OIG Releases Report On Trust Fund Solvency
A recently published Informational Report by the Social Security Administration’s Office of Inspector General (OIG) makes clear that the newly elected Congress has a limited amount of time to arrive at a resolution for the Disability Insurance (DI) Trust Fund. While the OIG did not make any specific recommendations to Congress, it did note that “implementing changes soon would allow more generations to share in the needed revenue increases or reductions in scheduled benefits.” The report also echoes the Social Security Board of Trustees’ recommendation that Congress act as soon as possible to allow time to phase in changes for U.S. workers and beneficiaries.
The DI Trust Fund asset reserves have been declining since 2009 and are on pace to be depleted in the fourth quarter of 2016. One of the most commonly talked about plans for extending the date of solvency of the DI Trust Fund is an inter-fund transfer or reallocation from the Old-Age and Survivors Insurance (OASI) Trust Fund to the DI Trust Fund. There is historical precedence for such transfers, as it has happened 11 times throughout history, but would require an act of Congress.
The Social Security Act specifies that benefit payments can only be made from the trust funds (accumulated trust fund assets and current tax income). Therefore, if depletion occurs, the SSA would be prohibited from paying full Social Security benefits on time, and would “have to decide whether to pay disabled beneficiaries 81 percent of their scheduled benefits on time, delay benefit payments until enough funds are available, or determine another alternative.”
The report details three proposals evaluated by SSA’s Office of the Chief Actuary that would address the long-range actuarial status of the Social Security Trust Funds:
- Modifying how the cost-of-living adjustment (COLA) is calculated.
- Revising payroll taxes and how they are calculated or structured.
- Altering the full retirement age and also the minimum age at which people could begin receiving benefits.
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