According to the Trustees: The Fate of the Social Security Trust Funds

Each year, the Board of Trustees that oversees the Medicare and Social Security Trust Funds generates a report for Congress detailing the health of the trust funds. The Board released its annual report on May 31^st, 2013, but before we examine its findings, a quick note on the Board and its charges.

The Board of Trustees comprises the Secretaries of Labor, Treasury, and Health and Human Services, the Social Security Commissioner, and two public representatives, one from each of the two major political parties. There are two Social Security Trust Funds: the Old Age and Survivors Insurance (OASI) Trust Fund and the Disability Insurance (DI) Trust Fund. All individuals who receive Social Security benefits of any kind are paid from these two trust funds, which are often – but not always – treated as one.

The Board of Trustees found that while the OASI Trust Fund is in decent shape, the DI Trust Fund could use a boost. Assuming no Congressional action taken to correct for the imbalance between the funds, the DI Trust Fund’s reserves will likely be exhausted in 2016 and the combined reserves of the OASI and DI Trust Funds are expected to be depleted in 2033. If Congress takes no action, both funds will be able to pay 100% of benefits due until 2033, at which point, with reserves depleted, they will be able to pay about 75% of scheduled benefits, having and using only the incoming payroll taxes to do so.

Next time, we will examine reallocation, a potential solution to the DI Trust Fund’s uncertain future.