BOARD OF TRUSTEES OF THE FEDERAL 

OLD-AGE AND SURVIVORS INSURANCE AND 

FEDERAL DISABILITY INSURANCE TRUST FUNDS 

WASHINGTON, D.C., MAY 31, 2013 

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, 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 within the next 10 years. As shown in 

the 2013 OASDI Trustees Report, which we are issuing today and a copy of which is 

attached, the projected asset reserves of the DI Trust Fund fall below 20 percent of annual 

cost during 2015 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 one year later, in 2016, and only about 80 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 requires the Board of Trustees of the 

Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds (the 

Board) to submit a report to each House of the Congress when it determines that the 

balance ratio of a trust fund for any calendar year may become less than 20 percent. The 

balance ratio is the ratio of asset reserves at the beginning of a year to the cost for that 

year.

1

 Section 709 further requires that the report include: 

 . . . 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 Disability Insurance Trust Fund—Each year, the Board prepares a report, 

commonly referred to as the Trustees Report, on the financial outlook for the Social 

Security trust funds. Estimates in the 2013 Trustees Report show that although the OldAge and Survivors Insurance (OASI) Trust Fund and the theoretical combined OASI and 

Disability Insurance (DI) Trust Funds are adequately financed through the 10-year shortrange projection period under intermediate assumptions, the DI fund alone is not. 

 

1

 This ratio is also called a trust fund ratio in the 2013 OASDI Trustees Report. 
Under

Truste

the DI

and be

the co

fund r

The B

DI Tru

regard

Maint

minim

below

amoun

of equ

goal. W

the 20

meani

for the

The ad

balanc

r the interme

ees’ best esti

I Trust Fund

ecoming dep

ombined OA

reserve deple

Balance ratio

Board believe

ust Fund in t

d to the amou

taining a Ba

mum annual 

w 20 percent 

nts of: (1) ad

ual amounts 

We chose th

013 Trustees

ingful for ye

e DI Trust F

dditional pay

ce ratio diffe

ediate assum

imate of futu

d steadily dec

pleted in 201

SI and DI Tr

etion. 

os for the OAS

law 

es that repor

this and prev

unt of time n

alance Ratio

amounts of c

over the nex

dditional pay

of payroll ta

his period bec

 Report and 

ears farther in

und would r

yroll tax rev

er somewhat

mptions of the

ure economic

cline, falling

16. The figur

rust Funds a

SI and DI Trust

under the Inter

2013 Truste

rting the exp

vious letters 

necessary to 

o of at Leas

change nece

xt 10 years. F

yroll tax reve

ax revenue in

cause it coin

because nom

n the future. 

require large

enue amoun

t from the re

e 2013 Trust

c and demog

g below 20 p

re below sho

and for each 

t Funds, separa

rmediate Assum

ees Report, 199

ected future 

fulfills the s

alleviate the

t 20 Percen

essary to kee

For each yea

enue; (2) cos

ncreases and

ncides with t

minal dollar 

Maintaining

er changes af

nts required t

quired reduc

tees Report (

graphic trend

percent of an

ows the estim

fund separat

ately and comb

mptions of the

90-2040 

decrease in 

statutory req

e inadequacy

nt—The follo

ep the DI bal

ar through 20

st reductions

d cost reduct

the short-ran

amounts be

g a balance r

fter 2022. 

to meet the 2

ctions in cos

(those repres

ds), the asset

nnual cost du

mated balanc

ately up to th

bined, based on

the balance 

quirement to 

y in a pruden

owing table 

lance ratio fr

022, the tabl

s; and (3) a c

tions needed

nge projectio

come increa

ratio of at le

20-percent m

st. Payroll tax

senting the 

t reserves of

uring 2015 

ce ratios for 

he date of tru

n present 

ratio for the

give due 

nt manner. 

shows the 

rom falling 

le shows the

combination

d to meet this

on period in 

asingly less 

ast 20 perce

minimum DI 

x revenue 

2 

f

ust 

e

n

s

nt 
3 

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

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

affect both asset 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 cost reductions. 

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

Assumptions of the 2013 Trustees Report 

(In billions) 

Calendar 

year 

Additional 

payroll tax 

revenue only 

Cost reductionsa

only 

Total amounts of additional payroll tax 

revenue and cost reductionsa under a 

combined approach 

2015 $8.1 $1.6 $4.9 

2016 31.2 32.0 31.6 

2017 28.3 29.1 28.7 

2018 25.7 26.3 26.0 

2019 24.4 24.8 24.6 

2020 24.0 24.0 24.0 

2021 25.0 25.0 25.0 

2022 26.4 26.2 26.3 

Total, 

2015-2022 193.2 189.1 191.1 a

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

reductions that would occur automatically due to income taxes on Social Security benefits. 

A projected trust fund level of 20 percent of annual cost may be sufficient to enable the 

timely payment of benefits but does not provide an adequate reserve against adverse 

contingencies. A more stringent measure of trust fund strength is the test of short-range 

financial adequacy. As described in the 2013 Trustees Report, meeting this test requires 

that the estimated balance ratio remain at or above 100 percent if the current ratio is at least 

100 percent. If the current balance ratio is under 100 percent, then the projected ratio must 

reach 100 percent by the beginning of the sixth year and remain at or over 100 percent 

throughout the remainder of the 10-year short-range period. In addition, projected financial 

resources must be sufficient to pay all estimated costs over the entire 10-year period. We 

apply this test based on our intermediate assumptions. Compliance with this test should be 

an important goal for any statutory adjustments designed to strengthen the financial 

condition of the DI Trust Fund. 

Recommendation—Based on the intermediate estimates in the 2013 Trustees Report, the 

asset reserves of the DI Trust Fund would fall below 20 percent of annual cost during 2015 

and would be depleted in 2016 in the absence of corrective legislation. Lawmakers should 

take prompt action to strengthen the short-term finances of the DI Trust Fund. 

As described above, lawmakers could choose to increase revenues to the DI Trust Fund 

independent of any effect on the OASI program, to reduce cost through modification of the 

DI program, or to use a combination of methods to strengthen the financial condition of the 

DI Trust Fund. Such actions would improve the finances of the DI Trust Fund without a 

corresponding diminution in OASI Trust Fund asset reserves.