BOARD OF TRUSTEES OF THE FEDERAL 

OLD-AGE AND SURVIVORS INSURANCE AND 

FEDERAL DISABILITY INSURANCE TRUST FUNDS 

WASHINGTON, D.C., JUNE 22, 2016 

HON. JOSEPH R. BIDEN, JR., 

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 2016 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 2022 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 third calendar quarter of 

2023, and only about 89 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 2016 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 2016 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 2016 Trustees Report (those representing the 

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

reserves rise until 2019 and then decline, falling below 20 percent of annual cost by the 

beginning of calendar year 2022 and becoming depleted in the third calendar quarter of 

2023. 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 

2016 Trustees Report, 1990-2040 

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

amounts of change necessary for each of the next 10 years required to achieve a stable DI 

balance ratio of 20 percent beginning at the point the balance ratio is projected under 

present law to fall below 20 percent. For each year through 2025, 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 2025 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 2016 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 

2021 $12.8 $8.6 $10.7 

2022 20.6 20.7 20.6 

2023 20.7 21.0 20.8 

2024 20.5 20.6 20.5 

2025 21.0 21.2 21.1 

Total, 

2021-2025 95.6 92.1 93.9 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 2016 Trustees Report, 

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

calendar year 2022, and will become depleted in the third calendar quarter of 2023 in the 

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

We note that results presented a year ago based on the intermediate projections in the 2015 

Trustees Report indicated that the DI Trust Fund reserves would be depleted in late 2016. 

The change in projected reserve depletion date is due primarily to the enactment of the 

Bipartisan Budget Act of 2015, which was projected to extend the reserve depletion date of 

the DI Trust Fund by six years, to 2022 from 2016, largely by temporarily reallocating a 

portion of the payroll tax rate from the OASI Trust Fund to the DI Trust Fund. The effect 

of updated programmatic, demographic, and economic data since the issuance of the 2015 

Trustees Report extended the DI Trust Fund reserve depletion date by an additional year, 

to the third quarter of 2023, in this year's report. 

However, while the estimated reserve depletion of the DI Trust Fund has been delayed to 

2023, lawmakers still need to take prompt action to strengthen the actuarial status of the DI 

Trust Fund before 2023. 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.