

Social Security Disability Insurance (DI) Trust
Fund: Background and Solvency Issues
William R. Morton
Analyst in Income Security
August 21, 2014
Congressional Research Service
7-5700
www.crs.gov
R43318
Social Security Disability Insurance (DI) Trust Fund: Background and Solvency Issues
Summary
Social Security Disability Insurance (SSDI) is a social insurance program that provides benefits
to insured workers under the full retirement age who meet the statutory test of disability and to
their eligible dependents. Unlike some other federal programs, benefit payments and
administrative costs associated with the SSDI program are paid not out of the General Fund but
from a dedicated Federal Disability Insurance (DI) Trust Fund in the U.S. Treasury.
Like the Federal Old-Age and Survivors Insurance (OASI) Trust Fund, which pays for Social
Security retirement and survivor benefits, the DI trust fund is financed primarily through payroll
taxes levied on covered wages and covered self-employment income. The two trust funds also
receive income from the taxation of some Social Security benefits and from interest earned on
trust fund investments. Occasionally, the OASI and DI trust funds receive income via
reimbursements from the General Fund of the Treasury. All trust fund balances are invested in
special-issue (non-marketable), interest-bearing U.S. government securities. Each trust fund is a
separate account in the U.S. Treasury, and the two funds may not borrow from one another under
current law.
Increasingly, some Members of Congress and the public have expressed concern over the
solvency of the DI trust fund. Total expenditures have exceeded non-interest income since 2005
and have surpassed total income (including interest) since 2009. In 2013, DI income was $111.2
billion and DI expenditures were $143.4 billion. To make up for the shortfall between total
income and expenditures, the DI trust fund used some of its asset reserves (investments) and
redeemed a net total of $32.2 billion in special-issue U.S. government securities.
Under current law, the Social Security trustees project that the DI trust fund will be exhausted in
the fourth quarter of calendar year 2016. The Congressional Budget Office (CBO) predicts a
similar exhaustion date in early FY2017, which overlaps with the fourth quarter of calendar year
2016. Once the DI trust fund is depleted, the Social Security trustees estimate that the SSDI
program will have enough continuing tax revenues to pay 81% of scheduled benefits. This
percentage rises to a slightly higher level for 2020 through 2040, before declining to 80% in
2088.
The declining solvency of the DI trust fund is the result of an increasing imbalance between the
fund’s income and expenditures. Over the past 20 years, tax revenues to the DI trust fund have
remained relatively flat as a share of taxable payroll, while expenditures as a percentage of
taxable payroll have grown markedly. The increase in expenditures stems largely from the growth
in the number of beneficiaries on SSDI. Between 1990 and 2013, the total number of individuals
receiving SSDI benefits (disabled workers and their dependents) increased 155.8% (from 4.3
million to 11.0 million). Because benefit payments account for nearly all program spending, the
growth in the number individuals receiving SSDI benefits has contributed heavily to the
worsening financial condition of the DI trust fund.
Most researchers agree that changes in the demographic characteristics of the working-age
population account for a substantial share of the growth in the number of individuals on SSDI.
Demographic changes include (1) the aging of the baby-boomer generation, (2) the growth in
women’s labor force participation, and (3) the overall growth in the insured-worker population.
However, there is considerable disagreement among researchers over how non-demographic
factors have contributed to the growth in the size of the program, such as changes in opportunities
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Social Security Disability Insurance (DI) Trust Fund: Background and Solvency Issues
for work and compensation, changes to federal policy that altered certain program eligibility
criteria, and inconsistency in the disability determination and adjudication process. In recent
years, a number of researchers have developed proposals to limit the growth in SSDI enrollment.
In the past, Congress has used temporary cash infusions to bolster the asset reserves of nearly
depleted trust funds. Typically, the aim of this policy is to improve the financial solvency of a
trust fund in the short term, in order to give lawmakers additional time to develop and implement
longer-term solutions. For example, Congress could authorize interfund borrowing among the
OASI, DI, and Medicare’s Hospital Insurance (HI) trust funds to strengthen the asset reserves of
the DI trust temporarily.
Additionally, Congress could change the allocation of the Social Security payroll tax rate between
the OASI and DI trust funds to provide the DI trust fund with a larger share. According to the
Social Security Administration’s (SSA’s) Office of the Chief Actuary, a reallocation of the payroll
tax rate to equalize the financial conditions of the OASI and DI trust funds would extend the
solvency of the DI trust fund until 2033. However, such a reallocation would also reduce the
solvency of the OASI trust fund slightly.
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Social Security Disability Insurance (DI) Trust Fund: Background and Solvency Issues
Contents
Introduction ...................................................................................................................................... 1
Background on the SSDI Program ................................................................................................... 1
Eligibility ................................................................................................................................... 1
Benefits ...................................................................................................................................... 2
The Federal Disability Insurance (DI) Trust Fund ........................................................................... 3
Financing ................................................................................................................................... 3
Current and Projected Financial Condition of the DI Trust Fund ............................................. 5
Trustees’ Projections ........................................................................................................... 6
CBO’s Projections ............................................................................................................... 8
What Would Happen If the DI Trust Fund’s Reserves Were Depleted? .................................... 8
Factors Behind the Status of the DI Trust Fund ............................................................................... 9
Possible Short-Term Solutions ....................................................................................................... 12
Interfund Borrowing ................................................................................................................ 12
Payroll Tax Reallocation.......................................................................................................... 14
Potential Rate Schedule to Extend the Solvency of the DI Trust Fund ............................. 16
Possible Long-Term Solutions ....................................................................................................... 17
Figures
Figure 1. Actual and Projected DI Trust Fund Ratios, 2000-2023 ................................................... 8
Figure 2. DI Income and Cost Rates, 1990-2013........................................................................... 10
Figure 3. Actual and Projected OASI, DI, and HI Trust Fund Ratios ............................................ 14
Figure A-1. Actual and Projected DI Income and Cost Rates with Scheduled and Payable
Benefits, 1970-2090 .................................................................................................................... 20
Tables
Table 1. Social Security and Medicare Payroll Tax Rates ............................................................... 4
Table 2. Annual Operations of the DI Trust Fund, 2003-2013 ........................................................ 6
Table 3. Interfund Loans From the DI and HI Trust Funds to the OASI Trust Fund, 1982 ........... 13
Table 4. Legislative History of Payroll Tax Reallocations Between the OASI and DI Trust
Funds .......................................................................................................................................... 15
Table 5. OASDI Payroll Tax Rate Reallocations under the Social Security Domestic
Employment Reform Act of 1994 (P.L. 103-387) ...................................................................... 15
Table 6. Potential Reallocation of the OASDI Payroll Tax Rate, 2015 and Beyond .................... 17
Table A-1. Key Dates Projected for the Social Security Trust Funds as Shown Under the
Intermediate Assumptions in Trustees Reports from 1983 to 2014 ............................................ 19
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Appendixes
Appendix. Supplemental Tables and Figures ................................................................................. 19
Contacts
Author Contact Information........................................................................................................... 21
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Social Security Disability Insurance (DI) Trust Fund: Background and Solvency Issues
Introduction
Some Members of Congress and the public have increasingly expressed concern over the
solvency of the Federal Disability Insurance (DI) Trust Fund, from which Social Security
Disability Insurance (SSDI) benefits are paid.1 Total expenditures have exceeded non-interest
income since 2005 and have surpassed total income (including interest) since 2009. According to
the Social Security trustees, the DI trust fund will be exhausted in the fourth quarter of calendar
year 2016 under current law.2 Once it is depleted, the DI trust fund will have enough continuing
tax revenues to pay around 81% of scheduled SSDI benefits. This report provides an overview of
the DI trust fund and examines potential solutions to improve the DI trust fund’s solvency in the
short term.
Background on the SSDI Program
Enacted in 1956 under Title II of the Social Security Act, SSDI is part of the Old-Age, Survivors,
and Disability Insurance (OASDI) program administered by the Social Security Administration
(SSA). OASDI is a form of social insurance designed to protect against the loss of income due to
retirement, disability, or death.3 Like Old-Age and Survivors Insurance (OASI), SSDI replaces a
portion of an insured worker’s earnings based on the individual’s work history and career-average
earnings in covered employment.4 Specifically, SSDI provides benefits to insured workers under
the full retirement age who meet the statutory test of disability and to their eligible dependents. In
July 2014, 10.9 million individuals received SSDI benefits, including 9.0 million disabled
workers, 152 thousand spouses of disabled workers, and 1.8 million children of disabled
workers.5
Eligibility
To qualify for SSDI, workers must be (1) insured in the event of disability and (2) statutorily
disabled. To achieve insured status, individuals generally must have worked in covered
1 For example, see U.S. Congress, House Committee on Ways and Means, Subcommittee on Social Security, First in a
Hearing Series on Securing the Future of the Social Security Disability Insurance Program, 112th Cong., 1st sess.,
December 2, 2011, (Washington: GPO, 2012), pp. 4-5, http://www.gpo.gov/fdsys/pkg/CHRG-112hhrg76319/pdf/
CHRG-112hhrg76319.pdf. See also U.S. Congress, Senate Committee on Finance, Social Security: A Fresh Look at
Workers’ Disability Insurance, 113th Cong., 2nd sess., July 24, 2014, http://www.finance.senate.gov/imo/media/doc/
07242014%20Wyden%20Hearing%20Statement%20on%20Keeping%20the%20Promise%20of%20Social%20Security
1.pdf.
2 The Board of Trustees, Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds, The
2014 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability
Insurance Trust Funds, Table IV.B2, July 28, 2014, http://www.ssa.gov/oact/tr/2014/index.html (hereinafter cited as
“2014 Social Security Trustees Report”). Projections are based on the trustees’ intermediate assumptions.
3 For more information on the concept of social insurance, see Larry DeWitt, “The Development of Social Security in
America,” Social Security Bulletin, vol. 70, no. 3 (August 2010), http://www.ssa.gov/policy/docs/ssb/v70n3/
v70n3p1.html.
4 For more information on the OASI program, see CRS Report R42035, Social Security Primer, by Dawn Nuschler.
5 Social Security Administration (SSA), Monthly Statistical Snapshot, July 2014, August 2014, Table 2,
http://www.ssa.gov/policy/docs/quickfacts/stat_snapshot/ (hereinafter cited as “SSA Monthly Statistical Snapshot”).
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employment about a quarter of their adult lives before they became disabled and for at least 5 of
the past 10 years immediately before the onset of disability.6 In 2013, 150.5 million workers were
insured in the event of disability.7
To meet the statutory test of disability, an insured worker must be unable to engage in any
substantial gainful activity (SGA) by reason of any medically determinable physical or mental
impairment that can be expected to result in death or last for at least a year.8 The monthly SGA
earnings limit in 2014 is $1,070 for non-blind individuals and $1,800 for statutorily blind
individuals.9 In general, workers must have a severe condition that prevents them from doing any
kind of work that exists in the national economy.
Benefits
SSDI beneficiaries receive cash benefits after a five-month waiting period from their disability
onset date.10 Initial cash benefits are based on a worker’s past average monthly earnings, indexed
to reflect changes in average wage levels. Benefits paid to current beneficiaries are adjusted to
account for inflation through cost-of-living adjustments (COLA), as measured by the Consumer
Price Index for Urban Wage Earners and Clerical Workers (CPI-W). In July 2014, the average
monthly benefit was $1,145.52 for a disabled worker, $308.89 for a spouse of a disabled worker,
and $341.13 for a child of a disabled worker.11
Disabled-worker beneficiaries also receive health care coverage under Medicare following a 24-
month waiting period.12 Furthermore, some SSDI beneficiaries may qualify for Supplemental
Security Income (SSI). SSI is a need-based program that provides cash benefits to ensure a
minimum income to aged, blind, or disabled individuals with limited income and assets.13 In July
2014, over 1.6 million disabled individuals under age 65 received both Social Security and SSI
cash benefits.14
Disabled workers generally maintain their eligibility for benefits as long as they are under their
full retirement age, exhibit no substantial medical improvement, and have monthly earnings
within the SGA limit.
6 See CRS Report RL32279, Primer on Disability Benefits: Social Security Disability Insurance (SSDI) and
Supplemental Security Income (SSI), by William R. Morton.
7 SSA, Disabled Insured Workers, accessed August 15, 2014, http://www.ssa.gov/OACT/STATS/table4c2DI.html.
8 42 U.S.C. §423(d)(1).
9 For more information on SGA limits, see SSA, Substantial Gainful Activity, http://www.ssa.gov/oact/cola/sga.html.
10 The first month counted as part of the waiting period can be no more than 17 months before the month of application.
For more information, see CRS Report RS22220, Social Security Disability Insurance (SSDI): The Five-Month Waiting
Period for Benefits, by William R. Morton.
11 SSA Monthly Statistical Snapshot, Table 2. SSA may offset cash benefits if a disabled-worker beneficiary also
receives workers’ compensation or other public disability benefits. Moreover, cash benefits to spouses and children of
disabled workers are subject to certain maximum family benefit limits.
12 Due to the five-month waiting period for cash benefits, Medicare eligibility begins 29 months after the onset of
disability.
13 For more information on SSI, see CRS Report 94-486, Supplemental Security Income (SSI), by William R. Morton.
14 Monthly Statistical Snapshot, Table 1. The vast majority of SSI beneficiaries under age 65 in concurrent receipt of
Social Security draw SSDI cash benefits; however, some SSI beneficiaries under age 65 receive dependents’ benefits
from the Old-Age and Survivors Insurance (OASI) program.
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The Federal Disability Insurance (DI) Trust Fund
A trust fund is an accounting mechanism that records and keeps track of revenues, offsetting
receipts, or collections earmarked for the purpose of the specific federal fund.15 Although Social
Security (OASDI) is often viewed as a single program, its financing comes from two legally
distinct trust funds.16 Whereas the Federal Old-Age and Survivors Insurance (OASI) Trust Fund
finances the benefits of retired-worker beneficiaries and their dependents, as well as survivors of
deceased workers, the Federal Disability Insurance (DI) Trust Fund finances the benefits of
disabled workers and their dependents.17 Each trust fund is a separate account in the U.S.
Treasury, and the two funds may not borrow from one another under current law.
For more information on trust funds, see CRS Report R41328, Federal Trust Funds and the
Budget, by Mindy R. Levit. For more information on the combined OASI and DI trust funds, see
CRS Report RL33028, Social Security: The Trust Fund, by Dawn Nuschler and Gary Sidor.18
Financing
The OASI and DI trust funds are financed primarily by payroll taxes levied on covered wages and
covered self-employment income. Employees and employers each pay Federal Insurance
Contribution Act (FICA) taxes, while Self-Employment Contribution Act (SECA) taxes are borne
fully by self-employed individuals.19 As shown in Table 1, the FICA tax rate is 7.65% for
employees and employers each (15.3% combined), with 6.2% directed to Social Security
(OASDI) and 1.45% directed to Medicare’s Hospital Insurance (HI) trust fund.20 Of the 6.2%
allocated to Social Security from the FICA tax rate, the OASI trust fund receives 5.3% and the DI
trust fund receives 0.9%.
The SECA tax rate is 15.3%, with 12.4% directed to Social Security and 2.9% to Medicare’s HI
trust fund. Of the 12.4% allocated to Social Security from the SECA tax rate, the OASI trust fund
receives 10.6% and the DI trust fund receives 1.8%. Social Security (OASDI) and Medicare tax
rates are prescribed in sections 1401, 3101, and 3111 of the Internal Revenue Code (IRC)21, and
15 See CRS Report R41328, Federal Trust Funds and the Budget, by Mindy R. Levit.
16 42 U.S.C. §401 (Section 201 of the Social Security Act).
17 For more information on the Federal Disability Insurance Trust Fund, see SSA, Disability Insurance Trust Fund,
accessed July 31, 2014, http://www.ssa.gov/oact/progdata/describedi.html.
18 See also SSA, Trust Fund FAQs, accessed July 31, 2014, http://www.ssa.gov/oact/ProgData/fundFAQ.html.
19 For information on how FICA and SECA taxes are calculated and credited to the OASI and DI trust funds, see SSA,
Office of the Chief Actuary, Tax Deposits & Adjustments, accessed August 7, 2014, http://www.ssa.gov/oact/progdata/
taxflow.html.
20 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. The revenues from the 0.9% tax are allocated
to the HI trust fund. For more information, see CRS Report R41436, Medicare Financing, by Patricia A. Davis. See
also Internal Revenue Service, Questions and Answers for the Additional Medicare Tax, June 24, 2014,
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Questions-and-Answers-for-the-Additional-
Medicare-Tax.
21 The IRC is Title 26 of the U.S. Code.
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the allocation of the Social Security payroll tax rate between the OASI and DI trust funds is set in
section 201(b) of the Social Security Act.22
Social Security taxes are levied on covered wages and covered self-employment income up to a
taxable maximum of $117,000 in 2014.23 In 2013, payroll tax revenues credited to the DI trust
fund amounted to $105.4 billion or 94.8% of total DI trust fund income.24
Table 1. Social Security and Medicare Payroll Tax Rates
FICA
SECA
Employees and Employers, Each Combined Self Employed
Social Security
OASI
5.30%
10.60%
10.60%
DI
0.90%
1.80%
1.80%
OASDI
6.20%
12.40%
12.40%
Medicare
HI
1.45%a 2.90%a 2.90%a
Total FICA/SECA
7.65%
15.30%
15.30%
Source: Table prepared by the Congressional Research Service (CRS).
a. 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.
In addition to payroll taxes, the OASI and DI trust funds receive income from the interest earned
on trust fund investments. When Social Security tax revenues exceed expenditures in a given
year, the surplus is credited to the trust funds in the form of special-issue (non-marketable) U.S.
government securities.25 These trust fund investments, or asset reserves, accrue interest, which
the U.S. Treasury credits to the trust funds semiannually in the form of additional U.S.
government securities. In 2013, net interest from the DI trust fund’s asset reserves totaled $4.7
billion or 4.2% of total DI trust fund income.26
The OASI and DI trust funds also receive revenues from the taxation of Social Security benefits.
Beneficiaries who file a federal tax return as an individual with provisional income (adjusted
gross income, plus nontaxable interest, plus certain income exclusions, plus one-half of Social
Security benefits) between $25,000 and $34,000 may have to pay income tax on up to 50% of
benefits.27 For beneficiaries filing a joint federal tax return, married couples with provisional
22 42 U.S.C. §401(b).
23 For more information on the taxable maximum, see SSA, Contribution and Benefit Base, http://www.ssa.gov/oact/
COLA/cbb.html. Unlike the Social Security tax rate, the Medicare tax rate applies to all covered earnings.
24 2014 Social Security Trustees Report, Table IV.A2.
25 In the past, the DI trust fund held publicly available securities. For more information on Social Security investment
holdings, see CRS Report RS20607, Social Security: Trust Fund Investment Practices, by Dawn Nuschler.
26 2014 Social Security Trustees Report, Table VI.A2. In 2013, the asset reserves of the DI trust fund earned an
effective annual interest rate of 4.5%. For more information, see SSA, Effective Interest Rates, accessed July 31, 2014,
http://www.ssa.gov/OACT/ProgData/effectiveRates.html.
27 26 U.S.C. §86. For more information on the taxation of Social Security benefits, see CRS Report RL32552, Social
(continued...)
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income between $32,000 and $44,000 may have to pay income tax on up to 50% of benefits.
Revenues derived from taxing Social Security benefits are credited to the OASI and DI trust
funds based on the source of the benefits taxed. In 2013, revenues credited to the DI trust fund
from the taxation of benefits totaled $0.4 billion or 0.4% of DI trust fund income.28
Occasionally, the OASI and DI trust funds receive reimbursements from the General Fund of the
Treasury for various costs imposed on the two programs.29 For example, in 2011 and 2012, the
OASI and DI trust funds received reimbursements from the General Fund to compensate for the
loss of revenues from a temporary payroll tax reduction. In 2013, reimbursements from the
General Fund to the DI trust fund totaled $0.7 billion or 0.6% of DI trust fund income.30
Current and Projected Financial Condition of the DI Trust Fund
The Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability
Insurance Trust Funds (hereinafter “the trustees”) presents an annual report to Congress on the
current and projected financial conditions of the OASI and DI trust funds.31 According to the
trustees, the balance of the DI trust fund (i.e., the amount of accumulated trust fund assets) is
declining. Total expenditures have exceeded non-interest income since 2005 and have surpassed
total income since 2009 (see Table A-1 in the appendix for more information). In 2013, total DI
income was $111.2 billion and DI expenditures were $143.4 billion. To make up for the shortfall
between total income and expenditures in 2013, the DI trust fund used its asset reserves and
redeemed a net total of $32.2 billion in U.S. government securities.32 As shown in Table 2, the
asset reserves held by the DI trust fund decreased from $122.7 billion at the end of 2012 to $90.4
billion at the end of 2013.
(...continued)
Security: Calculation and History of Taxing Benefits, by Noah P. Meyerson.
28 2014 Social Security Trustees Report, Table VI.A2.
29 The OASI and DI 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 1984-1989 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. For
more information, see 2014 Social Security Trustees Report, p.146.
30 2014 Social Security Trustees Report, Table VI.A2.
31 42 U.S.C. §401(c).The Social Security Board of Trustees is composed of six members: the Secretary of the Treasury,
the Secretary of Labor, the Secretary of Health and Human Services, the Commissioner of Social Security, and two
public representatives who are appointed by the President and confirmed by the Senate for four-year terms.
32 For data on OASI and DI investment transactions, see SSA, Investment Transactions, http://www.ssa.gov/OACT/
ProgData/transactions.html.
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Table 2. Annual Operations of the DI Trust Fund, 2003-2013
(dollar amounts in billions)
Income
Expenditures
Asset Reserves
Net
Net
Change
Amount
Non-
Interest
During
at the
Interest
on
Total
Benefit
Admin.
Total
the
End of
Year Incomea
Assets
Income Payments Expensesb Expenditures
Year
the Year
2003 $78.3 $9.7 $88.1 $70.9
$2.2
$73.1
$15.0 $175.4
2004 81.4 10.0 91.4 78.2
2.4
80.6
10.8 186.2
2005 87.2 10.3 97.4 85.4
2.6
88.0
9.4 195.6
2006 92.0 10.6 102.6 91.7
2.7
94.5
8.2 203.8
2007 96.6 13.2 109.9 95.9
2.9
98.8
11.1 214.9
2008 98.9 11.0 109.8 106.0
2.9
109.0
0.9 215.8
2009 98.9 10.5 109.3 118.3
3.1
121.5
-12.2 203.5
2010 94.8 9.3 104.0 124.2
3.5
127.7
-23.6 179.9
2011 98.4 7.9 106.3 128.9
3.4
132.3
-26.1 153.9
2012 102.7 6.4 109.1 136.9
3.4
140.3
-31.2 122.7
2013 106.5 4.7 111.2 140.1
3.4
143.4
-32.2 90.4
Source: CRS table based on data from The Board of Trustees, Federal Old-Age and Survivors Insurance and
Federal Disability Insurance Trust Funds, The 2014 Annual Report of the Board of Trustees of the Federal Old-Age and
Survivors Insurance and Federal Disability Insurance Trust Funds, Table VI.A2, http://www.ssa.gov/oact/tr/2014/
VI_A_cyoper_hist.html#288797 (hereinafter cited as “2014 Social Security Trustees Report”).
Notes: Totals may not equal subtotals due to rounding.
a. Non-interest income includes net payrol tax contributions, General Fund reimbursements, and revenues from
the taxation of benefits.
b. Administrative Expenses include the financial interchange with the Railroad Retirement Board.
Trustees’ Projections
According to the trustees, a trust fund is solvent if it can pay all scheduled benefits in full and on
time.33 One method for gauging solvency is to measure the amount of reserves a trust fund has on
hand to cover its expected expenditures over a specified period. A trust fund ratio is a measure of
a trust fund’s asset reserves at the beginning of a year expressed as a percentage of actual or
expected total expenditures for that year.34 The trustees consider a trust fund ratio of 100% in a
given year to be a reasonable contingency reserve to ensure against the risk of insolvency should
unforeseen circumstances (such as an economic downturn) quickly draw down a trust fund’s
reserves.
To estimate the future financial status of the DI trust fund, the Social Security trustees produce
short-range and long-range actuarial projections under three sets of economic and demographic
33 2014 Social Security Trustees Report, p. 39.
34 Ibid.
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assumptions: intermediate, low-cost, and high-cost. Intermediate assumptions represent the
trustees’ best estimate of the financial condition of the DI trust fund in the future. The low-cost
and high-cost sets of assumptions, on the other hand, depict extraordinarily favorable (low-cost)
or unfavorable (high-cost) possibilities for the DI trust fund’s future solvency.35 According to the
trustees, actual future costs are “unlikely to be as extreme as those portrayed by the low-cost and
high-cost projections.”36 Therefore, projections cited in this report are based on the trustees’
intermediate assumptions, unless otherwise specified.
To satisfy the trustees’ short-range test of financial adequacy, the DI trust fund must maintain a
trust fund ratio of 100% or more over a 10-year projection period (2014-2023). If the trust fund
ratio is under 100% at the start of the 10-year projection period, it must rise to at least 100%
within five years (without becoming depleted) and then remain at or above 100% throughout the
rest of the 10-year period. To pass the trustees’ long-range test of close actuarial balance, the DI
trust fund must (1) satisfy the short-range test of financial adequacy and (2) maintain a trust fund
ratio above zero throughout the 75-year projected period.37
As shown in Figure 1, under their intermediate, low-cost, and high-cost sets of assumptions, the
trustees project that the DI trust fund ratio will remain below 100% over the entire 10-year
projection period. Therefore, the DI trust fund fails both the short-range test of financial adequacy
and the long-range test of close actuarial balance under all three scenarios.
Under their high cost and intermediate sets of assumptions, the trustees project that DI asset
reserves would continue to decline until depletion in the second and fourth quarters of calendar
year 2016, respectively. Moreover, the DI trust fund would continue to run annual cash flow
deficits under both sets of assumptions.38 A cash flow deficit occurs when annual expenditures
exceed tax revenues.
Under their low-cost assumptions, the trustees estimate that the DI trust fund ratio would fall to
2% in 2019 and 2020 before increasing to 12% in 2023. However, advance tax transfers from the
General Fund would be required to pay all scheduled benefits in a timely manner. Advance tax
transfers are payroll tax receipts credited to a trust fund on the first of the month rather than
throughout the month to ensure the timely payment of benefits.39 The DI trust fund would
subsequently run cash flow surpluses under the low-cost assumptions beginning in 2020. A cash
flow surplus occurs when annual tax revenues exceed expenditures. It is important to note that the
low-cost assumptions reflect relatively rapid economic growth, as well as immediate and extreme
changes to program enrollment and termination rates.40
35 Ibid., p. 220. According to the trustees, the low-cost set of assumptions assumes relatively rapid economic growth,
low inflation, and favorable demographic and program-specific conditions. Conversely, the high-cost set of
assumptions assumes relatively slow economic growth, high inflation, and unfavorable demographic and program-
specific conditions.
36 Ibid., p. 18. In addition, the trustees caution against using the low-cost and high-cost estimates as a range of possible
outcomes.
37 Ibid., p. 62.
38 Ibid., Table IV.B1, p. 50. Under both high-cost and intermediate sets of assumptions, the trustees project that the DI
cost rate (as a percentage of taxable payroll) will continue to exceed the DI income rate through 2090.
39 Ibid., p. 43. Under current law, advance tax transfers are permitted when the Secretary of the Treasury determines
that the assets of the OASI or DI trust funds are insufficient to pay full scheduled benefits for any month (see 42 U.S.C.
§401[a]). Advance tax transfers must be repaid to the General Fund with interest.
40 Ibid., p. 220.
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Social Security Disability Insurance (DI) Trust Fund: Background and Solvency Issues
Figure 1. Actual and Projected DI Trust Fund Ratios, 2000-2023
(asset reserves as a percentage of annual expenditures)
Trust Fund Ratio
250%
Actual
Projected
200%
150%
Minimum Level under the Short-
Range Test of Financial Adequacy
100%
Intermediate
50%
Low Cost
High Cost
0%
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
Source: CRS graph based on data from the 2014 Social Security Trustees Report, Figure IV.B3, at
http://www.ssa.gov/oact/tr/2014/LD_figIVB3.html.
Notes: The trust fund ratio represents asset reserves at the beginning of a year as a percentage of total
expenditures for the year. Therefore, projections will indicate a positive trust fund ratio at the beginning of an
estimated trust fund exhaustion year. For example, under their intermediate assumptions, the trustees project
that the DI trust fund’s asset reserves will be depleted during 2016. However, the trustees estimate that the DI
trust fund will have an 18% trust fund ratio at the beginning of 2016 (i.e., $28.4 billion in projected asset reserves
to $155.8 billion in projected total expenditures).
CBO’s Projections
Based on its April 2014 baseline, the Congressional Budget Office (CBO) projects that the DI
trust fund will be exhausted in early FY2017, which overlaps with the fourth quarter of calendar
year 2016.41
What Would Happen If the DI Trust Fund’s Reserves
Were Depleted?
Under current law, the trustees estimate that the DI trust fund will be unable to meet its financial
obligations by the end of the fourth quarter of calendar year 2016. Although the DI trust fund will
continue to receive revenues from payroll taxes and the taxation of benefits, it will be unable to
41 U.S. Congressional Budget Office, Old-Age, Survivors, and Disability Insurance Trust Funds—CBO’s April 2014
Baseline, April 2014, http://www.cbo.gov/sites/default/files/cbofiles/attachments/43890-2014-04-
Social_Security_Trust_Fund.pdf. CBO projects that the DI trust fund will have a balance of $8.0 billion at the
beginning of FY2017 (i.e., October 2016).
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Social Security Disability Insurance (DI) Trust Fund: Background and Solvency Issues
pay all scheduled benefits in a timely manner. Upon depletion of its asset reserves, the DI trust
fund will have enough continuing tax revenues to pay 81% of scheduled SSDI benefits under
current law.42 This percentage rises to a slightly higher level for 2020 through 2040, before
declining to 80% in 2088 (see Figure A-1 in the appendix for more information).43
The Social Security Act provides no guidance on the payment of benefits once a trust fund’s asset
reserves have been depleted and current tax revenues are insufficient to meet current
expenditures. Although individuals who meet SSDI’s eligibility requirements are legally entitled
to disability benefits, a provision in the Antideficiency Act prohibits a federal agency from
spending in excess of available funds.44 Since the Social Security Act stipulates that SSDI benefit
payments shall be made only from the DI trust fund, without a change in the law, monthly cash
payments to SSDI beneficiaries could be delayed or reduced.45
For more information on Social Security trust fund exhaustion, see CRS Report RL33514, Social
Security: What Would Happen If the Trust Funds Ran Out?, by Christine Scott. For a legal
analysis of benefit entitlement in the context of trust fund insolvency, see CRS Report RL32822,
Social Security Reform: Legal Analysis of Social Security Benefit Entitlement Issues, by Kathleen
S. Swendiman and Thomas J. Nicola.
Factors Behind the Status of the DI Trust Fund
As Figure 2 illustrates, the declining solvency of the DI trust fund is the result of an increasing
imbalance between its income and cost rates (i.e., tax revenues and expenditures, respectively,
expressed as a percentage of taxable payroll). Taxable payroll is defined as the total effective
amount of wages and self-employment income in the economy that is subject to Social Security
taxes. Between 2000 and 2013, the DI income rate stayed relatively constant (from 1.78% to
1.81% of taxable payroll), whereas the DI cost rate grew markedly (from 1.42% to 2.43% of
taxable payroll).46
The increase in the DI cost rate stems largely from the growth in the number of beneficiaries on
SSDI. Between 1990 and 2013, the total number of individuals receiving SSDI benefits (disabled
workers and their dependents) increased 155.8% (from 4.3 million to 11.0 million).47 During that
time, spending on SSDI benefits doubled as a share of the economy, from 0.42% of gross
domestic product (GDP) in 1990 to 0.84% of GDP in 2013.48 Because benefit payments account
for nearly all program expenditures, the increase in the number of SSDI beneficiaries drove the
DI cost rate upward.49
42 2014 Social Security Trustees Report, p.12.
43 Ibid.
44 42 U.S.C. §423 and 31 U.S.C. §1341.
45 42 U.S.C. §401(h).
46 2014 Social Security Trustees Report, Table IV.B1.
47 Ibid., Table V.C5.
48 GDP data are from the U.S. Department of Commerce, Bureau of Economic Analysis, Current-dollar and “real”
GDP, July 30, 2014, http://www.bea.gov/national/index.htm. DI expenditure data are from the SSA, DI Trust Fund, A
Social Security Fund, http://www.ssa.gov/oact/STATS/table4a2.html.
49 In 2013, benefit payments accounted for 97.7% of DI trust fund expenditures. See 2014 Social Security Trustees
Report, Table IV.A2.
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Social Security Disability Insurance (DI) Trust Fund: Background and Solvency Issues
Figure 2. DI Income and Cost Rates, 1990-2013
(as a percentage of taxable payroll)
3.0%
2.5%
Income Rate
2.0%
1.5%
Cost Rate
1.0%
0.5%
0.0%
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Source: CRS graph based on data from the 2014 Social Security Trustees Report, Figure IV.B1, at
http://www.ssa.gov/oact/tr/2014/LD_figIVB1.html.
Notes: The income rate excludes net interest. The cost rate includes benefits and administrative expenses. The
marked increase in the DI income rate in 1994 stemmed from a reallocation of the payrol tax rate between the
OASI and DI trust funds (see the section of the report titled “Payrol Tax Reallocation”). For DI income and cost
rate projections, see Figure A-1 in the appendix.
The rise in disability rolls can be attributed to a number of factors.50 First, the overall growth in
the working-age population increased the number of workers insured for disability.51 Between
1990 and 2013, the insured-worker population increased 26.0% (from 119.4 million to 150.5
million).52
Second, demographic changes in the composition of the insured-worker population contributed to
the increase in the number of beneficiaries on SSDI.53 Most importantly, the aging of the baby-
boomer generation increased the number of older workers, who are more likely to become
disabled than are younger workers.54 In addition, growth in the labor force participation rate of
women in the latter half of the 20th century led to more women being insured for disability.55 As
50 See Mary C. Daly, Brian Lucking, and Jonathan A. Schwabish, The Future of Social Security Disability Insurance,
Federal Reserve Bank of San Francisco, Economic Letter 2013-17, June 24, 2013, http://www.frbsf.org/economic-
research/publications/economic-letter/2013/june/future-social-security-disability-insurance-ssdi/el2013-17.pdf.
51 See David Pattison and Hilary Waldron, “Growth in New Disabled-Worker Entitlements, 1970–2008,” Social
Security Bulletin, vol. 73, no. 4 (November 2013), http://www.ssa.gov/policy/docs/ssb/v73n4/v73n4p25.html.
52 SSA, Disability Insured Workers, accessed August 6, 2014, http://www.ssa.gov/oact/STATS/table4c2DI.html.
53 2014 Social Security Trustees Report, pp. 135-136.
54 Ibid. See also Kathy Ruffing, How Much of the Growth in Disability Insurance Stems From Demographic Changes?,
Center on Budget and Policy Priorities, January 27, 2014, Table 1, p. 5, http://www.cbpp.org/cms/index.cfm?fa=view&
id=4080.
55 Social Security Advisory Board, Aspects of Disability Decision Making: Data and Materials, Table 2b, February
2012, p. 7, http://www.ssab.gov/Publications/Disability/GPO_Chartbook_FINAL_06122012.pdf. Between 1980 and
(continued...)
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Social Security Disability Insurance (DI) Trust Fund: Background and Solvency Issues
the size of the female insured-worker population increased, the enrollment rate of women into the
SSDI program grew to near parity with men.56
Third, changes in opportunities for work and compensation induced more individuals to apply for
SSDI. According to SSA’s Chief Actuary, economic downturns are associated with a temporary
increase in the enrollment rate of insured workers into the SSDI program.57 During the last
recession, the number of SSDI awards per 1,000 insured workers increased 17.9% (from 5.6 in
2007 to 6.6 in 2009).58
Fourth, legislative changes to the SSDI program also contributed to the increase in the number of
SSDI beneficiaries. For example, the Social Security Amendments of 1983 (P.L. 98-21) raised the
full retirement age (FRA) for Social Security retirement benefits, thereby increasing both the
number of insured workers in their older and most disability-prone years and the duration of
benefit receipt for older SSDI beneficiaries close to the FRA. The increase in the FRA also raised
the value of disability benefits relative to early retirement benefits, which likely impelled more
individuals between the ages of 62 and FRA to apply for SSDI.
Furthermore, the Disability Benefits Reform Act of 1984 (P.L. 98-460), which changed the
evaluative criteria used in making disability determinations, contributed to the growth in the
number of SSDI beneficiaries with mental and musculoskeletal disorders.59 Because such
disorders are less likely to result in death compared to other qualifying impairments, the growth
in the share of beneficiaries with mental and musculoskeletal disorders likely increased the
average duration of benefit receipt, as well as the total number of individuals on disability rolls.
It is important to note that although most researchers agree that changes in the demographic
characteristics of the working-age population account for a substantial share of the growth in the
number of workers on SSDI, there is considerable disagreement among researchers over how
more “difficult to quantify factors” (such as changes in opportunities for work and compensation
or changes to federal policy) have contributed to the growth in the program.60
For a more detailed analysis of the factors behind the growth in disability rolls, see CRS Report
R43054, Social Security Disability Insurance (SSDI) Reform: An Overview of Proposals to
Reduce the Growth in SSDI Rolls, by William R. Morton.
(...continued)
2010, the share of working-age women insured for disability increased from 51% to 68%.
56 Tim Zayatz, Social Security Disability Insurance Program Work Experience, Social Security Administration,
Actuarial Study No. 122, Table 4, May 2011, p. 21, http://www.ssa.gov/oact/NOTES/pdf_studies/study122.pdf.
57 U.S. Congress, House Committee on Ways and Means, Subcommittee on Social Security, Johnson Announces
Hearing on the Financing Challenges Facing the Social Security Disability Insurance Program, Testimony of Stephen
C. Goss, Chief Actuary of the Social Security Administration, 113th Cong., 1st sess., March 14, 2013,
http://www.ssa.gov/legislation/testimony_031413a.html (hereinafter cited as “Testimony of SSA Chief Actuary
Stephen C. Goss, 2013”).
58 SSA, Annual Statistical Supplement, 2013, February 2014, Table 6.C7, http://www.ssa.gov/policy/docs/statcomps/
supplement/2013/6c.html#table6.c7.
59 See David H. Autor, The Unsustainable Rise of the Disability Rolls in the United States: Causes, Consequences, and
Policy Options, National Bureau of Economic Research, NBER Working Paper No. 17697, December 2011, p. 5,
http://www.nber.org/papers/w17697.
60 Gina Livermore, David Wittenburg, and David Neumark, “Finding alternatives to disability benefit receipt,” IZA
Journal of Labor Policy, 2014, p. 2. http://www.izajolp.com/content/pdf/2193-9004-3-14.pdf.
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Social Security Disability Insurance (DI) Trust Fund: Background and Solvency Issues
Possible Short-Term Solutions
To extend the solvency of the DI trust fund, Congress could consider a variety of legislative
changes to increase tax revenues, reduce program expenditures (i.e., alter benefits levels or
program eligibility requirements), or some combination thereof.61 In the absence of changes that
would restore solvency over the long term, Congress could use temporary cash infusions to
bolster the asset reserves of the DI trust fund. Typically, the aim of this policy is to improve the
financial solvency of a trust fund in the short term, in order to give lawmakers additional time to
develop and implement longer-term solutions.62 This section examines two policy options to
shore-up the DI trust fund’s asset reserves in the short term: interfund borrowing and a
reallocation of the Social Security payroll tax rate. Congress has authorized both of these
approaches in the past under similar circumstances.
Interfund Borrowing
The Social Security Act created the OASI, DI, HI, and Medicare’s Supplementary Medical
Insurance (SMI) trust funds.63 Although the four trust funds currently do not have the authority to
borrow from one another, Congress could permit temporary borrowing among specified trust
funds as a means of improving the solvency of the DI trust fund in the short term.
The last time Congress authorized temporary interfund borrowing was in the early 1980s. In
1981, the OASI trust fund was close to exhaustion with a trust fund ratio (asset reserves as a
percentage of total annual expenditures) of 18%.64 To help maintain the solvency of the OASI
trust fund, Congress enacted the “Social Security Amendments of 1981” (P.L. 97-123),65 which
authorized interfund borrowing among the OASI, DI, and HI trust funds until December 31,
1982.66 Under the 1981 amendments, any trust fund could issue loans to either of the other trust
funds. Congress specified that the interest paid on the loans would be equivalent to what the
loaned reserves would have earned had the interfund borrowing not occurred. Moreover,
61 For a general estimate of the amount of additional payroll tax revenues or cost reductions needed to prevent the DI
trust fund ratio from falling below 20% in the short term (2015-2023), see Letter from the Board of Trustees of the
Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds to the Honorable John A.
Boehner, Speaker of the House of Representatives, July 28, 2014, http://www.ssa.gov/oact/TR/2014/
709letter_DI_House_2014.pdf.
62 For example, a 1980 Senate Committee on Finance report accompanying H.R. 7670 (enacted as P.L. 96-403) stated
that the reallocation of the payroll tax rate between the OASI and DI trust funds “is expected to maintain sufficient
reserves in the OASI fund to pay benefits through the end of 1981, giving Congress time to take further remedial action
next year.” U.S. Congress, Senate Committee on Finance, Reallocation of Social Security Taxes Between OASI and DI
Trust Funds, report to accompany H.R. 7670, 96th Cong., 2nd sess., September 16, 1980, S.Rept. 96-946, p. 2,
http://www.finance.senate.gov/library/reports/committee/.
63 42 U.S.C. §401, §1395i, and §1395t. Unlike the OASI, DI, and HI trust funds, which are financed primarily through
payroll taxes, the SMI trust fund is financed mostly through premiums paid by beneficiaries and general revenues.
Because revenues to the SMI trust fund are reset each year to cover expected costs, the SMI trust fund will remain in
financial balance indefinitely. For more information on the HI and SMI trust funds, see CRS Report R41436, Medicare
Financing, by Patricia A. Davis.
64 2014 Social Security Trustees Report, Table VI.A1.
65 P.L. 97-123 is titled “An Act to amend the Omnibus Reconciliation Act of 1981 to restore minimum benefits under
the Social Security Act.”
66 “Interfund Borrowing Under the Social Security Act,” Social Security Bulletin, vol. 46, no. 9 (September 1983), pp.
13-14, http://www.ssa.gov/policy/docs/ssb/v46n9/v46n9p13.pdf.
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Social Security Disability Insurance (DI) Trust Fund: Background and Solvency Issues
Congress stipulated that the amount of loan transfers between the trust funds could not exceed the
amount required to ensure the timely payment of scheduled benefits for a six-month period.67
With insufficient funds to pay full benefits on time, the OASI trust fund borrowed $17.5 billion
from the DI and HI trust funds between November and December 1982 (Table 3). These loans
gave lawmakers a short, six-month window (through June 1983) to address the financial
imbalance of the OASI trust fund. On April 20, 1983, Congress enacted the comprehensive Social
Security Amendments of 1983 (P.L. 98-21), which made substantial changes to the Old-Age and
Survivors program to improve the balance of the OASI trust fund.68
Table 3. Interfund Loans From the DI and HI Trust Funds to the OASI Trust Fund,
1982
(dollar amounts in billions)
Amount Borrowed From
Date of Loan
Total Amount Borrowed
DI Trust Fund
HI Trust Fund
November 5, 1982
$0.58
$0.58
a
December 7, 1982
$3.44
a $3.44
December 31, 1982
$13.50
$4.50
$9.00
Total $17.52
$5.08
$12.44
Source: CRS table adapted from Table 1 in “Interfund Borrowing Under the Social Security Act,” Social Security
Bulletin, vol. 46, no. 9 (September 1983), p. 14, http://www.ssa.gov/policy/docs/ssb/v46n9/v46n9p13.pdf.
Notes: Total amounts may not equal subtotals due to rounding.
a. Not Applicable.
As part of the Social Security Amendments of 1983, Congress reauthorized the previously
expired interfund borrowing among the three trust funds until the end of 1987. The 1983
amendments required the repayment of all loans, with interest, by December 31, 1989. However,
the borrowing authority under the 1983 amendments was never exercised. The 1982 loans from
the DI and HI trust funds were repaid by April 1986.69
To delay the exhaustion of the DI trust fund temporarily, Congress could reauthorize interfund
borrowing among the trust funds. In 2013, the HI trust fund had a trust fund ratio of 83%, and the
Board of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical
Insurance Trust Funds projects that the HI trust fund will be exhausted by 2030 under current law
(see Figure 3).70
67 Ibid.
68 For more information on the 1983 amendments, see John A. Svahn and Mary Ross, “Social Security Amendments of
1983: Legislative History and Summary of Provisions,” Social Security Bulletin, vol. 46, no. 7 (July 1983),
http://www.ssa.gov/policy/docs/ssb/v46n7/v46n7p3.pdf.
69 SSA, Research Note #4: Inter-Fund Borrowing Among the Trust Funds, http://www.ssa.gov/history/
interfundnote.html.
70 The Board of Trustees, Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds, 2014
Annual Report of the Board of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical
Insurance Trust Funds, July 28, 2014, http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-
and-Reports/ReportsTrustFunds/Downloads/TR2014.pdf. Projection is based on the intermediate assumption of the
(continued...)
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Social Security Disability Insurance (DI) Trust Fund: Background and Solvency Issues
Figure 3. Actual and Projected OASI, DI, and HI Trust Fund Ratios
(asset reserves as a percentage of annual expenditures)
450%
Actual Projected
400%
Estimated
OASI
350%
Exhaustion Year
300%
DI:
2016
HI:
2030
250%
OASI:
2034
DI
200%
150%
100%
HI
50%
0%
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035
Source: CRS graph based on data from the Social Security and Medicare Boards of Trustees, Status of the Social
Security and Medicare Programs: A Summary of the 2014 Annual Reports, 2014, Chart E, at http://www.ssa.gov/
OACT/TRSUM/images/LD_ChartE.html.
Notes: Projections are based on the intermediate assumptions of the 2014 Social Security and Medicare
trustees reports. The estimated exhaustion year is the year during which the balance of the trust fund is
projected to fall to zero.
The OASI trust fund had a trust fund ratio of 384% in 2013, and the Social Security trustees
estimate that the OASI trust fund will be exhausted by 2034 under current law.71
Payroll Tax Reallocation
Another option to improve the solvency of the DI trust fund in the short term is for Congress to
reallocate the Social Security (OASDI) payroll tax rate. A payroll tax reallocation would change
the amount of Social Security payroll tax revenues directed to the OASI and DI trust funds. By
increasing the DI trust fund’s share of the payroll tax rate, more income would be credited to the
DI trust fund, while less would be directed to the OASI trust fund.72
For the purposes of this report, a reallocation occurs when the overall Social Security payroll tax
rate remains the same but the share allocated to each trust fund changes. As shown in Table 4,
(...continued)
2014 Medicare trustees report.
71 2014 Social Security Trustees Report. Projection is based on the intermediate assumptions of the 2014 Social
Security trustees report.
72 For current and historical Social Security payroll tax rates, see SSA, Social Security Tax Rates, accessed August 15,
2014, http://www.ssa.gov/oact/progdata/oasdiRates.html.
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Social Security Disability Insurance (DI) Trust Fund: Background and Solvency Issues
Congress has authorized the reallocation of the Social Security payroll tax rate several times in
the past.
Table 4. Legislative History of Payroll Tax Reallocations Between the OASI and DI
Trust Funds
Public Law Number
Name
Reallocation Direction
P.L. 91-172
Tax Reform Act of 1969
OASI to DI
P.L. 93-233
“Social Security Benefits Increase of 1973”a
OASI to DI
P.L. 96-403
“Allocation of Social Security Tax Receipts of 1980”b
DI to OASI
P.L. 98-21
Social Security Amendments of 1983
DI to OASI
P.L. 103-387
Social Security Domestic Employment Reform Act of 1994
OASI to DIc
Source: Table prepared by CRS.
Notes: For a chronological history of Social Security legislation, see CRS Report RL30920, Social Security: Major
Decisions in the House and Senate Since 1935, by Gary Sidor.
a. P.L. 93-233 is titled “An Act to provide a 7-percent increase in social security benefits beginning with March
1974 and an additional 4-percent increase beginning with June 1974, to provide increases in supplemental
security income benefits, and for other purposes.”
b. P.L. 96-403 is titled “An Act to amend title II of the Social Security Act to make necessary adjustments in
the allocation of social security tax receipts between the Federal Old-Age and Survivors Insurance Trust
Fund and the Federal Disability Insurance Trust Fund.”
c. The 1994 reallocation occurred in three stages. The first and third stages reallocated the payrol tax rate
from the OASI trust fund to the DI trust fund, while the second stage reallocated the tax rate from the DI
trust fund to the OASI trust fund.
The most recent reallocation of the Social Security payroll tax occurred in the mid-1990s (Table
5). At the start of 1994, the DI trust fund ratio was 23% and the trustees projected that the DI trust
fund would be exhausted in 1995 under their intermediate assumptions.73 To improve the balance
of the DI trust fund, Congress enacted the Social Security Domestic Employment Reform Act of
1994 (P.L. 103-387). The act changed the allocation of the Social Security payroll tax rate to
provide the DI trust fund with an immediate increase in revenues, as well as a larger share of the
total payroll tax rate in subsequent years.
Table 5. OASDI Payroll Tax Rate Reallocations under the Social Security Domestic
Employment Reform Act of 1994 (P.L. 103-387)
Employees and Employers, Each
Self-Employed
Year
OASDI OASI DI
OASDI OASI DI
Rates Scheduled Under the Social Security Amendments of 1983 (P.L. 98-21)
1990-1999 6.20%
5.60%
0.60%
12.40%
11.20%
1.20%
2000+ 6.20%
5.49%
0.71%
12.40%
10.98%
1.42%
73 U.S. Congress, House Committee on Ways and Means, 1994 Annual Report of the Board of Trustees of the Federal
Old-Age and Survivors Insurance and Disability Insurance Trust Funds, prepared by The Board of Trustees, Federal
Old-Age and Survivors Insurance and Disability Insurance Trust Funds, 103rd Cong., 2nd sess., April 12, 1994, H. Doc.
103-231 (Washington: GPO, 1994), p. 14, http://www.ssa.gov/history/reports/trust/1994/1994.pdf.
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Social Security Disability Insurance (DI) Trust Fund: Background and Solvency Issues
Employees and Employers, Each
Self-Employed
Year
OASDI OASI DI
OASDI OASI DI
Rates Scheduled Under the Social Security Domestic Employment Reform Act of 1994 (P.L. 103-387)
1994-1996 6.20%
5.26%
0.94%
12.40%
10.52%
1.88%
1997-1999 6.20%
5.35%
0.85%
12.40%
10.70%
1.70%
2000+ 6.20%
5.30%
0.90%
12.40%
10.60%
1.80%
Source: Tabled prepared by CRS.
In justifying the reallocation, a House Committee on Ways and Means, Subcommittee on Social
Security report noted that:
[T]he reallocation recommended by the Trustees not only secures the funding necessary to
keep the DI program solvent in the short run; it also provides two critical opportunities. First,
it provides time for a more detailed study of the DI program—one aimed at identifying with
a higher level of certainty the underlying causes of its recent growth. Second, and perhaps
even more importantly, the proposed reallocation would provide additional DI program
experience to analyze. Is increased growth a temporary or longer-term phenomenon? What
role will a stronger economy play in altering this pattern? Answers to these critical questions
can be obtained only through the additional time and experience that can be gained through
[a] small reallocation of the Social Security tax.74
In their 1995 annual report, the trustees projected that the boost in revenues from the payroll tax
reallocation would extend DI trust fund solvency from 1995 to 2016.75
Potential Rate Schedule to Extend the Solvency of the DI Trust Fund
To delay the exhaustion of the DI trust fund, Congress could again reallocate the payroll tax rate
to give the DI trust fund a greater share of Social Security’s payroll tax revenues. In July 2014,
SSA’s Office of the Chief Actuary prepared a potential rate schedule that is projected to extend
the solvency of the DI trust fund in the short-term (Table 6).76
74 U.S. Congress, House Committee on Ways and Means, Subcommittee on Social Security, Social Security Board of
Trustees’ Recommendation to Reallocate a Portion of the Social Security Payroll Tax to the Disability Insurance Trust
Fund, 103rd Cong., 1st sess., April 22, 1993, H.Hrg. 781-44 (Washington: GPO, 1993), p. 7.
75 U.S. Congress, House Committee on Ways and Means, 1995 Annual Report of the Board of Trustees of the Federal
Old-Age and Survivors Insurance and Disability Insurance Trust Funds, 104th Cong., 1st sess., April 3, 1995, H.
Doc.104-57 (Washington: GPO, 1995), http://www.ssa.gov/history/reports/trust/1995/overview.html.
76 SSA Memorandum from Chris Chaplain, Supervisory Actuary, Jason Schultz, Supervisory Actuary, and Daniel
Nickerson, Actuary, to Alice Wade, Deputy Chief Actuary, July 28, 2014, http://www.ssa.gov/oact/solvency/
NA_20140728.pdf.
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Social Security Disability Insurance (DI) Trust Fund: Background and Solvency Issues
Table 6. Potential Reallocation of the OASDI Payroll Tax Rate,
2015 and Beyond
Employees and Employers, Each
Self-Employed
Year
OASDI OASI DI
OASDI
OASI
DI
2014 (current law)
6.20%
5.30%
0.90%
12.40%
10.60%
1.80%
2015-2016 6.20%
4.80%
1.40%
12.40%
9.60%
2.80%
2017 6.20%
4.90%
1.30%
12.40%
9.80%
2.60%
2018-2019 6.20%
5.10%
1.10%
12.40%
10.20%
2.20%
2020-2023 6.20%
5.20%
1.00%
12.40%
10.40%
2.00%
2024 6.20%
5.25%
0.95%
12.40%
10.50%
1.90%
2025+ 6.20%
5.30%
0.90%
12.40%
10.60%
1.80%
Source: Tabled prepared by CRS based on SSA Memorandum from Chris Chaplain, Supervisory Actuary, Jason
Schultz, Supervisory Actuary, and Daniel Nickerson, Actuary, to Alice Wade, Deputy Chief Actuary, July 28,
2014, http://www.ssa.gov/oact/solvency/NA_20140728.pdf.
Notes: Under this potential rate schedule, SSA’s Office of the Chief Actuary projects that the asset reserves of
the OASI and DI trust funds will both be depleted in 2033. Projections are based on the intermediate
assumptions of the 2014 Social Security trustees report.
Like the 1994 payroll tax reallocation, the potential rate schedule would reallocate a larger
portion of the Social Security payroll tax rate to the DI trust fund upon implementation and then
would taper the allocation over time. Unlike the 1994 reallocation, however, the potential rate
schedule would equalize the financial conditions of the OASI and DI trust funds. In other words,
if implemented, the OASI and DI trust funds would both be depleted in the same year—2033.77
Under current law, the trustees estimate that the OASI trust fund will be exhausted in 2034 (see
Table A-1 in the appendix). The Office of the Chief Actuary projects that both trust funds would
pass the short-range test of financial adequacy under the potential rate schedule.
Upon depletion in 2033, the Office of the Chief Actuary estimates that the OASI trust fund would
have enough continuing tax revenues to cover 75% of Old-Age and Survivors expenditures
(declining to 70% in 2088), and the DI trust fund would have enough continuing tax revenues to
cover 88% of SSDI expenditures (dropping to 80% in 2088).78
Possible Long-Term Solutions
The last major congressional effort to address the financial status of the OASI and DI trust funds
occurred in the early 1980s with the Social Security Amendments of 1983 (P.L. 98-21).79 Under
the 1983 amendments, Congress used a combination of revenue increases and cost reductions to
stabilize and eventually improve the solvency of the OASI and DI trust funds. To prevent the
77 Ibid., p.1.
78 Expenditures include scheduled benefit payments, other small payments, and administrative expenses.
79 For more information on the 1983 Social Security Amendments, see John A. Svahn and Mary Ross, “Social Security
Amendments of 1983: Legislative History and Summary of Provisions,” Social Security Bulletin, vol. 46, no. 7 (July
1983).
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Social Security Disability Insurance (DI) Trust Fund: Background and Solvency Issues
projected exhaustion of the combined OASI and DI trust funds in 2033, Congress could enact
similar legislation to ameliorate the long-term solvency of the two trust funds.80
For information on reform proposals that would affect the long-term solvency of the DI trust fund
(or the combined OASI and DI trust funds), see the following resources:
• the “Proposals Affecting Trust Fund Solvency” and “Individual Changes
Modifying Social Security” sections of the Office of the Chief Actuary’s website
at http://www.ssa.gov/oact/;
• CBO’s 2012 report, Policy Options for the Social Security Disability Insurance
Program, at http://www.cbo.gov/publication/43421; and
• CRS Report R43054, Social Security Disability Insurance (SSDI) Reform: An
Overview of Proposals to Reduce the Growth in SSDI Rolls, by William R.
Morton.
80 For information on Social Security reform proposals, see CRS Report RL33544, Social Security Reform: Current
Issues and Legislation, by Dawn Nuschler.
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Appendix. Supplemental Tables and Figures
Table A-1. Key Dates Projected for the Social Security Trust Funds as Shown Under
the Intermediate Assumptions in Trustees Reports from 1983 to 2014
Year That Expenditures
Year of Projected
Year That Expenditures
First Exceed Revenues Plus
Exhaustion
First Exceed Revenues
Net Interest on Assets
Year of
Report
OASI DI OASDI
OASI DI OASDI
OASI DI OASDI
Intermediate II-B Projectionsa
1983
b
b b c
c
2021
c c
2047
1984
b
2050
b
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
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Social Security Disability Insurance (DI) Trust Fund: Background and Solvency Issues
Year That Expenditures
Year of Projected
Year That Expenditures
First Exceed Revenues Plus
Exhaustion
First Exceed Revenues
Net Interest on Assets
Year of
Report
OASI DI OASDI
OASI DI OASDI
OASI DI OASDI
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
Source: Tabled prepared by CRS based on data from 1983-2014 Social Security trustees reports and
information provided by SSA.
a. From 1983-1990, two intermediate forecasts were prepared (II-A and II-B). The intermediate II-B forecast
corresponds more closely to the intermediate forecast in subsequent years.
b. Trust fund expected to remain solvent throughout the long-range projection period.
c. Not Available.
Figure A-1. Actual and Projected DI Income and Cost Rates with Scheduled and
Payable Benefits, 1970-2090
(as a percentage of taxable payroll)
3.0%
Actual
Projected
Cost: Scheduled But Not
Fully Payable Benefits
2.5%
Income
Short
2.0%
fall
Rate
1.5%
Expenditures: Payable Benefits = Income
After Trust Fund Depletion in 2016
Cost
1.0%
Rate
Payable Benefits as a Percentage of
Scheduled Benefits
0.5%
2013-2015: 100%
2016:
81%
2088:
80%
0.0%
1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090
Source: CRS graph based on data from the 2014 Social Security Trustees Report, Table IV.B1 and Figure II.D3,
at http://www.ssa.gov/oact/tr/2014/index.html.
Notes: Projections are based on the intermediate assumptions of the 2014 Social Security trustees report.
Figure adapted from Figure II.D3 in the 2014 trustees report. The income rate excludes net interest. The cost rate
includes benefits and administrative expenses. The trustees project that, under current law, SSDI benefits will be
fully payable at the beginning of 2016 but will fall to 81% of scheduled benefits before the end of the year. When
the DI trust fund is depleted, the amount of payable benefits is determined by the level of continuing tax
revenues (i.e., expenditures equal income). The shaded area represents the shortfall or deficit between payable
and scheduled SSDI benefits once the DI trust fund is exhausted.
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Author Contact Information
William R. Morton
Analyst in Income Security
wmorton@crs.loc.gov, 7-9453
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