BOARD OF TRUSTEES OF THE FEDERAL

OLD-AGE AND SURVIVORS INSURANCE AND

FEDERAL DISABILITY INSURANCE TRUST FUNDS

WASHINGTON, D.C., JULY 28, 2014

HON. JOHN A. BOEHNER,

Speaker of the House of Representatives.

DEAR MR. SPEAKER:

In accordance with the requirements of section 709 of the Social Security Act, 

“Recommendations by Board of Trustees to Remedy Inadequate Balances in the Social 

Security Trust Funds”, we are writing to notify you that we project that the asset reserves 

held in the Federal Disability Insurance (DI) Trust Fund will become inadequate under the 

meaning of this section within the next 10 years. As shown in the 2014 OASDI Trustees 

Report, which we are issuing today and a copy of which is attached, the projected reserves 

expressed as a percentage of annual program cost (the balance ratio1) of the DI Trust Fund 

fall below 20 percent for calendar year 2016 based on our intermediate set of economic, 

demographic, and programmatic assumptions. Moreover, we project that the reserves of 

the DI Trust Fund will be depleted soon afterwards, during the fourth calendar quarter of 

2016, and only about 81 percent of benefits scheduled in current law will be payable at that 

time if no legislative action is taken.

Background—Section 709 of the Social Security Act specifies:

If the Board of Trustees . . . determines at any time that the balance ratio 

of any such Trust Fund for any calendar year may become less than 20 

percent, the Board shall promptly submit to each House of the Congress a 

report setting forth its recommendations for statutory adjustments affecting 

the receipts and disbursements of such Trust Fund necessary to maintain 

the balance ratio of such Trust Fund at not less than 20 percent, with due 

regard to the economic conditions which created such inadequacy in the 

balance ratio and the amount of time necessary to alleviate such 

inadequacy in a prudent manner. The report shall set forth specifically the 

extent to which benefits would have to be reduced, taxes . . . would have to 

be increased, or a combination thereof, in order to obtain the objectives 

referred to in the preceding sentence.

The Board believes that issuing a report under this section whenever the balance ratio of a 

trust fund is expected to fall below 20 percent within the next ten years provides 

reasonable advance notice and time for prudent action to alleviate inadequate financing. 

The annual reports that the Board submits to the Congress under section 201(c) of the 

 1 This ratio is also called a trust fund ratio in the 2014 OASDI Trustees Report.
2

Social Security Act (commonly referred to as the Trustees Reports) provide a more 

extensive evaluation of the actuarial status of the trust funds through the next 75 years. 

The Disability Insurance Trust Fund—Estimates in the 2014 Trustees Report show that 

although the Old-Age and Survivors Insurance (OASI) Trust Fund and the theoretical 

combined OASI and DI Trust Funds are adequately financed in the meaning of this section 

(709) through the next 10 years under intermediate assumptions, the DI fund alone is not.

Under the intermediate assumptions of the 2014 Trustees Report (those representing the 

Trustees’ best estimate of future economic and demographic trends), the DI Trust Fund

reserves steadily decline, falling below 20 percent of annual cost by the beginning of 

calendar year 2016 and becoming depleted in the fourth calendar quarter of 2016. The 

figure below shows the estimated balance ratios for the combined OASI and DI Trust 

Funds and for each fund separately up to the date of trust fund reserve depletion.

Balance ratios for the OASI and DI Trust Funds, separately and combined, 

based on present law under the Intermediate Assumptions of the

2014 Trustees Report, 1990-2035

Maintaining a Balance Ratio of at Least 20 Percent—The following table shows 

minimum annual amounts of change necessary for each of the next 10 years to keep the DI 

balance ratio from falling below 20 percent. For each year through 2023, the table shows 

the amounts of: (1) additional payroll tax revenue alone; (2) net cost reductions alone; and 

(3) a combination of equal amounts of payroll tax revenue increases and net cost 

reductions needed to meet this goal. Maintaining a balance ratio of at least 20 percent for 

the DI Trust Fund after 2023 would require changes in revenue and/or net cost in 

subsequent years that are similar when expressed as a percentage of total program costs.
3

The additional payroll tax revenue amounts required to meet the 20-percent minimum DI 

balance ratio differ somewhat from the required net reductions in cost. Payroll tax revenue 

changes affect trust fund reserves (the numerator of the balance ratio) but have little if any 

immediate effect on cost (the denominator); benefit changes needed to reduce net program 

cost affect both reserves and cost directly and simultaneously. Under the combined 

approach, roughly one-half of the amounts shown would be raised through additional 

payroll tax revenue and one-half would be implemented through net cost reductions.

Amounts required to prevent DI balance ratio from declining below 20 percent 

under the Intermediate Assumptions of the 2014 Trustees Report

(In billions)

Calendar 

year

Additional 

payroll tax 

revenue only

Net cost

reductionsa only

Total amounts of additional payroll tax 

revenue and net cost reductionsa under a 

combined approach

2015 $2.7 – –

2016 29.7 $26.9 $29.7

2017 27.4 28.2 27.8

2018 25.1 25.7 25.4

2019 23.8 24.2 24.0

2020 23.2 23.2 23.2

2021 23.9 23.9 23.9

2022 24.9 24.9 24.9

2023 26.2 26.2 26.2

Total,

2015-2023 206.9 203.1 205.0 a

Amounts shown for net cost reductions through changes in benefits are net of partially offsetting 

reductions in income from income taxes on Social Security benefits.

Recommendation—Based on the intermediate projections in the 2014 Trustees Report, 

the DI Trust Fund reserves will fall below 20 percent of annual cost by the beginning of 

calendar year 2016 and will become depleted in the fourth calendar quarter of 2016 in the 

absence of legislation to address this imbalance between scheduled benefits and revenue. 

Lawmakers should take prompt action to strengthen the actuarial status of the DI Trust 

Fund.

Lawmakers could choose to increase revenues to the DI Trust Fund, to reduce cost through 

modification of the DI program benefit levels or eligibility requirements or to use a 

combination of methods to strengthen the financial condition of the DI Trust Fund. Such 

actions could apply only to the DI program benefits and revenue, or might have effects also 

on the OASI program.

Lawmakers may consider responding to the impending DI Trust Fund reserve depletion, 

as they did in 1994, solely by reallocating the payroll tax rate between OASI and DI. Such 

a response might serve to delay DI reforms and much needed financial corrections for 

OASDI as a whole. However, enactment of a more permanent solution could include a tax 

reallocation in the short-run.