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 their 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.
Key Takeaways
- The Old-Age and Survivors Insurance Trust Fund is a Treasury account used to pay Social Security benefits.
- The fund holds receipts from payroll taxes earmarked for Social Security benefits other than disability insurance under the Federal Insurance Contributions Act and the Self-Employment Contributions Act.
- The fund has the standing authority to pay monthly benefits to retired workers and their survivors without separate congressional appropriations.
- The OASI fund is expected to exhaust its surplus in 2033, at which point its receipts are only expected to amount to 77% of projected payment obligations.
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 that aren't 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 that are 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 (COLAs) 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. In October 2023, the SSA announced a 3.2% cost-of-living adjustment to Social Security benefits for 2024.
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 that of OASI, 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.
The OASI and DI Trust funds are known collectively as Social Security. They provide retirement, survivorship, and disability benefits to almost 67 million Americans per month, paying out more than $1.4 trillion each year.
Limitations of the OASI Trust Fund
The OASI and DI trust funds held a combined $2.83 trillion at the end of 2022. They're expected to exhaust those reserves by 2034, according to the 2023 annual report by the funds' trustees.
OASI Retirement and Survivorship Benefits
On its own, OASI is projected to run out of surplus funds in 2033, a year earlier than OASDI and a year earlier than projected in the trustees' prior year's annual report. OASI's income from payroll tax receipts is expected to amount to 77% of the projected benefit payouts at the point its surplus runs out.
Disability Benefits
The 2023 report projected a DI surplus persisting until 2097, a year later than 2022's projection.
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, which is a significantly larger age group than the one replacing it in the workforce.
A 65-year-old retiree had a life expectancy of not quite 14 years in 1940, versus just over 20 years in 2022. The number of Americans who are age 65 and older is expected to increase from 58 million in 2022 to 76 million by 2035.
The ratio of workers paying into Social Security per benefits recipient is projected to decline from 2.7 in 2023 to 2.3 in 2035 as a result. The U.S. Congress will have to make changes to replenish the fund if future retirees are to receive full benefits.
Is OASI the Same As Social Security?
Yes, OASI is the same as Social Security. Social Security consists of two parts. The first part is Old-Age and Survivors Insurance, which pays benefits to retirees, their families, and survivors. The second part is Disability Insurance, which pays benefits to disabled workers.
Which Trust Fund Pays for Retirement and Survivor Benefits?
The trust fund that pays for retirement and survivor benefits is the Old-Age and Survivors Insurance Trust Fund. The fund that pays benefits to disabled workers is the Disability Insurance Trust Fund.
How Is the OASI Account Funded?
The OASI account is funded through payroll taxes. All employees are taxed 6.2% of their incomes for Social Security up to a cap of $168,600 in 2024. The taxes fund the OASI Trust Fund, which pays retirement benefits.
The Bottom Line
Payroll taxes fund the Old Age and Survivors Insurance Trust Fund. The ongoing wave of baby boomer retirements is expected to reduce the amount of taxes collected and earmarked for OASI.
