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 2010
This section presents detailed information on the operations of the OASI and DI Trust Funds
1 during calendar year 2010. Chapter IV provides projections for calendar years 2011 through 2085.
Table III.A1 presents a statement of the income and disbursements of the Federal
Old-Age and Survivors Insurance Trust Fund in calendar year 2010, 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 2010 amounted to $677.1 billion, while disbursements totaled $584.9 billion, an increase in trust fund assets during 2010 of $92.2 billion.
Included in total receipts during calendar year 2010 were $546.3 billion in payroll tax contributions. These contributions were partially offset by payments totaling $1.5 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 payroll tax contributions thus amounted to $544.8 billion in 2010.
Reimbursements from the General Fund of the Treasury amounted to $2.0 billion in 2010. As shown in the table, the primary reimbursement for the year resulted from Public Law 111-147, the Hiring Incentives to Restore Employment (HIRE) Act. This law specified general fund reimbursement for temporary reductions in employer payroll taxes on behalf of certain qualified individuals.
The OASI Trust Fund was reimbursed approximately $12 million in 2010 under the provisions of Public Law 110-246, the Food, Conservation, and Energy Act of 2008.
Reimbursements from the General Fund of the Treasury to the OASI and DI Trust Funds have been made for the cost attributable to the granting of noncontributory wage credits for military service prior to 1957. Adjustments are made to the original reimbursements on a periodic basis. In 2010, a $113 million adjustment was made from the OASI Trust Fund to the general fund.
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. Although there was no reimbursement in 2010, a reimbursement of about $3,000 is scheduled for 2011, reflecting costs incurred in fiscal year 2009.
Income based on taxation of benefits amounted to $22.1 billion in 2010. 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.
The OASI Trust Fund was credited with net interest of $108.2 billion in 2010, 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 $97,000, consisted of gifts received under the provisions authorizing the deposit of money gifts or bequests in the trust funds.
Of the $584.9 billion in total OASI disbursements in 2010, $577.4 billion was for net benefit payments, including the reimbursable costs of vocational rehabilitation services.
2 The amount of net benefit payments in calendar year 2010 represents an increase of 3.6 percent over the corresponding amount in calendar year 2009. 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 smaller than normal because there was no automatic cost-of-living adjustment for December 2009.
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 an interchange of $3.9 billion to the Social Security Equivalent Benefit Account from the OASI Trust Fund was required in June 2010.
The remaining $3.5 billion of disbursements from the OASI Trust Fund represented net administrative expenses. The expenses of administering the OASI program are initially charged directly to the trust fund on an estimated basis. Periodically, as actual experience develops and is analyzed, adjustments to the allocations of administrative expenses for prior periods are made between the OASI Trust Fund, the DI 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 2010, 82 percent of OASI net administrative expenses represented the cost of administering the program. The Social Security Administration charges such costs to the trust fund ($2.9 billion in 2010). In addition, the Department of the Treasury charges directly to the trust fund expenses ($0.6 billion in 2010) for services provided in administering the OASI program. A relatively small offset ($413 thousand in 2010) to administrative expenses represents income from the sale of excess supplies and equipment.
Finally, net reimbursements are made from the General Fund of the Treasury 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 ($2 million in 2010) and with the provision of information to participants in certain pension plans ($2 million in 2010). These miscellaneous reimbursements totaled $4 million in 2010.
The assets of the OASI Trust Fund at the end of calendar year 2010 totaled $2,429.0 billion, consisting of $2,429.5 billion in U.S. Government obligations and, as an offset, an extension of credit in the amount of $0.5 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 2010 was 4.6 percent, as compared to 4.8 percent earned during calendar year 2009. 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 2009 and 2010.
By law, trust fund assets can be invested only 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 (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 (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 amounts and maturity dates of the OASI special-issue bonds purchased on June 30, 2010, with an interest rate of 2.875 percent, were selected so that the maturity dates of the total portfolio of special issues were spread evenly over the 15-year period 2011-25. The amounts of bonds purchased on June 30, 2010 are shown in table
III.A7.
A statement of the income and disbursements of the Federal Disability Insurance Trust Fund in calendar year 2010, and of the assets of the fund at the beginning and end of the calendar year, is presented in table
III.A2.
Of the $127.7 billion in total disbursements, $124.2 billion was net benefit payments. This amount represents an increase of 4.9 percent over the corresponding amount in calendar year 2009. 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. As with OASI benefits, the increase in DI benefit payments was smaller than normal in 2010 because there was no automatic cost-of-living increase in December 2009. The increase in the number of DI beneficiaries from 2009 to 2010 was more pronounced than the corresponding increase in the number of OASI beneficiaries, due to the increase in applications for disability benefits caused by the economic slowdown.
Total DI disbursements, which started to exceed non-interest income in 2005, continued to exceed such income in 2010. As in 2009, DI disbursements exceeded total DI income (including interest).
The assets of the DI Trust Fund at the end of calendar year 2010 totaled $179.9 billion, and consisted of $180.0 billion in U.S. Government obligations and, as an offset, an extension of credit amounting to $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 2010 was 4.9 percent, as compared to 5.0 percent earned during calendar year 2009. 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 2009 and 2010.
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 2010, the DI Trust Fund was estimated to exhaust its assets within 15 years. Therefore, the amounts and maturity dates of the DI special-issue bonds purchased on June 30, 2010, with an interest rate of 2.875 percent, were selected so that equal amounts of special issues would mature over the 10-year period 2011-20. The DI Trust Fund had already redeemed many of the bonds coming due June 30, 2011, so this even spread led to the purchase of a single bond maturing on June 30, 2011, as shown in table III.A7.
A statement of the operations 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 that cover OASI and DI separately.
Table III.A4 compares estimates of total income and total expenditures for calendar year 2010, from the 2006-10 Trustees Reports, to the corresponding actual amounts for 2010.
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 not enacted or finalized at the time the earlier estimates were completed can contribute to such differences. Estimates for 2010 were far too optimistic in the 2006 through 2008 reports because they did not anticipate the economic recession. Estimates in the 2009 report were more accurate, but still underestimated the effect of the recession for 2010.
At the end of calendar year 2010, about 54.0 million persons were receiving monthly benefits under the OASDI program. Of these persons, about 43.8 million and 10.2 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 2.4 percent and 5.0 percent, respectively, during the calendar year, which reflects increases in the insured population and effects of the economic downturn. The estimated distributions of benefit payments in calendar years 2009 and 2010, by type of beneficiary, are shown in table III.A5 for each trust fund separately.
Net administrative expenses drawn from the OASI and DI Trust Funds in calendar year 2010 totaled $6.5 billion. This amount represented 1.0 percent of non-interest 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.
Changes in the invested assets of the OASI Trust Fund and the DI Trust Fund between the end of 2009 and the end of 2010 result from the acquisition and disposition of securities during calendar year 2010. Table III.A7 presents these investment transactions for each trust fund separately and for the trust funds combined.
