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<p><b>Frequently Asked Questions</b>
about the Social Security Trust Funds
</p>
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<p><a href="#">What are the Social Security Trust Funds?</a></p>
<div><p> The Social Security Trust Funds are the <a href="describeoasi.html">Old-Age
and Survivors Insurance</a> (OASI) and the <a href="describedi.html">Disability
Insurance</a> (DI) Trust Funds. These funds are accounts managed
by the Department of the Treasury. They serve two purposes:
(1) they provide an accounting mechanism for tracking all income to and disbursements
from the trust funds, and (2) they hold the accumulated asset reserves. These
accumulated reserves provide automatic spending authority to pay benefits.
The Social Security Act limits trust fund expenditures to benefits
and administrative costs. </p>
<p>
Benefits to retired workers and their families, and to families of deceased
workers, are paid from the OASI Trust Fund. Benefits to disabled workers and
their families are paid from the DI Trust Fund. Benefit payments accounted for about 99 percent of the total
cost of the combined OASI and DI funds in calendar year 2023.</p>
<p>
A Board of Trustees oversees the financial operations of the trust funds. The
Board reports annually to the Congress on the <a href="../TR/index.html">financial
status of the trust funds</a>.</p></div>
<p><a href="#">How are the trust funds invested?</a></p>
<div><p>By law, income to the trust funds must be invested, on a daily basis,
in securities guaranteed as to both principal and interest by the
Federal government. All securities held by the trust funds are
"special issues" of the United States Treasury. Such securities are
available only to the trust funds. </p>
<p>
In the past, the trust funds have held marketable Treasury
securities, which are available to the general public.
Unlike marketable securities, special issues can be redeemed at any time at
<i>face value</i>. Marketable securities are subject to the forces of the
open market and may suffer a loss, or enjoy a gain, if sold before maturity.
Investment in special issues gives the trust funds the same flexibility as
holding cash. </p>
<p>
Data on <a href="investheld.html">trust fund investments</a> provide
a breakdown by interest rate and trust fund for any month after 1989.
</p></div>
<p><a href="#">What interest rate do the trust funds' invested assets earn?</a></p>
<div><p>The rate of interest on special issues is determined by a
<a href="intrateformula.html">formula</a> enacted in 1960.
The rate is determined at the end of each month and applies to new
investments in the following month. </p>
<p>
The numeric average of the 12 <a href="newIssueRates.html">monthly
interest rates</a> for 2023 was 4.125 percent. The annual
<a href="effectiveRates.html">
effective interest rate</a> (the average rate of return on <i>all</i>
investments over a one-year period) for the OASI and DI Trust Funds, combined,
was 2.387 percent in 2023. This lower effective rate resulted because
the funds hold special-issue bonds acquired in past years when
<a href="intRates.html">interest rates</a> were lower.
</p></div>
<p><a href="#">What happens to the taxes that go into the trust funds?</a></p>
<div><p> Tax income is deposited on a daily basis and is invested in
"<a href="specialissues.html">special-issue</a>" securities. The cash
exchanged for the securities goes into the general fund of the
Treasury and is indistinguishable from other cash in the general fund.
</p></div>
<p><a href="#">If all the income is invested, how do benefits get paid each month?</a></p>
<div><p>Money to cover program cost (mainly benefit payments) from the trust funds
comes from the redemption or sale of securities held by the trust funds.
When "special-issue" securities are redeemed, interest is paid. In fact,
the principal amount of special issues redeemed, plus the corresponding
interest, is just enough to cover the required cost.</p></div>
<p><a href="#">What were the amounts of securities bought and sold during recent years?</a></p>
<div><p>The amount bought in 2023 was $1,565 billion, while the amount sold
was $1,607 billion.
See <a href="transactions.html">investment transactions</a> for more
detail and earlier years.</p></div>
<p><a href="#">Why do some people describe the "special issue"
securities held by the trust funds as worthless IOUs? &nbsp;
What is SSA's reaction to this criticism?</a></p>
<div><p>Money flowing into the trust
funds is invested in U. S. Government securities. Because the government
spends this borrowed cash, some people see the
trust fund asset reserves as an accumulation of securities that the
government will be unable to make good on in the future.
Without legislation to restore long-range solvency of the
trust funds, redemption of long-term securities prior to maturity
would be necessary.</p>
<p>
Far from being "worthless IOUs," the investments held by the trust funds
are backed by the full faith and credit of the U. S. Government.
The government has always repaid Social Security, with interest.
The special-issue securities are, therefore, just as safe as U.S.
Savings Bonds or other financial instruments of the Federal government. </p>
<p>
Many options are being considered to restore long-range
<a href="../solvency/index.html">trust fund solvency</a>.
These options are being considered now, well in advance of the year
the trust fund reserves are likely to be depleted. It is thus likely that legislation
will be enacted to restore long-term solvency, making it unlikely that
the trust funds' securities will need to be redeemed on a large scale
prior to maturity.</p></div>
<p><a href="#">Can the Social Security Trust Funds remain solvent without making changes to the program?</a></p>
<div><p> In the annual <a href="../TR/index.html">Trustees Report</a>,
projections are made under three alternative sets of economic,
demographic, and programmatic assumptions. Under one of these sets (labeled "Low Cost")
in the 2024 Trustees Report, the combined trust funds would be temporarily depleted before
returning to positive levels by the end of the 75 year projection period. Under
the other two sets (the "Intermediate" and "High Cost") in the 2024 Trustees Report, the combined trust
fund reserves become depleted within the next 15 years. The intermediate
assumptions reflect the Trustees' best estimate of future experience. </p>
<p>
Some benefits could be paid even if the trust fund reserves are depleted. For example,
under the intermediate assumptions, annual income to the trust funds is projected
to equal about eighty percent of program cost once the trust fund reserves become
depleted. If no legislation has been enacted to restore long-term solvency
by that time, about three-quarters of scheduled benefits could be paid in
each year thereafter. </p>
<p>
The Trustees believe that extensive public discussion and analysis of the
long-range financing problems of the Social Security program are essential in
developing broad support for changes to restore the long-range balance
of the program.
</p></div>
<p><a href="#">Were the asset reserves of the Social Security Trust Funds depleted in the past?</a></p>
<div><p>The reserves of the larger trust fund (OASI), from which retirement benefits are
paid, were nearly depleted in 1982. No beneficiary was shortchanged because
the Congress enacted temporary emergency legislation that permitted
borrowing from other Federal trust funds and then later enacted
legislation to strengthen OASI Trust Fund financing. The borrowed
amounts were repaid with interest within 4 years.</p></div>
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