2004 OASDI Trustees Report

Contents Previous Next List of Tables List of Figures Index

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 2003

Detailed information on the operations of the OASI and DI Trust Funds1 during calendar year 2003 is presented in this section. Chapter IV provides projections for calendar years 2004-78.

1. OASI Trust Fund

A statement of the income and disbursements of the Federal Old-Age and Survivors Insurance Trust Fund in calendar year 2003, and of the assets of the fund at the beginning and end of the calendar year, is presented in table III.A1. Included in total receipts during calendar year 2003 were $457.5 billion in employment tax contributions. These contributions were partially offset by transfers totaling $1.5 billion to the General Fund of the Treasury 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.

Tax revenues that should have been received by the trust fund in 2000 and 2001, based on estimated deemed wage credits for military service prior to 2002 have not been paid in full and no partial payment was made in 2003. Public Law 108-203, enacted after the preparation of the estimates for this report were completed, provided that the trust funds be compensated for these taxes plus an adjustment for interest lost due to the delay in remitting the taxes. The total amount of the compensation to the OASI Trust Fund includes adjustments for actual data for years 1983-2001, and was specified in the legislation to be $625 million.2 This amount must be deposited in the trust fund no later than July 1, 2004. Although estimates presented later in this report do not include receipt of this amount, inclusion of this amount would not materially change the conclusions presented in this report.

Net contributions thus amounted to $456.1 billion, an increase of 0.2 percent over the amount in the preceding year. The increase in OASI tax contributions from calendar year 2002 to calendar year 2003 is due to increased earnings and the increases 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 $12.5 billion in 2003, a decrease of about 3 percent from 2002. Nearly 99 percent of this income represented amounts credited to the trust funds, based on estimated Federal personal income taxation of benefits, generally in advance of the actual receipt of taxes by the Treasury. The remaining 1 percent of the total income from taxation of benefits represented amounts withheld from the benefits paid to nonresident aliens.

Table III.A1.--Operations of the OASI Trust Fund, Calendar Year 2003 

[In millions]


Total assets, December 31, 2002
 
$1,217,497
Receipts:
 
Contributions:
 
 
Employment taxes
$457,530
 
 
 
Payments from the General Fund of the Treasury for contributions subject to refund
-1,453
 
 
 
 
Net contributions
 
456,077
 

Income based on taxation of benefit payments:
 
 
Withheld from benefit payments to nonresident aliens
146
 
 
 
All other, not subject to withholding
12,351
 
 
 
 
Total income from taxation of benefits
 
12,497
 

Investment income and interest adjustments:
 
 
 
 
Interest on investments
75,228
 
 
 
Interest adjustments 1
9
 
 
 
 
Total investment income and interest adjustments
 
75,237
 
Gifts
 
2/
Total receipts
 
543,811

Disbursements:
 
 
 
Benefit payments:
 
 
 
 
Gross benefit payments
400,870
 
 
 
Offset for collected overpayments
-978
 
 
 
Reimbursement from the general fund for unnegotiated checks
-50
 
 
 
 
Net benefit payments
 
399,842
 

Transfer to the Railroad Retirement "Social Security Equivalent Benefit Account"
 
3,580
 
Payment for costs of vocational rehabilitation services for disabled beneficiaries
 
3
 
Administrative expenses:
 
 
 
 
Costs incurred by:
 
 
 
 
 
Social Security Administration
2,252
 
 
 
 
Department of the Treasury
306
 
 
 
Offsetting receipts from sales of supplies, materials, etc.
-1
 
 
 
Miscellaneous reimbursements from the general fund 3
-5
 
 
 
 
Net administrative expenses
 
2,553
Total disbursements
 
405,978
Net increase in assets
 
137,833
Total assets, December 31, 2003
 
1,355,330

1Includes (1) 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, (2) interest arising from the revised allocation of administrative expenses among the trust funds and (3) interest on reimbursements to the trust fund for costs associated with union activities and pension reform.

2Less than $500,000.

3Reimbursements 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 OASI Trust Fund was credited with interest netting $75.2 billion an increase of about 6 percent over 2002. Credited interest 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 reimbursements to the trust fund for costs associated with union activities and pension reform. The remaining $9,800 of receipts consisted of gifts received under the provisions authorizing the deposit of money gifts or bequests in the trust funds.

Of the $406.0 billion in total disbursements, $399.8 billion was for net benefit payments. The amount of net benefit payments in calendar year 2003 represents an increase of 3.0 percent over the corresponding amount in calendar year 2002. This increase was due to (1) an increase in the total number of beneficiaries and (2) an increase in the average benefit amount primarily because of the automatic cost-of-living benefit increase of 1.4 percent which became effective for December 2002 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 $3.6 billion to the Social Security Equivalent Benefit Account from the OASI Trust Fund was required in June 2003.

A disbursement of $3 million was made in 2003 to cover the costs of vocational rehabilitation services furnished to disabled widow(er) beneficiaries and to those children of retired or deceased workers who were receiving benefits on the basis of disabilities that began before age 22. Reimbursement from the trust funds for the costs of vocational rehabilitation services is made only in those cases where the services contributed to the successful rehabilitation of the beneficiaries.

The remaining $2.6 billion of disbursements from the OASI Trust Fund represented net administrative expenses. The expenses incurred by various Federal agencies for administering the OASDI and Medicare programs are allocated and charged directly to each of the 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 effected by 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.

The vast majority of OASI disbursements recorded as administrative expenses represent the cost of administering the program and are charged to the trust fund by the Social Security Administration ($2.3 billion in 2003). In addition, the Department of the Treasury charges directly to the trust fund certain expenses that it incurs in helping to administer the OASI program ($306 million in 2003). Finally, there are some relatively small adjustments which reduced total administrative expenses by $6 million in 2003. The first of these adjustments is an offset ($1 million in 2003) representing income from the sale of excess supplies and equipment. The second adjustment represents net reimbursements 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. Such reimbursements totaled $5 million in 2003.

The assets of the OASI Trust Fund at the end of calendar year 2003 totaled $1,355.3 billion (11 percent more than at the end of 2002), consisting of $1,355.1 billion in U.S. Government obligations and cash totaling $0.2 billion. The effective annual rate of interest earned by the assets of the OASI Trust Fund during calendar year 2003 was 6.0 percent, as compared to 6.4 percent earned during calendar year 2002. A detailed listing of OASI Trust Fund holdings by type of security, interest rate, and year of maturity at the end of each calendar year 2002 and 2003 can be found in appendix A.

All securities held by the trust funds 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, 2003, with an interest rate of 3.5 percent, were selected so that the maturity dates of the total portfolio of special issues were spread evenly over the 15-year period 2004-18. The amount of bonds purchased on June 30, 2003 is shown in table III.A7.

2. DI Trust Fund

A statement of the income and disbursements of the Federal Disability Insurance Trust Fund in calendar year 2003, and of the assets of the fund at the beginning and end of the calendar year, is presented in table III.A2.

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

Net contributions amounted to $77.4 billion, an increase of 0.2 percent from the amount in the preceding calendar year. This increase is attributable to the same factors, insofar as they apply to the DI program, that accounted for the change in contributions to the OASI Trust Fund.

Of the $73.1 billion in total disbursements, $70.9 billion was for net benefit payments. This represents an increase of 8.0 percent over the corresponding amount of benefit payments in calendar year 2002. This increase in DI benefit payments is due to the same factors that resulted in the net increase in benefit payments from the OASI Trust Fund. However, the number of persons receiving benefits from the DI Trust Fund increased more rapidly in 2003 than the number receiving benefits from the OASI Trust Fund largely due to the current ages of the baby-boom generation.

Table III.A2.--Operations of the DI Trust Fund, Calendar Year 2003 

[In millions]


Total assets, December 31, 2002
 
$160,468
Receipts:
 
 
 
Contributions:
 
 
 
 
Employment taxes
$77,688
 
 
 
Payments from the General Fund of the Treasury for contributions subject to refund
-246
 
 
 
 
Net contributions
 
77,442
 

Income based on taxation of benefit payments:
 
 
 
 
Withheld from benefit payments to nonresident aliens
5
 
 
 
All other, not subject to withholding
939
 
 
 
 
Total income from taxation of benefits
 
944
 

Investment income and interest adjustments:
 
 
 
 
Interest on investments
9,694
 
 
 
Interest adjustments 1
-5
 
 
 
 
Net investment income and interest adjustments
 
9,689
Total receipts
 
88,074

Disbursements:
 
 
 
Benefit payments:
 
 
 
 
Gross benefit payments
71,379
 
 
 
Offset for collected overpayments
-473
 
 
 
Reimbursement from the general fund for unnegotiated checks
-20
 
 
 
 
Net benefit payments
 
70,886
 

Transfer to the Railroad Retirement "Social Security Equivalent Benefit Account"
 
167
 
Payment for costs of vocational rehabilitation services for disabled beneficiaries
 
47
 

Administrative expenses:
 
 
 
 
Costs incurred by:
 
 
 
 
 
Social Security Administration
1,951
 
 
 
 
Department of the Treasury
57
 
 
 
Miscellaneous reimbursements from the general fund 2
3/
 
 
 
 
Net administrative expenses
 
2,008
Total disbursements
 
73,108
Net increase in assets
 
14,966
Total assets, December 31, 2003
 
175,434

1Includes (1) 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, (2) interest arising from the revised allocation of administrative expenses among the trust funds, and (3) interest on reimbursements to the trust fund for costs associated with union activities and pension reform.

2Reimbursements for costs incurred in performing certain legislatively mandated activities not directly related to administering the DI program.

3Less than -$500,000.

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

The assets of the DI Trust Fund at the end of calendar year 2003 totaled $175.4 billion, consisting of $175.3 billion in U.S. Government obligations and cash totaling $182 million. The effective annual rate of interest earned by the assets of the DI Trust Fund during calendar year 2003 was 5.9 percent, compared to 6.3 percent earned during calendar year 2002. A detailed listing of DI Trust Fund holdings by type of security, interest rate, and year of maturity at the end of each calendar year 2002 and 2003 can be found in appendix A.

3. OASI and DI Trust Funds, Combined

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. For a discussion of the nature of these income and expenditure transactions, reference should be made to the two preceding subsections covering OASI and DI separately.

Table III.A3.--Operations of the Combined OASI and DI Trust Funds,
Calendar Year 2003 

[In millions]


Total assets, December 31, 2002
 
$1,377,965
Receipts:
 
 
 
Contributions:
 
 
 
 
Employment taxes
$535,218
 
 
 
Payments from the General Fund of the Treasury for contributions subject to refund
-1,699
 
 
 
 
Net contributions
 
533,519
 

Income based on taxation of benefit payments:
 
 
 
 
Withheld from benefit payments to nonresident aliens
151
 
 
 
All other, not subject to withholding
13,290
 
 
 
 
Total income from taxation of benefits
 
13,441
 

Investment income and interest adjustments:
 
 
 
 
Interest on investments
84,921
 
 
 
Interest adjustments 1
4
 
 
 
 
Total investment income and interest adjustments
 
84,926
 
Gifts
 
2/
Total receipts
 
631,886

Disbursements:
 
 
 
Benefit payments:
 
 
 
 
Gross benefit payments
472,248
 
 
 
Offset for collected overpayments
-1,451
 
 
 
Reimbursement from the general fund for unnegotiated checks
-69
 
 
 
 
Net benefit payments
 
470,728
 

Transfer to the Railroad Retirement "Social Security Equivalent Benefit Account"
 
3,747
 
Payment for costs of vocational rehabilitation services for disabled beneficiaries
 
49
 

Administrative expenses:
 
 
 
 
Costs incurred by:
 
 
 
 
 
Social Security Administration
4,204
 
 
 
 
Department of the Treasury
364
 
 
 
Offsetting receipts from sales of supplies, materials, etc.
-1
 
 
 
Miscellaneous reimbursements from the general fund 3
-5
 
 
 
 
Net administrative expenses
 
4,562
Total disbursements
 
479,086

Net increase in assets
 
152,799
Total assets, December 31, 2003
 
1,530,764

1Includes (1) interest on transfers between the trust funds and the general fund account for the Supplemental Security Income program due to adjustments in the allocation of administrative expenses, (2) interest arising from the revised allocation of administrative expenses among the trust funds, and (3) interest on reimbursements to the trust fund for costs associated with union activities and pension reform.

2Less than $500,000.

3Reimbursements 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.

To provide a context for estimates of future trust fund income and expenditures provided later in this report, table III.A4 compares past estimates of contributions and benefit payments for calendar year 2003, as shown in the 1999-2003 Annual Reports, with the corresponding actual amounts in 2003.3

Table III.A4.--Comparison of Actual Calendar Year 2003 Trust Fund Operations
With Estimates Made in Prior Reports 1 

[Amounts in billions]

  
Net contributions  2
 
Benefit payments  3
Amount
Difference
from actual
(percent)
Amount
Difference
from actual
(percent)
OASI Trust Fund:
 
Estimate in 1999 report
$453.4
-0.6
 
$393.9
-1.5
 
Estimate in 2000 report
483.5
6.0
 
402.9
.8
 
Estimate in 2001 report
490.1
7.5
 
407.1
1.8
 
Estimate in 2002 report
479.5
5.1
 
398.9
-.2
 
Estimate in 2003 report
463.0
1.5
 
398.5
-.3
 
Actual amount
456.1
--
 
399.8
--
DI Trust Fund:
 
Estimate in 1999 report
77.0
-.6
 
69.4
-2.2
 
Estimate in 2000 report
82.1
6.0
 
70.0
-1.3
 
Estimate in 2001 report
83.2
7.5
 
68.6
-3.2
 
Estimate in 2002 report
81.4
5.1
 
69.7
-1.8
 
Estimate in 2003 report
78.6
1.5
 
71.2
.3
 
Actual amount
77.4
--
 
70.9
--
OASI and DI Trust Funds, combined:
 
Estimate in 1999 report
530.4
-.6
 
463.3
-1.6
 
Estimate in 2000 report
565.6
6.0
 
472.9
.5
 
Estimate in 2001 report
573.3
7.5
 
475.7
1.0
 
Estimate in 2002 report
560.9
5.1
 
468.6
-.5
 
Estimate in 2003 report
541.6
1.5
 
469.7
-.2
 
Actual amount
533.5
--
 
470.8
--

1 The estimates shown are based on the intermediate assumptions.

2"Actual" contributions for 2003 reflect adjustments for prior calendar years (see appendix A for description of these adjustments). "Estimated" contributions also include such adjustments, but on an estimated basis.

3Includes payments, if any, for vocational rehabilitation services furnished to disabled persons receiving benefits because of their disabilities.

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 previously assumed levels. Another factor contributing to such differences is new legislation. For example, legislation eliminating the retirement earnings test for workers over the normal retirement age was enacted shortly after publication of the 2000 report. Consequently, actual OASI benefit payments in 2003 were larger than estimated for the 1999 report, and larger than estimated for the 2000 report after taking into account the effect of economic variables that turned out to be different than expected in the 2000 report.

At the end of calendar year 2003, about 47.0 million persons were receiving monthly benefits under the OASDI program. Of these persons, about 39.4 million and 7.6 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 0.6 percent and 5.2 percent, respectively, during the calendar year. The estimated distributions of benefit payments in calendar years 2002 and 2003, by type of beneficiary, are shown in table III.A5 for each trust fund separately.

Table III.A5.--Distribution of Benefit Payments by Type of Beneficiary or Payment, Calendar Years 2002 and 2003 

[Amounts in millions]

 
Calendar year 2002
 
Calendar year 2003
Amount
Percentage
of total
Amount
Percentage
of total
Total OASDI benefit payments
$453,746
100.0
 
$470,728
100.0
 
OASI benefit payments
388,119
85.5
 
399,842
84.9
 
DI benefit payments
65,627
14.5
 
70,886
15.1
OASI benefit payments, total
388,119
100.0
 
399,842
100.0
 
Monthly benefits:
 
 
 
 
 
 
 
Retired workers and auxiliaries
303,943
78.3
 
314,012
78.5
 
 
 
Retired workers
281,587
72.6
 
291,481
72.9
 
 
 
Spouses
19,882
5.1
 
19,948
5.0
 
 
 
Children
2,474
.6
 
2,582
.6
 
 
Survivors of deceased workers
83,963
21.6
 
85,624
21.4
 
 
 
Aged widows and widowers
67,313
17.3
 
68,532
17.1
 
 
 
Disabled widows and widowers
1,461
.4
 
1,512
.4
 
 
 
Parents
25
1/
 
24
 1/ 
 
 
 
Children
13,688
3.5
 
14,070
3.5
 
 
 
Widowed mothers and fathers
caring for child beneficiaries
1,476
.4
 
1,486
.4
 
 
Uninsured persons generally aged 72 before 1968
2/
 1/ 
 
 2/ 
 1/ 
 
213
.1
 
206
.1
DI benefit payments, total
65,627
100.0
 
70,886
100.0
 
 
Disabled workers
59,869
91.2
 
64,793
91.4
 
 
Spouses
423
.6
 
431
.6
 
 
Children
5,335
8.1
 
5,662
8.0

1Less than 0.05 percent.

2Less than $500,000.

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

Net administrative expenses charged to the OASI and DI Trust Funds in calendar year 2003 totaled $4.6 billion. This amount represented 0.9 percent of contribution income and 1.0 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.

Table III.A6.--Administrative Expenses as a Percentage of Contribution Income and of Total Expenditures, Calendar Years 1999-2003
Calendar year
OASI Trust Fund
 
DI Trust Fund
 
OASI and DI
Trust Funds,
combined
Contribution
income
Total
expenditures
Contribution
income
Total
expenditures
Contribution
income
Total
expenditures
1999
0.5
0.5
 
2.4
2.9
 
0.7
0.8
2000
.5
.6
 
2.3
2.9
 
.8
.9
2001
.4
.5
 
2.3
2.8
 
.7
.8
2002
.5
.5
 
2.7
3.0
 
.8
.9
2003
.6
.6
 
2.6
2.7
 
.9
1.0

Changes in the invested assets of the OASI and DI funds between the end of 2002 and the end of 2003 are a result of the acquisition and disposition of securities during calendar year 2003. Table III.A7 presents these investment transactions for each trust fund separately and combined. Tables VI.A5 and VI.A6, presented in appendix A, show the assets of the OASI and DI Trust Funds at the end of calendar years 2002 and 2003.

Table III.A7.--Trust Fund Investment Transactions, Calendar Year 2003

[In millions]

 
OASI
Trust Fund
DI
Trust Fund
OASI and DI
Trust Funds,
combined
Invested assets, December 31, 2002
$1,217,702
$160,380
$1,378,081
Acquisitions:
 
Special issues:
 
 
 
 
 
Certificates of indebtedness
509,905
83,980
593,885
 
 
Bonds 1
220,094
26,990
247,084
 
Public issues:2
 
 
 
 
 
Treasury bonds
--
0
0
 
 
Total acquisitions
729,998
110,970
840,968
Dispositions:
 
Special issues:
 
 
 
 
 
Certificates of indebtedness
510,217
84,225
594,442
 
 
Bonds
82,372
11,873
94,244
 
Public issues:2
 
 
 
 
 
Treasury bonds
--
0
0
 
 
Total dispositions
592,589
96,098
688,686
Net increase in invested assets
137,410
14,873
152,282
Invested assets, December 31, 2003
1,355,111
175,252
1,530,364

1Amounts shown were purchased on June 30, 2003. The interest rate on such purchases was 3.5 percent.

2Dash indicates no holdings at any time during the year; zero indicates holdings throughout the year but no transactions.

Note: All investments are shown at par value.


1Trust fund data are available by month, quarter, or year on the Internet at www.socialsecurity.gov/OACT/ProgData/fundsQuery.html.

2This legislation also requires the deposit of $105 million to the DI Trust Fund and $173 million to the Hospital Insurance Trust Fund.

3Estimated amounts used to calculate percentage errors are before rounding to amounts shown in the annual reports.


Contents Previous Next List of Tables List of Figures Index  
 Link to FirstGov.gov: U.S. Government portal Privacy Policy | Website Policies & Other Important Information  | Site Map  | Actuarial Publications 3/23/2004