Social Security Trust Fund
The Social Security Trust Fund is the United States federal government's means of accounting for workers' paid-in contributions that are in excess of current payments to cover retirement payouts in coming years. The Social Security system is a pay as you go system, which means that payments to current retirees come primarily from current payments into the system. Because of the policy choice made in 1983, the tax has been greater than necessary to pay for current expenditures. The surplus goes into the Social Security trust fund, and is currently at around $1.8 trillion.
Unlike private pension funds, the Social Security Trust Fund does not hold any marketable assets to secure workers' paid-in contributions. The Social Security Trust Fund "invests" surpluses in non-negotiable United States Treasury bonds and U.S. securities backed "by the full faith and credit of the government".
As the baby boomers age, future Social Security expenditures are expected to exceed future income. The rub for upcoming recipients is that the federal government has used the Social Security Trust Fund in a way which would be illegal for any private-sector company to do – in order to help balance the federal budget, the government uses the current account excess as it does any revenue: it spends it.
The relationship between the Social Security Trust Fund and the national debt requires some explanation. As of the early 21st century, the amount raised by the Social Security taxes are in excess of the payments to recipients of social security. Hence in presentations of government spending, it is tempting to include those budget surpluses in government accounts. However, this is problematic because Social Security will go into deficit by 2015, and hence if Social Security surpluses are used to balance the current budget, extra funds will be needed when Social Security goes into deficit.
The FY 2000 budget put the issue very clearly:
These [Trust Fund] balances are available to finance future benefit
payments and other Trust Fund expenditures ? but only in a bookkeeping
sense. ... They do not consist of real economic assets that can be drawn
down in the future to fund benefits. Instead, they are claims on the
Treasury that, when redeemed, will have to be financed by raising taxes,
borrowing from the public, or reducing benefits or other expenditures. The
existence of large Trust Fund balances, therefore, does not, by itself, have
any impact on the Government?s ability to pay benefits.
Source: FY 2000 Budget, Analytical Perspectives, p. 337
Board of Trustees of the Social Security Trust Fund
The Board of Trustees is made up of 6 members. 4 are automatically members because of the office they hold in the Federal Government. These 4 are:
Two additional members are appointed by the President and confirmed by the Senate to serve 4-year terms.
