August 7, 2020
The Social Security Trust Funds and the Budget
Social Security, a self-financing program, is the federal
Social Security as “Off-Budget”
government’s single largest program in terms of the number
Most receipts and spending included in the unified budget
of people affected (i.e., covered workers and beneficiaries)
are designated as “on-budget.” By statute, however, the
and its finances (i.e., receipts and expenditures). This In
receipts and expenditures of the Social Security trust funds
Focus provides an overview of the Social Security trust
are designated as “off-budget.” Specifically, Section 13301
funds and describes their status within the federal budget.
of the Budget Enforcement Act of 1990 (P.L. 101-508, Title
XIII; see 2 U.S.C. §632 note) provides that
The Social Security Trust Funds
Social Security is comprised of two programs: Old-Age and
Notwithstanding any other provision of law, the
Survivors Insurance (OASI) and Disability Insurance (DI).
receipts and disbursements of the Federal Old-Age
Current law requires each to use a trust fund mechanism to
and Survivors Insurance Trust Fund and the Federal
account for its dedicated receipts (primarily tax revenues
Disability Insurance Trust Fund shall not be
and interest) and expenditures (primarily benefit payments
counted as new budget authority, outlays, receipts,
and administrative costs) and to provide an accounting of
or deficit or surplus for purposes of—
any accumulated assets. They are frequently referred to on a
combined basis as the Social Security, or OASDI, trust
(1) the budget of the United States Government as
funds. The trust funds are legally distinct, with no general
submitted by the President,
authority to borrow or transfer money between them.
(2) the congressional budget, or
Accumulated assets are dedicated to pay benefits to current
and future Social Security beneficiaries. This arrangement
(3) the Balanced Budget and Emergency Deficit
legally requires benefits be paid to workers and their family
Control Act of 1985.
members who meet eligibility requirements. The trust funds
have mandatory budget authority, meaning funds can be
The off-budget status also is provided in Section 710 of the
spent to pay benefits without further appropriation. This
Social Security Act (42 U.S.C. §710). The off-budget status
feature allows Social Security to continue paying benefits
does not affect the Social Security programs’ funding,
during lapses in appropriations.
spending, or operations. (The Postal Service Fund is the
only other account designated as off-budget.)
Money is credited to and debited from the trust funds on a
Implications of Off-Budget Status
daily basis; the balance functions as the program’s
accumulated holdings. Accumulated holdings can be drawn
This off-budget status results in the reporting of three
down through years of deficit when the programs’
measures of the federal deficit/surplus: (1) the unified
expenditures are larger than receipts. Said differently, the
budget deficit/surplus; (2) the on-budget deficit/surplus; and
trust funds can act as contingency funds and be used to
(3) the off-budget deficit/surplus. The Social Security trust
supplement tax revenues during years in which tax revenues
fund balances, in any year, affect these measures. For
are less than expenditures. However, once depleted, the
example, during years in which the Social Security program
trust funds can neither borrow money from the General
operates a surplus (total receipts exceed total expenditures),
Fund of the U.S. Treasury nor enter into debt. Although the
its off-budget surplus is subtracted from the on-budget
trust funds would no longer have accumulated holdings,
deficit in the unified budget deficit calculation. That is, the
they would still exist as designated accounts that provide a
Social Security surplus improves the position of the unified
mechanism to track continuing receipts and expenditures.
budget. Alternatively, during years in which the program
operates a deficit (total expenditures exceed total receipts),
The Unified Budget
its off-budget deficit would be added to the on-budget
The unified budget accounts for all federal receipts and
deficit in the unified budget deficit calculation, making the
expenditures on a consolidated basis. It does not distinguish
position of the unified budget worse.
between sources of receipts and types of expenditures or
Procedural Implications of Off-Budget Status
how a program is fiscally structured. Thus, a program that
is self-financed through a trust fund structure, such as
The trust funds’ off-budget status largely excludes them
Social Security, is grouped together with all other federal
from most budget enforcement rules. For example, the
receipts and expenditures. This provides lawmakers with a
general enforcement rules associated with the budget
single measure, giving a comprehensive picture of all
resolution, enforceable during congressional consideration,
federal fiscal activity and its impact on the economy.
and the requirements of the Statutory Pay-As-You-Go Act
of 2010 (P.L. 111-139, Title I), enforceable after enactment,
do not apply to legislation that is estimated to affect Social
Security revenues or expenditures. That is, any estimated
effects to Social Security revenues or expenditures are not
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The Social Security Trust Funds and the Budget
counted for purposes of determining compliance with such
Accordingly, the Social Security Amendments of 1983
rules. In practice, the tradeoffs among budgetary priorities
(P.L. 98-21), which enacted many of the commission’s
required by most budget enforcement rules do not involve
suggestions, required that the Social Security trust funds not
the Social Security programs . For example, legislation to
be included in the budget totals, beginning in FY1993. The
increase spending for another mandatory spending program
act also required that, beginning in FY1985, the trust funds
generally cannot be offset by a reduction in Social Security
(as well as both Medicare trust funds, the Federal Hospital
benefits or an increase in Social Security taxes. The
Insurance Trust Fund [Medicare Part A], and the Federal
Congressional Budget Act (2 U.S.C. §621 et seq.)
Supplementary Medical Insurance Trust Fund [Medicare
reinforces this separation by specifically excluding changes
Part B]) be presented separately in the budget, with
to Social Security from any reconciliation legislation.
disbursements treated as a separate, major functional budget
category. Prior to this change, Social Security outlays were
The estimated budgetary effects to the Social Security trust
included in the “Income Security” functional category.
funds are subject to certain budget enforcement rules. For
example, the House Pay-As-You-Go rule prohibits
In 1985, the Balanced Budget and Emergency Deficit
legislation that would increase the unified deficit, which
Control Act (P.L. 99-177, Title II) moved the Social
includes any off-budget effects to the Social Security trust
Security trust funds’ off-budget status to begin in FY1986.
funds, over 6 or 11 years. The House and Senate each have
The act also established annual maximum deficit targets
separate rules for legislation estimated to affect the trust
and a process to automatically reduce certain spending (i.e.,
funds. In the Senate, for example, the Budget Act prohibits
“sequestration”) if deficit targets were unmet. As part of the
legislation that would cause a decrease in the trust funds’
new budget enforcement process, receipts and outlays of
surplus (or an increase in their deficit) for the first fiscal
the Social Security program were counted for purposes of
year and the total for all fiscal years , relative to the levels
meeting deficit targets, but benefit outlays were exempt
set forth in the budget resolution. In other words, the
from any reductions through sequestration if the targets
legislation must not worsen the trust fund balances relative
were not met.
to existing law.
In 1990, even though the Social Security trust funds were
History of Social Security Budget Status
already off-budget (42 U.S.C. §911), the Budget
The Social Security Act was enacted in 1935. Payroll taxes
Enforcement Act (BEA; P.L. 101-508, Title XIII)
were first collected in 1937, and the OASI Trust Fund was
reaffirmed the off-budget status by enacting a separate,
established in 1940. The Social Security Amendments of
similar provision (Section 13301 of P.L. 101-508). Section
1956 created the DI program, and its trust fund was
13301 required that the receipts and disbursements of the
established that same year. For each trust fund, there has
Social Security trust funds not be “counted as new budget
been little change in financing and investment procedures,
authority, outlays, receipts, or deficit or surplus for
although the treatment of the trust funds in the federal
purposes of” the President’s budget, the congressional
budget process has changed.
budget, and the 1985 Deficit Control Act. The BEA also
established certain budget enforcement rules applicable
The current off-budget status of the Social Security trust
specifically to legislation estimated to affect the receipts
funds is provided in the context of the unified budget
and outlays of the Social Security program.
framework. The framework was first adopted with the
FY1969 budget submitted by President Lyndon B. Johnson
About 45% of discretionary administrative expenses for the
and continues today. Prior to the FY1969 budget, the
Social Security Administration (SSA) are derived from the
federal budget was presented in many different forms. The
trust funds and have been treated as if such funds were on-
administrative budget, a widely-used presentation, included
budget. That is, those amounts for discretionary
all federal funds but excluded trust funds, such as the Social
administrative expenses of the SSA are counted against any
Security trust funds. The unified budget framework, by
budget enforcement rules related to discretionary spending,
consolidating the receipts and expenditures from both
such as the statutory limits and the so-called 302(b)
federal funds and trust funds, was intended to provide an
appropriations subcommittee allocations. This practice
integrated and comprehensive presentation of the full range
appears to have begun without any provision in the BEA
of federal activities.
directing it. Since 2000, however, the budget resolution has
explicitly provided the authority for counting such amounts
Financial shortfalls for Social Security programs in the late
for purposes of the congressional budget process. Amounts
1970s and early 1980s led to a reassessment of the Social
for the discretionary administrative expenses of the SSA are
Security trust funds’ inclusion in the unified budget. In
generally provided in the annual Labor, Health and Human
1983, the National Commission on Social Security Reform
Services, and Education, and Related Agencies
(i.e., the Greenspan Commission) suggested the Social
Appropriations Act, mostly, but not exclusively, in the form
Security trust funds be taken off-budget, among other
of a limitation on administrative expenses.
financing-related reforms. The commission’s final report
argued that “changes in the Social Security program should
Related Resources
be made only for programmatic reasons, and not for
CRS Report RL33028, Social Security: The Trust Funds.
purposes of balancing the budget,” and that doing so
“would be more likely to be carried out if the Social
CRS Report R41328, Federal Trust Funds and the Budget.
Security program were not in the unified budget.”
Barry F. Huston, Analyst in Social Policy
https://crsreports.congress.gov
The Social Security Trust Funds and the Budget
Bill Heniff Jr.
IF11615
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