According to the 2012 Board of Trustees Report for the Social Security and Medicare Trust Funds, released on April 23, 2012, the funds, though relatively stable, are being impacted by the recession. The 2012 report finds that, if no Congressional action is taken, the Social Security Old Age and Survivors Insurance (OASI) will be able to pay 100% of scheduled benefits until the year 2033. Following that, scheduled benefits would still be paid at a reduced level of about 75% after 2033 using incoming payroll tax revenue. However, the need to shore up the Disability Insurance (DI)Trust fund is much more immediate with exhaustion projected to occur in 2016. Although like the OASI fund, the DI fund would continue to pay 75% of scheduled benefits with incoming payroll tax revenue.
There are two Social Security Trust Funds – The Old Age and Survivors (OASI) Trust Fund and the Disability Insurance (DI) Trust Fund. The Social Security program administers benefits through a social insurance program. It is funded through payroll FICA taxes. The employer and employee each pay 6.2% of earnings (or 4.2% for the 2011-2012 temporary payroll tax holiday for the worker portion) and 1.45% of earnings for health insurance under Medicare Part A up to an income cap of $110,100 a year. The portion of this premium that pays for disability insurance is .9%. The remainder pays for Old Age and Survivors Insurance (OASI). Today 1 in 6 Americans receives Social Security.
News reports that Social Security is soon to be “bankrupt” are misleading. The 2012 Trustees Report found that Social Security is 100% solvent through 2033. In 2011, Social Security had a surplus. Social Security revenue plus interest income was in excess of outgoing payments by $69 billion dollars. Reserves are projected to grow to $3.1 trillion by the end of 2020. After 2033, if Congress takes no action, workers and employer contributions alone will cover 75% of scheduled benefits.