2012 OASDI Trustees Report

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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 2011
This section presents detailed information on the operations of the OASI and DI Trust Fundsa during calendar year 2011. Chapter IV provides projections for calendar years 2012 through 2090.
1. OASI Trust Fund
Table III.A1 presents a statement of the income and disbursements of the Federal Old-Age and Survivors Insurance Trust Fund in calendar year 2011, 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 2011 amounted to $698.8 billion, while disbursements totaled $603.8 billion, an increase in trust fund assets during 2011 of $95.0 billion.
Total receipts during calendar year 2011 included $484.1 billion in gross payroll tax contributions. The OASI fund paid the general fund $1.8 billion for the estimated amount of employee payroll-tax refunds, partially offsetting these gross contributions. Employees who work for more than one employer during a year and pay contributions on total earnings in excess of the contribution and benefit base are eligible for such refunds. Net payroll tax contributions were therefore $482.4 billion in 2011.
Reimbursements from the General Fund of the Treasury amounted to $87.8 billion in 2011. As shown in the table, Public Law 111-312, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, accounts for almost all of the reimbursement for the year, or about $87.6 billion. This act specified general fund reimbursement for temporary reductions in employee payroll taxes.
The General Fund of the Treasury reimbursed the OASI Trust Fund approximately $142 million in 2011 under the provisions of Public Law 111-147, the Hiring Incentives to Restore Employment (HIRE) Act. The General Fund reimbursed the OASI Trust Fund about $7 million in 2011 under the provisions of Public Law 110-246, the Food, Conservation, and Energy Act of 2008.
The Social Security Administration makes special payments to uninsured persons who meet certain requirements. The General Fund of the Treasury largely reimburses costs associated with providing such payments. In 2011, the general fund reimbursed the OASI Trust Fund approximately $7 thousand. These reimbursements reflect costs incurred in fiscal years 2009 and 2010.
Income based on taxation of benefits amounted to $22.2 billion in 2011. 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.
In 2011, the OASI Trust Fund earned $106.5 billion in net interest, 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 $1 million, consisted of gifts received under the provisions authorizing the deposit of money gifts or bequests in the trust funds.
Of the $603.8 billion in total OASI disbursements in 2011, $596.2 billion was for net benefit payments, including the reimbursable costs of vocational rehabilitation services.2 Net benefit payments increased by 3.2 percent from calendar year 2010 to calendar year 2011. 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 lessened this year because there was no automatic cost-of-living adjustment for December 2010.
 
Interest adjustmentsb
Financial interchange with the Railroad Retirement “Social Security Equivalent Benefit Account”
Miscellaneous reimbursements from the general fund c

a
Between -$0.5 and $0.5 million.

b
Includes: (1) interest on adjustments in the allocation of administrative expenses between the trust fund and the general fund account for the Supplemental Security Income program; (2) interest arising from the revised allocation of administrative expenses among the trust funds; and (3) interest on certain reimbursements to the trust fund.

c
Reimbursements 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 Railroad Retirement Act requires an annual financial interchange between the Railroad Retirement program and the OASDI program. The purpose of the interchange 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. The Railroad Retirement Board and the Social Security Administration calculated an interchange of $4.1 billion from the OASI Trust Fund to the Social Security Equivalent Benefit Account for June 2011.
The remaining $3.5 billion of disbursements from the OASI Trust Fund represents net administrative expenses. The Social Security Administration and the Department of the Treasury initially charge administrative expenses directly to the trust fund on an estimated basis. Periodically, as actual experience develops, they adjust the allocations of administrative expenses for prior periods. These adjustments affect the OASI Trust Fund, the DI Trust Fund, and the general fund account for the Supplemental Security Income program, and include appropriate interest adjustments. As described earlier, the trust fund accounting records such interest adjustments under investment income.
In 2011, the cost of administering the OASI program was 80 percent of OASI net administrative expenses. The Social Security Administration charges such costs to the trust fund ($2.8 billion in 2011). In addition, the Department of the Treasury charges directly to the trust fund expenses ($0.7 billion in 2011) for services provided in administering the OASI program. A relatively small offset ($5 million in 2011) to administrative expenses represents income from the sale of excess supplies and equipment.
Finally, the General Fund of the Treasury makes net reimbursements 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 ($4 million in 2011) and with the provision of information to participants in certain pension plans ($3 million in 2011). These miscellaneous reimbursements totaled $7 million in 2011.
The assets of the OASI Trust Fund at the end of calendar year 2011 totaled $2,524.1 billion, consisting of $2,524.9 billion in U.S. Government obligations and, as an offset, an extension of credit of $0.8 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 2011 was 4.4 percent, slightly lower than the 4.6 percent earned during calendar year 2010. Table VI.A4, 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 calendar years 2010 and 2011.
By law, the Department of the Treasury must invest trust fund assets 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, that is, securities sold only to the trust funds. These special issues are of two types: short-term certificates of indebtedness and longer-term bonds. On a daily basis, the Federal Government issues certificates of indebtedness which mature on the next June 30 following the date of issue. Receipts not required to meet current expenditures are invested in these certificates of indebtedness. The trust fund normally acquires long-term special-issue bonds when special issues of either type mature on June 30. The amount of long-term 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 Department of the Treasury, in consultation with the Chief Actuary of the Social Security Administration, selected the amounts and maturity dates of the special-issue bonds purchased on June 30, 2011, so that the maturity dates of the total portfolio of special issues were spread evenly over the 15‑year period 2012‑26. The bonds purchased had an interest rate of 2.5 percent. Table III.A7 shows additional details on the investment transactions during 2011, including the amounts of bonds purchased on June 30, 2011.
2. DI Trust Fund
Table III.A2 presents a statement of the income and disbursements of the Federal Disability Insurance Trust Fund in calendar year 2011, and of the assets of the fund at the beginning and end of the calendar year.
Line entries in the DI statement are similar to those in the OASI statement. The explanations of the OASI entries generally apply to DI as well.
Of the $106.3 billion in total receipts, $81.9 billion was net payroll tax contributions.
 

a
Between -$0.5 and $0.5 million.

b
Includes: (1) interest on adjustments in the allocation of administrative expenses between the trust fund and the general fund account for the Supplemental Security Income program; (2) interest arising from the revised allocation of administrative expenses among the trust funds; and (3) interest on certain reimbursements to the trust fund.

c
Includes reimbursements for costs incurred in performing certain legislatively mandated activities not directly related to administering the DI program.

Note: Totals do not necessarily equal the sums of rounded components.
Of the $132.3 billion in total disbursements, $128.9 billion was net benefit payments. Net benefit payments increased by 3.8 percent from calendar year 2010 to calendar year 2011. This increase in DI benefit payments was due to the same factors described earlier for OASI benefit payments. As with OASI benefits, the increase in DI benefit payments was lessened in 2011 because there was no automatic cost-of-living increase in December 2010. The increase in the number of DI beneficiaries from 2010 to 2011 was more pronounced than the corresponding increase in the number of OASI beneficiaries, due to the increase in applications for disability benefits associated with the weak economy.
Total DI disbursements, which started to exceed non-interest income in 2005, continued to exceed such income in 2011. As in 2010, DI disbursements exceeded total DI income (including interest).
The assets of the DI Trust Fund at the end of calendar year 2011 totaled $153.9 billion, and consisted of $154.0 billion in U.S. Government obligations and, as an offset, an extension of credit of $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 2011 was 4.8 percent, slightly lower than the 4.9 percent earned during calendar year 2010. Table VI.A5, 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 calendar years 2010 and 2011.
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 2011, the Trustees projected that the assets of the DI Trust Fund would be exhausted within 15 years. Therefore, the Department of the Treasury, in consultation with the Chief Actuary of the Social Security Administration, selected the amounts and maturity dates of the DI special-issue bonds purchased on June 30, 2011, so that equal amounts of special issues would mature over the 10-year period 2012-21. The bonds purchased had an interest rate of 2.5 percent. The DI Trust Fund had already redeemed many of the bonds coming due June 30, 2012, so this investment approach required that all bond purchases on June 30, 2011 have a maturity date of June 30, 2012. Table III.A7 shows additional details on the investment transactions during 2011.
3. OASI and DI Trust Funds, Combined
Table III.A3 presents a statement of the operations of the OASI and DI Trust Funds on a combined basis. The entries in this table represent the sums of the corresponding values from tables III.A1 and III.A2. The two preceding subsections that cover OASI and DI provide a description of the nature of these income and expenditure transactions.
 
Table III.A3.—Operations of the Combined OASI and DI Trust Funds,
Calendar Year 2011 

a
Between -$0.5 and $0.5 million.

b
Includes: (1) interest on adjustments in the allocation of administrative expenses between the trust funds and the general fund account for the Supplemental Security Income program; (2) interest arising from the revised allocation of administrative expenses among the trust funds; and (3) interest on certain reimbursements to the trust funds.

c
Includes reimbursements 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.
Table III.A4 compares estimates of total income and total expenditures for calendar year 2011 from the 2007-11 Trustees Reports, to the corresponding actual amounts for 2011.
Table III.A4.—Comparison of Actual Calendar Year 2011 Trust Fund Operations
With Estimates Made in Prior Reports, Based on Intermediate Assumptions a 
 
Difference
from actual
(percent)
Difference
from actual
(percent)

a
Percentage differences are calculated prior to rounding.

b
“Actual” income for 2011 reflects adjustments to payroll tax contributions for prior calendar years (see appendix A for description of these adjustments). “Estimated” income also includes such adjustments, but on an estimated basis.

Note: Totals do not necessarily equal the sums of rounded components.
A number of factors contribute to differences between estimates and subsequent actual amounts, including: (1) actual values for key demographic, economic, and other variables that differ from assumed levels; and (2) legislation or other administrative initiatives that lawmakers enacted or finalized after the Trustees completed their estimates. Estimates for 2011 were far too optimistic in the 2007 and 2008 reports because they did not anticipate the economic recession. Estimates in the 2009 and 2010 reports included an economic recession in the projections but assumed the recession would not be as deep as it actually was and the recovery would not be as gradual as it has been so far.
At the end of calendar year 2011, the OASDI program was providing monthly benefits to about 55.4 million people. The OASI Trust Fund was providing benefits to about 44.8 million people and the DI Trust Fund was providing benefits to about 10.6 million people. The number of people receiving benefits from the OASI and DI Trust Funds grew by 2.2 percent and 4.2 percent, respectively, during the calendar year. This growth reflects increases in the insured population and effects of the economic downturn. Table III.A5 shows the estimated distributions of benefit payments in calendar years 2010 and 2011, by type of beneficiary, for each trust fund separately.
 
Table III.A5.—Distribution of Benefit Payments by Type of Beneficiary or Payment, Calendar Years 2010 and 2011 
Percentage
of total
Percentage
of total
a
Widowed mothers and fathers
caring for child beneficiaries
a
b
a

a
Less than 0.05 percent.

b
Less than $0.5 million.

Note: Benefits are monthly benefits and lump-sum death payments. Totals do not necessarily equal the sums of rounded components.
Net administrative expenses of the OASI and DI Trust Funds in calendar year 2011 totaled $6.4 billion. This amount is equal to 0.9 percent of non-interest income and 0.9 percent of total expenditures. Table III.A6 shows corresponding percentages for each trust fund separately and for the OASDI program as a whole for each of the last 5 years.
 
Table III.A6.—Administrative Expenses as a Percentage of Non-interest Income and of Total Expenditures, Calendar Years 2007-11
OASI and DI
Trust Funds,
combined
Total
expenditures
Total
expenditures
Total
expenditures
The acquisition and disposition of securities during calendar year 2011 changed the invested assets of the OASI Trust Fund and the DI Trust Fund. Table III.A7 presents these investment transactions for each trust fund separately and for the trust funds combined.
 
OASI and DI
Trust Funds,
Bondsa

a
Purchased on June 30, 2011. The interest rate on these purchases was 2.5 percent.

Note: All investments are shown at par value. Totals do not necessarily equal the sums of rounded components.

1
See www.socialsecurity.gov/oact/progdata/fundsQuery.html.

2
Vocational rehabilitation services are furnished to disabled widow(er) beneficiaries and to those children of retired or deceased workers who receive benefits based on disabilities that began before age 22. The Trust Funds reimburse the providers of such services only in those cases where the services contributed to the successful rehabilitation of the beneficiary.
 


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