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VI. APPENDICESThe Federal Old-Age and Survivors Insurance (OASI) Trust Fund was established on January 1, 1940 as a separate account in the United States Treasury. The Federal Disability Insurance (DI) Trust Fund, another separate account in the United States Treasury, was established on August 1, 1956. These funds conduct the financial operations of the OASI and DI programs. The Board of Trustees is responsible for overseeing the financial operations of these funds. The following paragraphs describe the various components of trust fund income and outgo. Following this description, tables VI.A1 and VI.A2 present the historical operations of the separate trust funds since their inception, and table VI.A3 presents the operations of the theoretical combined trust funds during the period when they have co-existed.The primary receipts of these two funds are amounts appropriated under permanent authority on the basis of payroll tax contributions. Federal law requires that all employees who work in OASDI covered employment, and their employers, make payroll tax contributions on their wages. Employees and their employers must also make payroll tax contributions on monthly cash tips if such tips are at least $20. Self-employed persons must make payroll tax contributions on their covered net earnings from self-employment. The Federal Government pays amounts equivalent to the combined employer and employee contributions that would be paid on deemed wage credits attributable to military service performed between 1957 and 2001, if such wage credits were covered wages.Beginning in 1984, Federal law subjected up to 50 percent of an individual’s or couple’s OASDI benefits to Federal income taxation under certain circumstances. Effective for taxable years beginning after 1993, the law increased the maximum percentage from 50 percent to 85 percent. Treasury credits the proceeds from this taxation of up to 50 percent of benefits to the OASI and DI Trust Funds in advance, on an estimated basis, at the beginning of each calendar quarter, with no reimbursement to the general fund for interest costs attributable to the advance transfers.1 Treasury makes subsequent adjustments based on the actual amounts shown on annual income tax records. Each of the OASI and DI Trust Funds receives the income taxes paid on the benefits from that trust fund.2Another source of income to the trust funds is interest received on investments held by the trust funds. On a daily basis, Treasury invests trust fund income not required to meet current operating expenses, primarily in interest-bearing obligations of the U.S. Government. These investments include the special public-debt obligations described in the next paragraph. The Social Security Act also authorizes the trust funds to hold obligations guaranteed as to both principal and interest by the United States. The act therefore permits the trust funds to hold certain Federally sponsored agency obligations and marketable obligations.3 The trust funds may acquire any of these obligations on original issue at the issue price or by purchase of outstanding obligations at their market price.The Social Security Act authorizes the issuance of special public-debt obligations for purchase exclusively by the trust funds. The act provides that the interest rate for special obligations newly issued in any month is the average market yield, as of the last business day of the prior month, on all of the outstanding marketable U.S. obligations that are due or callable more than 4 years in the future. This rate is rounded to the nearest one-eighth of one percent. Beginning January 1999, in calculating the average market yield rate for this purpose, the Treasury incorporates the yield to the call date when a callable bond’s market price is above par.Although the Social Security Act does not authorize the purchase or sale of special issues in the open market, the Treasury may redeem them at any time at par value. In practice, the Treasury redeems special issues prior to maturity only when needed to meet current operating expenses. Given this separation from market-based valuations, changes in market yield rates do not cause fluctuations in principal value. As is true for marketable Treasury securities held by the public, the full faith and credit of the U.S. Government backs all of the investments held by the trust funds.The primary expenditures of the OASI and DI Trust Funds are: (1) OASDI benefit payments, net of any reimbursements from the General Fund of the Treasury for unnegotiated benefit checks; and (2) expenses incurred by the Social Security Administration and the Department of the Treasury in administering the OASDI program and the provisions of the Internal Revenue Code relating to the collection of contributions. Such administrative expenses include expenditures for construction, rental and lease, or purchase of office buildings and related facilities for the Social Security Administration. The Social Security Act prohibits expenditures from the OASI and DI Trust Funds for any purpose not related to the payment of benefits or administrative costs for the OASDI program.The expenditures of the trust funds also include: (1) the costs of vocational rehabilitation services furnished to disabled persons receiving cash benefits because of their disabilities, where such services contributed to their successful rehabilitation; and (2) net costs of the provisions of the Railroad Retirement Act that provide for a system of coordination and financial interchange between the Railroad Retirement program and the Social Security program. Under the financial interchange provisions, the Railroad Retirement program’s Social Security Equivalent Benefit Account and the trust funds interchange amounts on an annual basis so that each trust fund is in the same position it would have been had railroad employment always been covered under Social Security.
Includes reimbursements from the General Fund of the Treasury to the OASI Trust Fund for: (1) the cost of noncontributory wage credits for military service before 1957; (2) the cost in 1971-82 of deemed wage credits for military service performed after 1956; (3) the cost of benefits to certain uninsured persons who attained age 72 before 1968; (4) the cost of payroll tax credits provided to employees in 1984 and self-employed persons in 1984-89 by Public Law 98-21; (5) the cost in 2009-17 of excluding certain self-employment earnings from SECA taxes under Public Law 110-246; and (6) payroll tax revenue forgone under the provisions of Public Laws 111-147, 111-312, 112-78, and 112-96.
Net interest includes net profits or losses on marketable investments. Beginning in 1967, the trust fund pays administrative expenses on an estimated basis, with a final adjustment including interest made in the following fiscal year. Net interest includes the amounts of these interest adjustments. The 1970 report describes the accounting for administrative expenses for years prior to 1967. Beginning in October 1973, figures include relatively small amounts of gifts to the fund. Net interest for 1983-86 reflects payments for interest on amounts owed under the interfund borrowing provisions. During 1983-90, net interest reflects interest reimbursements paid from the trust fund to the general fund on advance tax transfers.
Between -$50 million and $50 million.
Reflects interfund borrowing and subsequent repayment of loans. The OASI Trust Fund borrowed $17.5 billion from the DI and HI Trust Funds in 1982 and repaid the loans in 1985 ($4.4 billion) and 1986 ($13.2 billion).
Includes reimbursements from the General Fund of the Treasury to the DI Trust Fund for: (1) the cost of noncontributory wage credits for military service before 1957; (2) the cost in 1971-82 of deemed wage credits for military service performed after 1956; (3) the cost of payroll tax credits provided to employees in 1984 and self-employed persons in 1984-89 by Public Law 98-21; (4) the cost in 2009-17 of excluding certain self-employment earnings from SECA taxes under Public Law 110-246; and (5) payroll tax revenue forgone under the provisions of Public Laws 111-147, 111-312, 112-78, and 112-96.
Between -$50 million and $50 million.
Reflects interfund borrowing and subsequent repayment of loans. The DI Trust Fund loaned $5.1 billion to the OASI Trust Fund in 1982. The OASI Trust Fund repaid the loan in 1985 ($2.5 billion) and 1986 ($2.5 billion).
Includes reimbursements from the General Fund of the Treasury to the OASI and DI Trust Funds for: (1) the cost of noncontributory wage credits for military service before 1957; (2) the cost in 1971-82 of deemed wage credits for military service performed after 1956; (3) the cost of benefits to certain uninsured persons who attained age 72 before 1968; (4) the cost of payroll tax credits provided to employees in 1984 and self-employed persons in 1984-89 by Public Law 98-21; (5) the cost in 2009-17 of excluding certain self-employment earnings from SECA taxes under Public Law 110-246; and (6) payroll tax revenue forgone under the provisions of Public Laws 111-147, 111-312, 112-78, and 112-96.
Between -$50 million and $50 million.
Reflects interfund borrowing and subsequent repayment of loans. The OASI trust fund borrowed $12.4 billion from the HI Trust Fund in 1982 and repaid the loan in 1985 ($1.8 billion) and 1986 ($10.6 billion).
Tables VI.A4 and VI.A5 show the total asset reserves of the OASI Trust Fund and the DI Trust Fund, respectively, at the end of calendar years 2012 and 2013. The tables show reserves by interest rate and year of maturity. Bonds issued to the trust funds in 2013 had an interest rate of 1.75 percent, compared with an interest rate of 1.375 percent for bonds issued in 2012.
A special provision applies to benefits paid to nonresident aliens. Effective for taxable years beginning after 1994, Public Law 103-465 subjects benefits to a flat-rate tax, usually 25.5 percent, before they are paid. Therefore, this tax remains in the trust funds. From 1984 to 1994, the flat-rate tax was usually 15 percent.
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