The combined OASI and DI Trust Funds are adequately financed over the next 10 years, and for many years thereafter. At the beginning of 1995, the combined assets of the trust funds represented 128 percent of combined expenditures for 1995. The combined funds are projected to continue to grow during the next 10 years, and for many years thereafter, under both the intermediate and low cost assumptions. However, while the assets of the combined funds, in nominal dollars, continue to grow under the high cost assumptions for the next 10 years, 1995 through 2004, the trust fund ratio of assets to annual expenditures begins to decline in 2000.
The OASI Trust Fund is expected to grow rapidly during the next 10 years from a current level of 139 percent of annual outgo to about 2.5 times annual outgo by the year 2004, based on the intermediate assumptions. Thus, the OASI Trust Fund meets the criteria for financial adequacy in the short range by a wide margin.
The DI Trust Fund is also adequately financed over the next 10 years. Outgo from the DI Trust Fund exceeded income in both 1992 and 1993. However, these declines were reversed by the reallocation of part of the OASI contribution rate to DI that was enacted in 1994. The assets of the DI fund, in nominal dollars, are now expected to rise throughout the next 10 years, based on both the intermediate and low cost assumptions. The ratio of assets to expenditures is expected to increase from 54 percent at the beginning of 1995 to 142 percent by the beginning of 2003 and then to decline to 140 percent at the beginning of 2004, based on the intermediate assumptions.
Although the combined trust funds are well financed over the first 10 years and are expected to continue growing, in nominal dollars, for the first 25 years under the intermediate assumptions, the OASDI program is not in close actuarial balance over the next 75 years, based on these assumptions. The estimates indicate that the combined trust funds would be sufficient to enable the timely payment of benefits for the next 35 years. Relative to annual expenditures, the combined trust funds would continue to grow during the next 16 years, reaching a peak of about 2.7 times annual expenditures. Considering each fund separately, the OASI Trust Fund would have sufficient funds for the next 36 years, and the DI Trust Fund would be sufficient for the next 21 years. On the basis of the high cost assumptions, the combined funds would be sufficient to enable timely payment of benefits for about the next 21 years. Based on the low cost assumptions, the combined funds would continue to grow throughout the next 75 years, and they would be sufficient to enable timely payment of benefits during all of the long-range period.
For each of the next 18 years, OASDI income from payroll taxes and income taxes on benefits is expected to exceed total expenditures based on the intermediate assumptions. Starting about 14 years from now, however, OASDI costs as a percentage of taxable payroll are projected to begin increasing rapidly as the annual balances become negative after the first 18 years, the availability of interest earnings, in addition to tax revenues, results in projected trust fund growth (in dollars) that would continue for another 7 years. Because expenditures are estimated to increase at a faster rate than assets, however, OASDI assets would decline relative to annual disbursements, from about 2.7 times to about 2.0 times annual expenditures, during the same time period.
The Advisory Council on Social Security is conducting an extensive review of Social Security financing issues, and the Board looks forward to receiving the Council's recommendations for restoring the long-range actuarial balance of the OASDI program.