BOARD OF TRUSTEES OF THE FEDERAL 

OLD-AGE AND SURVIVORS INSURANCE AND 

FEDERAL DISABILITY INSURANCE TRUST FUNDS 

WASHINGTON, D.C., June 5, 2018 

HON. MICHAEL R. PENCE, 

President of the Senate. 

DEAR MR. PRESIDENT: 

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 2018 OASDI Trustees 

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

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

are projected to fall below 20 percent by the beginning of calendar year 2027 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 

2032, and only about 96 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 inadequacy in the 

balance ratio. The annual reports that the Board submits to the Congress under section 

201(c) of the Social Security Act (commonly referred to as the Trustees Reports) provide a 

 

1

 This ratio is also called a trust fund ratio in the 2018 OASDI Trustees Report. 
2 

more extensive evaluation of the actuarial status of the trust funds through the next 75 

years. 

The Disability Insurance Trust Fund—Estimates in the 2018 Trustees Report show that 

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

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 2018 Trustees Report (those representing the 

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

reserves rise through 2018 and then decline, falling below 20 percent of annual cost by the 

beginning of calendar year 2027 and becoming depleted in 2032. 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 

2018 Trustees Report, 1990-2040 

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

amounts of change necessary for each year within the next 10 years where a change would 

be required to keep the DI balance ratio from dropping below 20 percent. For each such 

year through 2027, 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. Changes in revenue 

and/or net cost would be required in subsequent years that are similar when expressed as a 

percentage of total program costs in order to maintain a balance ratio of at least 20 percent. 
3 

The additional payroll tax revenue amounts required for each year to meet the 20-percent 

minimum DI balance ratio differ somewhat from the required net reductions in cost for that 

year. 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. 

Changes required through 2027 to prevent DI balance ratio from declining below 20 percent 

under the Intermediate Assumptions of the 2018 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 

2026 $0.7 $0.0 $0.0 

2027 7.8 7.2 7.8 

Total, 

2026-2027 8.5 7.2 7.8 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. 

Note: Totals do not necessarily equal the sums of rounded components. 

Recommendation—Based on the intermediate projections in the 2018 Trustees Report, 

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

calendar year 2027, and will become depleted in 2032 in the absence of legislation to 

address this decline in reserves relative to program cost. We note that results presented a 

year ago based on the intermediate projections in the 2017 Trustees Report indicated that 

the DI Trust Fund reserves were then projected to become depleted in 2028. Revisions 

reflecting recent experience have extended the DI Trust Fund reserve depletion date by 

four years, to 2032, in this year's report. 

While the projected reserve depletion of the DI Trust Fund has been delayed to 2032, 

lawmakers still need to take action to strengthen the actuarial status of the DI Trust Fund 

before 2032. 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. 

The Board recommends that lawmakers enact appropriate legislation as soon as possible to 

make necessary adjustments for the DI program.