The Social Security trust funds are two separate accounts at the U.S. Treasury that collect dedicated payroll tax revenue and pay out retirement, survivor, and disability benefits. Federal law under 42 U.S.C. § 401 keeps them legally distinct: the Old-Age and Survivors Insurance (OASI) fund pays retirees, spouses, children, and survivors of deceased workers, and the Disability Insurance (DI) fund pays workers who meet the medical and work-history tests for disability, along with their eligible family members.1Office of the Law Revision Counsel. 42 USC 401 – Trust Funds According to the 2025 Trustees Report, the OASI fund is projected to exhaust its reserves in 2033, after which continuing payroll taxes would still cover about 77 percent of scheduled benefits.2Social Security Administration. A Summary of the 2025 Annual Reports
Two Funds, Not One
Because the funds are legally separate, one cannot automatically rescue the other. Congress has occasionally rebalanced the payroll tax split between them to handle short-term pressure, and in the early 1980s it briefly let OASI borrow from DI and Medicare when OASI was close to running dry. That authority has lapsed, and the loans were repaid with interest by 1986.3Social Security Administration. Inter-Fund Borrowing Among the Trust Funds
The two funds also sit in very different financial positions today. OASI is under real pressure; DI is projected to pay full benefits through at least 2099. Analysts often quote a combined figure because Congress could, in theory, merge the two, and on that combined basis the depletion date pushes out to 2034.4Social Security Administration. 2025 OASDI Trustees Report
Where the Money Comes From
Three streams feed the trust funds: payroll taxes, income taxes on benefits paid to higher-income recipients, and interest on invested reserves. Payroll taxes carry most of the load. Under the Federal Insurance Contributions Act, employees and employers each pay 6.2 percent of wages, for a combined 12.4 percent.5Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates The tax applies only up to a wage cap that rises with average wages each year. For 2026, the cap is $184,500, so earnings above that amount are not subject to Social Security tax.6Social Security Administration. What Is the Current Maximum Amount of Taxable Earnings for Social Security
Self-employed workers pay both halves themselves under the Self-Employment Contributions Act, for a full 12.4 percent on net self-employment income. The IRS lets them deduct the employer-equivalent half when calculating adjusted gross income, which lowers income tax but not the self-employment tax itself.7Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes) These receipts flow from the general fund of the Treasury into the appropriate trust fund, and the only legal uses for the money are paying benefits and covering the program’s administrative costs.8Social Security Administration. What Are the Trust Funds
The second stream is the federal income tax on Social Security benefits themselves. Under 26 U.S.C. § 86, whether your benefits are taxed depends on “combined income” — adjusted gross income, plus any nontaxable interest, plus half of your Social Security benefits.9Office of the Law Revision Counsel. 26 USC 86 – Social Security and Tier 1 Railroad Retirement Benefits For single filers, no benefits are taxed below $25,000; up to 50 percent may be taxable between $25,000 and $34,000; and up to 85 percent may be taxable above $34,000. For joint filers, the brackets are $32,000 and $44,000. These thresholds have never been indexed for inflation, so more retirees cross them each year.
The One Big Beautiful Bill Act, signed into law on July 4, 2025, includes provisions reducing or eliminating the federal income tax on Social Security benefits for the large majority of recipients.10Social Security Administration. Proposals to Change Social Security Because that tax revenue had been flowing back into the trust funds, cutting it accelerates the timeline for when reserves run short. Future Trustees Reports will show the full effect.
What Happens to the Surplus
Any trust fund revenue not needed for immediate benefit payments has to be invested in interest-bearing obligations of the United States. The statute directs the Secretary of the Treasury, acting as Managing Trustee, to buy federal securities that earn interest at a rate pegged to the average market yield on Treasury bonds with at least four years to maturity.1Office of the Law Revision Counsel. 42 USC 401 – Trust Funds
In practice, the funds hold “special issue” securities that are not sold to the public and are not traded on any market.11Social Security Administration. Social Security Trust Fund Investment They are obligations from one part of the federal government to another, backed by the full faith and credit of the United States. Critics point out that the Treasury spends the cash on other government operations and hands back IOUs. Supporters note that those IOUs carry the same legal standing as any other federal debt. When benefits owed exceed incoming taxes in a given month, the Treasury redeems the securities and provides cash.
Who Watches the Funds
A six-member Board of Trustees oversees both funds. Four members serve by virtue of their office: the Secretary of the Treasury (Managing Trustee), the Secretary of Labor, the Secretary of Health and Human Services, and the Commissioner of Social Security. Two public trustees, who cannot belong to the same political party, are nominated by the President for four-year terms and confirmed by the Senate.1Office of the Law Revision Counsel. 42 USC 401 – Trust Funds
Each year, the Board publishes a Trustees Report that projects income and spending over 75 years, a practice the program has followed since 1965.12Social Security Administration. 2024 OASDI Trustees Report The projections rest on assumptions about birth rates, immigration, wage growth, and inflation, and any of those can shift substantially over decades. The report is the best single source for the program’s finances, but it is a forecast, not a guarantee.
What Depletion Actually Means
Fund depletion does not mean Social Security disappears. As long as people work and pay payroll taxes, revenue keeps flowing in. Depletion means the accumulated reserve built up over decades is gone, and the program can only pay out what it takes in each year. Without action from Congress, benefits would be reduced automatically to match available revenue: about 77 percent of scheduled OASI benefits starting in 2033 on the fund’s own numbers, or about 81 percent of combined program costs starting in 2034 if the two funds are viewed together, declining to 72 percent by 2099.4Social Security Administration. 2025 OASDI Trustees Report
The Social Security Administration’s Office of the Chief Actuary evaluates legislative proposals aimed at closing the gap. Recent proposals in Congress have included raising the payroll tax cap, adjusting the benefit formula, increasing payroll tax rates, and changing the retirement age.10Social Security Administration. Proposals to Change Social Security No single proposal has drawn the support needed to resolve the shortfall, and the closer the depletion date gets, the sharper the eventual fix has to be.
Workers Who Don’t Pay In
Not every worker pays Social Security taxes, and not every worker earns benefits. The largest exempt group is certain state and local government employees whose positions are covered by a public retirement system instead. Coverage turns on “Section 218 Agreements,” voluntary and irrevocable agreements between a state and the Social Security Administration that cover positions rather than individual people.13Social Security Administration. Section 218 Agreements Once a state opts a position in, it cannot pull it back out; positions that were never opted in stay exempt as long as the employee participates in the state’s own retirement plan.
Members of certain religious groups can apply for exemption from both Social Security and Medicare taxes using IRS Form 4029. The requirements are strict. The religious group must have existed continuously since December 31, 1950, must be opposed to accepting any form of private or public insurance, and must provide a reasonable level of living for its dependent members. The applicant permanently waives all rights to Social Security benefits.14Internal Revenue Service. Form 4029 – Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits In practice, the exemption applies almost entirely to Old Order Amish and certain Mennonite communities. Leaving the group or ceasing to follow its teachings ends the exemption, and the IRS must be notified within 60 days.