Please ensure Javascript is enabled for purposes of website accessibility The solvency of the Social Security trust funds and the impact on benefits | Brown & Brown Absence Services Group

With more than 65 million Americans receiving monthly benefits from the Social Security Administration (SSA), the Social Security program provides crucial income protection for retirees, disabled workers, and widow(er)s across the United States. Despite the importance of the benefits administered, the program and its funding have long been a source of concern and deliberation for lawmakers. 

As Social Security Disability Insurance (SSDI) claim backlogs reach historic highs and applicants face a years-long wait to obtain benefits, receiving Social Security benefits has never been so contentious. Despite backlogs and growing wait times, applicants filing for much-needed benefits expect payments to be available once their application is approved. Discussions around solvency and the inability of Social Security to pay full benefits are not conversations that applicants and beneficiaries like to hear. While these conversations may be frustrating, it is important to understand how solvency may impact future benefits. 

Funding the Social Security program 
Since its inception, the Social Security program has been funded in the same way – a “pay as you go” system where beneficiaries receive payments financed by current workers, a process they would have taken part in themselves as a worker. Federal Insurance Contributions Act (FICA) payroll taxes are collected by the Internal Revenue Service (IRS) and then distributed to two separate trust funds: The Federal Old-Age and Survivors Insurance Trust Fund (OASI) and the Federal Disability Insurance Trust Fund (DI). Together, these trust funds form the Social Security Trust Funds (OASDI), providing benefits to millions of Americans and their dependents each month. For each worker, employers and employees are responsible for 12.4% in OASDI taxes (10.6% for OASI and 1.8% for DI), up to the maximum amount allowed. 

The discussions around solvency and expected funding
Hearing that the Social Security trust funds may be depleted or exhausted can be overwhelming. The reality is, however, that these discussions are quite common, particularly around election and economic cycles. Each year the Office of the Chief Actuary releases a report from the Trustees of the Social Security and Medicare trust funds on the financial status of the two programs. In addition, the Congressional Budget Office (CBO) releases an annual report on the “Long-Term Projections for Social Security.” Typically released several months apart, these reports take into account recent applications, the number of beneficiaries, total workers paying into the trust funds, and other factors when making their predictions and projections for the Social Security program. The last several reports follow a previous pattern of trust fund depletion dates fluctuating, with substantial improvement and subsequent decline possibly attributed to the COVID-19 pandemic. 

Should I be worried about my benefits? 
Solvency issues with Social Security program funds are not new news. These concerns have been present for some time and will most likely continue for the foreseeable future. Currently, there is no need to worry about the solvency of benefits. The most recent report from CBO projects both the OASI and DI trust funds will remain solvent – or fully funded – for at least the next ten years. While this is a decline from the most recent Trustees Report, a decade-long window still exists.  

In the event that the trust funds become insolvent, a significant portion of benefits would still be payable, with beneficiaries receiving a percentage of their monthly benefits. Such a situation, however, would likely lead to a poor public reaction, so it is expected that Congress would act well before insolvency. In addition, at the most recent State of the Union address, there was clear bipartisan support to continue funding both the Social Security and Medicare programs.

The Social Security program remaining solvent is of utmost importance to the team at Brown & Brown Absence Services Group. We continue to monitor updates as they come out from the federal government and will keep our clients apprised of any changes they should be made aware of. If you have any additional questions about the Social Security trust funds, you may reach out to your local office or Brown & Brown directly.