.

Social Security: The Trust Fund
Dawn Nuschler
Specialist in Income Security
Gary Sidor
Information Research Specialist
June 16, 2009
Congressional Research Service
7-5700
www.crs.gov
RL33028
CRS Report for Congress
P
repared for Members and Committees of Congress
c11173008

---

.
Social Security: The Trust Fund

Summary
The Social Security program pays benefits to retired and disabled workers and their family
members, and to 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 fund and the Federal Disability Insurance (DI)
trust fund. This report refers to the two trust funds as an aggregate Social Security trust fund and
discusses the operations of the OASI and DI trust funds on a combined basis.
The Social Security program is financed primarily through payroll taxes that are deposited in the
U.S. Treasury and credited to the Social Security trust fund. Any revenues credited to the trust
fund in excess of program costs (benefit payments and administrative expenses) are invested in
special U.S. government obligations (debt instruments of the U.S. government).
The Social Security trust fund represents funds dedicated to pay current and future Social
Security benefits. However, it is useful to view the trust fund 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. 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, any surplus Social Security revenues must be invested in U.S. government obligations.
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 fund differ from those of private trusts because (1) the types of investments the trust
fund may hold are limited, and (2) the U.S. government is both the buyer and seller of the
investments.
This report covers the basics of how the Social Security program is funded and how the Social
Security trust fund works. It will be updated as needed to reflect legislative or other activity.

Congressional Research Service

---

.
Social Security: The Trust Fund

Contents
Introduction ................................................................................................................................ 1
How the Social Security Program Is Financed ............................................................................. 1
The Social Security Trust Fund as a Designated Account............................................................. 2
Social Security Trust Fund Revenues .................................................................................... 2
Social Security Trust Fund Costs........................................................................................... 2
Social Security Trust Fund Operations................................................................................... 2
Investment of the Social Security Trust Fund......................................................................... 8
The Social Security Trust Fund and the Federal Budget ......................................................... 8
On-Budget Versus Off-Budget............................................................................................... 9
The Social Security Trust Fund as Accumulated Holdings ........................................................... 9
The Social Security Trust Fund and the Level of Federal Debt............................................. 14
The Social Security Trust Fund and Federal Default ............................................................ 14
The Social Security Trust Fund and Benefit Payments ......................................................... 14

Figures
Figure 1. Ratio of Current (Annual) Revenues to Costs for the Social Security Trust Fund,
1957-2036................................................................................................................................ 7

Tables
Table 1. Annual Revenues, Costs, and Cash Flow Surplus or Deficit for the Social
Security Trust Fund, 1957-1983 ............................................................................................... 4
Table 2. Annual Revenues, Costs, and Cash Flow Surplus for the Social Security Trust
Fund, 1984-2008...................................................................................................................... 5
Table 3. Projected Annual Revenues, Costs, and Cash Flow Surplus or Deficit for the
Social Security Trust Fund, 2009-2036..................................................................................... 6
Table 4. Accumulated Holdings of the Social Security Trust Fund, 1957-2008.......................... 11
Table 5. Projected Accumulated Holdings of the Social Security Trust Fund, 2009-2036 ........... 13

Contacts
Author Contact Information ...................................................................................................... 15
Acknowledgments .................................................................................................................... 15

Congressional Research Service

---

.
Social Security: The Trust Fund

Introduction
The Social Security program pays benefits to retired and disabled workers and their family
members, and to family members of deceased workers. The program is financed primarily
through payroll taxes that are deposited in the U.S. Treasury and credited to the Social Security
trust fund. Any revenues credited to the trust fund in excess of program costs (benefit payments
and administrative expenses) are invested in special U.S. government obligations (debt
instruments of the U.S. government). The Social Security trust fund is both a designated account
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.
How the Social Security Program Is Financed
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 example,
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. In 2009, employers and employees each pay 6.2% of wages up to
$106,800 in Social Security payroll taxes.1 The SECA tax rate is 15.3% for self-employed
individuals, with 12.4% for Social Security and 2.9% for Medicare Hospital Insurance. In 2009,
self-employed individuals pay 12.4% of net self-employment income up to $106,800 in Social
Security payroll taxes, with one-half of the SECA taxes allowed as a deduction for federal income
tax purposes.2 SECA taxes are normally paid once a year as part of filing an annual individual
income tax return.
In addition to Social Security payroll taxes, the Social Security program has two other sources of
income. Certain Social Security recipients must include a portion of Social Security benefits in
taxable income for the federal income tax, and the Social Security program receives part of those
taxes.3 In addition, the Social Security program receives interest from the U.S. Treasury on its
investments in special U.S. government obligations.
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.

1 The limit on wages subject to the Social Security payroll tax is indexed annually to average wage growth. The
Medicare Hospital Insurance component of the FICA tax is levied on total wages.
2 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.
3 The taxes associated with including Social Security benefits in federal taxable income go to the Social Security trust
fund and the Medicare Hospital Insurance trust fund. See CRS Report RL32552, Social Security: Calculation and
History of Taxing Benefits, by Janemarie Mulvey and Christine Scott.
Congressional Research Service
1

---

.
Social Security: The Trust Fund

The Social Security Trust Fund as a Designated
Account
Within the U.S. Treasury, there are numerous accounts established for internal accounting
purposes. Although all of the monies within the 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. In addition, the government can affect the level of revenues and expenditures
associated with a trust fund through changes in the law. Social Security 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 fund and (2) the Federal
Disability Insurance (DI) trust fund.4 This report refers to the two separate trust funds as an
aggregate Social Security trust fund and discusses the operations of the OASI and DI trust funds
on a combined basis.
Social Security Trust Fund Revenues
The Social Security trust fund receives a credit equal to the Social Security payroll taxes
deposited in the U.S. Treasury by the IRS. The payroll taxes are allocated between the OASI and
DI trust funds based on a proportion specified by law.5 Currently, of the 6.2% tax rate, 5.3% is
allocated to the OASI trust fund and 0.9% is allocated to the DI trust fund.6
Social Security Trust Fund Costs
The U. S. Treasury makes Social Security benefit payments to entitled individuals on a monthly
basis. The Treasury is 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 Treasury, the Social
Security trust fund is debited for the payments. Periodically, the Social Security trust fund is 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.
Social Security Trust Fund Operations
The annual revenues to the Social Security trust fund are used to pay current Social Security
benefits and administrative expenses. If, in any year, revenues are greater than costs, the
Secretary of the Treasury (as the Managing Trustee of the Social Security trust fund) is required
to invest surplus Social Security revenues in securities backed by the U.S. government.7 The
purchase of government securities allows surplus Social Security revenues to be used for other
government spending needs at the time.8 If, in any year, costs are greater than revenues, the cash

4 Social Security Act, Title II, §201.
5 Social Security Act, Title II, §201(b).
6 The share allocated to the DI trust fund was last changed (to 0.9%) in 2000. The proportional split between the OASI
and DI trust funds has been altered five times since 1985.
7 Social Security Act, Title II, §201(d).
8 This is often referred to as “borrowing from the Social Security trust fund.”
Congressional Research Service
2

---

.
Social Security: The Trust Fund

flow deficit is offset by selling some of the accumulated holdings of the trust fund (government
securities) to 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).9 The annual cash flow operations of the
Social Security trust fund 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 fund from prior years to pay benefits and
administrative expenses.10
Although Social Security is often referred to as 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,
including the coverage of federal workers, an increase in the full retirement age, and the taxation
of Social Security benefits, began a sustained period of annual cash flow surpluses. In the 2009
Annual Report, the Social Security trustees project annual cash flow surpluses to continue
through 2015. Beginning in 2016, however, program costs are projected to exceed revenues and
annual cash flow deficits are projected to continue throughout the remainder of the 75-year
projection period (under the intermediate assumptions).11
On average, over the 75-year projection period (2009 to 2083), the Social Security trustees
project that program costs will exceed income (tax revenues plus interest income) by an amount
equal to 2.00% of taxable payroll (costs are projected to exceed income by 14%).12 The gap
between income and costs, however, is projected to increase over the 75-year projection period.
For example, in 2030, the cost of the program is projected to exceed income by an amount equal
to 3.56% of taxable payroll (costs are projected to exceed income by 27%). By the end of the
projection period, in 2083, the cost of the program is projected to exceed income by an amount
equal to 4.34% of taxable payroll (costs are projected to exceed income by 33%). According to
the Social Security trustees, the Social Security program could be brought into actuarial balance
over the next 75 years with changes equivalent to an immediate 16% increase in the payroll tax
(from a rate of 12.4% to 14.4%) or an immediate reduction in benefits of 13% (or some
combination of the two options). The Social Security trustees point out that larger changes would
be needed to maintain trust fund solvency beyond the next 75 years.13
As shown in Table 1, during the 1957 to 1983 period, the cash flow operations of the Social
Security trust fund (annual revenues less annual costs) were negative in 21 of the 27 years.

9 The accumulated holdings of the Social Security trust fund in U.S. government obligations are often referred to as the
Social Security trust fund balance.
10 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.
11 The 2009 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal
Disability Insurance Trust Funds, Washington, DC, May 12, 2009.
12 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. The projected 75-year actuarial deficit (2.00% of taxable payroll)
represents $5.3 trillion in present value terms.
13 Projections by the Social Security trustees are based on the intermediate assumptions of the 2009 Annual Report.
Congressional Research Service
3

---

.
Social Security: The Trust Fund

Table 1. Annual Revenues, Costs, and Cash Flow Surplus or Deficit
for the Social Security Trust Fund, 1957-1983
($ in billions)
Annual Revenues
Year
(not including
Annual
Annual Cash Flow Surplus or Deficit
Costs
(annual revenues less annual costs)
interest)
1957
$7.50
$7.60
($0.10)
1958
8.50
8.90
(0.40)
1959
8.90
10.80
(1.90)
1960
11.90
11.80
0.10
1961
12.30
13.40
(1.10)
1962
13.10
15.20
(2.10)
1963
15.60
16.20
(0.60)
1964
16.80
17.00
(0.20)
1965
17.20
19.20
(2.00)
1966
22.60
20.90
1.70
1967
25.40
22.50
2.90
1968
27.00
26.00
1.00
1969
31.50
27.90
3.60
1970
34.70
33.10
1.60
1971
38.30
38.50
(0.20)
1972
42.90
43.30
(0.40)
1973
51.90
53.10
(1.20)
1974
58.90
60.60
(1.70)
1975
64.30
69.20
(4.90)
1976
71.60
78.20
(6.60)
1977
78.70
87.30
(8.60)
1978
88.90
96.00
(7.10)
1979
103.00
107.30
(4.30)
1980
116.70
123.60
(6.90)
1981
139.40
144.40
(5.00)
1982
145.70
160.10
(14.40)
1983
156.30
171.20
(14.90)
Source: Table prepared by the Congressional Research Service (CRS) from data provided in The 2009 Annual
Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust
Funds, Washington, DC, May 12, 2009, Table VI.A4.


Congressional Research Service
4

---

.
Social Security: The Trust Fund

Table 2 shows the cash flow operations of the Social Security trust fund (annual revenues, costs,
and cash flow surplus) for the 1984 to 2008 period. Table 3 shows the projected cash flow
operations of the Social Security trust fund (projected annual revenues, costs, and cash flow
surplus or deficit) for the 2009 to 2036 period, as projected by the Social Security trustees in the
2009 Annual Report (under the intermediate assumptions).
Table 2. Annual Revenues, Costs, and Cash Flow Surplus
for the Social Security Trust Fund, 1984-2008
($ in billions)
Annual Revenues
Year
(not including
Annual
Annual Cash Flow Surplus
interest)
Costs
(annual revenues less annual costs)
1984
$183.10
$180.40
$2.70
1985
197.50
190.60
6.90
1986
212.80
201.50
11.30
1987
225.60
209.10
16.50
1988
255.20
222.50
32.70
1989
276.70
236.20
40.50
1990
301.10
253.10
48.00
1991
307.80
274.20
33.60
1992
317.20
291.90
25.30
1993
327.70
308.80
18.90
1994
350.00
323.00
27.00
1995
364.80
339.80
25.00
1996
385.70
353.60
32.10
1997
413.90
369.10
44.80
1998
439.90
382.30
57.60
1999
471.20
392.90
78.30
2000
504.80
415.10
89.70
2001
529.10
438.90
90.20
2002
546.30
461.70
84.60
2003
546.90
479.10
67.80
2004
568.70
501.60
67.10
2005 607.80
529.90
77.90
2006 642.50
555.40
87.10
2007 674.70
594.50
80.20
2008 689.00
625.10
63.90
Source: Table prepared by the Congressional Research Service (CRS) from data provided in The 2009 Annual
Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust
Funds, Washington, DC, May 12, 2009, Table VI.A4.
Congressional Research Service
5

---

.
Social Security: The Trust Fund

Table 3. Projected Annual Revenues, Costs, and Cash Flow Surplus or Deficit
for the Social Security Trust Fund, 2009-2036
($ in billions)
Annual Revenues
Year
Annual
Annual Cash Flow Surplus or Deficit
a
(not including
Costs
(annual revenues less annual costs)
interest)
2009 $701.30
$682.50
$18.80

2010 727.60
709.30
18.30

2011 763.60
735.10
28.50

2012 810.40
772.40
38.00

2013 855.50
822.70
32.80

2014 898.60
880.20
18.40

2015 943.50
941.20
2.30

2016
986.40
1,005.30
(18.90)
2017
1,031.40
1,074.30
(42.90)
2018
1,077.00
1,147.50
(70.50)
2019
1,125.20
1,226.20
(101.00)
2020
1,175.50
1,308.80
(133.30)
2021
1,227.90
1,394.30
(166.40)
2022
1,282.50
1,482.40
(199.90)
2023
1,339.60
1,574.10
(234.50)
2024
1,399.10
1,669.40
(270.30)
2025
1,461.30
1,767.90
(306.60)
2026
1,526.00
1,869.50
(343.50)
2027
1,593.70
1,974.90
(381.20)
2028
1,664.40
2,083.70
(419.30)
2029
1,738.50
2,194.60
(456.10)
2030
1,815.90
2,309.30
(493.40)
2031
1,897.00
2,426.80
(529.80)
2032
1,981.80
2,547.20
(565.40)
2033
2,070.30
2,670.00
(599.70)
2034
2,162.80
2,795.10
(632.30)
2035
2,259.20
2,922.90
(663.70)
2036
2,360.00
3,054.40
(694.40)
Source: Table prepared by the Congressional Research Service (CRS) from data provided in The 2009 Annual
Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust
Funds, Washington, DC, May 12, 2009, Table VI.F8 (intermediate assumptions).
a. Projections for years after 2036 are not shown because the Social Security trust fund is projected to be
exhausted in 2037 under the intermediate assumptions.
Congressional Research Service
6

---

.
Social Security: The Trust Fund

One way to measure the annual cash flow operations over time is to take the ratio of current
revenues to current costs for each year. A ratio greater than 100% indicates positive cash flow (a
cash flow surplus). Conversely, a ratio less than 100% indicates negative cash flow (a cash flow
deficit). Figure 1 shows the ratio of current revenues to current costs for the Social Security trust
fund over the historical period from 1957 to 2008 and over the future period from 2009 to 2036,
as projected by the Social Security trustees in the 2009 Annual Report (under the intermediate
assumptions).14
As shown in the figure, in 2008, revenues of $689 billion divided by costs of $625 billion results
in a ratio of 110%, indicating a cash flow surplus for the Social Security trust fund. By
comparison, in 2016, projected revenues of $986 billion divided by projected costs of $1 trillion
results in a ratio of 98%, indicating a cash flow deficit. In the 2009 Annual Report, the Social
Security trustees project that the ratio of current revenues to current costs will fall below 100% in
2016 and remain below 100% for the rest of the projection period, with the gap between revenues
and costs increasing over time (under the intermediate assumptions).
Figure 1. Ratio of Current (Annual) Revenues to Costs
for the Social Security Trust Fund, 1957-2036
Ratio
125%
120%
115%
110%
105%
100%
95%
90%
85%
80%
Historical Period
Projected Period
(1957-2008)
(2009-2036)
75%
7
4
1
8
5
2
9
6
3
0
7
4
5
6
7
7
8
9
9
0
1
2
2
3
9
9
9
9
9
9
9
0
0
0
0
0
1
1
1
1
1
1
1
2
2
2
2
2

Source: Figure prepared by the Congressional Research Service (CRS) from data provided in The 2009 Annual
Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust
Funds, Washington, DC, May 12, 2009, Tables VI.A4 and VI.F8 (intermediate assumptions).
Notes: Annual revenues do not include 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.

14 The 2009 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal
Disability Insurance Trust Funds, Washington, DC, May 12, 2009, Tables VI.A4 & VI.F8 (intermediate assumptions).
Congressional Research Service
7

---

.
Social Security: The Trust Fund

While the Social Security program has experienced cash flow deficits in the past and is projected
to do so in the future, Social Security benefits can continue to be paid by the Treasury at levels
scheduled under current law as long as the accumulated balance in the Social Security trust fund
is positive. This is because the Social Security program has budget authority to pay benefits as
long as the balance in the Social Security trust fund (the designated account) is positive.
However, when current revenues are not sufficient to pay benefits, the U.S. government must
raise the funds necessary to honor the redemption of U.S. government obligations held by the
Social Security trust fund 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 spending, or borrowing (or some combination of these options).
Investment of the Social Security Trust Fund
The Secretary of the Treasury is required by law to invest Social Security revenues that are not
needed to pay current benefits and administrative expenses in securities backed by the U.S.
government.15 In addition, the Social Security trust fund receives interest on its holdings of
special U.S. government obligations. Each government security issued by the Treasury for
purchase by the Social Security trust fund must be a paper instrument in the form of a bond, note
or certificate of indebtedness.16 Any interest or proceeds from the sale of government securities
held by the Social Security trust fund must be paid in the form of paper checks from the general
fund of the Treasury to the Social Security trust fund.17 The interest rates paid on the government
securities issued to the Social Security trust fund are tied to market rates.18
For internal federal accounting purposes, when special U.S. government obligations are
purchased by the Social Security trust fund, the Treasury is shifting surplus Social Security
revenues from one government account (the Social Security trust fund) to another government
account (the Treasury’s “general fund” account). The special U.S. government obligations are
physical documents held by the Social Security Administration, not the U.S. Treasury. The
government securities held by the Social Security trust fund are redeemed on a regular basis.
These special U.S. government obligations, however, are not resources for the government
because they represent both an asset and a liability for the government.
The Social Security Trust Fund and the Federal Budget
The Social Security program is indirectly part of the annual congressional budget process. This
creates some confusion on the part of the public.

15 Social Security Act, Title II, §201(d).
16 Social Security Act, Title II, §201(d). The Social Security trust fund may purchase certain other government
securities, such as those issued by Fannie Mae or Freddie Mac, but this option is seldom used.
17 Social Security Act, Title II, §201(f). The funds are then used to purchase additional government securities credited
to the Social Security trust fund.
18 For more information, see CRS Report RS20607, Social Security: Trust Fund Investment Practices, by Dawn
Nuschler.
Congressional Research Service
8

---

.
Social Security: The Trust Fund

On-Budget Versus Off-Budget
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 government program that, like the Postal Service, has had its
receipts and (most) outlays designated by law as off-budget.19 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 government revenues
and expenditures 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 government revenues (26.1% in FY2008) and
expenditures (20.7% in FY2008).20 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 Fund as Accumulated
Holdings
The Social Security trust fund can be (and often is) viewed as a trust fund, similar to any private
trust fund, that is to be used for paying current and future benefits (and administrative expenses).
By law, any Social Security revenues credited to the trust fund (within the U.S. Treasury) in
excess of program costs are invested in non-marketable U.S. government obligations. These
obligations are physical (paper) documents issued to the trust fund and held by the Social
Security Administration. When the obligations are redeemed, the Treasury must issue a check (a
physical document) to the Social Security trust fund for the interest earned on the obligations.21
However, unlike a private trust that may hold a variety of assets and obligations of different
borrowers, the Social Security trust fund can hold only non-marketable U.S. government
obligations. The sale of these obligations by the U.S. government to the Social Security trust fund

19 Although the Social Security program is off-budget, the annual congressional budget process does provide the budget
authority for Social Security administrative spending. SSA’s administrative funding, which is paid for out of the Social
Security trust fund, is subject to an annual appropriated limit. In contrast, the Social Security program has budget
authority to pay benefits as long as the balance in the Social Security trust fund (the designated account) is positive.
20 Percentages calculated by the Congressional Research Service (CRS) from data provided in: Office of Management
and Budget, Historical Tables, Budget of the U.S. Government, Fiscal Year 2010, Tables 2.1, 2.4, 6.1 and 13.1.
21 The funds are then used to purchase additional government securities credited to the Social Security trust fund.
Congressional Research Service
9

---

.
Social Security: The Trust Fund

is federal government borrowing (from itself) and counts against the federal debt limit. The
requirement that the Social Security trust fund purchase U.S. government obligations serves
several purposes, such as:
• offering a mechanism for the Social Security program to recoup the surplus
revenues loaned to the rest of the government,
• paying interest so that the loan of the surplus revenues does not lose value over
time,
• ensuring that the Social Security trust fund (and not other government accounts)
receives credit for the interest earnings,
• ensuring a level of return (interest) to the Social Security trust fund, and
• providing a means outside of the securities market for the U.S. government to
borrow funds.
The accumulated holdings of the Social Security trust fund represent the sum of annual surplus
Social Security revenues (for all past years) which were invested in U.S. government obligations,
plus the interest earned on those obligations. As a result of surplus Social Security revenues for
the past 25 years (1984 to 2008) and the interest income credited to the Social Security trust fund,
the accumulated holdings of the Social Security trust fund totaled $2.4 trillion at the end of
calendar year 2008. It is the accumulated holdings of the Social Security trust fund (or the trust
fund balance) that many people refer to when discussing the Social Security trust fund. Table 4
shows the accumulated holdings of the Social Security trust fund for the historical period from
1957 to 2008. Table 5 shows the accumulated holdings of the Social Security trust fund for the
future period from 2009 to 2036, as projected by the Social Security trustees in the 2009 Annual
Report (under the intermediate assumptions). The Social Security trustees project that the level of
accumulated holdings will begin to decline in 2024 and that the Social Security trust fund will be
exhausted in 2037.
Congressional Research Service
10

---

.
Social Security: The Trust Fund

Table 4. Accumulated Holdings of the Social Security Trust Fund, 1957-2008
($ in billions)
Year
Accumulated
Holdingsa
1957 $23.00
1958 23.20
1959 22.00
1960 22.60
1961 22.20
1962 20.70
1963 20.70
1964 21.20
1965 19.80
1966 22.30
1967 26.30
1968 28.70
1969 34.20
1970 38.10
1971 40.40
1972 42.80
1973 44.40
1974 45.90
1975 44.30
1976 41.10
1977 35.90
1978 31.70
1979 30.30
1980 26.50
1981 24.50
1982 24.80
1983 24.90
1984 31.10
1985 42.20
1986 46.90
1987 68.80
1988 109.80
1989 163.00
1990 225.30
1991 280.70
Congressional Research Service
11

---

.
Social Security: The Trust Fund

Accumulated
Year
Holdingsa
1992 331.50
1993 378.30
1994 436.40
1995 496.10
1996 567.00
1997 655.50
1998 762.50
1999 896.10
2000 1,049.40
2001 1,212.50
2002 1,378.00
2003 1,530.80
2004 1,686.80
2005 1,858.70
2006 2,048.10
2007 2,238.50
2008 2,418.70
Source: Table prepared by the Congressional Research Service (CRS) from data provided in The 2009 Annual
Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust
Funds, Washington, DC, May 12, 2009, Table VI.A4.
a. The accumulated holdings of the Social Security trust fund are also referred to as the trust fund balance.







Congressional Research Service
12

---

.
Social Security: The Trust Fund

Table 5. Projected Accumulated Holdings of the
Social Security Trust Fund, 2009-2036
($ in billions)
Yeara
Accumulated
Holdingsb
2009 $2,555.50

2010 2,693.90
2011 2,848.80
2012 3,022.90
2013 3,204.00
2014 3,383.50
2015 3,558.10
2016 3,722.40
2017 3,873.80
2018 4,008.80
2019 4,123.60
2020 4,215.40
2021 4,282.30
2022 4,322.20
2023 4,332.40
2024 4,306.60
2025 4,242.00
2026 4,135.90
2027 3,985.00
2028 3,786.10
2029 3,538.00
2030 3,237.20
2031 2,881.70
2032 2,469.30
2033 1,997.90
2034 1,465.70
2035 870.50
2036 209.50
Source: Table prepared by the Congressional Research Service (CRS) from data provided in The 2009 Annual
Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust
Funds, Washington, DC, May 12, 2009, Table VI.F8 (intermediate assumptions).
a. Projections for years after 2036 are not shown because the Social Security trust fund is projected to be
exhausted in 2037 under the intermediate assumptions.
b. The accumulated holdings of the Social Security trust fund are also referred to as the trust fund balance.
Congressional Research Service
13

---

.
Social Security: The Trust Fund

The Social Security Trust Fund and the Level of Federal Debt
As part of the annual congressional budget process, the level of federal debt (the federal debt
limit) is set 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 fund in special U.S.
government obligations both fall under the restrictions of the federal debt limit. This means that
the Social Security trust fund balance may have implications for the federal debt limit. The sale of
government securities to the Social Security trust fund is a transaction between federal accounts;
it does not generate any resources for the government. It is the interest payments on federal debt
held by the public that is considered the more relevant measure of the impact of the federal
budget on the economy.
The Social Security Trust Fund and Federal Default
The special obligations purchased by the Social Security trust fund are backed by “the full faith
and credit” of the U.S. government. This is a promise by the U.S. government to redeem the
securities (debt instruments). Technically, like any other borrower, the federal government could
default on any or all of its outstanding obligations. The implications for the economy, and for the
private market for government securities, of a federal government default on the special
obligations held by the Social Security trust fund would depend on the views of private investors.
The impact would be determined by whether private investors think this is a precursor to a federal
government default on securities held by the public (a general government default). There is no
precedent for a federal government default which makes it difficult to predict the implications.
The Social Security Trust Fund and Benefit Payments
The accumulated holdings of the Social Security trust fund, which represent budget authority for
the program, can be viewed as a measure of funds dedicated to pay current and future benefits.
However, beginning in 2016, when revenues are projected to be below levels needed to pay
benefits,22 these funds will be available to pay benefits only as the government raises the
resources necessary to pay for the securities as they are redeemed by the Social Security trust
fund. The securities are a promise, by the U.S. government, to raise the necessary funds.23 When
the system is operating with a cash flow surplus, the surplus Social Security revenues (which are
invested in government securities held by the trust fund) are used to fund other government
activities at the time. The surplus Social Security revenues, therefore, are not available to finance
benefits directly when the system is operating with a cash flow deficit.
The Social Security trustees project that the accumulated holdings of the Social Security trust
fund will be exhausted in 2037 and that only an estimated 76% of scheduled annual benefits will
be payable with incoming receipts at that point (based on the intermediate assumptions of the
2009 Annual Report). The Social Security Act does not state what would happen to the payment
of benefits in the event of Social Security trust fund exhaustion. Two possible scenarios are the

22 The Social Security trustees project that revenues will fall below program costs beginning in 2016, based on the
intermediate assumptions of the 2009 Annual Report.
23 If there are no surplus governmental receipts, policymakers would have three options: raise taxes or other income,
reduce spending, or borrow (or some combination of these options).
Congressional Research Service
14

---

.
Social Security: The Trust Fund

payment of full monthly benefits on a delayed schedule or the payment of partial (reduced)
monthly benefits on time.24

Author Contact Information

Dawn Nuschler
Gary Sidor
Specialist in Income Security
Information Research Specialist
dnuschler@crs.loc.gov, 7-6283
gsidor@crs.loc.gov, 7-2588

Acknowledgments
This report was originally written by Christine Scott.




24 For information on the legal entitlement to benefits and trust fund exhaustion, see CRS Report RL32822, Social
Security Reform: Legal Analysis of Social Security Benefit Entitlement Issues, by Kathleen S. Swendiman and Thomas
J. Nicola, and CRS Report RL33514, Social Security: What Would Happen If the Trust Funds Ran Out?, by Kathleen
Romig.
Congressional Research Service
15

---