Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Old Age and Survivors Insurance Trust Fund

What it is:

The Old Age and Survivors Insurance Trust Fund is an account that funds the Old Age Survivors and Disability Insurance Program (OASDI). OASDI, also known as Social Security, is a federal program that provides income and health insurance to retired people, the disabled, the poor and other groups. The program started in 1935 with the signing of the Social Security Act, which was an effort to provide a safety net for the millions of people who had suffered through the Great Depression.

How it works (Example):

The Old Age and Survivors Insurance Trust Fund is an account maintained by the U.S. Treasury. The account is funded by Federal Insurance Contributions Act (FICA) and self-employment taxes. The money pays for several programs offered through the U.S. Social Security Administration, including retirement benefits, disability benefits, survivors benefits, and supplemental security income (SSI).

The OASI has a six-member board of trustees that includes the secretaries of the treasury, labor, and health and human services departments and the commissioner of Social Security. The president of the United States appoints the other two members.

Why it Matters:

Social Security and Medicare expenses constituted about 50% of the federal government’s outlays in 2011. The programs receive a substantial portion of their revenues through the collection of payroll taxes from workers and employers, and the business model has come under considerable scrutiny in recent decades because the baby boomer generation has begun to enter its retirement years and begun applying for benefits that cannot be sustained with payroll taxes from the younger generations in the workforce.