Old-Age, Survivors, and Disibality Insurance: Financing

THE COST aspects of any proposed changes in the old-age, survivors, and disability insurance program have always received careful study by Congress. In the 1950 amendments, Congress expressed it,s conviction that the program should be completely self-supporting from the contributions of covered individuals and employers, and it repealed the provision permitting appropriat’ions to the system from the General Treasury. All major legislation since 1950, including the 1961 amendments,* has indicated the intent of Congress that the tax schedule make the program as self-supporting as possible-in other words, actuarially sound. Actuarial soundness does not have precisely the same meaning for old-age, survivors, and disability insurance and for private insurance and, to some extent, for private pension plans. In connection with individual insurance, the privat,e insurance company to be actuarially sound must, in general, have sufficient funds on hand to pay off all accrued liabilities if operations are terminated. This is not a necessary basis for a nat,ional compulsory social insurance program, nor is it always necessary for a well-administered private pension plan. The national program can be expected to continue indefinitely, and the test is whether t,he expected future income from taxes and from interest on invested assets will be sufficient to meet anticipat,ed expenditures for benefits and administrative costs. Though future experience may vary from the actuarial cost estimates, the intent that the program be self-supporting, or actuarially sound, can be expressed in law by a contribution schedule that, according to the intermediate-cost estimate, brings the program into approximate balance.