The Federal Old-Age and Survivors Insurance (OASI) Trust Fund was established on January 1, 1940 as a separate account in the United States Treasury. The Federal
Disability Insurance (DI) Trust Fund, another separate account in the United States Treasury, was established on August 1, 1956. All the financial operations of the OASI and DI programs are handled through these respective funds. The Board of Trustees is responsible for overseeing the financial operations of these funds. The following paragraphs describe the various components of trust fund income and outgo. The tables at the end of this section present the historical operations of the separate trust funds since their inception, as well as the operations of the combined trust funds during the period when they have co-existed.
The primary receipts of these two funds are amounts appropriated to each of them under permanent authority on the basis of
contributions payable by workers, their employers, and individuals with self-employment income, in work covered by the OASDI program. All employees, and their employers, in
covered employment are required to pay contributions with respect to their wages. Employees, and their employers, are also required to pay contributions with respect to cash tips, if the individual’s monthly cash tips amount to at least $20. All self-employed persons are required to pay contributions with respect to their covered net
earnings from self-employment. In addition to paying the required employer contributions on the wages of covered Federal employees, the Federal Government also pays amounts equivalent to the combined employer and employee contributions that would be paid on
deemed wage credits attributable to military service performed between 1957 and 2001 if such wage credits were covered wages.
In general, an individual’s contributions, or taxes, are computed on wages or net earnings from self-employment, or both wages and net self-employment earnings combined, up to a specified maximum annual amount. The contributions are determined first on the wages and then on any net self-employment earnings, such that the total does not exceed the annual maximum amount. An employee who pays contributions on wages in excess of the annual maximum amount (because of employment with two or more employers) is eligible for a refund of the excess employee contributions.
The monthly benefit amount to which an individual (or his or her spouse and children) may become entitled under the OASDI program is based on the individual’s taxable earnings during his or her lifetime. For almost all persons who first become eligible to receive benefits in 1979 or later, the earnings used in the computation of benefits are indexed to reflect increases in average wage levels.
The contribution, or tax, rates applicable under current law in each calendar year and the allocation of these rates between the OASI and DI Trust Funds are shown in table
VI.A1.
1 The maximum amount of earnings on which OASDI contributions are payable in a year, which is also the maximum amount of earnings creditable in that year for benefit-computation purposes, is called the
contribution and benefit base. The contribution and benefit base for each year through 2007 is also shown in table
VI.A1.
