2013 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 2012

This section presents detailed information on the operations of the OASI and DI Trust Funds¹ during calendar year 2012. Chapter IV provides projections for calendar years 2013 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 2012, and of the asset reserves in the fund at the beginning and end of the calendar year. As shown in this table, total trust fund receipts in 2012 amounted to $731.1 billion, while disbursements totaled $645.5 billion, an increase in trust fund reserves during 2012 of $85.6 billion.

Total receipts during calendar year 2012 included $505.2 billion in gross payroll tax contributions. The OASI fund paid the general fund $1.3 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 $503.9 billion in 2012.

Net reimbursements from the General Fund of the Treasury amounted to $97.7 billion in 2012. As shown in the table, Public Law 111-312, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, Public Law 112-78, the Temporary Payroll Tax Cut Continuation Act of 2011, and Public Law 112-96, the Middle Class Tax Relief and Job Creation Act of 2012, account for almost all of the reimbursement for the year, or about $97.6 billion. These acts specified general fund reimbursement for temporary reductions in employee payroll taxes.

The General Fund of the Treasury reimbursed the OASI Trust Fund approximately $133 million in 2012 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 $6 million in 2012 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. Although there was no reimbursement in 2012, a reimbursement of about $1 thousand is scheduled for 2013, reflecting costs incurred in fiscal year 2011.

Income based on taxation of OASI benefits amounted to $26.7 billion in 2012. 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 2012, the OASI Trust Fund earned $102.8 billion in net interest, which consisted of: (1) interest earned on the investments held by 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 thousand, consisted of gifts received under the provisions authorizing the deposit of money gifts or bequests in the trust funds.

Of the $645.5 billion in total OASI disbursements in 2012, $637.9 billion was for net benefit payments, including the reimbursable costs of vocational rehabilitation services.² Net benefit payments increased by 7.0 percent from calendar year 2011 to calendar year 2012. 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 2012 was due in large part to the automatic cost-of-living benefit increase of 3.6 percent which became effective for December 2011 under the automatic-adjustment provisions in section 215(i) of the Social Security Act.

 

Table III.A1.—Operations of the OASI Trust Fund, Calendar Year 2012

[In millions]

Total asset reserves, December 31, 2011					$2,524,075
Receipts:
	Net payroll tax contributions:
		Payroll tax contributions		$505,192
		Payments from the General Fund of the Treasury for payroll tax contributions subject to refund		-1,299
			Net payroll tax contributions		503,893
	Reimbursements from the general fund:
		Reduction in payroll tax contributions due to P.L. 111-312, P.L. 112-78, and P.L. 112-96		97,596
		Reduction in payroll tax contributions due to P.L. 111-147		133
		Reimbursement directed by P.L. 110-246		6
		Payroll tax credits due to P.L. 98-21		a
			Net general fund reimbursements		97,735
	Income based on taxation of benefit payments:
		Withheld from benefit payments to nonresident aliens		169
		All other, not subject to withholding		26,506
			Total income from taxation of benefits		26,675
	Investment income and interest adjustments:
		Interest on investments		102,768
		Interest adjustmentsb		5
			Total investment income and interest adjustments		102,773
	Gifts				a
Total receipts					731,075
Disbursements:
	Benefit payments:
		Monthly benefits and lump-sum death payments		637,948
		Reimbursement from the general fund for unnegotiated checks		-55
		Payment for costs of vocational rehabilitation services for disabled beneficiaries		1
			Net benefit payments		637,894
	Financial interchange with the Railroad Retirement “Social Security Equivalent Benefit Account”				4,139
	Administrative expenses:
		Costs incurred by:
			Social Security Administration	2,896
			Department of the Treasury	573
		Offsetting receipts from sales of supplies, materials, etc.		-9
		Miscellaneous reimbursements from the general fund c		-12
			Net administrative expenses		3,448
Total disbursements					645,482
Net increase in asset reserves					85,593
Total asset reserves, December 31, 2012					2,609,668

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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 in had railroad employment always been covered directly 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 2012.

The remaining $3.4 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 is recorded, 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 2012, the cost incurred by the Social Security Administration to administer the OASI program was 84 percent of OASI net administrative expenses. The Social Security Administration charges such costs to the trust fund ($2.9 billion in 2012). In addition, the Department of the Treasury charges to the trust fund expenses ($0.6 billion in 2012) for services provided in administering the OASI program. A relatively small offset ($9 million in 2012) 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 ($3 million in 2012) and with the provision of information to participants in certain pension plans ($8 million in 2012). These miscellaneous reimbursements totaled $12 million in 2012.

The asset reserves in the OASI Trust Fund at the end of calendar year 2012 totaled $2,609.7 billion, consisting of $2,610.3 billion in U.S. Government obligations and, as an offset, an extension of credit of $0.6 billion against securities to be redeemed within the following days. The effective annual rate of interest earned by the reserves in the OASI Trust Fund during calendar year 2012 was 4.1 percent, slightly lower than the 4.4 percent earned during calendar year 2011. 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 2011 and 2012.

By law, the Department of the Treasury must invest trust fund reserves 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. Daily receipts are invested in the short-term certificates of indebtedness which mature on the next June 30 following the date of issue. The trust fund normally acquires long-term special-issue bonds when special issues of either type mature on June 30 and must be reinvested. The amount of long-term bonds acquired on June 30 is equal to the amount of special issues maturing (including accrued 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 reinvest the maturing special issues, as of each June 30, so that the value of the securities 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, 2012, so that the maturity dates of the total portfolio of special issues were spread evenly over the 15‑year period 2013‑27. The bonds purchased on that date have an interest rate of 1.375 percent. Table III.A7 shows additional details on the investment transactions during 2012, including the amounts of bonds purchased on June 30, 2012.

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 2012, and of the asset reserves in 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 $109.1 billion in total receipts, $85.6 billion was net payroll tax contributions.

 

Table III.A2.—Operations of the DI Trust Fund, Calendar Year 2012

[In millions]

Total asset reserves, December 31, 2011					$153,850
Receipts:
	Net payroll tax contributions:
		Payroll tax contributions		$85,836
		Payments from the General Fund of the Treasury for payroll tax contributions subject to refund		-221
			Net payroll tax contributions		85,615
	Reimbursements from the general fund:
		Reduction in payroll tax contributions due to P.L. 111-312, P.L. 112-78, and P.L. 112-96		16,522
		Reduction in payroll tax contributions due to P.L. 111-147		22
		Reimbursements directed by P.L. 110-246		1
		Payroll tax credits due to P.L. 98-21		a
			Net general fund reimbursements		16,546
	Income based on taxation of benefit payments:
		Withheld from benefit payments to nonresident aliens		4
		All other, not subject to withholding		579
			Total income from taxation of benefits		583
	Investment income and interest adjustments:
		Interest on investments		6,368
		Interest adjustmentsb		2
			Total investment income and interest adjustments		6,371
Total receipts					109,115
Disbursements:
	Benefit payments:
		Monthly benefits		136,878
		Reimbursement from the general fund for unnegotiated checks		-28
		Payment for costs of vocational rehabilitation services for disabled beneficiaries		48
			Net benefit payments		136,897
	Financial interchange with the Railroad Retirement “Social Security Equivalent Benefit Account”				512
	Administrative expenses:
		Costs incurred by:
			Social Security Administration	2,758
			Department of the Treasury	107
		Offsetting receipts from sales of supplies, materials, etc.		-1
		Demonstration projects		30
		Miscellaneous reimbursements from the general fund c		-3
			Total administrative expenses		2,890
Total disbursements					140,299
Net increase in asset reserves					-31,184
Total asset reserves, December 31, 2012					122,666

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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 $140.3 billion of total disbursements, $136.9 billion was net benefit payments. Net benefit payments increased by 6.2 percent from calendar year 2011 to calendar year 2012. This increase in DI benefit payments was due to the same factors described earlier for OASI benefit payments.

Total DI disbursements, which started to exceed non-interest income in 2005, continued to exceed such income in 2012. As in 2011, DI disbursements exceeded total DI income (including interest).

The reserves in the DI Trust Fund at the end of calendar year 2012 totaled $122.7 billion, and consisted of $122.8 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 asset reserves in the DI Trust Fund during calendar year 2012 was 4.7 percent, slightly lower than the 4.8 percent earned during calendar year 2011. 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 2011 and 2012.

Section 201(d) of the Social Security Act provides that the Treasury securities 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 reinvest the maturing special issues, as of each June 30, so that the value of the securities maturing in each of the next 15 years are approximately equal. However, as of June 2012, the Trustees projected that the reserves in the DI Trust Fund would be depleted 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, 2012, so that equal amounts of special issues would mature over the four-year period 2013-16. The bonds purchased have an interest rate of 1.375 percent. As of June 30, 2012, the DI Trust Fund had already redeemed all of the bonds coming due on June 30, 2013 and on June 30, 2014, so this investment approach required that all bond purchases on June 30, 2012 be split evenly over maturity dates of June 30, 2013 and June 30, 2014. Table III.A7 shows additional details on the investment transactions during 2012.

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 2012 

[In millions]

Total asset reserves, December 31, 2011					$2,677,925
Receipts:
	Net payroll tax contributions:
		Payroll tax contributions		$591,028
		Payments from the General Fund of the Treasury for payroll tax contributions subject to refund		-1,519
			Net payroll tax contributions		589,508
	Reimbursements from the general fund:
		Reduction in payroll tax contributions due to P.L. 111-312, P.L. 112-78, and P.L. 112-96		114,118
		Reduction in payroll tax contributions due to P.L. 111-147		155
		Reimbursements directed by P.L. 110-246		7
		Payroll tax credits due to P.L. 98-21		a
			Net general fund reimbursements		114,280
	Income based on taxation of benefit payments:
		Withheld from benefit payments to nonresident aliens		173
		All other, not subject to withholding		27,085
			Total income from taxation of benefits		27,258
	Investment income and interest adjustments:
		Interest on investments		109,136
		Interest adjustments b		7
			Total investment income and interest adjustments		109,143
	Gifts				a
Total receipts					840,190
Disbursements:
	Benefit payments:
		Monthly benefits and lump-sum death payments		774,825
		Reimbursement from the general fund for unnegotiated checks		-83
		Payment for costs of vocational rehabilitation services for disabled beneficiaries		49
			Net benefit payments		774,791
	Financial interchange with the Railroad Retirement “Social Security Equivalent Benefit Account”				4,651
	Administrative expenses:
		Costs incurred by:
			Social Security Administration	5,654
			Department of the Treasury	680
		Offsetting receipts from sales of supplies, materials, etc.		-10
		Demonstration projects		30
		Miscellaneous reimbursements from the general fund c		-15
			Net administrative expenses		6,338
Total disbursements					785,781
Net increase in asset reserves					54,409
Total asset reserves, December 31, 2012					2,732,334

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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 2012 from the 2008-12 Trustees Reports, to the corresponding actual amounts for 2012.

Table III.A4.—Comparison of Actual Calendar Year 2012 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 2008 report	$896.8	22.7		$656.7	1.7
	Estimate in 2009 report	822.4	12.5		633.9	-1.8
	Estimate in 2010 report	789.7	8.0		638.3	-1.1
	Estimate in 2011 report	752.8	3.0		633.0	-1.9
	Estimate in 2012 report	735.7	.6		647.2	.3
	Actual amount	731.1	—		645.5	—
DI Trust Fund:
	Estimate in 2008 report	135.2	23.9		136.7	-2.6
	Estimate in 2009 report	124.1	13.7		138.6	-1.2
	Estimate in 2010 report	118.4	8.5		141.1	.5
	Estimate in 2011 report	114.0	4.5		139.0	-1.0
	Estimate in 2012 report	110.2	1.0		141.5	.8
	Actual amount	109.1	—		140.3	—
OASI and DI Trust Funds, combined:
	Estimate in 2008 report	1,031.9	22.8		793.4	1.0
	Estimate in 2009 report	946.5	12.7		772.4	-1.7
	Estimate in 2010 report	908.1	8.1		779.3	-.8
	Estimate in 2011 report	866.8	3.2		772.0	-1.8
	Estimate in 2012 report	846.0	.7		788.7	.4
	Actual amount	840.2	—		785.8	—

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a

Percentage differences are calculated prior to rounding.

b

“Actual” income for 2012 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 2012 were far too optimistic in the 2008 report 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 2012, the OASDI program was providing monthly benefits to about 56.8 million people. The OASI Trust Fund was providing benefits to about 45.9 million people and the DI Trust Fund was providing benefits to about 10.9 million people. The number of people receiving benefits from the OASI and DI Trust Funds grew by 2.4 percent and 2.6 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 2011 and 2012, by type of beneficiary, for each trust fund separately.

 

Table III.A5.—Distribution of Benefit Payments by Type of Beneficiary or Payment, Calendar Years 2011 and 2012 

[Amounts in millions]

				Calendar year 2011			Calendar year 2012
				Amount	Percentage of total		Amount	Percentage of total
Total OASDI benefit payments				$725,148	100.0		$774,825	100.0
	OASI benefit payments			596,212	82.2		637,948	82.3
	DI benefit payments			128,935	17.8		136,878	17.7
OASI benefit payments, total				596,212	100.0		637,948	100.0
	Monthly benefits:
		Retired workers and auxiliaries		489,699	82.1		527,403	82.7
			Retired workers	461,234	77.4		497,471	78.0
			Spouses	24,176	4.1		25,348	4.0
			Children	4,288	.7		4,583	.7
		Survivors of deceased workers		106,310	17.8		110,345	17.3
			Aged widows and widowers	84,342	14.1		87,603	13.7
			Disabled widows and widowers	2,199	.4		2,293	.4
			Parents	22	a		22	a
			Children	18,100	3.0		18,752	2.9
			Widowed mothers and fathers caring for child beneficiaries	1,647	.3		1,676	.3
		Uninsured persons generally aged 72 before 1968		b	a		—	—
	Lump-sum death payments			204	a		200	a
DI benefit payments, total				128,935	100.0		136,878	100.0
		Disabled workers		119,563	92.7		127,155	92.9
		Spouses		608	.5		631	.5
		Children		8,765	6.8		9,092	6.6

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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 2012 totaled $6.3 billion. This amount is equal to 0.9 percent of non-interest income and 0.8 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 2008-12

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
2008	0.5	0.6		2.6	2.3		0.8	0.9
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
2012	.5	.5		2.8	2.1		.9	.8

The acquisition and disposition of securities during calendar year 2012 changed the invested reserves 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 2012

[In millions]

			OASI Trust Fund	DI Trust Fund	OASI and DI Trust Funds, combined
Invested asset reserves, December 31, 2011a			$2,524,898	$153,996	$2,678,895
Acquisitions:
	Special issues:
		Certificates of indebtedness	685,103	107,084	792,187
		Bonds b	266,943	6,530	273,473
		Total acquisitions	952,046	113,614	1,065,660
Dispositions:
	Special issues:
		Certificates of indebtedness	687,607	107,556	795,163
		Bonds	179,066	37,253	216,318
		Total dispositions	866,672	144,809	1,011,481
Net increase in invested asset reserves			85,374	-31,195	54,179
Invested asset reserves, December 31, 2012a			2,610,272	122,802	2,733,074

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a

Invested asset reserves differ from total asset reserves by the amount of undisbursed balances. See tables VI.A4 and VI.A5 for details.

b

Purchased on June 30, 2012. The interest rate on these purchases was 1.375 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.