III. FINANCIAL OPERATIONS OF THE TRUST FUNDS ANDLEGISLATIVE CHANGES IN THE LAST YEAR
A.
OPERATIONS OF THE OLD‑AGE AND SURVIVORS INSURANCE
(OASI) AND DISABILITY INSURANCE (DI) TRUST FUNDS, IN
CALENDAR YEAR 2009
This section presents detailed information on the operations of the OASI and DI Trust Funds
1 during calendar year 2009. Chapter IV provides projections for calendar years 2010 through 2085.
A statement of the income and disbursements of the Federal Old-Age and Survivors Insurance Trust Fund in calendar year 2009, and of the
assets of the fund at the beginning and end of the calendar year, is presented in table III.A1. As shown in the table, total trust fund receipts in 2009 amounted to $698.2 billion, while disbursements totaled $564.3 billion, resulting in an increase in trust fund assets during 2009 of $133.9 billion. Details of the various components of trust fund income and disbursements are discussed in the following paragraphs.
Included in total receipts during calendar year 2009 were $572.5 billion in employment tax contributions. These contributions were partially offset by transfers totaling $2.1 billion to the general fund for the estimated amount of refunds to employees who worked for more than one employer during a year and paid contributions on total earnings in excess of the contribution and benefit base.
Net contributions thus amounted to $570.4 billion in 2009, a decrease of 0.7 percent from the corresponding amount in 2008. This decrease in OASI tax contributions is due to the net effect of decreased earnings and the increase in the contribution and benefit base. (Table VI.A1 shows the tax rates and contribution and benefit bases in effect for past years.)
Income based on taxation of benefits amounted to $19.9 billion in 2009. About 99 percent of this income represents amounts credited to the trust funds, on an estimated basis, generally in advance of the actual receipt of taxes by the Treasury. The remaining 1 percent of the total income from taxation of benefits represents amounts withheld from the benefits paid to nonresident aliens.
Special payments are made to uninsured persons who meet certain requirements. The costs associated with providing such payments are largely reimbursed from the General Fund of the Treasury. Accordingly, a transfer of about $3 thousand was made in 2009, reflecting costs incurred in fiscal year 2008.
The OASI Trust Fund was credited with interest netting $107.9 billion, which consisted of (1) interest earned on the investments of the trust fund, (2) interest on transfers between the trust fund and the general fund account for the
Supplemental Security Income program due to adjustments in the allocation of administrative expenses, (3) interest arising from the revised allocation of
administrative expenses among the trust funds, and (4) interest on certain reimbursements to the trust fund. The remaining receipts, about $98 thousand, consisted of gifts received under the provisions authorizing the deposit of money gifts or bequests in the trust funds.
Of the $564.3 billion in total OASI disbursements, $557.2 billion was for net benefit payments, including the reimbursable costs of vocational rehabilitation services.
2 As described in the 2008 report, in 2007 there was a transfer of $5.6 billion from the OASI Trust Fund to the DI Trust Fund to correct a long-standing, but small, error in the allocation between the trust funds of the cost for certain benefit payments. The error related to payments to certain dually-entitled disabled adult children that had been made entirely from the DI Trust Fund, even though a portion should have been paid from the OASI Trust Fund. In 2009, a relatively small ($0.1 billion) transfer was made to correct previous estimates of this error and to correct ongoing errors in fiscal year 2009. Excluding the $0.1 billion interfund transfer due to the trust fund allocation error, net benefit payments would have been $557.1 billion. This adjusted amount represents an increase of 9.5 percent over the corresponding amount in calendar year 2008. This increase is due primarily to (1) an increase in the total number of beneficiaries and (2) an increase in the average benefit amount. The increase in the average benefit amount in 2009 was due in large part to the
automatic cost-of-living benefit increase of 5.8 percent which became effective for December 2008 under the automatic-adjustment provisions in section 215(i) of the Social Security Act.
Provisions of the Railroad Retirement Act require an annual financial interchange between the Railroad Retirement and OASDI programs. The purpose of such provisions is to put the OASI and DI Trust Funds in the same financial position they would have been had railroad employment always been covered by Social Security. Under those provisions, the Railroad Retirement Board and the Commissioner of Social Security determined that a transfer of $3.7 billion to the Social Security Equivalent Benefit Account from the OASI Trust Fund was required in June 2009.
The remaining $3.4 billion of disbursements from the OASI Trust Fund represented net administrative expenses. The expenses of administering the OASDI and
Medicare programs are allocated and charged directly to each of the various trust funds through which those programs are financed, on the basis of provisional estimates. Similarly, the expenses allocated for administering the Supplemental Security Income program are charged directly to the General Fund of the Treasury on a provisional basis. Periodically, as actual experience develops and is analyzed, adjustments to the allocations of administrative expenses for prior periods are made through interfund transfers and transfers between the OASI Trust Fund and the general fund account for the Supplemental Security Income program, with appropriate interest adjustments. As described earlier, the interest adjustments arising from the reallocation of administrative expenses are recorded in the trust fund accounting under investment income.
In 2009, 78 percent of OASI net administrative expenses represented the cost of administering the program. Such costs are charged to the trust fund by the Social Security Administration ($2.7 billion in 2009). In addition, the Department of the Treasury charges directly to the trust fund certain expenses ($0.8 billion in 2009) that it incurs in helping to administer the OASI program. In addition a relatively small adjustment ($454 thousand in 2009) to administrative expenses is an offset representing income from the sale of excess supplies and equipment.
Finally, certain net reimbursements are made from the General Fund of the Treasury for administrative costs incurred by the Social Security Administration in performing certain legislatively mandated activities that are not directly related to the OASI program. These reimbursements include the costs associated with union activities related to administering the OASI program and with the provision of information to participants in certain pension plans. Such reimbursements totaled $4 million in 2009.
The assets of the OASI Trust Fund at the end of calendar year 2009 totaled $2,336.8 billion, consisting of $2,318.8 billion in U.S. Government obligations and cash totaling $18.0 billion. The effective annual rate of interest earned by the assets of the OASI Trust Fund during calendar year 2009 was 4.8 percent, as compared to 5.1 percent earned during calendar year 2008. Table
VI.A5, presented in appendix
A, shows a detailed listing of OASI Trust Fund holdings by type of security, interest rate, and year of maturity at the end of each year 2008 and 2009.
The trust fund assets can be invested only in securities that are backed by the full faith and credit of the United States Government, as required by law. Those currently held by the OASI Trust Fund are special issues (i.e., securities sold only to the trust funds). These are of two types: short-term certificates of indebtedness and long-term bonds. The certificates of indebtedness are issued on a daily basis for the investment of receipts not required to meet current expenditures, and they mature on the next June 30 following the date of issue. Special-issue bonds, on the other hand, are normally acquired only when special issues of either type mature on June 30. The amount of bonds acquired on June 30 is equal to the amount of special issues maturing, less amounts required to meet expenditures on that day.
Section 201(d) of the Social Security Act provides that the obligations issued for purchase by the OASI and DI Trust Funds shall have maturities fixed with due regard for the needs of the funds. The usual practice has been to spread the holdings of special issues, as of each June 30, so that the amounts maturing in each of the next 15 years are approximately equal. Accordingly, the amounts and maturity dates of the OASI special-issue bonds purchased on June 30, 2009, with an interest rate of 3.25 percent, were selected so that the maturity dates of the total portfolio of special issues were spread evenly over the 15-year period 2010-24. The amount of bonds purchased on June 30, 2009 is shown in table
III.A7.
A statement of the income and disbursements of the Federal Disability Insurance Trust Fund in calendar year 2009, and of the assets of the fund at the beginning and end of the calendar year, is presented in table
III.A2.
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$215,773
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10,463
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2,743
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-12,223
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Net contributions amounted to $96.9 billion, a decrease of 0.7 percent from the amount in the preceding calendar year. This decrease is attributable to the same factors, insofar as they apply to the DI program, which accounted for the change in contributions to the OASI Trust Fund.
Of the $121.5 billion in total disbursements, $118.3 billion was for net benefit payments. Excluding the $0.1 billion interfund transfer, net benefit payments would have been $118.4 billion. This adjusted amount represents an increase of 11.3 percent over the corresponding amount in calendar year 2008. This increase in DI benefit payments was due to the same factors that resulted in the net increase in benefit payments from the OASI Trust Fund: (1) an increase in the total number of beneficiaries and (2) an increase in the average benefit amount. The increase in the average benefit amount in 2009 was due in large part to the automatic cost-of-living benefit increase of 5.8 percent. The increase in the number of DI beneficiaries from 2008 to 2009 was more pronounced than the corresponding increase in the number of OASI beneficiaries, due to the impact of the economic slowdown on applications for disability benefits. Disability applications for 2009 were nearly 260 thousand above the level for 2008.
Total DI disbursements, which started to exceed non-interest income in 2005, continue to exceed such income in 2009. In 2009, DI disbursements exceeded total DI income (including interest), the first time DI assets have declined on an annual basis since 1993.
The assets of the DI Trust Fund at the end of calendar year 2009 totaled $203.5 billion, consisting of $199.8 billion in U.S. Government obligations and cash totaling $3.8 billion. The effective annual rate of interest earned by the assets of the DI Trust Fund during calendar year 2009 was 5.0 percent, as compared to 5.2 percent earned during calendar year 2008. Table VI.A6, presented in appendix A, shows a detailed listing of DI Trust Fund holdings by type of security, interest rate, and year of maturity at the end of each year 2008 and 2009.
A statement of the operations of the income and disbursements of the OASI and DI Trust Funds, on a combined basis, is presented in table III.A3. The entries in this table represent the sums of the corresponding values from tables III.A1 and III.A2. A description of the nature of these income and expenditure transactions is provided in the two preceding subsections covering OASI and DI separately.
To provide a context for estimates of future trust fund income and expenditures provided later in this report, table III.A4 compares estimates of contributions and benefit payments for calendar year 2009, from the 2005-09 Trustees Reports, to the corresponding actual amounts for 2009.
3
A number of factors can contribute to differences between estimates and subsequent actual amounts, including actual values for key demographic, economic, and other variables that differ from assumed levels. In addition, new legislation or other administrative initiatives that were unanticipated at the time the earlier estimates were completed can contribute to such differences.
At the end of calendar year 2009, about 52.5 million persons were receiving monthly benefits under the OASDI program. Of these persons, about 42.8 million and 9.7 million were receiving monthly benefits from the OASI Trust Fund and the DI Trust Fund, respectively. The number of persons receiving benefits from the OASI and DI Trust Funds grew by 2.9 percent and 4.6 percent, respectively, during the calendar year, reflecting increases in the insured population and effects of the economic downturn. The estimated distributions of benefit payments in calendar years 2008 and 2009, by type of beneficiary, are shown in table III.A5 for each trust fund separately.
Net administrative expenses charged to the OASI and DI Trust Funds in calendar year 2009 totaled $6.2 billion. This amount represented 0.9 percent of contribution income and 0.9 percent of expenditures. Corresponding percentages for each trust fund separately and for the OASDI program as a whole are shown in table III.A6 for each of the last 5 years.
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Contribution
income
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| 2005 |
0.6 | 0.7 | |
2.7 | 2.6 | |
0.9 | 1.0 |
| 2006 |
.6 | .7 | |
2.6 | 2.5 | |
.9 | 1.0 |
| 2007 |
.5 | .6 | |
2.6 | 2.5 | |
.8 | .9 |
| 2008 |
.6 | .6 | |
2.6 | 2.3 | |
.9 | .9 |
| 2009 |
.6 | .6 | |
2.8 | 2.3 | |
.9 | .9 |
Changes in the invested assets of the OASI and DI funds between the end of 2008 and the end of 2009 are a result of the acquisition and disposition of securities during calendar year 2009. Table III.A7 presents these investment transactions for each trust fund separately and for the trust funds combined.
