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Social Security News

Social Security Trustees Project Trust Fund Exhaustion One Year Sooner

Senior citizen advocacy groups not alarmed by 2036 deadline, see time for fix

May 15, 2011 - The Social Security Board of Trustees late Friday (May 13, 2011) released its annual report on the financial health of the Social Security Trust Funds and said they will be exhausted in 2036, one year earlier than projected last year.  one year sooner than projected last year. Most senior advocacy groups were not alarmed (see comments below news report).

 

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The Disability Insurance (DI) Trust Fund, while unchanged from last year, will be exhausted in 2018 and legislative action will be needed soon, the trustees say. At a minimum, a reallocation of the payroll tax rate between the Old-Age and Survivors Insurance (OASI) and DI would be necessary, as was done in 1994.

The Trustees also project that the combined OASDI program costs will exceed non-interest income in 2011 and will remain higher throughout the remainder of the 75-year period.

In the 2011 Annual Report to Congress, the Trustees announced:

   ● The projected point at which the combined Trust Funds will be exhausted comes in 2036 -- one year sooner than projected last year. At that time, there will be sufficient non-interest income coming in to pay about 77 percent of scheduled benefits.

   ● The point at which non-interest income fell below program costs was 2010. Program costs are projected to exceed non-interest income throughout the remainder of the 75-year period.

   ● The projected actuarial deficit over the 75-year long-range period is 2.22 percent of taxable payroll -- 0.30 percentage point larger than in last year’s report.

   ● Over the 75-year period, the Trust Funds would require additional revenue equivalent to $6.5 trillion in present value dollars to pay all scheduled benefits.

“The current Trustees Report again reflects what we have long known to be true -- we need changes to ensure the long-term solvency of Social Security and to restore younger workers' confidence in the program,” said Michael J. Astrue, Commissioner of Social Security.

“The report also highlights the more near-term shortfall in the Disability Insurance Trust Fund. Our disability programs are complex, and there is a long history of well intended ‘reforms’ causing unintended consequences.

"The President sent to Congress our Work Incentive Simplification Proposal, which would be a good start for bipartisan debate. I urge the House and Senate to review this proposed legislation carefully and schedule hearings this year.”

Other highlights of the Trustees Report include:

   ● Income including interest to the combined OASDI Trust Funds amounted to $781 billion ($637 billion in net contributions, $24 billion from taxation of benefits, $117 billion in interest, and $2 billion in reimbursements from the General Fund of the Treasury) in 2010.

   ● Total expenditures from the combined OASDI Trust Funds amounted to $713 billion in 2010.

   ● The assets of the combined OASDI Trust Funds increased by $69 billion in 2010 to a total of $2.6 trillion.

   ● During 2010, an estimated 157 million people had earnings covered by Social Security and paid payroll taxes.

   ● Social Security paid benefits of $702 billion in calendar year 2010. There were about 54 million beneficiaries at the end of the calendar year.

   ● The cost of $6.5 billion to administer the program in 2010 was a very low 0.9 percent of total expenditures.

   ● The combined Trust Fund assets earned interest at an effective annual rate of 4.6 percent in 2010.

The Board of Trustees is comprised of six members. Four serve by virtue of their positions with the federal government: Timothy F. Geithner, Secretary of the Treasury and Managing Trustee; Michael J. Astrue, Commissioner of Social Security; Kathleen Sebelius, Secretary of Health and Human Services; and Hilda L. Solis, Secretary of Labor. The two public trustees are Charles P. Blahous, III and Robert D. Reischauer.

Note: The 2011 Trustees Report is posted at www.socialsecurity.gov/OACT/TR/2011/ .

Statements by Senior Citizen Advocates on Social Security Trustees’ Report

AARP: Report Shows Social Security is Strong

“The Social Security Trustees reaffirm that the program is financially strong for decades to come and can be strengthened for the future with relatively modest adjustments,” said AARP Executive Vice President John Rother.

“With pensions, savings, and home equity down, many older workers unable to find jobs; and health costs continuing their upward climb, Social Security’s guaranteed benefits are more crucial than ever.

“The Trustees’ report shows that Social Security can pay full benefits for roughly 25 years, and approximately 75 percent of earned benefits beyond that time even if nothing is done. However, that is not good enough. AARP renews its call on Congress and the Administration to work together to shore up the system’s long-term ability to pay promised benefits to retirees, survivors, and those with disabilities.

“The report also confirms that the Social Security Trust Funds continue to grow. Debt held by the Trust Funds is a real obligation of the United States to its own people, and the American people, like any other creditor, expect that the money borrowed from them by the government will be paid back.

Strengthen Social Security Campaign Sees No Current Problem; Wants Payroll Tax Cap Raised

“The trustees’ report found that Social Security's surplus will be $69.3 billion in 2011. Those who say that Social Security is in deficit this year are flat wrong,” said Nancy Altman, Co-Chair of the Strengthen Social Security Campaign.

“By law, Social Security cannot deficit-spend and cannot borrow, so it is obvious that Social Security cannot add a penny to the federal deficit.ť

“The trustees’ report states that Social Security will be able to pay all benefits for the next quarter century, even without congressional action.

“Bottom line, Social Security works,” said Eric Kingson, Co-Chair. “Even in a bad economy, Americans continue to receive the full benefits they have earned for themselves and their families. The trustees report makes clear there is no reason to cut benefits-”not for today's seniors; not for any generation.

“This data shows that Social Security is not in crisis. It also does not contribute to the federal deficit. By law, Social Security cannot borrow and it cannot make benefit payments if it lacks the revenue to cover them. Its only recourse is to cut benefits. That is why Social Security should not be part of any deficit-reduction deal.

“The Trustees Report reminds us that lawmakers do need to address Social Security’s long-range funding gap but there is no need for haste.

“This long-range funding gap can be closed relatively painlessly by scrapping the payroll tax cap. Congress could raise the Social Security tax cap so that the 6 percent of the population that makes more than $106,800 a year pays taxes on all of their wages just like everyone else who makes less than that amount has to do. This will guarantee that full Social Security benefits can be paid for the next 75 years and beyond.”

National Committee to Preserve Social Security: Program Fine and Growing

“It’s important Americans understand the 2011 Trustees Report confirms that Social Security and Medicare continue to fulfill their mission, providing retirement and health security to millions still suffering during the worst economic crisis of a generation,” says Max Richtman, Executive Vice President/Acting CEO, National Committee To Preserve, Social Security & Medicare. 

“Beyond the doom-and-gloom news headlines and calls to cut these programs in order to save them, the fiscal facts in this annual report show that Social Security has a $2.6 trillion surplus which continues to grow. 

“While healthcare reform has extended the solvency of the Medicare Trust Fund the economic recession and high healthcare costs continue to take their toll. The bottom line is Social Security is not in crisis and further reforms to our healthcare system are necessary to bring down costs nationwide, not just in Medicare.” ť

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