Interfund borrowing under the Social Security act.

Until recently, the four Social Security trust funds were, by law, kept completely separate, each having its own sources of revenue and paying benefits to specific groups of entitled persons. The original Social Security Act (Public Law 74-271, enacted on August 14, 1935) created the Old-Age Reserve Account, which was later renamed the Federal Old-Age and Survivors Insurance (OASI) Trust Fund. The Social Security Amendments of 1956 (Public Law 84-880, August 1, 1956) created the Federal Disability Insurance (DI) Trust Fund. The Social Security Amendments of 1965 (Public Law 89-97, July 30, 1965) created the Federal Hospital Insurance (HI) Trust Fund and the Federal Supplementary Medical Insurance (SMI) Trust Fund. The Social Security Act did not allow transfers or loans among the four funds (although in certain situations, for convenience, one fund would pay relatively small amounts-generally, for administrative expenses-for another fund, with subsequent reimbursements and adjustments for interest). In the event that one of the three trust funds which rely primarily on the payroll tax as a source of income-OASI, DI, and HI-was inadequately financed, while another of these trust funds was more than adequately financed, amendments were passed by the Congress that included a reallocation of the tax rate among the funds in order to put income where it was needed most and to bring a11 the funds into actuarial balance. This occurred several times over the years, including one instance of a law (Public Law 96-403, October 9, 1980) being enacted with the sole purpose of reallocating the tax rate between the OASI and DI Trust Funds. In 1981, as the financial problems of the OASI program became very critical, Congress took a different approach and passed the Social Security Amendments of 1981 (Public Law 97-123, December 29, 1981). Section 1 of that law provided immediate, but limited, interfund borrowing authority among the OASI, DI, and HI Trust Funds. Loans could be made to any one of these funds from either of the other funds, at the discretion of the Managing Trustee (the Secretary of the Treasury). Interest was required to be paid on such loans at the rate that would have been earned on the assets of the lending fund in the absence of interfund borrowing. The law did not permit interfund loans to be made after December 3 1, 1982, and the Conference Report on the bill limited the amount of interfund borrowing by stating, “In no case shall interfund borrowing make adjustments in the trust funds insuring benefit payments