Social Security Trust Funds: Headed for Insolvency?
The 2012 Social Security Board of Trustees recently released a report on the financial status of of OASI (Old Age & Survivors Insurance) and DI (Disability Insurance) Trust Funds. The report indicates that if Congress takes no corrective action that the Retirement and Survivors Trust fund will only be able to pay 100% of scheduled benefits through 2033. Thereafter, again if no action is taken by Congress, approximately 75% of scheduled benefits would be funded from new tax revenues.
The Disability Insurance Trust Fund has more immediate concerns as it is projected to become inadequate by 2016. Some news reports suggest that the DI Trust Fund will be "insolvent", or even "bankrupt" with an inability to pay any SSDI benefits as early as 2016. In reality, payroll tax revenues (F.I.C.A.) would permit the DI Trust Fund to pay approximately 79 percent of scheduled benefits.
Of the 6.2 percent payroll tax (Federal Insurance Contributions Act), 5.3 percent is allocated to the OASI Trust Fund and 0.9 percent is allocated to the DI Trust Fund. There have been prior incidences in which there was an imbalance in funding benefit payments between the two Trust Funds. In 1983 and then again in 1994 Congress authorized inter-Trust Fund borrowing to ensure scheduled benefit payments were accomplished. It is reasonable to believe that Congress may consider doing so again before the DI Trust Fund "inadequacy" would occur in 2016.
Once the Baby Boomer generation (1946-1964) moves through the disability prone ages of 50-66 the DI Trust Funds would again produce excesses for the DI Trust Fund. The Boomers will graduate from the DI Trust Fund to the OASI Trust Fund by calendar year 2030.
Current concern about the solvency of the Social Security Trust Fund(s) is a priority elected officials and Congress must address. There are currently sixty two (62) proposals for Social Security Reform that have been put forth by committees, elected officials, and advisory panels. Over a dozen have been put forth in the last year. http://www.ssa.gov/oact/solvency/index.html
Social Security has been described as "A compact Between Generations". The Congressional "fixes" to the system may include a combination of tax increase (unchanged since 1990) http://www.ssa.gov/policy/docs/statcomps/supplement/2010/2a1-2a7.html#table2.a3, Tax base (amount of earnings subjected to taxation http://www.ssa.gov/oact/COLA/cbb.html, or adjustments in benefit formulas and Cost Of Living Adjustment (COLA) increases.
The 2012 Trustees’ Report is available on the SSA Office of the Chief Actuary website, http://www.socialsecurity.gov/OACT/TR/2012/.
If you have comments or questions please feel free to contact the GENEX Social Security Program by emailing firstname.lastname@example.org.