Social Security (Old-Age, Survivors, and Disability Insurance)
The Old-Age, Survivors, and Disability Insurance (OASDI) program provides monthly benefits to qualified retired and disabled workers and their dependents, and to survivors of insured workers. Eligibility and benefit amounts are determined by the worker's contributions to Social security. Benefits are paid as an earned right to workers, their families, and their survivors. There is no means test to qualify for benefits.
At the end of December 2003, 47.0 million people were receiving benefits at a rate exceeding $39 billion each month (more than $470 billion annually). According to the latest Social security Trustees Report, these cash benefits made up 4.3 percent of the nation's gross domestic product. During the same year, approximately 154 million employees and self-employed workers, along with employers, contributed $533.5 billion to the OASDI trust funds-through which contributions are credited and benefits are paid.
Social Security benefits are essential to the economic well-being of millions of individuals. Social security pays benefits to 90 percent of those 65 or older. It is the major source of income (providing 50 percent or more of total income) for 66 percent of the beneficiaries. It contributes 90 percent or more of income for one-third of the beneficiaries and is the only source of income for 22 percent of them.
Contributions and Trust Funds
A person contributes to Social security through either payroll taxes or self-employment taxes under the Federal Insurance Contributions Act (PICA) or the Self-Employed Contributions Act (secA). Employers match the employee contribution, while self-employed workers pay an amount equal to the combined employer-employee contributions. (Self-employed workers receive a special tax deduction to ease the impact of paying the higher rate.) There is a maximum yearly amount of earnings subject to OASDI taxes, $87,900 in 2004. There is no upper limit on taxable earnings for Medicare Hospital Insurance. Employees whose contributions exceed the maximum taxable amount because they worked for more than one employer can receive refunds of excess PICA payments when they file their tax returns.
Taxes are allocated to the Old-Age (Retirement) and Survivors Insurance (OASI), the Disability Insurance (Dl), and the Hospital Insurance (HI) Trust Funds. In addition to the taxes on covered earnings, OASI and Dl trust fund revenues include interest on trust fund securities, income from taxation of OASI and Dl benefits, certain technical transfers, and gifts or bequests. By law, the OASI and Dl trust funds may only be disbursed for
1. Monthly benefits for workers and their families.
2. Vocational rehabilitation services for disabled beneficiaries.
3. Administrative costs (currently less than 1 percent of expenditures).
4. The lump-sum death payment to eligible survivors.
Revenue received from PICA payments is transferred to the U.S. Treasury. PICA revenue in excess of outlays is used to purchase special interest-bearing Treasury bonds. These securities remain assets of the trust funds until needed to cover Social security costs.
Structure and Organization
The OASDI program is administered by the Social security Administration (SSA), which became an independent agency in 1995. The commissioner of Social security serves a 6-year term following appointment by the president and confirmation by the Senate. A bipartisan Social security Advisory Board serves to review existing laws and policies and commissions studies and issues recommendations intended to anticipate changing circumstances. The president appoints three of the seven board members, and Congress appoints the other four members.
The Social Security Administration is headquartered in Baltimore, Maryland. Major headquarter components include the National Computer Center that contains SSA's mainframe computers that drive our systems, much of the executive staff for policy, programs, and systems, as well as field support components. …