July 2014 ~ Social Security Brief No. 44
The 2014 Trustees Report updates projections about the future finances of Social Security’s two trust funds. The Disability Insurance (DI) trust fund, which is legally separate from the Old-Age and Survivors Insurance (OASI) trust fund, will require legislative action soon to ensure that all scheduled benefits for disabled workers and their families can be paid in 2016 and beyond. Of the 6.2 percent of earnings that workers and employers each pay into Social Security, 5.3 percent goes to the OASI trust fund and 0.9 percent goes to the DI trust fund. A 0.2 percentage-point increase in the DI contribution rate (from 0.9 percent to 1.1 percent for workers and employers each) would fully fund the DI program for the next 75 years. Alternatively, a temporary reallocation of part of the OASI contribution rate would strengthen DI while keeping the OASI fund adequately funded for many years into the future.
On a combined OASDI basis, Social Security is fully funded until 2033, but faces a long-term shortfall thereafter. In 2013, Social Security revenue plus interest income exceeded outgo by $32 billion, leaving a surplus. Reserves, now at $2.8 trillion, are projected to grow to $2.9 trillion by the end of 2019. Then, if Congress takes no action in the meantime, reserves would start to be drawn down to pay benefits. If Congress does not act before 2033, Social Security is projected to face a shortfall. Its reserves would be depleted and revenue continuing to come into the trust funds from workers’ and employers’ contributions and taxation of benefits would cover about 77 percent of scheduled benefits (and administrative costs, which are less than 1 percent of outgo). Timely revenue increases and/or gradual benefit reductions can bring the program into balance over the long term, preventing the projected shortfall. Download the full brief to read more.