2012 OASDI Trustees Report

III. FINANCIAL OPERATIONS OF THE TRUST FUNDS AND
LEGISLATIVE CHANGES IN THE LAST YEAR

A. OPERATIONS OF THE OLD‑AGE AND SURVIVORS INSURANCE
(OASI) AND DISABILITY INSURANCE (DI) TRUST FUNDS, IN
CALENDAR YEAR 2011

This section presents detailed information on the operations of the OASI and DI Trust Funds^a during calendar year 2011. Chapter IV provides projections for calendar years 2012 through 2090.

1. OASI Trust Fund

Table III.A1 presents a statement of the income and disbursements of the Federal Old-Age and Survivors Insurance Trust Fund in calendar year 2011, and of the assets of the fund at the beginning and end of the calendar year. As shown in this table, total trust fund receipts in 2011 amounted to $698.8 billion, while disbursements totaled $603.8 billion, an increase in trust fund assets during 2011 of $95.0 billion.

Total receipts during calendar year 2011 included $484.1 billion in gross payroll tax contributions. The OASI fund paid the general fund $1.8 billion for the estimated amount of employee payroll-tax refunds, partially offsetting these gross contributions. Employees who work for more than one employer during a year and pay contributions on total earnings in excess of the contribution and benefit base are eligible for such refunds. Net payroll tax contributions were therefore $482.4 billion in 2011.

Reimbursements from the General Fund of the Treasury amounted to $87.8 billion in 2011. As shown in the table, Public Law 111-312, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, accounts for almost all of the reimbursement for the year, or about $87.6 billion. This act specified general fund reimbursement for temporary reductions in employee payroll taxes.

The General Fund of the Treasury reimbursed the OASI Trust Fund approximately $142 million in 2011 under the provisions of Public Law 111-147, the Hiring Incentives to Restore Employment (HIRE) Act. The General Fund reimbursed the OASI Trust Fund about $7 million in 2011 under the provisions of Public Law 110-246, the Food, Conservation, and Energy Act of 2008.

The Social Security Administration makes special payments to uninsured persons who meet certain requirements. The General Fund of the Treasury largely reimburses costs associated with providing such payments. In 2011, the general fund reimbursed the OASI Trust Fund approximately $7 thousand. These reimbursements reflect costs incurred in fiscal years 2009 and 2010.

Income based on taxation of benefits amounted to $22.2 billion in 2011. 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.

In 2011, the OASI Trust Fund earned $106.5 billion in net interest, which consisted of: (1) interest earned on the investments of the trust fund; (2) interest on adjustments in the allocation of administrative expenses between the trust fund and the general fund account for the Supplemental Security Income program; (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 $1 million, consisted of gifts received under the provisions authorizing the deposit of money gifts or bequests in the trust funds.

Of the $603.8 billion in total OASI disbursements in 2011, $596.2 billion was for net benefit payments, including the reimbursable costs of vocational rehabilitation services.² Net benefit payments increased by 3.2 percent from calendar year 2010 to calendar year 2011. Normally, benefit payments increase because of both an increase in the total number of beneficiaries and an increase in the average benefit. The increase in benefit payments was lessened this year because there was no automatic cost-of-living adjustment for December 2010.

 

Table III.A1.—Operations of the OASI Trust Fund, Calendar Year 2011

[In millions]

Total assets, December 31, 2010					$2,429,043
Receipts:
	Net payroll tax contributions:
		Payroll tax contributions		$484,141
		Payments from the General Fund of the Treasury for payroll tax contributions subject to refund		-1,790
			Net payroll tax contributions		482,350
	Reimbursements from the general fund:
		Reduction in payroll tax contributions due to P.L. 111-312		87,604
		Reduction in payroll tax contributions due to P.L. 111-147		142
		Reimbursement directed by P.L. 110-246		7
		Reimbursement for the costs of payments to uninsured persons who attained age 72 before 1968		a
		Payroll tax credits due to P.L. 98-21		a
			Net general fund reimbursements		87,753
	Income based on taxation of benefit payments:
		Withheld from benefit payments to nonresident aliens		162
		All other, not subject to withholding		22,049
			Total income from taxation of benefits		22,211
	Investment income and interest adjustments:
		Interest on investments		106,461
		Interest adjustmentsb		6
			Total investment income and interest adjustments		106,467
	Gifts				1
Total receipts					698,781
Disbursements:
	Benefit payments:
		Monthly benefits and lump-sum death benefits		596,212
		Reimbursement from the general fund for unnegotiated checks		-59
		Payment for costs of vocational rehabilitation services for disabled beneficiaries		1
			Net benefit payments		596,155
	Financial interchange with the Railroad Retirement “Social Security Equivalent Benefit Account”				4,110
	Administrative expenses:
		Costs incurred by:
			Social Security Administration	2,772
			Department of the Treasury	726
		Offsetting receipts from sales of supplies, materials, etc.		-5
		Miscellaneous reimbursements from the general fund c		-7
			Net administrative expenses		3,486
Total disbursements					603,750
Net increase in assets					95,031
Total assets, December 31, 2011					2,524,075

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a

Between -$0.5 and $0.5 million.

b

Includes: (1) interest on adjustments in the allocation of administrative expenses between the trust fund and the general fund account for the Supplemental Security Income program; (2) interest arising from the revised allocation of administrative expenses among the trust funds; and (3) interest on certain reimbursements to the trust fund.

c

Reimbursements for costs incurred in performing certain legislatively mandated activities not directly related to administering the OASI program.

Note: Totals do not necessarily equal the sums of rounded components.

The Railroad Retirement Act requires an annual financial interchange between the Railroad Retirement program and the OASDI program. The purpose of the interchange 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. The Railroad Retirement Board and the Social Security Administration calculated an interchange of $4.1 billion from the OASI Trust Fund to the Social Security Equivalent Benefit Account for June 2011.

The remaining $3.5 billion of disbursements from the OASI Trust Fund represents net administrative expenses. The Social Security Administration and the Department of the Treasury initially charge administrative expenses directly to the trust fund on an estimated basis. Periodically, as actual experience develops, they adjust the allocations of administrative expenses for prior periods. These adjustments affect the OASI Trust Fund, the DI Trust Fund, and the general fund account for the Supplemental Security Income program, and include appropriate interest adjustments. As described earlier, the trust fund accounting records such interest adjustments under investment income.

In 2011, the cost of administering the OASI program was 80 percent of OASI net administrative expenses. The Social Security Administration charges such costs to the trust fund ($2.8 billion in 2011). In addition, the Department of the Treasury charges directly to the trust fund expenses ($0.7 billion in 2011) for services provided in administering the OASI program. A relatively small offset ($5 million in 2011) to administrative expenses represents income from the sale of excess supplies and equipment.

Finally, the General Fund of the Treasury makes net reimbursements for administrative costs incurred by the Social Security Administration in performing 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 ($4 million in 2011) and with the provision of information to participants in certain pension plans ($3 million in 2011). These miscellaneous reimbursements totaled $7 million in 2011.

The assets of the OASI Trust Fund at the end of calendar year 2011 totaled $2,524.1 billion, consisting of $2,524.9 billion in U.S. Government obligations and, as an offset, an extension of credit of $0.8 billion against securities to be redeemed within the following days. The effective annual rate of interest earned by the assets of the OASI Trust Fund during calendar year 2011 was 4.4 percent, slightly lower than the 4.6 percent earned during calendar year 2010. Table VI.A4, 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 calendar years 2010 and 2011.

By law, the Department of the Treasury must invest trust fund assets in interest-bearing securities backed by the full faith and credit of the United States Government. Those securities currently held by the OASI Trust Fund are special issues, that is, securities sold only to the trust funds. These special issues are of two types: short-term certificates of indebtedness and longer-term bonds. On a daily basis, the Federal Government issues certificates of indebtedness which mature on the next June 30 following the date of issue. Receipts not required to meet current expenditures are invested in these certificates of indebtedness. The trust fund normally acquires long-term special-issue bonds when special issues of either type mature on June 30. The amount of long-term bonds acquired on June 30 is equal to the amount of special issues maturing (including interest earnings), plus tax receipts for that day, 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 Department of the Treasury, in consultation with the Chief Actuary of the Social Security Administration, selected the amounts and maturity dates of the special-issue bonds purchased on June 30, 2011, so that the maturity dates of the total portfolio of special issues were spread evenly over the 15‑year period 2012‑26. The bonds purchased had an interest rate of 2.5 percent. Table III.A7 shows additional details on the investment transactions during 2011, including the amounts of bonds purchased on June 30, 2011.

2. DI Trust Fund

Table III.A2 presents a statement of the income and disbursements of the Federal Disability Insurance Trust Fund in calendar year 2011, and of the assets of the fund at the beginning and end of the calendar year.

Line entries in the DI statement are similar to those in the OASI statement. The explanations of the OASI entries generally apply to DI as well.

Of the $106.3 billion in total receipts, $81.9 billion was net payroll tax contributions.

 

Table III.A2.—Operations of the DI Trust Fund, Calendar Year 2011

[In millions]

Total assets, December 31, 2010					$179,907
Receipts:
	Net payroll tax contributions:
		Payroll tax contributions		$82,185
		Payments from the General Fund of the Treasury for payroll tax contributions subject to refund		-304
			Net payroll tax contributions		81,881
	Reimbursements from the general fund:
		Reduction in payroll tax contributions due to P.L. 111-312		14,902
		Reduction in payroll tax contributions due to P.L. 111-147		24
		Reimbursements directed by P.L. 110-246		1
		Payroll tax credits due to P.L. 98-21		a
			Net general fund reimbursements		14,927
	Income based on taxation of benefit payments:
		Withheld from benefit payments to nonresident aliens		4
		All other, not subject to withholding		1,577
			Total income from taxation of benefits		1,581
	Investment income and interest adjustments:
		Interest on investments		7,883
		Interest adjustments b		4
			Total investment income and interest adjustments		7,887
Total receipts					106,276
Disbursements:
	Benefit payments:
		Monthly benefits		128,935
		Reimbursement from the general fund for unnegotiated checks		-31
		Payment for costs of vocational rehabilitation services for disabled beneficiaries		44
			Net benefit payments		128,948
	Financial interchange with the Railroad Retirement “Social Security Equivalent Benefit Account”				465
	Administrative expenses:
		Costs incurred by:
			Social Security Administration	2,758
			Department of the Treasury	138
		Demonstration projects		28
		Miscellaneous reimbursements from the general fund c		-4
			Total administrative expenses		2,920
Total disbursements					132,332
Net increase in assets					-26,056
Total assets, December 31, 2011					153,850

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a

Between -$0.5 and $0.5 million.

b

Includes: (1) interest on adjustments in the allocation of administrative expenses between the trust fund and the general fund account for the Supplemental Security Income program; (2) interest arising from the revised allocation of administrative expenses among the trust funds; and (3) interest on certain reimbursements to the trust fund.

c

Includes reimbursements for costs incurred in performing certain legislatively mandated activities not directly related to administering the DI program.

Note: Totals do not necessarily equal the sums of rounded components.

Of the $132.3 billion in total disbursements, $128.9 billion was net benefit payments. Net benefit payments increased by 3.8 percent from calendar year 2010 to calendar year 2011. This increase in DI benefit payments was due to the same factors described earlier for OASI benefit payments. As with OASI benefits, the increase in DI benefit payments was lessened in 2011 because there was no automatic cost-of-living increase in December 2010. The increase in the number of DI beneficiaries from 2010 to 2011 was more pronounced than the corresponding increase in the number of OASI beneficiaries, due to the increase in applications for disability benefits associated with the weak economy.

Total DI disbursements, which started to exceed non-interest income in 2005, continued to exceed such income in 2011. As in 2010, DI disbursements exceeded total DI income (including interest).

The assets of the DI Trust Fund at the end of calendar year 2011 totaled $153.9 billion, and consisted of $154.0 billion in U.S. Government obligations and, as an offset, an extension of credit of $0.1 billion against securities to be redeemed within the following few days. The effective annual rate of interest earned by the assets of the DI Trust Fund during calendar year 2011 was 4.8 percent, slightly lower than the 4.9 percent earned during calendar year 2010. Table VI.A5, 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 calendar years 2010 and 2011.

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. However, as of June 2011, the Trustees projected that the assets of the DI Trust Fund would be exhausted within 15 years. Therefore, the Department of the Treasury, in consultation with the Chief Actuary of the Social Security Administration, selected the amounts and maturity dates of the DI special-issue bonds purchased on June 30, 2011, so that equal amounts of special issues would mature over the 10-year period 2012-21. The bonds purchased had an interest rate of 2.5 percent. The DI Trust Fund had already redeemed many of the bonds coming due June 30, 2012, so this investment approach required that all bond purchases on June 30, 2011 have a maturity date of June 30, 2012. Table III.A7 shows additional details on the investment transactions during 2011.

3. OASI and DI Trust Funds, Combined

Table III.A3 presents a statement of the operations of the OASI and DI Trust Funds on a combined basis. The entries in this table represent the sums of the corresponding values from tables III.A1 and III.A2. The two preceding subsections that cover OASI and DI provide a description of the nature of these income and expenditure transactions.

 

Table III.A3.—Operations of the Combined OASI and DI Trust Funds,
Calendar Year 2011 

[In millions]

Total assets, December 31, 2010					$2,608,950
Receipts:
	Net payroll tax contributions:
		Payroll tax contributions		$566,325
		Payments from the General Fund of the Treasury for payroll tax contributions subject to refund		-2,094
			Net payroll tax contributions		564,231
	Reimbursements from the general fund:
		Reduction in payroll tax contributions due to P.L. 111-312		102,506
		Reduction in payroll tax contributions due to P.L. 111-147		166
		Reimbursements directed by P.L. 110-246		8
		Reimbursement for the costs of payments to uninsured persons who attained age 72 before 1968		a
		Payroll tax credits due to P.L. 98-21		a
			Net general fund reimbursements		102,680
	Income based on taxation of benefit payments:
		Withheld from benefit payments to nonresident aliens		166
		All other, not subject to withholding		23,626
			Total income from taxation of benefits		23,792
	Investment income and interest adjustments:
		Interest on investments		114,344
		Interest adjustments b		9
			Total investment income and interest adjustments		114,354
	Gifts				1
Total receipts					805,057
Disbursements:
	Benefit payments:
		Monthly benefits and lump-sum death payments		725,148
		Reimbursement from the general fund for unnegotiated checks		-90
		Payment for costs of vocational rehabilitation services for disabled beneficiaries		45
			Net benefit payments		725,103
	Financial interchange with the Railroad Retirement “Social Security Equivalent Benefit Account”				4,574
	Administrative expenses:
		Costs incurred by:
			Social Security Administration	5,530
			Department of the Treasury	864
		Offsetting receipts from sales of supplies, materials, etc.		-5
		Demonstration projects		28
		Miscellaneous reimbursements from the general fund c		-11
			Net administrative expenses		6,405
Total disbursements					736,083
Net increase in assets					68,975
Total assets, December 31, 2011					2,677,925

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a

Between -$0.5 and $0.5 million.

b

Includes: (1) interest on adjustments in the allocation of administrative expenses between the trust funds and the general fund account for the Supplemental Security Income program; (2) interest arising from the revised allocation of administrative expenses among the trust funds; and (3) interest on certain reimbursements to the trust funds.

c

Includes reimbursements for costs incurred in performing certain legislatively mandated activities not directly related to administering the OASI and DI programs.

Note: Totals do not necessarily equal the sums of rounded components.

Table III.A4 compares estimates of total income and total expenditures for calendar year 2011 from the 2007-11 Trustees Reports, to the corresponding actual amounts for 2011.

Table III.A4.—Comparison of Actual Calendar Year 2011 Trust Fund Operations
With Estimates Made in Prior Reports, Based on Intermediate Assumptions ^a 

[Amounts in billions]

		Total income  b			Total expenditures
		Amount	Difference from actual (percent)		Amount	Difference from actual (percent)
OASI Trust Fund:
	Estimate in 2007 report	$860.8	23.2		$610.6	1.1
	Estimate in 2008 report	848.1	21.4		615.0	1.9
	Estimate in 2009 report	771.8	10.5		602.0	-.3
	Estimate in 2010 report	741.9	6.2		607.5	.6
	Estimate in 2011 report	700.7	.3		605.6	.3
	Actual amount	698.8	—		603.8	—
DI Trust Fund:
	Estimate in 2007 report	130.9	23.1		126.8	-4.2
	Estimate in 2008 report	129.4	21.8		128.7	-2.8
	Estimate in 2009 report	118.2	11.2		133.1	.6
	Estimate in 2010 report	112.9	6.2		134.2	1.4
	Estimate in 2011 report	107.0	.6		132.8	.3
	Actual amount	106.3	—		132.3	—
OASI and DI Trust Funds, combined:
	Estimate in 2007 report	991.6	23.2		737.4	.2
	Estimate in 2008 report	977.5	21.4		743.7	1.0
	Estimate in 2009 report	890.0	10.5		735.1	-.1
	Estimate in 2010 report	854.8	6.2		741.7	.8
	Estimate in 2011 report	807.7	.3		738.4	.3
	Actual amount	805.1	—		736.1	—

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a

Percentage differences are calculated prior to rounding.

b

“Actual” income for 2011 reflects adjustments to payroll tax contributions for prior calendar years (see appendix A for description of these adjustments). “Estimated” income also includes such adjustments, but on an estimated basis.

Note: Totals do not necessarily equal the sums of rounded components.

A number of factors contribute to differences between estimates and subsequent actual amounts, including: (1) actual values for key demographic, economic, and other variables that differ from assumed levels; and (2) legislation or other administrative initiatives that lawmakers enacted or finalized after the Trustees completed their estimates. Estimates for 2011 were far too optimistic in the 2007 and 2008 reports because they did not anticipate the economic recession. Estimates in the 2009 and 2010 reports included an economic recession in the projections but assumed the recession would not be as deep as it actually was and the recovery would not be as gradual as it has been so far.

At the end of calendar year 2011, the OASDI program was providing monthly benefits to about 55.4 million people. The OASI Trust Fund was providing benefits to about 44.8 million people and the DI Trust Fund was providing benefits to about 10.6 million people. The number of people receiving benefits from the OASI and DI Trust Funds grew by 2.2 percent and 4.2 percent, respectively, during the calendar year. This growth reflects increases in the insured population and effects of the economic downturn. Table III.A5 shows the estimated distributions of benefit payments in calendar years 2010 and 2011, by type of beneficiary, for each trust fund separately.

 

Table III.A5.—Distribution of Benefit Payments by Type of Beneficiary or Payment, Calendar Years 2010 and 2011 

[Amounts in millions]

				Calendar year 2010			Calendar year 2011
				Amount	Percentage of total		Amount	Percentage of total
Total OASDI benefit payments				$701,639	100.0		$725,148	100.0
	OASI benefit payments			577,448	82.3		596,212	82.2
	DI benefit payments			124,191	17.7		128,935	17.8
OASI benefit payments, total				577,448	100.0		596,212	100.0
	Monthly benefits:
		Retired workers and auxiliaries		471,505	81.7		489,699	82.1
			Retired workers	443,390	76.8		461,234	77.4
			Spouses	24,001	4.2		24,176	4.1
			Children	4,114	.7		4,288	.7
		Survivors of deceased workers		105,741	18.3		106,310	17.8
			Aged widows and widowers	83,927	14.5		84,342	14.1
			Disabled widows and widowers	2,121	.4		2,199	.4
			Parents	23	a		22	a
			Children	18,024	3.1		18,100	3.0
			Widowed mothers and fathers caring for child beneficiaries	1,645	.3		1,647	.3
		Uninsured persons generally aged 72 before 1968		b	a		b	a
	Lump-sum death payments			203	a		204	a
DI benefit payments, total				124,191	100.0		128,935	100.0
		Disabled workers		115,059	92.6		119,563	92.7
		Spouses		598	.5		608	.5
		Children		8,534	6.9		8,765	6.8

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a

Less than 0.05 percent.

b

Less than $0.5 million.

Note: Benefits are monthly benefits and lump-sum death payments. Totals do not necessarily equal the sums of rounded components.

Net administrative expenses of the OASI and DI Trust Funds in calendar year 2011 totaled $6.4 billion. This amount is equal to 0.9 percent of non-interest income and 0.9 percent of total expenditures. Table III.A6 shows corresponding percentages for each trust fund separately and for the OASDI program as a whole for each of the last 5 years.

 

Table III.A6.—Administrative Expenses as a Percentage of Non-interest Income and of Total Expenditures, Calendar Years 2007-11

Calendar year	OASI Trust Fund			DI Trust Fund			OASI and DI Trust Funds, combined
	Non-interest income	Total expenditures		Non-interest income	Total expenditures		Non-interest income	Total expenditures
2007	0.5	0.6		2.6	2.5		0.8	0.9
2008	.5	.6		2.6	2.3		.8	.9
2009	.6	.6		2.8	2.3		.9	.9
2010	.6	.6		3.1	2.3		1.0	.9
2011	.6	.6		3.0	2.2		.9	.9

The acquisition and disposition of securities during calendar year 2011 changed the invested assets of the OASI Trust Fund and the DI Trust Fund. Table III.A7 presents these investment transactions for each trust fund separately and for the trust funds combined.

 

Table III.A7.—Trust Fund Investment Transactions, Calendar Year 2011

[In millions]

			OASI Trust Fund	DI Trust Fund	OASI and DI Trust Funds, combined
Invested assets, December 31, 2010			$2,429,514	$180,023	$2,609,537
Acquisitions:
	Special issues:
		Certificates of indebtedness	654,372	103,661	758,033
		Bonds a	250,152	7,123	257,276
		Total acquisitions	904,525	110,784	1,015,309
Dispositions:
	Special issues:
		Certificates of indebtedness	660,837	104,920	765,758
		Bonds	148,303	31,890	180,193
		Total dispositions	809,140	136,811	945,951
Net increase in invested assets			95,385	-26,027	69,358
Invested assets, December 31, 2011			2,524,898	153,996	2,678,895

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a

Purchased on June 30, 2011. The interest rate on these purchases was 2.5 percent.

Note: All investments are shown at par value. Totals do not necessarily equal the sums of rounded components.

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1

See www.socialsecurity.gov/oact/progdata/fundsQuery.html.

2

Vocational rehabilitation services are furnished to disabled widow(er) beneficiaries and to those children of retired or deceased workers who receive benefits based on disabilities that began before age 22. The Trust Funds reimburse the providers of such services only in those cases where the services contributed to the successful rehabilitation of the beneficiary.