Social Security funding information is on the website in the solvency section and in the annual Trustees Report section. Much of the today’s information is from the 2014 Trustees Report. OASDI means Old Age, Survivors and Disability Insurance (Social Security).
The primary portion of Social Security funding is from payroll tax. According to the 2014 Trustees Report (section B – Trust Fund Financial Operations in 2013), “In 2013, net payroll tax contributions accounted for 85 percent of total trust fund income. Net payroll tax contributions consist of taxes paid by employees, employers, and the self-employed on earnings covered by Social Security. These taxes are paid on covered earnings up to a specified maximum annual amount, which was $113,700 in 2013.”
What many people do not realize is that a portion of income tax helps fund Social Security, and Medicare too. No one pays income tax on all of their SSA benefit. Some people pay no tax on their benefits, some on up to 50 percent of benefits and some on up to 85 percent of benefits. Information about income tax and Social Security benefits are here.
Beginning in 1984, Federal law subjected up to 50 percent of an individual’s or a couple’s OASDI (Social Security) benefits to Federal income taxation under certain circumstances. Treasury allocates the revenue derived from this provision to the OASI (Old Age & Survivors Insurance) and DI (Disability Insurance) Trust Funds on the basis of the income taxes paid on the benefits from each fund.
Beginning in 1994, the law increased the maximum percentage from 50 percent to 85 percent. The HI Trust Fund (Health Insurance = Medicare) receives the additional tax revenue resulting from the increase to 85 percent.
This portion of income taxes returns to help fund Social Security retirement, survivors and disability. Again referring to the 2014 Trustees Report, in 2013 about two percent of combined Trust Fund income was from income tax paid on portions of Social Security benefits.
The third major funding source for Social Security is interest on the Trust Funds. There are two separate Social Security funds, the OASI Trust Fund and the DI Trust Fund.
Per the 2014 Trustees Report, “Interest earned on investment of trust fund asset reserves accounted for 12 percent of OASDI income. The Department of the Treasury invests trust fund reserves in interest-bearing securities issued by the U.S. Government. In 2013, the combined trust fund reserves earned interest at an effective annual rate of 3.8 percent.”
Less than one percent of combined Trust Fund income was from the General Fund of the Treasury in 2013. Most of this was to reimburse funds for the loss of revenue due to temporary economic stimulus reductions in Social Security payroll taxes.
See the 2014 Trustees Report (section B – Trust Fund Financial Operations in 2013) for more details.