The projected shortfall for one of the main trust funds through which Social Security benefits are paid has been moved up a year according to the latest annual report published in June from the Social Security Board of Trustees. If these projections do indeed come to pass, it will spell major trouble for the over 70 million Americans who are currently reliant on their monthly benefit checks, as well as for those who will age into the program in the upcoming decade and the future beyond that.
As such, in a message to the public, the Board of Trustees has urged lawmakers to take action soon in the hopes of preventing this potential shortfall. Subsequently, in pursuit of preventing this dire situation, Senator Bill Cassidy (R-La.) and Senator Tim Kaine (D-Va.) have brought forward a proposal that could help save the Social Security Trust Fund. Here is what you need to know.
Social Security projected shortfall
Social Security has two major trust funds, the Old Age and Survivors Insurance (OASI) trust fund and the Disability Insurance (DI) trust fund. According to the trustees’ report for this year, the OASI trust fund will only be able to continue paying 100% of scheduled payments until 2033. Following this, the remaining revenue would only be able to cover 77% of scheduled payments going forward. The DI trust fund, however, will be able to cover 100% of scheduled payments until 2099, which is the end of the projection period for this report.
However, if both trust funds were to be combined into the OASDI trust fund, 100% of scheduled benefits would only be covered until 2034 — a year earlier than the projections of the previous year’s report. At this point, the combined trust fund would be depleted and only around 81% of scheduled payments would be covered by the remaining revenue.
The trustees ended the report by urging lawmakers to take action. “Lawmakers have many options for changes that would reduce or eliminate the long-term financing shortfalls. Taking action sooner rather than later will allow consideration of a broader range of solutions and provide more time to phase in changes so that the public has adequate time to prepare,” they wrote.
Subsequently, Senators Bill Cassidy (R-La.) and Tim Kaine (D-Va.) brought forward a proposal that could potentially save the finances of the program.
Senators Bill Cassidy (R-La.) and Tim Kaine (D-Va.)’s proposal
In the hopes of preventing this shortfall, Senators Bill Cassidy (R-La.) and Tim Kaine (D-Va.) have now proposed that trust fund investments be diversified which would then allow for all scheduled payments to roll out without issue.
In an op-ed for The Washington Post on Tuesday, Senators Cassidy and Kaine wrote, “We propose creating an additional investment fund — in parallel to the trust fund, not replacing it — that would be invested in stocks, bonds and other investments that generate a higher rate of return, helping keep the program from running dry.”
The Senators explained that a roughly $1.5 trillion investment into the Social Security trust fund up front would be required to put this proposal into motion, however. Senators Kaine and Cassidy also cited the success of the National Railroad Retirement Investment Trust when explaining why their proposal would work.
“The Treasury would temporarily shoulder the burden of providing benefits to Social Security beneficiaries — but when the new fund’s 75 years are up, it would pay the Treasury back and supplement payroll taxes to help fill the future gap,” the pair of senators said. “The trust has remained firmly in the black, with returns even exceeding expectations at some points and with payments consistently remaining reliable and on schedule.”
“Our proposal is also consistent with virtually every other pension plan — state and private — currently operating in our country, and it matches the strategy most nations use to fund their retirement programs,” Senators Kaine and Cassidy further noted.