Selected Research & Analysis: Trust Funds (Financing, Solvency)

See also related Statistics & Data Files and Extramural Projects.

Pensions for State and Local Government Workers Not Covered by Social Security: Do Benefits Meet Federal Standards?
from Social Security Bulletin, Vol. 80, No. 3 (released August 2020)
by Laura D. Quinby, Jean-Pierre Aubry, and Alicia H. Munnell

Federal law allows certain state and local governments to exclude employees from Social Security coverage if the employees are provided with a sufficiently generous pension. Approximately 6.5 million such workers were not covered by Social Security in 2018. Retirement systems for noncovered workers have become less generous in recent years, and a few plans could exhaust their trust funds within the next decade, putting beneficiaries at risk. This article examines data from a variety of sources to assess whether state and local governments currently satisfy the federal standards for retirement plan sufficiency and whether the standards ensure benefits equivalent to those from Social Security.

The Legacy Debt Associated with Past Social Security Transfers
from Social Security Bulletin, Vol. 76, No. 3 (released August 2016)
by Dean R. Leimer

A number of studies have used estimates of historical and projected lifetime net transfers (benefits less taxes) by birth cohort under the Old-Age and Survivors Insurance program to calculate and compare the aggregate present-value sum of such transfers for selected birth-cohort groups. Those calculations indicate that, from a program accounting perspective, the earliest generations of program participants received large transfers from later generations of participants. Some recent studies have referred to this cumulative transfer to the earliest generations as a “legacy debt” and characterized it as a burden borne by the later generations. This article clarifies the legacy debt concept and discusses the conditions required for a legacy debt to exist in a meaningful economic sense.

Social Security Trust Fund Cash Flows and Reserves
from Social Security Bulletin, Vol. 75, No. 1 (released February 2015)
by David Pattison

This article examines the Social Security trust fund reserves and cash flows and their interrelationships with the Treasury's cash management operations and the budget of the rest of the federal government. The article considers the extent to which the trust fund reserves and interest income reflect cash transactions between the trust funds and the public and are not, as some commenters have asserted, just accounting fictions. It also considers whether, under the Social Security system's self-financing framework, an improvement in trust fund finances can help relieve the accumulated debt commitments of the rest of the federal government.

The Evolution of Social Security's Taxable Maximum
Policy Brief No. 2011-02 (released September 2011)
by Kevin Whitman and Dave Shoffner

Since its inception, Social Security has featured a taxable maximum (or "tax max"). In 1937, payroll taxes applied to the first $3,000 in earnings. In 2011, payroll taxes apply to the first $106,800 in earnings. This policy brief summarizes the changes that have occurred to the tax max and to earnings patterns over this period. From 1937 to 1975, Congress increased the tax max on an ad-hoc basis. Increases were justified by the desire to improve system financing and maintain meaningful benefits for middle and higher earners. Since 1975, the tax max has generally increased at the same rate as average wages each year. Some policymakers propose increasing the tax max beyond wage-indexed levels to help restore financial balance and to reflect growing earnings inequality, as workers earning more than the tax max have experienced higher earnings growth rates than other workers in recent decades.

Managing Independence: The Governance Components of the National Railroad Retirement Investment Trust
from Social Security Bulletin, Vol. 71, No. 2 (released May 2011)
by Kevin Whitman

This article reviews the management components of the National Railroad Retirement Investment Trust (NRRIT) and their relationship to political independence. Centralized equity investment is sometimes proposed as a method for improving Social Security program financing and, echoing the debate over the NRRIT, politicized investment decisions are seen as one potential obstacle to the policy's success. This article does not advocate for or against investing Social Security's trust fund assets in equities, but examines the NRRIT's structure and experience to provide background information for policymakers.

Distributional Effects of Accelerating and Extending the Increase in the Full Retirement Age
Policy Brief No. 2011-01 (released January 2011)
by Glenn R. Springstead

This policy brief compares two options set forth by the Social Security Advisory Board to increase the full retirement age (FRA), the age at which claimants may receive unreduced Social Security old-age benefits. One option would raise the FRA from the current target of 67 years to 68 years; the other would raise the FRA to 70 years. The brief examines the effects of both options on the level of benefits of Social Security beneficiaries aged 62 or older in 2070 using Modeling Income in the Near Term (MINT) projections, and on Trust Fund solvency using estimates from the Social Security Administration's Office of the Chief Actuary. The brief finds that both options would reduce benefits, improve solvency, and slightly increase the poverty rate. Within each option, effects on benefits are relatively uniform across beneficiary characteristics, although some surviving spouse and disabled beneficiaries would be shielded from benefit reductions.

The Future Financial Status of the Social Security Program
from Social Security Bulletin, Vol. 70, No. 3 (released August 2010)
by Stephen C. Goss

This article describes four concepts—solvency, sustainability, shortfalls, and solutions—as they apply to the financial status of the Social Security program as well as how Social Security financing fits in the general federal budget. The little-understood basis for future projected shortfalls is explained and detailed in relation to the possible solutions.

The Distributional Consequences of a "No-Action" Scenario: Updated Results
Policy Brief No. 2005-01 (released July 2005)

Under the Social Security program, benefits are paid to retired workers, survivors, and disabled persons out of two trust funds—the Old-Age and Survivors Insurance and the Disability Insurance (OASDI) Trust Funds. In their 2005 report, the Social Security Trustees projected that the combined OASDI trust funds would be exhausted in 2041. Because the trust funds are used to pay benefits, retirement benefits would have to be reduced somewhat in 2041 and more drastically in 2042.

If no action were taken to strengthen Social Security, the benefit reductions necessitated by the exhaustion of the trust funds would double the poverty rate of Social Security beneficiaries aged 64–78 in 2042, from 1.5 percent to 3.3 percent. However, this increased poverty rate would still be lower than the current poverty rate for beneficiaries aged 62–76, which is 4.6 percent. In addition, the trust funds' exhaustion could lead to lower returns on payroll taxes using traditional "money's-worth" measures.

Stochastic Models of the Social Security Trust Funds
from Social Security Bulletin, Vol. 65, No. 1 (released May 2004)
by Clark Burdick and Joyce Manchester

The 2003 Trustees Report on the Old-Age and Survivors Insurance and Disability Insurance Trust Funds contains, for the first time, results from a stochastic model of the combined trust funds of the OASDI programs. To help interpret the new stochastic results and place them in context, the Social Security Administration's Office of Policy arranged for three external modeling groups to produce alternative stochastic results. This article demonstrates that the stochastic models deliver broadly consistent results even though they use significantly different approaches and assumptions. However, the results also demonstrate that the variation in trust fund outcomes differs as the approach and assumptions are varied.

The Distributional Consequences of a "No-Action" Scenario
Policy Brief No. 2004-01 (released February 2004)
by Andrew G. Biggs

The 2001 report of the Social Security trustees projected that the combined trust funds for the Old-Age and Survivors Insurance and Disability Insurance programs will be exhausted in 2038. This analysis explains the effects of insolvency on future retirement benefits and poverty rates of beneficiaries if no action is taken to strengthen Social Security.

Stochastic Models of the Social Security Trust Funds
Research and Statistics Note No. 2003-01 (released March 2003)
by Joyce Manchester and Clark Burdick
Actuarial Status of the Social Security and Medicare Programs
from Social Security Bulletin, Vol. 57, No. 1 (released January 1994)
Actuarial Status of the Social Security and Medicare Programs
from Social Security Bulletin, Vol. 56, No. 1 (released January 1993)
Actuarial Status of the Social Security and Medicare Programs
from Social Security Bulletin, Vol. 55, No. 2 (released April 1992)
Would Monetary Policy Be Effective if the OASDI Trust Funds Held Most Treasury Debt?
ORES Working Paper No. 50 (released July 1991)
by Willem Thorbecke and Tarik Alami

As a result of the buildup of the Old Age, Survivors, and Disability Insurance (OASDI) trust funds, the supply of U.S. securities to the public by the second and third decades of the next century might become extremely limited. While this increase in Federal savings would lower real interest rates and stimulate investment, the buildup would create a difficulty: it would force Federal Reserve open market operations to be conducted in assets other than Treasury securities. It is important to know whether monetary policy would continue to be effective under this new modus operandi. To answer this question it is necessary to have evidence concerning the transmission mechanism through which monetary policy affects the economy. Obtaining such evidence is especially important now since many economists argue that monetary policy works through a black box which we do not understand. Evidence demonstrating one channel though which monetary policy works is presented here. It is demonstrated that news of increases (decreases) in the Federal Reserve's target for the federal funds rate during the 1974–1979 period lowered (raised) stock prices. This period was unique because the Federal Reserve controlled its operating instrument, the federal funds rate, so closely that market participants were able to discern a change in the target on the day the target changed. This evidence supports the arguments of Tobin and Brunner and Meltzer that the stock market is an important link in the monetary transmission mechanism. The results indicate that if the OASDI trust funds purchased most or all Treasury securities, open market operations conducted using other assets would still be efficacious through this channel. By affecting bank reserves and thus the federal funds rate, these operations would influence stock prices and economic activity.

Actuarial Status of the HI and SMI Trust Funds
from Social Security Bulletin, Vol. 54, No. 6 (released June 1991)
Actuarial Status of the OASI and DI Trust Funds
from Social Security Bulletin, Vol. 54, No. 6 (released June 1991)
Social Security Technical Panel Report to the 1991 Advisory Council on Social Security: Appendices
from Social Security Bulletin, Vol. 53, No. 12 (released December 1990)
Social Security Technical Panel Report to the 1991 Advisory Council on Social Security
from Social Security Bulletin, Vol. 53, No. 11 (released November 1990)
Actuarial Status of the SMI Trust Fund
from Social Security Bulletin, Vol. 53, No. 6 (released June 1990)
Actuarial Status of the HI Trust Fund
from Social Security Bulletin, Vol. 53, No. 6 (released June 1990)
Actuarial Status of the OASI and DI Trust Funds
from Social Security Bulletin, Vol. 53, No. 6 (released June 1990)
by Harry C. Ballantyne
Actuarial Status of the OASI and DI Trust Funds
from Social Security Bulletin, Vol. 52, No. 6 (released June 1989)
Social Security Financing in North America
from Social Security Bulletin, Vol. 52, No. 4 (released April 1989)
by Harry C. Ballantyne
Actuarial Aspects of Financing Old-Age and Survivors Insurance
from Social Security Bulletin, Vol. 51, No. 11 (released November 1988)
by Robert J. Myers
Commentary: Actuarial Research and Analysis
from Social Security Bulletin, Vol. 51, No. 11 (released November 1988)
by Robert J. Myers
Actuarial Status of the HI and SMI Trust Funds
from Social Security Bulletin, Vol. 51, No. 6 (released June 1988)
Actuarial Status of the OASI and DI Trust Funds
from Social Security Bulletin, Vol. 51, No. 6 (released June 1988)
by Harry C. Ballantyne
Social Security Area Population Projections: 1987
from Social Security Bulletin, Vol. 51, No. 2 (released February 1988)
by Alice H. Wade
Economic Policy, Intergenerational Equity, and the Social Security Trust Fund Buildup
from Social Security Bulletin, Vol. 50, No. 10 (released October 1987)
by John C. Hambor
Actuarial Status of the HI and SMI Trust Funds
from Social Security Bulletin, Vol. 50, No. 6 (released June 1987)
by Barbara Klees and Carter Warfield
Actuarial Status of the OASI and DI Trust Funds
from Social Security Bulletin, Vol. 50, No. 6 (released June 1987)
by Harry C. Ballantyne
Actuarial Status of the HI and SMI Trust Funds
from Social Security Bulletin, Vol. 49, No. 7 (released July 1986)
by Barbara Klees and Carter Warfield
Actuarial Status of the OASI and DI Trust Funds
from Social Security Bulletin, Vol. 49, No. 7 (released July 1986)
by Harry C. Ballantyne
Actuarial Status of the OASI and DI Trust Funds
from Social Security Bulletin, Vol. 48, No. 6 (released June 1985)
by Harry C. Ballantyne
Actuarial Status of the HI and SMI Trust Funds
from Social Security Bulletin, Vol. 48, No. 6 (released June 1985)
by Sol Mussey
Actuarial Status of the HI and SMI Trust Funds
from Social Security Bulletin, Vol. 47, No. 5 (released May 1984)
by Sol Mussey
Actuarial Status of the OASI and DI Trust Funds
from Social Security Bulletin, Vol. 47, No. 5 (released May 1984)
by Harry C. Ballantyne
Actuarial Status of the Hospital Insurance and Supplementary Medical Insurance Trust Funds
from Social Security Bulletin, Vol. 46, No. 10 (released October 1983)
by Roland E. King
Actuarial Status of the Old-Age and Survivors Insurance and Disability Insurance Trust Funds
from Social Security Bulletin, Vol. 46, No. 10 (released October 1983)
by Harry C. Ballantyne
Interfund Borrowing Under the Social Security Act
from Social Security Bulletin, Vol. 46, No. 9 (released September 1983)
by Bruce D. Schobel
Financial Status of the Social Security Program
from Social Security Bulletin, Vol. 46, No. 3 (released March 1983)
by Robert J. Myers
Actuarial Status of the Old-Age and Survivors Insurance and Disability Insurance Trust Funds
from Social Security Bulletin, Vol. 45, No. 6 (released June 1982)
by Harry C. Ballantyne
Actual Costs of the Social Security System Over the Years Compared with 1935 Estimates
from Social Security Bulletin, Vol. 45, No. 3 (released March 1982)
by Robert J. Myers
Gifts to the Trust Funds
from Social Security Bulletin, Vol. 45, No. 2 (released February 1982)
Investment Policies and Procedures of the Social Security Trust Funds
from Social Security Bulletin, Vol. 45, No. 1 (released January 1982)
by Robert J. Myers
Economic Forecasting: Effect of Errors on OASDI Fund Ratios
from Social Security Bulletin, Vol. 45, No. 1 (released January 1982)
by Dwight K. Bartlett III and Joseph A. Applebaum
Long-Range Projection of Average Benefits Under OASDI
from Social Security Bulletin, Vol. 45, No. 1 (released January 1982)
by Steven F. McKay
Value-Added Tax as a Source of Social Security Financing
ORES Working Paper No. 23 (released September 1981)
by Sheng Cheng Hu

The data for this study are drawn mainly from the Consumer Expenditure Survey conducted by the Bureau of Labor Statistics during 1972–73. The respondents are divided into five income classes and two age groups. The focus of this analysis is placed on the consumption-type value-added tax.

Current Developments in Social Security Financing
from Social Security Bulletin, Vol. 43, No. 9 (released September 1980)
by Dwight K. Bartlett III
Social Security Financing
from Social Security Bulletin, Vol. 43, No. 5 (released May 1980)
Tax Impact From Elimination of the Retirement Test
from Social Security Bulletin, Vol. 42, No. 9 (released September 1979)
by Josephine G. Gordon and Robert N. Schoeplein
The Macroeconomic Effects of a Payroll Tax Rollback
ORES Working Paper No. 11 (released August 1979)
by John B. Hagens and John C. Hambor

In late 1977, the U.S. Congress passed Social Security legislation that included a series of increases in the payroll tax. These increases, which began in 1979 and carry on into the 1980s, substantially raise the projected levels of the Social Security trust funds. Since the amendments were passed, there has been some discussion and several proposals to roll back part of the tax. It is highly likely that additional rollback proposals will be made in the near future. The purpose of this paper is to shed some light on some of the macroeconomic effects of a payroll tax rollback.

Financial Status of Social Security Program After the Social Security Amendments of 1977
from Social Security Bulletin, Vol. 41, No. 3 (released March 1978)
by A. Haeworth Robertson
OASDI: Fiscal Basis and Long-Range Cost Projections
from Social Security Bulletin, Vol. 40, No. 1 (released January 1977)
by A. Haeworth Robertson
Financing Basis of Old-Age, Survivors, and Disability Insurance and Health Insurance Under the 1967 Amendments
from Social Security Bulletin, Vol. 31, No. 2 (released February 1968)
by Robert J. Myers and Francisco Bayo
Annual Earnings and the Taxable Maximum for OASDHI
from Social Security Bulletin, Vol. 29, No. 11 (released November 1966)
by Michael Resnick
OASDHI Contributions on Cash-Payment Basis
from Social Security Bulletin, Vol. 29, No. 9 (released September 1966)
by Michael Resnick and Kenneth G. Sander
Trust Fund Operations
from Social Security Bulletin, Vol. 29, No. 7 (released July 1966)
by James S. Parker
Old-Age, Survivors, and Disability Insurance: Administrative Expenses
from Social Security Bulletin, Vol. 29, No. 7 (released July 1966)
by Robert J. Myers and Francisco Bayo
Trust Fund Operations
from Social Security Bulletin, Vol. 28, No. 5 (released May 1965)
by James S. Parker and Sophie R. Dales
Trust Fund Operations, 1963
from Social Security Bulletin, Vol. 27, No. 5 (released May 1964)
by Sophie R. Dales
Old-Age, Survivors, and Disability Insurance: Administrative Expenses
from Social Security Bulletin, Vol. 26, No. 9 (released September 1963)
by Robert J. Myers
Trust Fund Operations, 1962
from Social Security Bulletin, Vol. 26, No. 5 (released May 1963)
by Sophie R. Dales
Trust Fund Operations, 1961
from Social Security Bulletin, Vol. 25, No. 5 (released May 1962)
by Sophie R. Dales
Proposed Social Security Budget, 1962–63
from Social Security Bulletin, Vol. 25, No. 3 (released March 1962)
by Sophie R. Dales
Old-Age, Survivors, and Disability Insurance: Financing Basis and Policy Under the 1961 Amendments
from Social Security Bulletin, Vol. 24, No. 9 (released September 1961)
by Robert J. Myers
Trust Fund Operations, 1960
from Social Security Bulletin, Vol. 24, No. 5 (released May 1961)
by Sophie R. Dales
Special Issue Investments of OASDI Trust Funds
from Social Security Bulletin, Vol. 24, No. 3 (released March 1961)
by Robert J. Myers
Old-Age, Survivors, and Disability Insurance: Financing Basis and Policy Under the 1960 Amendments
from Social Security Bulletin, Vol. 23, No. 11 (released November 1960)
by Robert J. Myers
Old-Age, Survivors, and Disability Insurance: Administrative Expenses
from Social Security Bulletin, Vol. 23, No. 5–6 (released May 1960)
by Robert J. Myers
Trust Fund Operations, 1959
from Social Security Bulletin, Vol. 23, No. 4 (released April 1960)
by Sophie R. Dales
Proposed Social Security Budget, 1960–61
from Social Security Bulletin, Vol. 23, No. 3 (released March 1960)
by Sophie R. Dales
Trust Fund Operations, 1958
from Social Security Bulletin, Vol. 22, No. 4 (released April 1959)
by Sophie R. Dales
Management of Selected Trust Funds
from Social Security Bulletin, Vol. 22, No. 2 (released February 1959)
by Glenn D. Morrow and Sophie R. Dales
Old-Age, Survivors, and Disability Insurance: Financing Basis and Policy Under the 1958 Amendments
from Social Security Bulletin, Vol. 21, No. 10 (released October 1958)
by Robert J. Myers
Trustees Report on Old-Age and Survivors Insurance and Disability Insurance Trust Funds
from Social Security Bulletin, Vol. 21, No. 8 (released August 1958)
Trust Fund Operations, 1957
from Social Security Bulletin, Vol. 21, No. 4 (released April 1958)
by Sophie R. Dales
Payments into OASI Trust Fund from Contributions
from Social Security Bulletin, Vol. 20, No. 10 (released October 1957)
by Sophie R. Dales
Disability Insurance Trust Fund, January–June 1957
from Social Security Bulletin, Vol. 20, No. 9 (released September 1957)
by Sophie R. Dales
Trustees Report on Old-Age and Survivors Insurance and Disability Insurance Trust Funds
from Social Security Bulletin, Vol. 20, No. 6 (released June 1957)
Trust Fund Operations, 1956
from Social Security Bulletin, Vol. 20, No. 4 (released April 1957)
by Sophie R. Dales
Old-Age and Survivors Insurance: Financing Basis and Policy Under 1956 Amendments
from Social Security Bulletin, Vol. 19, No. 9 (released September 1956)
by Robert J. Myers
Trustees Sixteenth Report on OASI Trust Fund
from Social Security Bulletin, Vol. 19, No. 7 (released July 1956)
Trust Fund Operations, 1955
from Social Security Bulletin, Vol. 19, No. 4 (released April 1956)
Old-Age and Survivors Insurance Administrative Expenses
from Social Security Bulletin, Vol. 18, No. 7 (released July 1955)
by Robert J. Myers
Fifteenth Trustees Report on OASI Trust Fund
from Social Security Bulletin, Vol. 18, No. 5 (released May 1955)
Trust Fund Operations, 1954
from Social Security Bulletin, Vol. 18, No. 4 (released April 1955)
Trust Fund Operations, 1953
from Social Security Bulletin, Vol. 17, No. 4 (released April 1954)
Actuarial Aspects of Financing Old-Age and Survivors Insurance
from Social Security Bulletin, Vol. 16, No. 6 (released June 1953)
by Robert J. Myers
Trust Fund Operations, 1951
from Social Security Bulletin, Vol. 15, No. 4 (released April 1952)
Financial Policy in Old-Age and Survivors Insurance, 1935–50
from Social Security Bulletin, Vol. 14, No. 6 (released June 1951)
by James S. Parker
Trust Fund Operations, 1950
from Social Security Bulletin, Vol. 14, No. 4 (released April 1951)
Trust Fund Operations in 1949
from Social Security Bulletin, Vol. 13, No. 4 (released April 1950)
Trustees' Report on Old-Age and Survivors Insurance Trust Fund
from Social Security Bulletin, Vol. 12, No. 4 (released April 1949)
Trust Fund Operations in 1948
from Social Security Bulletin, Vol. 12, No. 3 (released March 1949)
Comparison of Actual Experience With Estimates in the Trustees' Reports
from Social Security Bulletin, Vol. 11, No. 5 (released May 1948)
by Robert J. Myers
Economic Factors in Long-Range Cost Estimates of Old-Age and Survivors Insurance
from Social Security Bulletin, Vol. 7, No. 4 (released April 1944)
by Michael T. Wermel
Actuarial Factors in Old-Age and Survivors Insurance
from Social Security Bulletin, Vol. 7, No. 4 (released April 1944)
Long-Range Trend in Per Capita Income and Wages
from Social Security Bulletin, Vol. 5, No. 12 (released December 1942)
by W. S. Woytinsky
Financing Old-Age Insurance
from Social Security Bulletin, Vol. 2, No. 4 (released April 1939)
by Eleanor L. Dulles
Cost Factors in Old-Age Insurance
from Social Security Bulletin, Vol. 1, No. 7 (released July 1938)
by W. R. Williamson
Accounting Operations of the Bureau of Old-Age Insurance
from Social Security Bulletin, Vol. 1, No. 6 (released June 1938)
by Joseph L. Fay and Max J. Wasserman