SSA, not the U.S. Treasury. The government securities held by the Social Security trust funds are redeemed on a regular basis. These special U.S. government obligations, however, are not resources for the federal government because they represent both an asset and a liability for the government.28
The Social Security program is indirectly part of the annual congressional budget process. This creates some confusion on the part of the public.
For federal budget purposes, on-budget status generally refers to programs that are included in the annual congressional budget process, whereas off-budget status generally refers to programs that are not included in the annual congressional budget process.
The Social Security program is a is a federal government program that, like the Postal Service, has had its receipts and (most) outlays designated by law as off-budget.2933 The off-budget designation, however, has no practical effect on program funding, spending, or operations. The annual congressional budget resolution, in its legislative language, separates the off-budget totals (receipts and outlays) from the on-budget totals (receipts and outlays). The report language accompanying the congressional budget resolution usually shows the unified budget totals (which combine the on- and off-budget amounts) as well as the separate on- and off-budget totals. The President's budget tends to use the unified budget measures in discussing the budget totals. The President's budget documents also include the totals for the on- and off-budget components, as required by law. The Congressional Budget Office uses the unified budget numbers in its analyses of the budget; it generally does not include on- and off-budget data in its regular annual reports.
The unified budget framework is important because it includes all federal receipts and outlays providing a more comprehensive picture of the size of the federal government, as well as the impact of the federal budget on the economy. In the unified budget, the Social Security program is a large source of both federal receipts (24% in FY2014) and FY2015) and federal outlays (24% in FY2014).30FY2015).34 For purposes of the unified budget, the annual Social Security cash flow surplus or deficit is counted in determining the overall federal budget surplus or deficit.
The Social Security trust funds can be viewed as trust funds, similar to any private trust funds, that are to be used for paying current and future benefits (and administrative expenses). By law, the Social Security revenues credited to the trust funds (within the U.S. Treasury) are invested in non-marketable U.S. government obligations. These obligations are physical (paper) documents issued to the trust funds and held by SSA. When the obligations are redeemed, the U.S. Treasury must issue a check (a physical document) to the Social Security trust funds for the interest earned on the obligations.31
Unlike a private trust that may hold a variety of assets and obligations of different borrowers, the Social Security trust funds can hold only U.S. government obligations. The sale of these obligations by the U.S. government to the Social Security trust funds is federal government borrowing (from itself) and counts against the federal debt limit. The requirement that the Social Security trust funds purchase U.S. government obligations serves several purposes, such as
The accumulated holdings of the Social Security trust funds represent the sum of annual surplus Social Security revenues (for all past years) whichthat were invested in U.S. government obligations, plus the interest earned on those obligations. As a result of surplus Social Security revenues from 1984 to 2009 and the interest income credited to the Social Security trust funds, the accumulated holdings of the Social Security trust funds totaled $2.8 trillion at the end of calendar year 2014.322015.37 It is the accumulated holdings of the Social Security trust funds (or the trust fund balance) that many people refer to when discussing the Social Security trust funds. Table 3 shows the accumulated holdings of the Social Security trust funds for the historical period 1957 to 20142015. Table 4 shows the projected accumulated holdings of the Social Security trust funds for the 20152016 to 2033 period, as projected by the Social Security trustees in the 2015 Annual Report2016 annual report (under the intermediate assumptions). The Social Security trustees project that the level of accumulated trust fund holdings will continue to increase from 20152016 through 2019, due to interest income to the trust funds. Under the current projections, the level of accumulated holdings will begin to decline in 2020, and the Social Security trust funds' asset reserves will be depleted will be exhausted in 2034.33
The Social Security trustees project that, on average over the next 75 years (2015 to 20892016 to 2090), program costs will exceed income by an amount equal to 2.6866% of taxable payroll (on average, costs are projected to exceed income by about 19%).3439 The gap between income and costs, however, is projected to increase over the 75-year period. For example, in 2035, the cost of the program is projected to exceed income by an amount equal to 3.4228% of taxable payroll (costs are projected to exceed income by about 2625%). By 20852090, the cost of the program is projected to exceed income by an amount equal to 4.5035% of taxable payroll (costs are projected to exceed income by about 3433%).35
The Social Security40
For illustration purposes, the trustees project that the Social Security trust funds would remain solvent throughout the 75-year projection period if, for example,
Table 3. Accumulated Holdings of the
Social Security Trust Funds, Historical Period 1957-2014
($ in billions)
Year |
Accumulated |
Year |
Accumulated |
||
1957 |
$23.0 |
1986 |
$ |
||
1958 |
23.2 |
1987 |
|
||
1959 |
22.0 |
1988 |
109.8 |
||
1960 |
22.6 |
1989 |
163.0 |
||
1961 |
22.2 |
1990 |
225.3 |
||
1962 |
20.7 |
1991 |
280.7 |
||
1963 |
20.7 |
1992 |
331.5 |
||
1964 |
21.2 |
1993 |
378.3 |
||
1965 |
19.8 |
1994 |
436.4 |
||
1966 |
22.3 |
1995 |
496.1 |
||
1967 |
26.3 |
1996 |
567.0 |
||
1968 |
28.7 |
1997 |
|
||
1969 |
34.2 |
1998 |
762.5 |
||
1970 |
38.1 |
1999 |
896.1 |
||
1971 |
40.4 |
2000 |
1, |
||
1972 |
42.8 |
2001 |
1, |
||
1973 |
44.4 |
2002 |
1, |
||
1974 |
45.9 |
2003 |
1, |
||
1975 |
44.3 |
2004 |
1, |
||
1976 |
41.1 |
2005 |
1,858.7 |
||
1977 |
35.9 |
2006 |
2, |
||
1978 |
31.7 |
2007 |
2, |
||
1979 |
30.3 |
2008 |
2, |
||
1980 |
26.5 |
2009 |
2, |
||
1981 |
24.5 |
2010 |
2, |
||
1982 |
24.8 |
2011 |
2, |
||
1983 |
24.9 |
2012 |
2, |
||
1984 |
31.1 |
2013 |
2, |
||
1985 |
42.2 |
2014 |
2, 1986 46.9 |
Source: Table prepared by CRS from data provided in the 20152016 Annual Report, Table VI.A3, pp. 158-159, at http162-163 (the full report is at https://www.ssa.gov/oact/tr/2015/VI_A_cyoper_hist.html#293711OACT/TR/2016/tr2016.pdf). Accumulated holdings are end-of-year totals.
a.
The accumulated holdings of the Social Security trust funds are also referred to as the trust fund balance.
Table 4. Projected Accumulated Holdings of the
Social Security Trust Funds, 20152016-2033
($ in billions)
Yeara |
Accumulated |
Yeara |
Accumulated |
2015 |
$2, |
2025 |
$2, |
2016 |
2, |
2026 |
2, |
2017 |
2, |
2027 |
2, |
2018 |
2, |
2028 |
1, |
2019 |
2, |
2029 |
1, |
2020 |
2, |
2030 |
1, |
2021 |
2, |
2031 |
1, |
2022 |
2, |
2032 |
579.1 |
2023 |
2, |
2033 |
95.5 |
2024 |
2,611.0 |
Source: Table prepared by CRS from data provided in Table VI.G8 (intermediate assumptions), Supplemental Single-Year Tables Consistent with the 20152016 Annual Report, at http://www.socialsecurity.gov/oact/tr/2015https://www.ssa.gov/OACT/TR/2016/lr6g8.html. Accumulated holdings are end-of-year totals.
a.
Projections for years after 2033 are not shown because the asset reserves held by the Social Security trust funds are projected to be exhausteddepleted in 2034 under the intermediate assumptions.
b.
The accumulated holdings of the Social Security trust funds are also referred to as the trust fund balance.
As part of the annual congressional budget process, the level of federal debt (the federal debt limit) is setestablished for the budget by Congress. The federal debt limit includes debt held by the public, as well as the internal debt of the U.S. government (i.e., debt held by government accounts). Borrowing from the public and the investment of the Social Security trust funds in special U.S. government obligations both fall under the restrictions of the federal debt limit. This means that the balance of the Social Security trust fund balancefunds has implications for the federal debt limit.38
The accumulated holdings of the Social Security trust funds, which represent budget authority for the program, can be viewed as a measure of funds dedicated represent funds designated to pay current and future benefits. However, when currentWhen current Social Security tax revenues arefall below levelsthe level needed to pay benefits,39 these funds (the accumulated holdings) are available to pay benefits only as the however, these funds become available only as the federal government raises the resources necessary to pay for the securities as they are redeemed by the Social Securityneeded to redeem the securities held by the trust funds. The securities are a promise, by the U.S.federal government, to raise the necessary funds.40 When the system is44 In past years, when Social Security was operating with aannual cash flow surplus, the surplus Social Security revenues (which are invested in government securities held by the trust funds) are used to fund other government activities at the time. The surplus Social Securitysurpluses, Social Security's surplus revenues were invested in U.S. government securities and used at the time to pay for other federal government activities. Social Security's past surplus revenues, therefore, are not available to finance benefits directly when the systemdirectly when Social Security is operating with aannual cash flow deficits, as it does today.45 The securities held by the trust funds must be redeemed for Social Security benefits to be paid.
Stated another way, when Social Security is operating with a cash flow deficit, the program relies in part on the accumulated holdings of the trust funds to pay benefits and administrative expenses. Because the trust funds hold U.S. government securities that are redeemed with general revenues, there is increased reliance on the General Fund of the Treasury. With respect to reliance on the General Fund when Social Security is operating with a cash flow deficit, it is important to note that Social Security does not have authority to borrow from the General Fund. Social Security cannot simply draw upon general revenues to make up for any current funding shortfall. Rather, Social Security relies on revenues that were collected for the program in previous years and cash flow deficit.
Stated another way, when the Social Security trust funds operate with annual cash flow deficits, the trust funds redeem more federal government securities than the amount of current Social Security tax revenues, relying in part on accumulated trust fund holdings to pay benefits and administrative expenses. Because the federal government securities held by the trust funds are redeemed with general revenues, this results in increased spending for Social Security from the general fund. With respect to the Social Security program's reliance on general revenues, it is important to note that Social Security does not have authority to borrow from the general fund of the Treasury. Rather, the program relies on revenues collected for Social Security purposes in previous years that were used by the federal government at the time for other (non-Social Security) spending needs and, plus the interest income earned on its trust fund investments. The programSocial Security draws on thoseits own previously collected Social Security tax revenues and interest income (accumulated trust fund holdings) when current Social Security tax revenues fall below current program expenditures.
The Social Security trustees project that the accumulated holdings of the Social Security trust funds will be exhausted in 2034. At that time, the program will continue to operate with incoming receipts to the trust funds that are projected to equal 79% of program costs. By the end of the projection period (2089), incoming receipts are projected to equal 73% of program costs (based on the intermediate assumptions of the 2015 Annual Report).41 The Social Security Act does not state what would happen to the payment of benefits scheduled under current law in the event of Social Security trust fund exhaustion. Two possible scenarios are (1) the payment of full monthly benefits on a delayed schedule, or (2) the payment of partial (reduced) monthly benefits on time.42
1. |
A person may receive retired-worker benefits and continue to have earnings from work. If a person is below the full retirement age and earnings are above a specified amount, benefits are withheld in part or in full under the Retirement Earnings Test. For more information, see Social Security Administration (SSA), Social Security: How Work Affects Your Benefits, Publication No. 05-10069, January 2015, at http://www.socialsecurity.gov/pubs/EN-05-10069.pdf. |
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2. |
SSA, Monthly Statistical Snapshot, June 2015, Table 2. The latest edition of the Monthly Statistical Snapshot is available at http://www.ssa.gov/policy/docs/quickfacts/stat_snapshot/index.html. |
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3. |
SSA, Trust Fund FAQs, at http://www.socialsecurity.gov/OACT/ProgData/fundFAQ.html. |
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4. |
Social Security Act, Title II, §201(d). For more information, see SSA, Office of the Chief Actuary, Actuarial Note Number 142, Social Security Trust Fund Investment Policies and Practices, by Jeffrey L. Kunkel, January 1999, at http://www.ssa.gov/OACT/NOTES/n1990s.html. |
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5. |
This is often referred to as "borrowing from the Social Security trust funds." |
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6. |
The limit on wages and net self-employment income subject to the Social Security payroll tax (the taxable wage base) is adjusted annually based on average wage growth, if a Social Security cost-of-living adjustment (COLA) is payable. Because no COLA was payable in 2010 and 2011, the taxable wage base remained at its 2009 level ($106,800) in 2010 and 2011. For more information on the COLA, see CRS Report 94-803, Social Security: Cost-of-Living Adjustments, by [author name scrubbed]. The Medicare Hospital Insurance component of the FICA/SECA tax is levied on total wages. In addition, the Patient Protection and Affordable Care Act (ACA; P.L. 111-148, as amended) imposes an additional 0.9% tax on high-income workers with wages and self-employment income over $200,000 for single filers and $250,000 for joint filers effective for taxable years beginning after December 31, 2012. For more information on Medicare, see CRS Report R41436, Medicare Financing, by [author name scrubbed]. |
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7. |
Self-employed individuals are required to pay Social Security payroll taxes if they have annual net earnings of $400 or more. Only 92.35% of net self-employment income (up to the annual limit) is taxable. |
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8. |
SSA, Office of the Chief Actuary, Trust Fund Data, at http://www.socialsecurity.gov/OACT/STATS/table4a3.html. |
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9. |
The taxes associated with including Social Security benefits in federal taxable income go to the Social Security trust funds and the Medicare Hospital Insurance trust fund. See CRS Report RL32552, Social Security: Calculation and History of Taxing Benefits, by Noah P. Meyerson. |
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10. |
The Social Security trust funds receive reimbursements from the general fund for (1) the cost of noncontributory wage credits for military service before 1957; (2) the cost in 1971-1982 of deemed wage credits for military service performed after 1956; (3) the cost of benefits to certain uninsured persons who attained the age of 72 before 1968; (4) the cost of payroll tax credits provided to employees in 1984 and self-employed persons in 1984-89 by P.L. 98-21; (5) the cost in 2009-2013 of excluding certain self-employment earnings from SECA taxes under P.L. 110-246; and (6) payroll tax revenue forgone under the provisions of P.L. 111-147, P.L. 111-312, P.L. 112-78, and P.L. 112-96. (Source: SSA, Office of the Chief Actuary, Trust Fund Data, at http://www.socialsecurity.gov/OACT/STATS/table4a3.html.) |
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11. |
SSA, Office of the Chief Actuary, Trust Fund Data, at http://www.socialsecurity.gov/OACT/STATS/table4a3.html. |
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12. |
For more information, see CRS Report R41328, Federal Trust Funds and the Budget, by [author name scrubbed]. |
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13. |
Social Security Act, Title II, §201. |
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14. |
In addition, a portion of the federal income taxes paid on Social Security benefits, reimbursements from the general fund, and the interest income on Social Security trust fund investments are credited to the Social Security trust funds. |
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15. |
Social Security Act, Title II, §201(b). |
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16. |
The share allocated to the DI trust fund was last changed (to 0.9%) in 2000, under a reallocation schedule established in 1994 under P.L. 103-387. For more information on past legislative changes to the allocation of payroll taxes between the OASI and DI trust funds, see CRS Report R43318, Social Security Disability Insurance (DI) Trust Fund: Background and Solvency Issues, by [author name scrubbed]. |
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17. |
The accumulated holdings of the Social Security trust funds in U.S. government obligations are also referred to as the Social Security trust fund balance. |
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18. |
Certain government projects may be given "budget authority until expended," which allows the authority to spend funds on the project to be carried over each year until all of the authority to spend funds has been exhausted. |
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19. |
The Social Security Amendments of 1983 (P.L. 98-21) made a number of program changes, including the coverage of federal workers, an increase in the full retirement age and the taxation of Social Security benefits. For more information on the 1983 amendments, see CRS Report RL30920, Social Security: Major Decisions in the House and Senate Since 1935, by [author name scrubbed]. |
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20. | The trustees project that the asset reserves held by the Social Security trust funds will be depleted in 2034. At that point, the program will continue to operate with incoming receipts to the trust funds. Incoming receipts are projected to be sufficient to pay about three-fourths of scheduled benefits through the end of the projection period in 2090 (under the intermediate assumptions of the 2016 annual report).47 Title II of the Social Security Act, which governs the program, does not specify what would happen to the payment of benefits in the event that the trust funds' asset reserves are depleted and incoming receipts to the trust funds are not sufficient to pay scheduled benefits in full and on time. Two possible scenarios are (1) the payment of full monthly benefits on a delayed basis or (2) the payment of partial monthly benefits on time.48 The following table shows the key dates projected for the Social Security trust funds by the Social Security Board of Trustees (based on their intermediate set of assumptions) in each of their annual reports from 1983 to 2016. Year of Report Year of Reserve Depletion First Year That Cost Exceeds Non-Interest Income First Year That Cost Exceeds Total Income OASI DI OASDI OASI DI OASDI OASI DI OASDI 1983 2021 2047 1984 2050 2021 2012 2021 2045 2038 2044 1985 2050 2034 2049 2019 2010 2019 2032 2020 2032 1986 2054 2026 2051 2020 2009 2019 2035 2017 2033 1987 2055 2023 2051 2020 2008 2019 2036 2013 2033 1988 2050 2027 2048 2019 2009 2019 2033 2016 2032 1989 2049 2025 2046 2019 2009 2018 2032 2014 2030 1990 2046 2020 2043 2019 2008 2017 2030 2011 2028 Intermediate Projections 1991 2045 2015 2041 2018 1998 2017 2030 2011 2028 1992 2042 1997 2036 2018 1992 2016 2028 1992 2024 1993 2044 1995 2036 2019 1993 2017 2030 1993 2025 1994 2036 1995 2029 2016 1994 2013 2024 1994 2019 1995 2031 2016 2030 2014 2003 2013 2021 2007 2020 1996 2031 2015 2029 2014 2003 2012 2021 2007 2019 1997 2031 2015 2029 2014 2004 2012 2021 2007 2019 1998 2034 2019 2032 2015 2006 2013 2023 2009 2021 1999 2036 2020 2034 2015 2006 2014 2024 2009 2022 2000 2039 2023 2037 2016 2007 2015 2026 2012 2025 2001 2040 2026 2038 2016 2008 2016 2027 2015 2027 2002 2043 2028 2041 2018 2009 2017 2028 2018 2027 2003 2044 2028 2042 2018 2008 2018 2030 2018 2028 2004 2044 2029 2042 2018 2008 2018 2029 2017 2028 2005 2043 2027 2041 2018 2005 2017 2028 2014 2027 2006 2042 2025 2040 2018 2005 2017 2028 2013 2027 2007 2042 2026 2041 2018 2005 2017 2028 2013 2027 2008 2042 2025 2041 2018 2005 2017 2028 2012 2027 2009 2039 2020 2037 2017 2005 2016 2025 2009 2024 2010 2040 2018 2037 2018 2005 2015 2026 2009 2025 2011 2038 2018 2036 2017 2005 2010 2025 2009 2023 2012 2035 2016 2033 2010 2005 2010 2023 2009 2021 2013 2035 2016 2033 2010 2005 2010 2022 2009 2021 2014 2034 2016 2033 2010 2005 2010 2022 2009 2020 2015 2035 2016 2034 2010 2005 2010 2022 2009 2020 2016 2035 2023 2034 2010 2019 2010 2022 2019 2020 Source: CRS, based on data from the 1983 to 2016 Social Security trustees reports and information provided by SSA. Author Contact Information Acknowledgments This report was originally written by retired CRS analyst [author name scrubbed]. CRS analyst [author name scrubbed] made additional contributions. All questions should be directed to the current authors. A person may receive retired-worker benefits and continue to have earnings from work. If a person is below the full retirement age and has earnings above a specified amount, benefits are withheld in part or in full under the Retirement Earnings Test. For more information, see Social Security Administration (SSA), Social Security: How Work Affects Your Benefits, Publication No. 05-10069, January 2016, at https://www.ssa.gov/pubs/EN-05-10069.pdf. SSA, Monthly Statistical Snapshot, May 2016, Table 2. The latest edition of the Monthly Statistical Snapshot is available at http://www.ssa.gov/policy/docs/quickfacts/stat_snapshot/index.html. SSA, Trust Fund FAQs, at http://www.socialsecurity.gov/OACT/ProgData/fundFAQ.html. Social Security Act, Title II, §201(d) [42 U.S.C. §401(d)]. For more information, see SSA, Office of the Chief Actuary, Actuarial Note Number 142, Social Security Trust Fund Investment Policies and Practices, by Jeffrey L. Kunkel, January 1999, at http://www.ssa.gov/OACT/NOTES/n1990s.html. The limit on wages and net self-employment income subject to the Social Security payroll tax (the taxable wage base) is adjusted annually based on average wage growth if a Social Security cost-of-living adjustment (COLA) is payable. For more information on the COLA, see CRS Report 94-803, Social Security: Cost-of-Living Adjustments. The Medicare Hospital Insurance component of the FICA/SECA tax is levied on total earnings. In addition, the Patient Protection and Affordable Care Act (ACA; P.L. 111-148, as amended) imposes an additional 0.9% tax on high-income workers with wages and self-employment income over $200,000 for single filers and $250,000 for joint filers effective for taxable years beginning after December 31, 2012. For more information on Medicare, see CRS Report R43122, Medicare Financial Status: In Brief. Self-employed individuals are required to pay Social Security payroll taxes if they have annual net earnings of $400 or more. Only 92.35% of net self-employment income (up to the annual limit) is taxable. SSA, Office of the Chief Actuary, Financial Data For A Selected Time Period, at https://www.ssa.gov/OACT/ProgData/allOps.html. The taxes associated with including Social Security benefits in federal taxable income go to the Social Security trust funds and Medicare's Hospital Insurance trust fund. For more information, see CRS Report RL32552, Social Security: Calculation and History of Taxing Benefits. The Social Security trust funds receive reimbursements from the General Fund for (1) the cost of noncontributory wage credits for military service before 1957; (2) the cost in 1971-1982 of deemed wage credits for military service performed after 1956; (3) the cost of benefits to certain uninsured persons who attained the age of 72 before 1968; (4) the cost of payroll tax credits provided to employees in 1984 and self-employed persons in 1984-89 by P.L. 98-21; (5) the cost in 2009-2013 of excluding certain self-employment earnings from SECA taxes under P.L. 110-246; and (6) payroll tax revenue forgone under the provisions of P.L. 111-147, P.L. 111-312, P.L. 112-78, and P.L. 112-96. See SSA, Office of the Chief Actuary, Trust Fund Data, at http://www.socialsecurity.gov/OACT/STATS/table4a3.html. The total also includes a small amount of gifts to the trust funds. SSA, Office of the Chief Actuary, Financial Data For A Selected Time Period, at https://www.ssa.gov/OACT/ProgData/allOps.html. For more information, see CRS Report R41328, Federal Trust Funds and the Budget. Social Security Act, Title II, §201 [42 U.S.C. §401]. In addition, a portion of the federal income taxes paid on Social Security benefits, reimbursements from the General Fund, and the interest income on Social Security trust fund investments are credited to the Social Security trust funds. Social Security Act, Title II, §201(b) [42 U.S.C. §401(b)]. See SSA, Office of the Chief Actuary, Social Security Tax Rates, at https://www.ssa.gov/OACT/ProgData/oasdiRates.html. Before the Bipartisan Budget Act of 2015, the share of the payroll tax allocated to the DI fund was last changed (to 1.8%) in 2000, under a reallocation schedule established under the Social Security Domestic Employment Reform Act of 1994 (P.L. 103-387). For more information on past legislative changes to the allocation of payroll taxes between the OASI and DI trust funds, see CRS Report R43318, The Social Security Disability Insurance (DI) Trust Fund: Background and Current Status. The accumulated holdings of the Social Security trust funds in U.S. government obligations are also referred to as the Social Security trust fund balance. Certain government projects may be given "budget authority until expended," which allows the authority to spend funds on the project to be carried over each year until all of the authority to spend funds has been exhausted. The Social Security Amendments of 1983 (P.L. 98-21) made a number of program changes, including the coverage of federal workers, an increase in the full retirement age, and the taxation of Social Security benefits. For more information on the 1983 amendments, see CRS Report RL30920, Social Security: Major Decisions in the House and Senate Since 1935. Taxable payroll refers to total earnings in the economy that are subject to Social Security payroll taxes (with some adjustments). The Congressional Budget Office (CBO) projects that the trust funds will have asset reserves until 2029, and that the program's 75-year actuarial shortfall would be equal to 4.7% of taxable payroll. As CBO explains: "The larger shortfall projected by CBO primarily stems from differences in the projections of interest rates and taxable payroll. Differences in projections involving life expectancy, fertility, and growth in the consumer price index also contribute ... " See CBO, The 2016 Long-Term Budget Outlook, July 2016, p. 28. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Social Security and Medicare Boards of Trustees, Status of the Social Security and Medicare Programs: A Summary of the |
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The Bipartisan Budget Act of 2015 (P.L. 114-74) was signed into law on November 2, 2015. In July 2015, the trustees released the 2015 Annual Report in which they projected that the asset reserves held by the DI Trust Fund would be depleted by the end of calendar year 2016 (under the intermediate assumptions). If reserve depletion had occurred, Social Security would have been unable to pay disability benefits in full and on time from that point forward. 25.
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Summary of the 2016 Annual Report. 26.
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The DI Trust Fund was created under the Social Security Act Amendments of 1956, and DI became effective on January 1, 1957. The historical table begins with 1957, the first year for which operations of the combined OASDI Trust Fund can be shown. 27.
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2016 Annual Report, Table VI.A3, pp. 162-163, at https://www.ssa.gov/OACT/TR/2016/tr2016.pdf |
Summary of the 2015 Annual Report, A Message from the Public Trustees, p. 17. The reference to 1994 points to the last time Congress enacted legislation that reallocated payroll taxes between the OASI and DI trust funds. The provision was included in the Social Security Domestic Employment Reform Act of 1994 (H.R. 4278, 103rd Congress), which became P.L. 103-387. For information on payroll tax reallocations between OASI and DI and related topics, see CRS Report R43318, Social Security Disability Insurance (DI) Trust Fund: Background and Solvency Issues, by [author name scrubbed]. |
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23. |
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Social Security Act, Title II, §201(d) [42 U.S.C. §401(d)]. For more information, see SSA, Office of the Chief Actuary, Actuarial Note Number 142, Social Security Trust Fund Investment Policies and Practices, by Jeffrey L. Kunkel, January 1999, at http://www.ssa.gov/OACT/NOTES/n1990s.html. |
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Social Security Act, Title II, §201(d) [42 U.S.C. §401(d)]. |
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Social Security Act, Title II, §201(f) [42 U.S.C. §401(f)]. The funds are then used to purchase additional U.S. government securities credited to the Social Security trust funds. |
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For more information, see CRS Report RS20607, Social Security: Trust Fund Investment Practices |
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For SSA's perspective on the U.S. government securities held by the trust funds, see SSA, Trust Fund FAQs, at http://www.ssa.gov/oact/progdata/fundFAQ.html. |
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Although the Social Security program is designated as off-budget, SSA's administrative funding is subject to an annual appropriated limit. For more information, see CRS Report R41716, The Social Security Administration (SSA): Budget Request and Appropriations.
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30. |
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36.
For related information, see David Pattison, "Social Security Trust Fund Cash Flows and Reserves," Social Security Bulletin, vol. 75, no. 1 (February 2015), at https://www.ssa.gov/policy/docs/ssb/v75n1/v75n1p1.html. |
The funds are then used to purchase additional U.S. government securities credited to the Social Security trust funds. |
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The Social Security trust funds also receive reimbursements from the |
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Under the intermediate assumptions of the |
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Program costs and income are evaluated as a percentage of taxable payroll because Social Security payroll taxes are the primary source of funding for the program. |
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The 75-year "open group unfunded obligation" for Social Security is $ |
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The Social Security trustees explain that the projected increase in the payroll tax rate needed for the trust funds to remain solvent throughout the 75-year projection period (2. |
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For a discussion of how reaching the debt limit potentially could affect Social Security trust fund investment practices and benefit payments, see CRS Report R41633, Reaching the Debt Limit: Background and Potential Effects on Government Operations | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
39. |
In the 2015 Annual Report, the Social Security trustees project that revenues will remain below program costs each year throughout the 75-year projection period (2015-2089), under the intermediate assumptions. |
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If there are no surplus governmental receipts, the U.S. government may raise the necessary funds by increasing taxes or other income, reducing |
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42. | Summary of the 2016 Annual Report. Projections show that incoming receipts would be sufficient to pay 79% of scheduled benefits in 2034 and 74% of scheduled benefits in 2090. On a separate basis, the OASI Trust Fund is projected to be unable to pay scheduled benefits starting in 2035; the DI Trust Fund is projected to be unable to pay scheduled benefits starting in 2023. (2016 Annual Report, p. 12.) |