By: Benjamin Veghte and Elliot Schreur
Published: June, 2016
June 2016 ~ Social Security Brief No. 46
The 2016 Trustees Report updates projections about the future finances of Social Security’s two trust funds, the Old-Age and Survivors (OASI) Trust Fund and the Disability Insurance (DI) Trust Fund. Of the 6.2 percent of earnings that workers and employers each pay into Social Security, 5.015 percent goes into the OASI trust fund and 1.185 percent goes into the DI trust fund. The Bipartisan Budget Act of 2015 set these rates effective for the period January 1, 2016 through December 31, 2018. After 2018, the allocation of Social Security payroll contributions will revert to what it had been since 2000: 0.9 percent to the DI trust fund, and the remaining 5.3 percent to OASI. The DI fund is projected to cover scheduled benefits until 2023, and the OASI fund until 2035. On a combined OASDI basis, Social Security is fully funded until 2034, but faces a projected shortfall thereafter.
In 2015, Social Security income from payroll contributions, tax revenues, and interest on reserves exceeded outgo by $23 billion, leaving a surplus. Reserves, now at $2.8 trillion, are projected to grow to $2.9 trillion by the end of 2019. If Congress takes no action before then, reserves would be drawn down to pay benefits. After the projected depletion of the combined OASDI trust funds, continuing Social Security contributions and tax revenues would cover about 79 percent of scheduled benefits (and administrative costs, which are less than 1 percent of outgo). Timely revenue increases and/or benefit reductions can bring the program into long-term balance, preventing the projected shortfall.