Government trust funds are dedicated accounting ledgers inside the U.S. Treasury that hold tax revenue Congress has earmarked for a specific program. Each one is legally walled off from the general fund: money collected for Social Security, Medicare, highways, aviation, or unemployment can only pay for that program, and any surplus is invested in special Treasury securities that earn interest until the cash is needed. Together these funds hold trillions of dollars and touch nearly every working American through payroll taxes, fuel taxes, airline ticket taxes, and the benefits they eventually pay out.
The Major Federal Trust Funds
Social Security is the largest of them, and it is actually two funds created under the same statute. The Old-Age and Survivors Insurance (OASI) Trust Fund pays monthly benefits to retirees, their spouses, and survivors. The Disability Insurance (DI) Trust Fund pays workers who can no longer earn a living because of a medical condition.1Office of the Law Revision Counsel. 42 USC 401 – Trust Funds A single Board of Trustees oversees both and reports on their finances to Congress every year.
Medicare uses its own pair. The Federal Hospital Insurance Trust Fund covers inpatient hospital care for elderly and disabled beneficiaries.2Office of the Law Revision Counsel. 42 USC 1395i – Federal Hospital Insurance Trust Fund The Federal Supplementary Medical Insurance Trust Fund pays for doctor visits, outpatient services, and prescription drugs.3Office of the Law Revision Counsel. 42 USC 1395t – Federal Supplementary Medical Insurance Trust Fund Each fund has its own trustees, its own revenue, and its own financial outlook.
The Highway Trust Fund pays for federal-aid highways and mass transit.4Office of the Law Revision Counsel. 26 USC 9503 – Highway Trust Fund Its revenue comes mostly from motor fuel taxes, along with excise taxes on heavy trucks and tires. As vehicles have gotten more efficient and electric vehicles pay no federal fuel tax, receipts have not kept up with spending. Congress has moved about $275 billion out of the general fund since 2008 to keep the account solvent.5Congress.gov. Transfers to the Highway Trust Fund
The Airport and Airway Trust Fund pays for air traffic control, airport improvements, and aviation safety. Its money comes from a 7.5 percent tax on domestic passenger fares, a $5.30 charge per flight segment, a $23.40 international arrival and departure fee, aviation fuel taxes, and a 6.25 percent tax on domestic cargo shipments.6Federal Aviation Administration. Airport and Airway Trust Fund Fact Sheet
Two more deserve mention. The Civil Service Retirement and Disability Fund pays pensions to former federal workers and their survivors. The Unemployment Trust Fund, financed through a mix of federal and state payroll taxes, pays temporary income to workers who lose their jobs through no fault of their own. State unemployment taxes fund the actual benefits; the federal share covers administration and a loan program for states that run short in recessions.7U.S. Department of Labor. Unemployment Insurance Tax Fact Sheet
Where the Money Comes From
Payroll Taxes
The biggest single source is the payroll tax collected under the Federal Insurance Contributions Act. Employees pay 6.2 percent of wages toward Social Security and 1.45 percent toward Medicare, and employers match both.8Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates The Social Security portion applies only up to an annual wage base that rises with inflation; in 2026 that cap is $184,500.9Social Security Administration. Contribution and Benefit Base Anything you earn above that is not taxed at 6.2 percent. Medicare has no cap. Every dollar of wages is subject to it.
If you earn more than $200,000, you also owe an extra 0.9 percent Medicare surtax on wages above that threshold, and your employer does not match that piece.8Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates Self-employed workers pay both halves themselves under the Self-Employment Contributions Act: 12.4 percent for Social Security and 2.9 percent for Medicare, plus the 0.9 percent surtax if their earnings are high enough.
Federal unemployment has its own payroll tax. Under the Federal Unemployment Tax Act, employers pay 6.0 percent on the first $7,000 of each worker’s annual wages, though timely payment of state unemployment tax earns most employers a credit that drops the effective federal rate to 0.6 percent.10Internal Revenue Service. Topic No. 759, Form 940, Employers Annual Federal Unemployment Tax Return
Excise Taxes and Other Sources
Excise taxes carry several of the non-payroll funds. The Highway Trust Fund receives 18.4 cents per gallon on gasoline and 24.4 cents per gallon on diesel, including a small surcharge for cleaning up leaking underground storage tanks.11U.S. Energy Information Administration. How Much Tax Do We Pay on a Gallon of Gasoline and on a Gallon of Diesel Fuel Truck and tire excise taxes flow into the same account. These rates are set in statute and directed to the fund rather than to the general treasury.4Office of the Law Revision Counsel. 26 USC 9503 – Highway Trust Fund
Some of the money also loops back from beneficiaries. Higher-income Social Security recipients pay federal income tax on part of their benefits, and those proceeds are credited to the OASI and DI funds. When dedicated tax revenue falls short, general fund transfers can top up an account, as has repeatedly happened with the Highway Trust Fund. And interest on invested balances is a substantial income stream in its own right.
What Happens to Surplus Money
When a trust fund brings in more than it pays out, the extra does not sit in cash. Federal law requires the surplus to be invested in special-issue Treasury securities, non-marketable government bonds sold only to the trust funds.12Social Security Administration. Special Issue Securities The Treasury uses the cash for general government purposes and gives the trust fund an interest-bearing IOU backed by the full faith and credit of the United States.
The interest rate on those securities is not negotiated. It is set each month based on the average market yield of outstanding Treasury bonds with at least four years left to maturity, rounded to the nearest eighth of a percent.13Social Security Administration. Interest Rate Formula for Special Issues In early 2026, new special-issue rates have run roughly 4.0 to 4.5 percent.14Social Security Administration. Nominal Interest Rates on Special Issues That interest adds meaningfully to trust fund assets every year.
When benefits need to be paid, the Treasury redeems the securities and provides the cash. The arrangement lets the government manage its overall cash flow while giving each program a legally distinct pool of assets. Whether those assets amount to genuine savings or simply one arm of government owing another is a long-running policy argument, but as a matter of law the securities carry the same repayment obligation as any other federal debt.
What the Money Can Be Spent On
Each trust fund is a silo. Social Security money cannot pay for highways. Highway money cannot pay Medicare claims. The statute that created each fund defines exactly what qualifies as an authorized expenditure, whether that means monthly retirement checks, hospital reimbursements, or highway construction contracts. The Treasury releases funds only after verifying each payment meets the program’s legal criteria.
Administration is one of those authorized uses. Congress does not cap Social Security’s overhead as a percentage. Instead it appropriates a specific dollar amount each year. The fiscal year 2027 request limits the Social Security Administration’s administrative expenses to about $14.7 billion, covering claim processing, records, and field offices for the retirement, disability, and supplemental income programs.15Social Security Administration. Limitation on Administrative Expenses FY 2027 Congressional Justification Spending beyond that ceiling, or outside a fund’s defined purpose, would violate the Antideficiency Act, which bars federal officers from making expenditures that exceed what is available in the account.16Office of the Law Revision Counsel. 31 USC 1341 – Limitations on Expending and Obligating Amounts
How the Funds Are Monitored
The Social Security Act requires the Boards of Trustees of the Social Security and Medicare funds to report to Congress every year on each fund’s financial condition and outlook.17Social Security Administration. Status of the Social Security and Medicare Programs These Trustees Reports contain the 75-year actuarial projections that drive most public debate about long-term solvency.
At a more detailed level, the Treasury’s Fiscal Service produces monthly trial balance reports for each trust fund account, showing collections, disbursements, investment activity, and remaining balances, and delivers them to the lead program agencies within five business days of month’s end.18Treasury Financial Experience. Chapter 4700 Federal Entity Reporting Requirements for the Financial Report of the United States Government The Office of Management and Budget also watches trust fund spending for unauthorized withdrawals.
How Long the Funds Will Last
The funds are not all under equal pressure. Disability Insurance is projected to remain solvent through at least 2099. The retirement side is another matter. The OASI Trust Fund is projected to deplete its reserves in 2033, and at that point incoming payroll tax revenue would cover only about 77 percent of scheduled benefits.17Social Security Administration. Status of the Social Security and Medicare Programs If Congress hypothetically combined OASI and DI, the joint depletion date would be 2034.
Medicare’s Hospital Insurance Trust Fund has its own timeline. Based on Congressional Budget Office projections from early 2026, that fund is expected to run out around 2040. Without changes, benefits would be cut by roughly 8 percent initially, growing to about 10 percent by 2056.19Congressional Budget Office. CBOs Updated Projections of the Hospital Insurance Trust Funds Finances
What happens legally at depletion is genuinely unsettled. The Social Security Act does not spell out what the agency does when a fund hits zero. Because the Antideficiency Act bars the government from spending more than the account contains, the most likely results are full benefit checks paid on a delayed schedule or reduced checks paid on time.16Office of the Law Revision Counsel. 31 USC 1341 – Limitations on Expending and Obligating Amounts Beneficiaries would remain legally entitled to their full benefits and could sue for the unpaid portion, but collecting when the money simply is not there is another matter. The political stakes of cutting checks for tens of millions of retirees make some congressional action likely before depletion. The form it takes, whether tax increases, benefit adjustments, or transfers from the general fund, is one of the largest open questions in federal fiscal policy.