2017 OASDI Trustees Report

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Actuarial balance
The difference between the summarized income rate and the summarized cost rate as a percentage of taxable payroll over a given valuation period.
Actuarial deficit
A negative actuarial balance.
Administrative expenses
Expenses incurred by the Social Security Administration and the Department of the Treasury in administering the OASDI program and the provisions of the Internal Revenue Code relating to the collection of contributions. Such administrative expenses are paid from the OASI and DI Trust Funds.
Advance tax transfers
Amounts representing the estimated total OASDI tax contributions for a given month. From May 1983 through November 1990, such amounts were credited to the OASI and DI Trust Funds at the beginning of each month. The trust funds reimbursed the General Fund of the Treasury for the associated loss of interest. Advance tax transfers are no longer made unless needed in order to pay benefits.
Alternatives I, II, or III
See “Assumptions.”
Annual balance
The difference between the income rate and the cost rate for a given year.
Asset reserves
Treasury notes and bonds, other securities guaranteed by the Federal Government, certain Federally sponsored agency obligations, and cash, held by the trust funds for investment purposes.
Values related to future trends in key factors that affect the trust funds. Demographic assumptions include fertility, mortality, net immigration, marriage, and divorce. Economic assumptions include unemployment rates, average earnings, inflation, interest rates, and productivity. Program-specific assumptions include retirement patterns, and disability incidence and termination rates. This report presents three sets of demographic, economic, and program-specific assumptions:
See tables V.A2, V.B1, and V.B2.
Automatic cost-of-living benefit increase
The annual increase in benefits, effective for December, reflecting the increase, if any, in the cost of living. A benefit increase is applicable only after a beneficiary becomes eligible for benefits. In general, the benefit increase equals the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI‑W) measured from the third quarter of the previous year to the third quarter of the current year. If there is no increase in the CPI-W, there is no cost-of-living benefit increase. See table V.C1.
Auxiliary benefits
Monthly benefits payable to a spouse or child of a retired or disabled worker, or to a survivor of a deceased worker.
Average indexed monthly earnings — AIME
The measure of lifetime earnings used in determining the primary insurance amount (PIA) for most workers who attain age 62, become disabled, or die after 1978. A worker’s actual past earnings are adjusted by changes in the average wage index, in order to bring them up to their approximately equivalent value at the time of retirement or other eligibility for benefits.
Average wage index — AWI
A series that generally increases with the average amount of total wages for each year after 1950, including wages in noncovered employment and wages in covered employment in excess of the OASDI contribution and benefit base. (See Title 20, Chapter III, section 404.211(c) of the Code of Federal Regulations for a more precise definition.) These average wage amounts are used to index the taxable earnings of most workers first becoming eligible for benefits in 1979 or later, and for automatic adjustments in the contribution and benefit base, bend points, earnings test exempt amounts, and other wage-indexed amounts. See table V.C1.
An administrative determination that an individual is entitled to receive a specified type of OASDI benefit. Awards can represent not only new entrants to the benefit rolls but also persons already on the rolls who become entitled to a different type of benefit. Awards usually result in the immediate payment of benefits, although payments may be deferred or withheld depending on the individual’s particular circumstances.
Baby boom
The period from the end of World War II (1946) through 1965 marked by unusually high birth rates.
Bend points
The dollar amounts defining the AIME or PIA brackets in the benefit formulas. For the bend points for years 1979 and later, see table V.C2.
A person who has been awarded benefits on the basis of his or her own or another’s earnings record. The benefits may be either in current-payment status or withheld.
Benefit award
See “Award.”
Benefit conversion
See “Disability conversion.”
Benefit payments
The amounts disbursed for OASI and DI benefits by the Department of the Treasury.
Benefit termination
See “Termination.”
Best estimate assumptions
See “Assumptions.”
See “Board of Trustees.”
Board of Trustees
A Board established by 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 members serve 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 President appoints and the Senate confirms the other two members to serve as public representatives. Also referred to as the “Board” or the “Trustees.”
Cash flow
Actual or projected revenue and costs reflecting the levels of payroll tax contribution rates and benefits scheduled in the law. Net cash flow is the difference between non-interest income and cost.
Consumer Price Index — CPI
An official measure of inflation in consumer prices. In this report, CPI refers to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The Bureau of Labor Statistics, Department of Labor, publishes historical values for the CPI-W.
Contribution and benefit base
Annual dollar amount above which earnings in employment covered under the OASDI program are neither taxable nor creditable for benefit-computation purposes. (Also referred to as maximum contribution and benefit base, annual creditable maximum, taxable maximum, and maximum taxable.) See tables V.C1 and V.C6. See “Hospital Insurance (HI) contribution base.”
See “Payroll tax contributions.”
See “Disability conversion.”
The cost shown for a year includes benefits scheduled for payment in the year, administrative expenses, financial interchange with the Railroad Retirement program, and payments for vocational rehabilitation services for disabled beneficiaries.
Cost-of-living adjustment
See “Automatic cost-of-living benefit increase.”
Cost rate
The cost rate for a year is the ratio of the cost of the program to the taxable payroll for the year.
Covered earnings
Wages or earnings from self-employment covered by the OASDI program.
Covered employment
All employment for which earnings are creditable for Social Security purposes. The program covers almost all employment. Some exceptions are:
Covered worker
A person who has earnings creditable for Social Security purposes based on services for wages in covered employment or income from covered self-employment.
CPI-indexed dollars
Amounts adjusted by the CPI to the value of the dollar in a particular year.
Creditable earnings.
Wages or self-employment earnings posted to a worker’s earnings record. Such earnings determine eligibility for benefits and the amount of benefits on that worker’s record. The contribution and benefit base is the maximum amount of creditable earnings for each worker in a calendar year.
Current-cost financing
See “Pay-as-you-go financing.”
Current dollars
Amounts expressed in nominal dollars with no adjustment for inflation.
Currently insured status
A worker acquires currently insured status when he or she has accumulated six quarters of coverage during the 13-quarter period ending with the current quarter.
Current-payment status
Status of a beneficiary to whom a benefit is being paid for a given month (with or without deductions, provided the deductions add to less than a full month’s benefit).
Deemed filing
Under certain circumstances, a person applying for or receiving either an aged-spouse benefit or a retired-worker benefit is required to also file for the other of these two types of benefits. For those first eligible for benefits before 2016, this requirement applies to any person under normal retirement age who is eligible for the other benefit as of the starting month for the first benefit. For those first eligible for benefits in 2016 and later, this requirement applies whenever the person is eligible for the other benefit. This can occur at any age, and in months after the starting month of the first benefit.
Deemed wage credit
See “Military service wage credits.”
Delayed retirement credits
Increases in the benefit amount for certain individuals who did not receive benefits for months after attaining normal retirement age but before age 70. Delayed retirement credits apply to benefits for January of the year following the year they are earned or for the month of attainment of age 70, whichever comes first. See table V.C3.
Demographic assumptions
See “Assumptions.”
For Social Security purposes, the inability to engage in substantial gainful activity (see “Substantial gainful activity — SGA”) by reason of any medically determinable physical or mental impairment that can be expected to result in death or to last for a continuous period of not less than 12 months. Special rules apply for workers at ages 55 and over whose disability is based on blindness.
The law generally requires that a person be disabled continuously for 5 months before he or she can qualify for a disabled-worker benefit.
Disability conversion ratio
For a given year, the ratio of the number of disability conversions to the average number of disabled-worker beneficiaries at all ages during the year.
Disability conversion
Upon attainment of normal retirement age, a disabled-worker beneficiary is automatically converted to retired-worker status.
Disability incidence rate
The proportion of workers in a given year, insured for but not receiving disability benefits, who apply for and are awarded disability benefits.
Disability Insurance (DI) Trust Fund
See “Trust fund.”
Disability insured status
A worker acquires disability insured status if he or she is: (1) a fully insured worker who has accumulated 20 quarters of coverage during the 40-quarter period ending with the current quarter, (2) a fully insured worker aged 24-30 who has accumulated quarters of coverage during one-half of the quarters elapsed after the quarter of attainment of age 21 and up to and including the current quarter, or (3) a fully insured worker under age 24 who has accumulated six quarters of coverage during the 12-quarter period ending with the current quarter.
Disability prevalence rate
The proportion of persons insured for disability benefits who are disabled-worker beneficiaries in current-payment status.
Disability termination rate
The proportion of disabled-worker beneficiaries in a given year whose disability benefits terminate as a result of their recovery or death.
Disabled-worker benefit
A monthly benefit payable to a disabled worker under normal retirement age and insured for disability. Before November 1960, disability benefits were limited to disabled workers aged 50-64.
Actual expenditures (outgo) made or expected to be made under current law, including benefits paid or payable, administrative expenses, financial interchange with the Railroad Retirement program, and payments for vocational rehabilitation services for disabled beneficiaries.
Dual entitlement
A person may be entitled to more than one benefit at the same time. For example, a person may be entitled as a retired worker on his or her own record and as a spouse on another record. However, a person's benefit amount can never exceed the highest single benefit to which that person is entitled. Some benefits are calculated independently with the larger benefit being paid or the smaller benefit being paid plus the excess amount of the larger one.
Unless otherwise qualified, all wages from employment and net earnings from self-employment, whether or not they are taxable or covered.
Earnings test
The provision requiring the withholding of benefits if beneficiaries under normal retirement age have earnings in excess of certain exempt amounts. See table V.C1.
Economic assumptions
See “Assumptions.”
Effective interest rate
See “Interest rate.”
Excess wages
Wages in excess of the contribution and benefit base on which a worker initially makes payroll tax contributions, usually as a result of working for more than one employer during a year. Employee payroll taxes on excess wages are refundable to affected employees, while the employer taxes are not refundable.
See “Disbursements.”
Federal Insurance Contributions Act — FICA
Provision authorizing payroll taxes on the wages of employed persons to provide for Old-Age, Survivors, and Disability Insurance, and for Hospital Insurance. Workers and their employers generally pay the tax in equal amounts.
File and suspend
The ability to apply for a retired-worker benefit at or after normal retirement age, then voluntarily suspend it, allowing the worker to earn delayed retirement credits and a spouse or child to receive benefits on the worker’s record. Voluntary suspensions which are requested after April 29, 2016 will no longer allow spouses (other than divorced spouses) and children to receive benefits while the worker’s benefit is suspended.
Financial interchange
Provisions of the Railroad Retirement Act providing for transfers between the trust funds and the Social Security Equivalent Benefit Account of the Railroad Retirement program in order to place each trust fund in the same financial position it would have been had railroad employment always been covered under Social Security.
Fiscal year
The accounting year of the United States Government. A fiscal year is the 12-month period ending September 30. For example, fiscal year 2017 began October 1, 2016, and will end September 30, 2017.
Full advance funding
A financing method in which contributions are established to match the full cost of future benefits as these costs are incurred through current service. Such financing methods also provide for amortization over a fixed period of any financial obligation that is incurred at the beginning of the program (or subsequent modification) as a result of granting credit for past service.
Fully insured status
A worker acquires fully insured status when his or her total number of quarters of coverage is greater than or equal to the number of years elapsed after the year of attainment of age 21 (but not less than six). Once a worker has accumulated 40 quarters of coverage, he or she remains permanently fully insured.
General Fund of the Treasury
Funds held by the Treasury of the United States, other than receipts collected for a specific purpose (such as Social Security), and maintained in a separate account for that purpose.
General Fund reimbursements
Payments from the General Fund of the Treasury to the trust funds for specific purposes defined in the law, including:
The General Fund also reimburses the trust funds for various other items, including interest on checks which are not negotiated 6 months after the month of issue and costs incurred in performing certain legislatively mandated activities not directly related to administering the OASI and DI programs.
Gross domestic product — GDP
The total dollar value of all goods and services produced by labor and property located in the United States, regardless of who supplies the labor or property.
Hospital Insurance (HI) contribution base
Annual dollar amount above which earnings in employment covered under the HI program are not taxable. (Also referred to as maximum contribution base, taxable maximum, and maximum taxable.) Beginning in 1994, the HI contribution base was eliminated.
High-cost assumptions
See “Assumptions.”
Hospital Insurance (HI) Trust Fund
See “Trust fund.”
See “Legal immigration” and “Other immigration.”
Income for a given year is the sum of tax revenue on a cash basis (payroll tax contributions and income from the taxation of scheduled benefits), reimbursements from the General Fund of the Treasury, if any, and interest credited to the trust funds.
Income rate
Ratio of non-interest income to the OASDI taxable payroll for the year.
Infinite horizon
The period extending indefinitely into the future.
An increase in the general price level of goods and services.
Insured status
The state or condition of having sufficient quarters of coverage to meet the eligibility requirements for retired-worker or disabled-worker benefits, or to permit the worker’s spouse and children or survivors to establish eligibility for benefits in the event of his or her disability, retirement, or death. See “Quarters of coverage.”
A payment in exchange for the use of money during a specified period.
Interest rate
Interest rates on new public-debt obligations issuable to Federal trust funds (see “Special public-debt obligation”) are determined monthly. Such rates are equal to the average market yield on all outstanding marketable U.S. securities not due or callable until after 4 years from the date the rate is determined. See table V.B2 for historical and assumed future interest rates on new special-issue securities. The effective interest rate for a trust fund is the ratio of the interest earned by the fund over a given period of time to the average level of asset reserves held by the fund during the period. The effective rate of interest thus represents a measure of the overall average interest earnings on the fund’s portfolio of investments.
Interfund borrowing
The borrowing of asset reserves by a trust fund (OASI, DI, or HI) from another trust fund when the first fund is in danger of depletion. The Social Security Act permitted interfund borrowing only during 1982 through 1987, and required all amounts borrowed to be repaid prior to the end of 1989. The only exercise of this authority occurred in 1982, when the OASI Trust Fund borrowed from the DI and HI Trust Funds. The final repayment of borrowed amounts occurred in 1986.
Intermediate assumptions
See “Assumptions.”
Legal emigration
Legal emigration for a given year consists of those legal permanent residents and native-born citizens who leave the Social Security area during the year.
Legal immigration
Consistent with the definition used by the Department of Homeland Security, legal immigration for a given year consists of foreign-born individuals who are granted legal permanent resident status during the year.
Life expectancy
Average remaining number of years expected prior to death. Period life expectancy is calculated for a given year using the actual or expected death rates at each age for that year. Cohort life expectancy, sometimes referred to as generational life expectancy, is calculated for individuals at a specific age in a given year using actual or expected death rates from the years in which the individuals would actually reach each succeeding age if they survive.
The next 75 years. The Trustees make long-range actuarial estimates for this period because it covers approximately the maximum remaining lifetime for virtually all current Social Security participants.
Low-cost assumptions. See “Assumptions.”
Lump-sum death payment
A lump sum, generally $255, payable on the death of a fully or currently insured worker. The lump sum is payable to the surviving spouse of the worker, under most circumstances, or to the worker’s children.
Maximum family benefit
The maximum monthly amount that can be paid on a worker’s earnings record. Whenever the total of the individual monthly benefits payable to all the beneficiaries entitled on one earnings record exceeds the maximum, each dependent’s or survivor’s benefit is proportionately reduced. Benefits payable to divorced spouses or surviving divorced spouses are not reduced under the family maximum provision.
A nationwide, Federally administered health insurance program authorized in 1965 under Title XVIII of the Social Security Act to cover the cost of hospitalization, medical care, and some related services for most people age 65 and over. In 1972, lawmakers extended coverage to people receiving Social Security Disability Insurance payments for 2 years and people with End-Stage Renal Disease. (For beneficiaries whose primary or secondary diagnosis is Amyotrophic Lateral Sclerosis, the 2-year waiting period is waived.) In 2010, people exposed to environmental health hazards within areas under a corresponding emergency declaration became Medicare-eligible. In 2006, prescription drug coverage was added as well. Medicare consists of two separate but coordinated trust funds — Hospital Insurance (HI, Part A) and Supplementary Medical Insurance (SMI). The SMI trust fund is composed of two separate accounts — the Part B account and the Part D account. Almost all persons who are aged 65 and over or disabled and who are entitled to HI are eligible to enroll in Part B and Part D on a voluntary basis by paying monthly premiums.
Military service wage credits
Credits toward OASDI earnings records for benefit computation purposes, recognizing that military personnel receive non-wage compensation (such as food and shelter) in addition to their basic pay and other cash payments. Military personnel do not pay payroll taxes on these credits. Noncontributory wage credits of $160 were provided for each month of active military service from September 16, 1940, through December 31, 1956. For years after 1956, the basic pay of military personnel is covered under the Social Security program on a contributory basis. In addition to the contributory credits for basic pay, noncontributory wage credits of $300 were granted for each calendar quarter, from January 1957 through December 1977, in which a person received pay for military service. Noncontributory wage credits of $100 were granted for each $300 of military wages, up to a maximum credit of $1,200 per calendar year, from January 1978 through December 2001.
National average wage index — AWI
See “Average wage index — AWI.”
Non-interest income
Non-interest income for a given year is the sum of tax revenue on a cash basis (payroll tax contributions and income from the taxation of scheduled benefits) and reimbursements from the General Fund of the Treasury, if any.
Normal retirement age — NRA
The age at which a person may first become entitled to retirement benefits without reduction based on age. For persons reaching age 62 before 2000, the normal retirement age is 65. It will increase gradually to 67 for persons reaching that age in 2027 or later, beginning with an increase to 65 years and 2 months for persons reaching age 65 in 2003. See table V.C3.
Old-Age and Survivors Insurance (OASI) Trust Fund
See “Trust fund.”
Old-law base
Amount the contribution and benefit base would have been if the 1977 amendments had not provided for ad hoc increases. The Social Security Amendments of 1972 provided for automatic annual indexing of the contribution and benefit base. The Social Security Amendments of 1977 specified ad hoc bases for 1978‑81, with subsequent bases updated in accordance with the normal indexing procedure. See table V.C2.
Open group unfunded obligation
See “Unfunded obligation.”
Other emigration
Other emigration for a given year consists of individuals from the other-immigrant population who leave the Social Security area during the year or who adjust status to become legal permanent residents during the year.
Other immigration
Other immigration for a given year consists of individuals who enter the Social Security area and stay 6 months or more but without legal permanent resident status, such as undocumented immigrants and temporary workers and students.
See “Disbursements.”
Par value
The value printed on the face of a bond. For both public and special issues held by the trust funds, par value is also the redemption value at maturity.
Partial advance funding
A financing method in which contributions are established to provide a substantial accumulation of trust fund asset reserves, thereby generating additional interest income to the trust funds and reducing the need for payroll tax increases in periods when costs are relatively high. Higher general contributions or additional borrowing may be required, however, to support the payment of such interest. While substantial, the trust fund buildup under partial advance funding is much smaller than it would be with full advance funding.
Pay-as-you-go financing
A financing method in which contributions are established to produce just as much income as required to pay current benefits, with trust fund asset reserves built up only to the extent needed to prevent depletion of the fund by random economic fluctuations.
Payroll tax contributions
The amount based on a percent of earnings, up to an annual maximum, that must be paid by:
Also referred to as payroll taxes.
Population in the Social Security area
See “Social Security area population.”
Present value
The equivalent value, at the present time, of a stream of values (either income or cost, past or future). Present values are used widely in calculations involving financial transactions over long periods of time to account for the time value of money, by discounting or accumulating these transactions at the rate of interest. Present-value calculations for this report use the effective yield on trust fund asset reserves.
Primary insurance amount—PIA
The monthly amount payable to a retired worker who begins to receive benefits at normal retirement age or, generally, to a disabled worker. This amount, which is typically related to the worker’s average monthly wage or average indexed monthly earnings, is also used as a base for computing all types of benefits payable on an individual’s earnings record.
Primary-insurance-amount formula
The mathematical formula relating the PIA to the AIME for workers who attain age 62, become disabled, or die after 1978. The PIA is equal to the sum of 90 percent of AIME up to the first bend point, plus 32 percent of AIME above the first bend point up to the second bend point, plus 15 percent of AIME in excess of the second bend point. Automatic benefit increases are applied beginning with the year of eligibility. See table V.C2 for historical and assumed future bend points and table V.C1 for historical and assumed future benefit increases.
Quarters of coverage
Basic unit of measurement for determining insured status. In 2017, a worker receives one quarter of coverage (up to a total of four) for each $1,300 of annual covered earnings. For years after 1978, the amount of earnings required for a quarter of coverage is subject to annual automatic increases in proportion to increases in average wages. See table V.C2.
Railroad Retirement
A Federal insurance program, similar to Social Security, designed for workers in the railroad industry. The provisions of the Railroad Retirement Act provide for a system of coordination and financial interchange between the Railroad Retirement program and the Social Security program.
Reallocation of payroll tax rates
An increase in the payroll tax rate for either the OASI or DI Trust Fund, with a corresponding reduction in the rate for the other fund, so that the total OASDI payroll tax rate is not changed.
Real-wage differential
The difference between the percentage increases in: (1) the average annual wage in covered employment and (2) the average annual Consumer Price Index. See table V.B1.
A period of adverse economic conditions; in particular, two or more successive calendar quarters of negative growth in gross domestic product.
See “Asset reserves.”
Retired-worker benefit
A monthly benefit payable to a fully insured retired worker aged 62 or older or to a person entitled under the transitionally insured status provision in the law.
Retirement earnings test
See “Earnings test.”
Retirement eligibility age
The age, currently age 62, at which a fully insured individual first becomes eligible to receive retired-worker benefits.
Retirement test
See “Earnings test.”
Scheduled benefits
The level of benefits specified under current law.
Scenario-based model
A model with specified assumptions for and relationships among variables. Under such a model, any specified set of assumptions determines a single outcome directly reflecting the specifications.
Operation of a trade or business by an individual or by a partnership in which an individual is a member.
Self-Employment Contributions Act – SECA
Provision authorizing Social Security payroll taxes on the net earnings of most self-employed persons.
The next 10 years. The Trustees prepare short-range actuarial estimates for this period because of the test of short-range financial adequacy. The Social Security Act requires estimates for 5 years; the Trustees prepare estimates for an additional 5 years to help clarify trends which are only starting to develop in the mandated first 5-year period.
Social Security Act
Provisions of the law governing most operations of the Social Security program. The original Social Security Act is Public Law 74‑271, enacted August 14, 1935. With subsequent amendments, the Social Security Act consists of 21 titles, of which three have been repealed. Title II of the Social Security Act authorized the Old-Age, Survivors, and Disability Insurance program.
Social Security area population
The population comprised of: (1) residents of the 50 States and the District of Columbia (adjusted for net census undercount); (2) civilian residents of Puerto Rico, the Virgin Islands, Guam, American Samoa, and the Northern Mariana Islands; (3) Federal civilian employees and persons in the U.S. Armed Forces abroad and their dependents; (4) non-citizens living abroad who are insured for Social Security benefits; and (5) all other U.S. citizens abroad.
A program is solvent at a point in time if it is able to pay scheduled benefits when due with scheduled financing. For example, the OASDI program is solvent over any period for which the trust funds maintain a positive level of asset reserves.
Special public-debt obligation
Securities of the United States Government issued exclusively to the OASI, DI, HI, and SMI Trust Funds and other Federal trust funds. Section 201(d) of the Social Security Act provides that the public-debt 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. Special public-debt obligations are redeemable at par value at any time and carry interest rates determined by law (see “Interest rate”). See tables VI.A4 and VI.A5 for a listing of the obligations held by the OASI and DI Trust Funds, respectively.
Stochastic model
A model used for projecting a probability distribution of potential outcomes. Such models allow for random variation in one or more variables through time. The random variation is generally based on fluctuations observed in historical data for a selected period. A large number of simulations, each of which reflects random variation in the variable(s), produce a distribution of potential outcomes.
Substantial gainful activity — SGA
The level of work activity used to establish disability. A finding of disability requires that a person be unable to engage in substantial gainful activity. A person who earns more than a certain monthly amount (net of impairment-related work expenses) is ordinarily considered to be engaging in SGA. The amount of monthly earnings considered as SGA depends on the nature of a person’s disability. The Social Security Act specifies a higher SGA amount for statutorily blind individuals; Federal regulations specify a lower SGA amount for non-blind individuals. Both SGA amounts increase with increases in the national average wage index.
Summarized balance
The difference between the summarized income rate and the summarized cost rate, expressed as a percentage of GDP. The difference between the summarized income rate and cost rate as a percentage of taxable payroll is referred to as the actuarial balance.
Summarized cost rate
The ratio of the present value of cost to the present value of the taxable payroll (or GDP) for the years in a given period, expressed as a percentage. To evaluate the financial adequacy of the program, the summarized cost rate is adjusted to include the cost of reaching and maintaining a target trust fund level. A trust fund level of about 1 year’s cost is considered to be an adequate reserve for unforeseen contingencies; therefore, the targeted trust fund ratio is 100 percent of annual cost. Accordingly, the adjusted summarized cost rate is equal to the ratio of: (1) the sum of the present value of the cost during the period plus the present value of the targeted ending trust fund level to (2) the present value of the taxable payroll (or GDP) during the projection period.
Summarized income rate
The ratio of the present value of scheduled non-interest income to the present value of taxable payroll (or GDP) for the years in a given period, expressed as a percentage. To evaluate the financial adequacy of the program, the summarized income rate is adjusted to include asset reserves on hand at the beginning of the period. Accordingly, the adjusted summarized income rate equals the ratio of: (1) the sum of the trust fund reserve at the beginning of the period plus the present value of non-interest income during the period to (2) the present value of the taxable payroll (or GDP) for the years in the period.
Supplemental Security Income — SSI
A Federally administered program (often with State supplementation) of cash assistance for needy aged, blind, or disabled persons. The General Fund of the Treasury funds SSI and the Social Security Administration administers it.
Supplementary Medical Insurance (SMI) Trust Fund
See “Trust fund.”
Survivor benefit
Benefit payable to a survivor of a deceased worker.
Sustainable solvency
Sustainable solvency for the financing of the program under a specified set of assumptions is achieved when the projected trust fund ratio is positive throughout the 75‑year projection period and is either stable or rising at the end of the period.
Taxable earnings
Wages or self-employment income, in employment covered by the OASDI or HI programs, that is under the applicable annual maximum taxable limit. For 1994 and later, no maximum taxable limit applies to the HI program.
Taxable payroll
A weighted sum of taxable wages and taxable self-employment income. When multiplied by the combined employee-employer payroll tax rate, taxable payroll yields the total amount of payroll taxes incurred by employees, employers, and the self-employed for work during the period.
Taxable self-employment income
The maximum amount of net earnings from self-employment by an earner which, when added to any taxable wages, does not exceed the contribution and benefit base. For HI beginning in 1994, all net earnings from self-employment.
Taxable wages
See “Taxable earnings.”
Taxation of benefits
Beginning in 1984, Federal law subjected up to 50 percent of an individual’s or a couple’s OASDI benefits to Federal income taxation under certain circumstances. Treasury allocates the revenue derived from this provision to the OASI and DI Trust Funds on the basis of the income taxes paid on the benefits from each fund. Beginning in 1994, the law increased the maximum percentage from 50 percent to 85 percent. The HI Trust Fund receives the additional tax revenue resulting from the increase to 85 percent.
See “Payroll tax contributions” and “Taxation of benefits.”
Cessation of payment because the beneficiary is no longer entitled to receive a specific type of benefit. For example, benefits might terminate as a result of the death of the beneficiary, the recovery of a disabled beneficiary, or the attainment of age 18 by a child beneficiary. In some cases, an individual may cease one benefit and this is not a termination because they become immediately entitled to another type of benefit, such as the conversion of a disabled-worker beneficiary at normal retirement age to a retired-worker beneficiary.
Test of long-range close actuarial balance
The conditions required to meet this test are:
The Trustees apply the test to OASI, DI, and the combined OASDI program based on the intermediate set of assumptions.
Test of short-range financial adequacy
The conditions required to meet this test are:
The Trustees apply the test to OASI, DI, and the combined OASDI program based on the intermediate set of assumptions.
Total-economy productivity
The ratio of real GDP to hours worked by all workers. Also referred to as “labor productivity.”
Total fertility rate
The sum of the single year of age birth rates for women aged 14 through 49, where the rate for age 14 includes births to women aged 14 and under, and the rate for age 49 includes births to women aged 49 and over. The total fertility rate may be interpreted as the average number of children that would be born to a woman in her lifetime if she were to experience, at each age of her life, the birth rate observed in, or assumed for, a specified year, and if she were to survive the entire childbearing period.
Trust fund
Separate accounts in the United States Treasury which hold the payroll taxes received under the Federal Insurance Contributions Act and the Self-Employment Contributions Act; payroll taxes resulting from coverage of State and local government employees; any sums received under the financial interchange with the railroad retirement account; voluntary hospital and medical insurance premiums; and reimbursements or payments from the General Fund of the Treasury. As required by law, the Department of the Treasury invests funds not required to meet current expenditures in interest-bearing securities backed by the full faith and credit of the U.S. Government. The interest earned is also deposited in the trust funds.
Old-Age and Survivors Insurance (OASI). The trust fund used for paying monthly benefits to retired-worker (old-age) beneficiaries, their spouses and children, and to survivors of deceased insured workers.
Disability Insurance (DI). The trust fund used for paying monthly benefits to disabled-worker beneficiaries, their spouses and children, and for providing rehabilitation services to the disabled.
Hospital Insurance (HI). The trust fund used for paying part of the costs of inpatient hospital services and related care for aged and disabled individuals who meet the eligibility requirements. Also known as Medicare Part A.
Supplementary Medical Insurance (SMI). The Medicare trust fund composed of the Part B Account, the Part D Account, and the Transitional Assistance Account. The Part B Account pays for a portion of the costs of physicians’ services, outpatient hospital services, and other related medical and health services for voluntarily enrolled aged and disabled individuals. The Part D Account pays private plans to provide prescription drug coverage, beginning in 2006. The Transitional Assistance Account paid for transitional assistance under the prescription drug card program in 2004 and 2005.
The trust funds are distinct legal entities which operate independently. Fund operations are sometimes combined on a hypothetical basis.
Trust fund ratio
A measure of trust fund adequacy. The asset reserves at the beginning of a year, which do not include advance tax transfers, expressed as a percentage of the cost for the year. The trust fund ratio represents the proportion of a year’s cost which could be paid solely with the reserves at the beginning of the year.
See “Board of Trustees.”
Undisbursed balances
In general, refers to the cumulative differences between the actual cash expenditures that the Social Security Administration (SSA) made each month compared to security redemptions from the Trust Fund reserves made on a preliminary basis to cover such cash expenditures during the same month. On a monthly basis, SSA pays benefits and makes payments for other programmatic expenses associated with the Trust Funds. During each month, SSA draws cash from the Trust Funds on a preliminary basis, which results in Treasury redeeming invested securities to cover these expenditures. This monthly difference can be either positive or negative depending on net monthly activity, and is added to the balance at the end of the prior month.
A net positive undisbursed balance represents a situation where cumulative redemptions from the Trust Fund’s securities are more than was needed to cover actual program cash expenditures through the end of the month. A net negative balance represents a situation where cumulative program cash expenditures exceeded the amount redeemed from the invested securities. A negative value requires future redemption of additional invested securities.
In addition, about every seven years, when January 3 falls on a Sunday, benefit payments scheduled to be paid on January 3rd are actually paid on December 31 of the preceding year, as required by the statutory provision included in the 1977 Social Security Amendments for early delivery of benefit payments when the normal payment delivery date is a Saturday, Sunday, or legal public holiday. Consistent with practice in prior reports and for comparability with other historical years and the projections in this report, all trust fund operations and asset reserves reflect the 12 months of benefits scheduled for payment in each year. Therefore, such advance payments are included as positive values in the undisbursed balance at the end of the calendar years in which the advance payments are made.
Unfunded obligation
A measure of the shortfall of trust fund income to fully cover program cost through a specified date after depletion of trust fund asset reserves. This measure can be expressed in present value dollars, discounted to the beginning of the valuation period, by computing the excess of the present value of the projected cost of the program through a specified date over the sum of: (1) the value of trust fund reserves at the beginning of the valuation period; and (2) the present value of the projected non-interest income of the program through a specified date, assuming scheduled tax rates and benefit levels. This measure can apply for all participants through a specified date, i.e., the open group, or be limited to a specified subgroup of participants.
Unfunded obligation ratio
The unfunded obligation accumulated through the beginning of a year expressed as a percentage of the cost for the year.
Unnegotiated check
A check which has not been cashed 6 months after the end of the month in which the check was issued. When a check has been outstanding for a year, the Department of the Treasury administratively cancels the check and reimburses the issuing trust fund separately for the amount of the check and interest for the period the check was outstanding. The appropriate trust fund also receives an interest adjustment for the time the check was outstanding if it is cashed 6-12 months after the month of issue. If a check is presented for payment after it has been administratively canceled, a replacement check is issued.
Valuation period
A period of years which is considered as a unit for purposes of calculating the financial status of a trust fund.
Vocational rehabilitation
Services provided to disabled persons to help them to return to gainful employment. The trust funds reimburse the providers of such services only in those cases where the services contributed to the successful rehabilitation of the beneficiaries.
Year of depletion
The year in which a trust fund becomes unable to pay benefits when due because the fund’s asset reserves have been used up.

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