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 holding the tax receipts that fund Social Security benefits paid to retired workers, their surviving spouses, and eligible children.

The fund is managed by the Social Security Administration (SSA), which has the authority to distribute OASI Trust Fund benefits to eligible recipients.

How the OASI Trust Fund Works

The Old-Age and Survivors Insurance Trust Fund was established on Jan. 1, 1940, under 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 also has the authority to pay monthly Social Security benefits. The OASI Trust Fund has been an important part of the U.S. social safety net alongside Medicare and Medicaid.

OASI Investments

The SSA invests any OASI Trust Fund inflows not needed to meet current expenses. The OASI Trust Fund redeems, or sells, securities to make benefit payments or for other expenses. The money is invested in two types of interest-bearing federal securities:

• Special issues, which are government-backed securities only available to the trust fund
• U.S. Treasury bonds, which are government debt securities that are publicly traded

The interest earned from these investments is deposited into the OASI Trust Fund and may also be used for benefit payments.  

OASI Board of Trustees

The fund's Board of Trustees consists of six members, two of whom are appointed by the President and confirmed by the Senate. The remaining four board member positions are held ex officio by the following Cabinet-level officials:

• Secretary of the Treasury, who serves as managing trustee
• Secretary of Labor
• Secretary of Health and Human Services
• Commissioner of Social Security
  

Cost-of-Living Adjustments

The SSA adjusts Social Security benefits annually based on the increase in the cost of living, increasing payouts to offset beneficiaries' loss of purchasing power to inflation.

The cost of living adjustments (COLA) are based on changes in an inflation metric called the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which tracks the consumer prices paid by hourly and clerical workers. For example, in October 2021, the SSA announced a 5.9% cost-of-living adjustment to Social Security benefits for 2022. In October 2022, an 8.7% increase was announced for 2023.

OASI vs. OASDI

The benefits under OASI are part of a larger program called the Old-Age, Survivors, and Disability Insurance (OASDI) program. In addition to OASI, OASDI includes the Disability Insurance (DI) Trust Fund designed to help people with permanent disabilities.

The DI Trust Fund was established by amendments to the Social Security Act in 1956 and became effective in 1957. The DI Trust Fund fills a role similar to OASI's, receiving the share of payroll taxes earmarked for disability payouts and investing the surplus in the same securities as OASI until the funds are needed. The programs have the same board of trustees.

Limitations of the OASI Trust Fund

The OASI and DI trust funds held a combined $2.85 trillion at the end of 2021. They were expected to exhaust those reserves by 2035, according to the 2022 annual report by the funds' trustees.

OASI Retirement and Survivorship Benefits

OASI on its own is projected to run out of surplus funds in 2034, a year earlier than OASDI but a year later than projected in the trustees' prior annual report. At the point its surplus runs out, OASI's income from payroll tax receipts is expected to amount to 77% of the projected benefit payouts.

Disability Benefits

In contrast to the 2021 annual report estimating that the Disability Insurance (DI) Trust Fund would exhaust its surplus in 2057, the 2022 edition projected a DI surplus persisting over the entire 75-year forecast period. The report attributed the change to the recent decline in applications for disability benefits.

Causes of OASI's Financial Challenges

Social Security's solvency has been strained by gains in life expectancy and by the ongoing retirement of Baby Boomers, a significantly larger age group than the one replacing it in the workforce.

In 1940, a 65-year-old retiree had a life expectancy of not quite 14 years, versus just over 20 years now. The number of Americans 65 and older is expected to increase from 57 million in 2021 to 76 million by 2035.

As a result, the ratio of workers paying into Social Security per benefits recipient is projected to decline from 2.8 in 2022 to 2.3 in 2035. The U.S. Congress will need to make changes to replenish the fund if future retirees are to receive full current benefits.