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The 1997 OASDI Trustees Report

Updated September 9, 1997     Historical document  



The Old-Age, Survivors, and Disability Insurance (OASDI) program in the United States provides protection against the loss of earnings due to retirement, death, or disability. The OASDI program consists of two separate parts which pay monthly benefits to workers and their families -- Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI). Under OASI, monthly benefits are paid to retired workers and their families and to survivors of deceased workers. Under DI, monthly benefits are paid to disabled workers and their families.

The Board of Trustees is established under the Social Security Act to oversee the financial operations of the Federal Old-Age and Survivors Insurance Trust Fund and the Federal Disability Insurance Trust Fund. The Board is composed of six members, four of whom serve automatically by virtue of their positions in the Federal Government: the Secretary of the Treasury, who is the Managing Trustee, the Secretary of Labor, the Secretary of Health and Human Services, and the Commissioner of Social Security. The other two members are appointed by the President and confirmed by the Senate to serve as public representatives: Stephen G. Kellison and Marilyn Moon are currently serving 4-year terms that began on July 20, 1995.

The Social Security Act requires that the Board, among other duties, report annually to the Congress on the financial and actuarial status of the OASI and DI Trust Funds. This annual report, for 1997, is the 57th such report.


The provisions of the Social Security Act prior to enactment of the Social Security Independence and Program Improvements Act of 1994 (Public Law 103-296, enacted on August 15, 1994) required the appointment of an Advisory Council every 4 years to examine issues affecting the OASDI program as well as the Medicare program. The Secretary of Health and Human Services on June 9, 1994, announced the appointment of an Advisory Council on Social Security under the provisions of section 706 of the Social Security Act which were in effect prior to the enactment of Public Law 103-296. Under the provisions of Public Law 103-296, this is the last Advisory Council to be appointed.

The Council was composed of a Chair and 12 members representing employers and employees, self-employed persons, and the public. The Council's charge was focused on the OASDI program. Among the areas the Secretary specifically asked the Council to examine was Social Security financing. The Advisory Council submitted its report to the Secretary of Health and Human Services and the Commissioner of Social Security on January 6, 1997.

The Council's report presents three alternative sets of recommendations for restoring the long-range actuarial balance of the OASDI program. The first approach would maintain the Social Security benefit and tax structure essentially as it is in the current program, with the possibility that a portion of trust-fund assets be invested in private equities and managed by the Federal Government. Another approach would privatize a significant portion of the current program by directing 5 percentage points of each worker's contributions (from the current 12.4-percent contribution rate for employees and employers, combined) to a "Personal Security Account". Transition costs under this plan would require additional financing equivalent to 1.52 percent of taxable earnings over the first 72 years. A third approach would scale back benefits to levels that could be financed by the current 12.4-percent contribution rate and establish a defined contribution benefit plan, an Individual Account for each worker, through an additional 1.6-percent mandatory contribution payable by the worker to an investment account managed by the Federal Government.

The Council also convened a Technical Panel on Assumptions and Methods to review the assumptions and methodology used to project the future financial status of the OASDI program. In addition, a Technical Panel on Trends and Issues in Retirement Savings was convened by the Council to help analyze the relative roles of the public and private sectors in providing retirement income.

The Technical Panel on Assumptions and Methods found the intermediate estimates in the 1995 annual report of the Board of Trustees to be reasonable. Although the Panel did suggest that modifications be considered in various specific assumptions, the Panel also recognized that the overall effect of those suggestions would not significantly change the estimates of the financial status of the Social Security program. The Technical Panel on Trends and Issues in Retirement Savings recognized the present deficit in the long-range actuarial status of the Social Security program and developed criteria for evaluating a range of policy options to reduce the deficit. Reports of the findings of both Technical Panels were submitted to the Advisory Council in 1995 and are included in Volume II of the Council's report.


Important developments since the 1996 Annual Report was issued are shown below:

The major findings of this report are summarized below:

Short-Range Results

Long-Range Results

Estimated Operations of the Trust Funds