Disability Trust Fund Doing Better Than Projected

     The final 2013 numbers are in for Social Security's Disability Insurance Trust Fund. Here's a summary (in billions) for both the actual results and the projections that had been made for the year:

Receipts
Actual: $111.5
Intermediate Projection: $111.4
Low-Cost (optimistic) Projection: $112.5

Expenditures
Actual: $143.5
Intermediate Projection: $144.8
Low-Cost (optimistic) Projection: $142.8

Amount of Decline in Trust Fund Balance:
Actual: $32.3
Intermediate Projection: $33.5
Low-Cost (optimistic) Projection: $30.3

Trust Fund Balance at end of year
Actual: $90.4
Intermediate Projection: $89.2
Low-Cost (optimistic) Projection: $92.

     The key question is when, if ever, the Disability Insurance Trust Fund runs out of money. You might think it obvious that the Disability Insurance Trust Fund will run out of money in 2016 but you'd be wrong. While the most recent Intermediate projection was that the Disability Insurance Trust Fund will run out of funds in 2016, it is projected to be only a narrow shortfall in 2016 -- $3.4 billion. Note that the actual results in 2013 were $1.2 billion better than anticipated by the Intermediate Projection. It's impossible to say for sure but the slightly better than expected results in 2013 suggests that the projections for 2014-2016 should be more optimistic as well. The methodology will certainly be more sophisticated but if you multiply $1.2 billion times four years you find that instead of running out of money in late 2016, the Disability Insurance Trust Fund squeaks into 2017. My expectation is that the Intermediate Projection in the next Trustee's report coming out this Spring will show an exhaustion date of 2017. Of course, unfavorable economic news or even a small uptick in benefit payments could change this. 

     The difference between 2016 and 2017 may be politically crucial. It's three years off but 2017 looks like a better year for Democrats than 2016.

     Note that I indicated above that it is uncertain whether the Disability Insurance Trust Fund runs out of money at all. How can that be? Both the Intermediate and Low-Cost projections show that the declines in trust fund balance will be decreasing in coming years. They differ on how quickly the receipts and expenditures move towards each other.  The most recent Low-Cost projection was that the decline in Trust Fund balance will be rapid enough to keep the Disability Insurance Trust Fund in the black as far as the eye can see and that the Trust Fund balance actually starts rising in 2020.The Low-Cost projection was a bit less accurate for 2013 than the Intermediate projection. There's no telling what the next Low-Cost projection will look like. In any case, projections become less reliable the further you extend them into the future. It's more likely than not that the Disability Insurance Trust Fund runs out of money at some point but it's not a certainty. If it does happen, it'll probably be after 2016.

     By the way, Social Security's actuaries also made a High-Cost or pessimistic projection that the Disability Insurance Trust Fund would run out of money in 2015. I've omitted that from the summary above since it was so far off from what actually happened in 2013.