Research Notes & Special Studies by the Historian's Office

Research Note #4:
Inter-Fund Borrowing Among the Trust Funds

In the early 1980s the Social Security Trust Funds had developed short-term cash flow problems, as a result of the adverse performance of the economy during the "stagflation" of the 1970s. As a stop-gap measure, Congress passed legislation in 1981 to permit inter-fund borrowing among the three Trust Funds (the Old-Age and Survivors Trust Fund; the Disability Trust Fund; and the Medicare Trust Fund). This authority was to lapse at the end of 1982. However, the 1983 Amendments extended the inter-fund borrowing authority to the end of 1987. Under the law as amended, all loans would have to be repaid by the end of 1989.

The inter-fund loans were required to be repaid with an amount of interest equal to that which the loaning fund would have earned had it had use of the money during this time. In other words, the borrowing fund was required to make the loaning fund whole at the end of the process.

This authority was used twice, once in November 1982 and once in December 1982. The total amount borrowed was $17.5 billion. The Old-Age and Survivors Trust Fund borrowed the money-$5.1 billion from the Disability Trust Fund and $12.4 billion from the Medicare Trust Fund. Repayment began in 1985 and the debt to the Medicare Trust Fund was paid off by January 1986 and the debt to the Disability Trust Fund was liquidated in April 1986.

Larry DeWitt
SSA Historian's Office