Old-Age and Survivors Insurance (OASI) Trust Fund
What Is the Old-Age and Survivors Insurance (OASI) Trust Fund?
The Old-Age and Survivors Insurance Trust Fund (OASI) is a U.S. Treasury account used to deposit tax receipts that fund Social Security benefits paid to retired workers, their enduring companions, and eligible children.
At the end of the day, the OASI is the long name of Social Security. The fund is managed by the Social Security Administration (SSA), which holds the authority to distribute OASI Trust Fund benefits to eligible parties.
How the OASI Trust Fund Works
The Old-Age and Survivors Insurance Trust Fund was laid out on Jan. 1, 1940, as part of the Social Security Act amendments of 1939. Payroll or employment taxes received under the Federal Insurance Contributions Act (FICA) and the Self-Employment Contributions Act (SECA) are deposited daily into the OASI Trust Fund held in a separate account at the U.S. Treasury.
The fund has automatic spending authority to pay month to month benefits and doesn't have to make special solicitations to Congress to pay benefits. The OASI Trust Fund has been an important instrument for supporting residents, with a large part of the government's expenditures being either Medicare or Social Security.
OASI Investments
The SSA contributes the funds that are not required for current expenses. The OASI Trust Fund recovers or offers securities to make benefit payments or to pay different expenses. The money is invested in two types of interest-bearing Federal securities:
- Special issues, which are government-upheld securities simply available to the trust fund
- U.S. Treasury bonds, which are government debt securities that are publicly exchanged
The interest earned from these investments is deposited into the OASI fund and used to make benefit payments.
OASI Board of Trustees
The fund's Board of Trustees comprises of six members, two of whom are appointed by the President and confirmed by the Senate. The leftover four board member positions are held by Cabinet-level officials, including the:
- Secretary of the Treasury, who is the Managing Trustee
- Secretary of the Department of Labor
- Secretary of Health and Human Services
- Commissioner of Social Security
Cost-of-Living Adjustments
Periodically, the Social Security Administration (SSA) increases the benefit in view of an increase in the cost of living, which accounts for inflation or the pace of rising prices in the economy.
The SSA utilizes an inflation metric called the Consumer Price Index (CPI), which computes the average prices of a basket of goods and services throughout some stretch of time. For instance, in October 2021, the SSA chose to add a 1.3% cost of living adjustment (COLA) to Social Security benefits.
OASI versus OASDI
The benefits under OASI are actually part of a larger program called the Old-Age, Survivors, and Disability Insurance (OASDI) program. The OASDI incorporates the Disability Insurance (DI) Trust Fund intended to assist individuals with permanent disabilities.
The Disability Insurance (DI) Trust Fund was laid out through the passage of the Social Security Act Amendments of 1956, and the program became effective on Jan. 1, 1957. The DI works likewise to the Social Security benefits program (OASI). Funds from the disability trust are received through payroll taxes and invested in similar securities as the OASI. The two programs additionally have similar Board of Trustees.
Together, the OASI and DI Trust funds — known as Social Security — give retirement, survivorship, and disability benefits to 65 million Americans, paying out more than $1 trillion every year.
Limitations of the OASI Trust Fund
The combined OASI and DI trust funds held $2.9 trillion out of 2020. Nonetheless, the 2021 annual report from the Social Security and Medicare Board of Trustees showed that the combined funds are projected to run out of money by 2034.
OASI Retirement and Survivorship Benefits
Sadly, the OASI will run out of money sooner. The report displayed there's sufficient money to pay the scheduled retirement benefits until 2033. After that point, the funds will be drained, and just 76% of the scheduled benefits will actually want to be paid from continuing tax income.
Disability Benefits
The 2021 annual report additionally showed that the Disability Insurance (DI) Trust Fund is estimated to have sufficient money to make scheduled benefit payments until 2057. From that point forward, the DI fund's reserves will be exhausted, yet continuing tax income is estimated to be sufficient to pay 91% of scheduled benefits.
Purposes behind OASI's Financial Challenges
There are a number of financial difficulties facing Social Security. The 2021 annual report noticed that the coronavirus pandemic of 2020 had adversely impacted the financial feasibility of the trust fund.
Another test facing Social Security is life expectancy. In 1940, a 65-year-old retired person had a life expectancy of an additional 14 years, while today, it's 20 years. Additionally, population growth has added to the financial difficulties. For instance, the number of Americans 65 and older today total 57 million, and by 2035, that number is expected to increase to 76 million.
Accordingly, there will be less workers paying into Social Security. For instance, there are currently 2.7 workers for every Social Security beneficiary, and by 2035, the number of workers will be 2.3 per beneficiary. The U.S. Congress will probably have to make changes to recharge the fund, or future retired people might receive diminished benefits.
Features
- The fund has automatic spending authority to pay month to month benefits and doesn't have to make special solicitations to Congress to pay benefits.
- The Old-Age and Survivors Insurance (OASI) Trust Fund is a Treasury account used to pay out Social Security benefits.
- The OASI fund will be exhausted by 2033, and by then, just 76% of the scheduled benefits will be paid from continuing tax income.
- The fund holds deposits from the Federal Insurance Contributions Act (FICA) and the Self-Employment Contributions Act (SECA) taxes.
