BOARD OF TRUSTEES OF THE FEDERAL

OLD-AGE AND SURVIVORS INSURANCE AND

FEDERAL DISABILITY INSURANCE TRUST FUNDS

WASHINGTON, D.C., MAY 13, 2011

The Honorable John A. Boehner

Speaker of the House of Representatives

Washington, D.C. 20510

Dear Mr. Speaker:

We are writing to notify you, per the requirements of section 709 of the Social Security 

Act, that the Federal Disability Insurance (DI) Trust Fund is projected to become 

inadequate within the next 10 years. As shown in the 2011 OASDI Trustees Report, which 

we are issuing today and a copy of which is attached, the assets of the DI Trust Fund are 

projected to fall below 20 percent of annual cost during 2016 based on our intermediate set 

of economic, demographic, and programmatic assumptions. Moreover, the assets of the DI 

Trust Fund are projected to become exhausted in 2018, if no 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 assets 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 2011 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 during 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 2011 OASDI Trustees Report.
2

Under the intermediate assumptions of the 2011 Trustees Report (those representing the 

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

Trust Fund are projected to fall below 20 percent of annual cost during 2016 and are 

estimated to become exhausted in 2018. 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 exhaustion.

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

present law under the Intermediate Assumptions of the

2011 Trustees Report, 1990-2045

The Board believes that reporting the expected future decrease in the balance ratio for the 

DI Trust Fund at this time fulfills the statutory requirement to give due regard to the 

amount of time necessary to alleviate the inadequacy in a prudent manner.

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

minimum annual amounts of change necessary to keep the DI balance ratio from falling 

below 20 percent over the next 10 years. The amounts of (1) additional payroll tax

revenue, (2) cost reductions, and (3) a combination of equal amounts of payroll tax revenue 

increase and cost reduction are shown for each year through 2020. This period was chosen 

to coincide with the short-range projection period in the 2011 Trustees Report and because 

nominal dollar amounts become increasingly less meaningful for years farther in the 

future. Larger changes would be needed after 2020 in order to maintain a balance ratio of 

at least 20 percent for the DI Trust Fund.

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

differ somewhat from the required reductions in cost. Payroll tax revenue changes affect 

assets (the numerator of the balance ratio) but have little immediate effect on cost (the 

0%

50%

100%

150%

200%

250%

300%

350%

400%

450%

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045

OASI

DI

OASI and DI, 

combined
3

denominator); benefit changes needed to reduce program cost affect both assets and cost 

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 2011 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

2016 $1.4 — $0.7

2017 24.7 $21.3 23.0

2018 24.2 24.2 24.2

2019 25.0 25.0 25.0

2020 26.5 25.9 26.2

Total,

2016-2020 101.6 96.5 99.0 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 2011 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 is 

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

100 percent throughout the remainder of the 10-year short-range period. In addition, 

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

The test is applied on the basis of the 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 2011 Trustees Report, the 

assets of the DI Trust Fund would fall below 20 percent of annual cost during 2016 and 

would become exhausted in 2018 in the absence of corrective legislation. Legislative 

action should be taken to remedy the inadequate future assets of the DI Trust Fund.

Since the inception of the DI Trust Fund, inadequate assets in either the OASI or the DI 

Trust Fund have at times been remedied by reallocating part of the existing payroll tax rate 

from the more adequately financed fund to the less adequately financed fund. This has 

provided additional revenue for the inadequate fund without requiring an increase in 

overall tax rates. Though this action would improve the finances of the DI Trust Fund, it 

would produce no net improvement for the combined OASI and DI Trust Funds. Such 

action was taken most recently in 1994, when the DI Trust Fund was projected to become