On April 23, the Social Security Board of Trustees issued a report indicating financial poor health for the Social Security Trust Funds.
The trustees said in their report to Congressthat the combined assets of two trust funds (essentially, for retirees and the disabled) will be exhausted in 2033, three years sooner than projected just last year. At that time, according to projections, there will be sufficient non-interest income coming into the funds to pay about 75 percent of scheduled benefits.
The Disability Insurance (DI) Trust Fund will be exhausted in 2016, two years earlier than estimated last year. The OASI (Old-Age and Survivors Insurance) Trust Fund will be exhausted in 2035, three years earlier than previously projected. This situation is critical not only to a Social Security attorney or Social Security lawyer, but to all Americans.
Trustees also project that the program costs will exceed non-interest income this year, and will remain higher throughout the remainder of the 75-year projection period, and that, over that period, the Trust Funds need the equivalent of an additional $8.6 trillion in today’s dollars to pay all scheduled costs.
Michael J. Astrue, commissioner of Social Security, said in a press release about the report, “This year’s Trustees Report contains troubling, but not unexpected, projections about Social Security’s finances. It once again emphasizes that Congress needs to act to ensure the long-term solvency of this important program, and needs to act within four years to avoid automatic cuts to people receiving disability benefits.”
The report summarized that:
• In 2011, costs continued to exceed income (both tax and non-interest income). The size of the deficits is “largely due to a temporary reduction in the Social Security payroll tax for 2011 and 2012,” in which the employee portion of the tax was reduced from 6.2 to 4.2 percent.
• For the combined OASI and DI Trust Funds to remain solvent throughout the 75-year projection period, lawmakers could: (1) increase the combined payroll tax rate for the period in a manner equivalent to an immediate and permanent increase of 2.61 percentage points (from its current level of 12.40 percent to 15.01 percent);1 (2) reduce scheduled benefits for the period in a manner equivalent to an immediate and permanent reduction of 16.2 percent; (3) draw on alternative sources of revenue; or (4) adopt some combination of these approaches. Lawmakers would have to make significantly larger changes for future beneficiaries if they decide to avoid changes for current beneficiaries and those close to retirement age.
The Trustees recommend that lawmakers address the projected trust fund shortfalls in a timely way in order to phase in necessary changes and give workers and beneficiaries time to adjust to them. Implementing changes soon would allow more generations to share in the needed revenue increases or reductions in scheduled benefits.
The report pointed out that “Social Security will play a critical role in the lives of 56 million beneficiaries and 159 million covered workers and their families in 2012. With informed discussion, creative thinking, and timely legislative action, Social Security can continue to protect future generations.”