Academic journal article Social Security Bulletin

The 2005 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds

Academic journal article Social Security Bulletin

The 2005 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds

Article excerpt

I. INTRODUCTION

The Old-Age, Survivors, and Disability Insurance (OASDI) program in the United States provides protection against the loss of earnings due to retirement, death, or disability. The OASDI program consists of two separate parts which pay monthly benefits to workers and their families-Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI). Under OASI, monthly benefits are paid to retired workers and their families and to survivors of deceased workers. Under DI, monthly benefits are paid to disabled workers and their families.

The Board of Trustees was established under the Social security Act to over see the financial operations of the OASI and DI Trust Funds. 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 other two members are appointed by the President and confirmed by the Senate to serve as public representatives: John L. Palmer and Thomas R. Saving, the current public Trustees, began serving their 4-year terms on October 28, 2000. They have continued serving through the issuance of this report under the provision of the Social security Act that allows a public representative whose term has expired to continue in the position until the earlier of the time at which a successor takes office or the Board's next annual report. The Deputy Commissioner of the Social security Administration (SSA) is designated as secretary of the Board.

The Social security Act requires that the Board, among other duties, report annually to the Congress on the financial and actuarial status of the OASI and DI Trust Funds. This annual report, for 2005, is the 65th such report.

II. OVERVIEW

A. HIGHLIGHTS

The report's major findings are summarized below.

In 2004

At the end of 2004, 48 million people were receiving benefits: 33 million retired workers and their dependents, 7 million survivors of deceased workers, and 8 million disabled workers and their dependents. During the year an estimated 157 million people had earnings covered by Social security and paid payroll taxes. Total benefits paid in 2004 were $493 billion. Income was $658 billion, and assets held in special issue U.S. Treasury securities grew to $1.7 trillion.

Short-Range Results

The OASI and DI Trust Funds, individually and combined, are adequately financed over the next 10 years under the intermediate assumptions. The combined assets of the OASI and DI Trust Funds are projected to increase from $1,687 billion at the beginning of 2005, or 320 percent of annual expenditures, to $3,697 billion at the beginning of 2014, or 417 percent of annual expenditures in that year. Combined assets were projected in last year's report to rise to 325 percent of annual expenditures at the beginning of 2005, and 446 percent at the beginning of 2014.

Long-Range Results

Under the intermediate assumptions, OASDI cost will increase rapidly between about 2010 and 2030, due to the retirement of the large baby-boom generation. After 2030, increases in life expectancy and relatively low fertility rates will continue to increase Social security system costs, but more slowly. Annual cost will exceed tax income starting in 2017 at which time the annual gap will be covered with cash from redeeming special obligations of the Treasury, until these assets are exhausted in 2041. Separately, the DI fund is projected to be exhausted in 2027 and the OASI fund in 2043. For the 75-year projection period, the actuarial deficit is 1.92 percent of taxable payroll, 0.04 percentage point larger than in last year's report. The open group unfunded obligation for OASDI over the 75-year period is $4.0 trillion in present value, $0.3 trillion more than the unfunded obligation estimated a year ago. …

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