Social Insecurity

Trust fund depletion

What happens when the Social Security trust fund runs out of money? Millions of people may find out soon. The program's disability insurance (D.I.) trust fund—a legally separate and distinct entity from the one that pays retirement benefits—is set to run dry, the Obama administration admitted in July.

A report from Social Security's public trustees estimates that the trust fund will be depleted at the end of 2016, leaving the program to pay out benefits based only on revenues collected from payroll taxes. But the revenue generated by those taxes is only expected to cover about 81 percent of the program's expenditures, leaving an estimated 11 million people without their full benefits.

The Obama administration called on Congress to pass legislation allowing some funds to be transferred from the main Social Security trust fund to the D.I. trust fund. The program's trustees grudgingly agree, but also note that Congress has already done this once before, in 1994, when the trust fund faced a similar shortfall. That move was designed to give policy makers time to enact broader systemic reforms that would make the program sustainable.

Instead, it merely delayed the reckoning. As a result, the report says, "there are fewer reform options available now than there were in the 1990s, when the projected date of reserve depletion was more distant." Another reallocation plan would likely "serve to delay DI reforms and much needed corrections for [old age, survivor, and disability insurance] as a whole." In other words, the entire program is in need of drastic reform.