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TABLE 6.-ASSETS OF THE OLD-AGE AND SURVIVORS INSURANCE TRUST FUND, BY TYPE, AT THE END OF FISCAL

1 Par value, plus unamoritized premium, less discount outstanding.

The assets of the old-age and survivors insurance trust fund at the end of fiscal year 1973 totaled $36,416 million, consisting of $35,488 million in the form of obligations of the U.S. Government or of federally-sponsored agency obligations, and an undisbursed balance of $928 million. Table 6 shows a comparison of the total assets of the fund and their distribution at the end of fiscal years 1972 and 1973. The undisbursed balance at the end of fiscal year 1973 was $2,282 million lower than at the end of the previous fiscal year because of a change in timing of the redemption of investments to meet recurring benefit payments from the old-age and survivors insurance and dis

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ability insurance trust funds. As described in an earlier section, income received by the trust funds each month is invested on a daily basis. Once each month, part of the funds' investments is redeemed in order to meet those recurring benefit payments that are paid at the beginning of the month-normally the third of the month. Prior to November 1972, this required redemption of investments occurred on the last day of the preceding month. In November 1972, the Managing Trustee modified the redemption procedure by making the required monthly redemption of investments on the same date that the benefit payments are made. Thus, interest is earned for an additional 3 days each month on investments that are to be redeemed to meet benefit payments, and the undisbursed balance at the end of the month, under the procedure now in effect, is considerably lower than it was under the former procedure.

The net increase in the par value of the investments owned by the fund during fiscal year 1973 amounted to $2,298 million. (This increase represents the sum of the $17 million net increase in assets and the decrease of $2,282 million in the undisbursed balance described in the preceding paragraph.) New securities at a total par value of $48,610 million were acquired during the fiscal year through the investment of receipts, and the reinvestment of funds made available from the redemption of securities. The par value of securities redeemed during the fiscal year was $46,312 million. Included in these amounts is $44,063 million in certificates of indebtedness that were acquired and redeemed within the fiscal year. In addition, $24.5 million in 3%percent bonds maturing in November 1974 and $7.0 million in 534percent notes maturing in February 1975 were exchanged for $31.5 million in 63-percent bonds maturing in August 1984. Although the interest rate on bonds is generally limited to 44 percent by the provisions of 31 U.S.C. 752, P.L. 92-5, enacted March 17, 1971, amended these provisions to authorize the issuance to the public and to Government accounts of up to a total of $10 billion in bonds at rates of interests exceeding 414 percent."

The effective annual rate of interest earned by the assets of the oldage and survivors insurance trust fund during fiscal year 1973 was 5.5 percent. The interest rate on special issues purchased by the trust fund in June 1973 was 65-percent, payable semiannually.

The 1956 amendments provided that the public-debt obligations issued for purchase by the old-age and survivors insurance trust fund and the disability insurance trust fund shall have maturities fixed with due regard for the needs of the funds. Under these amendments, the general practice in the past was to spread the maturity dates for the holdings of special issues as nearly as practicable in equal amounts over a 15-year period. As result of this practice, the old-age and survivors insurance und held special issues, totalling $6,245 million, that were distributed in equal amounts of $1,080 million maturing in each of the years 1976-80 and in a smaller amount maturing in 1975 (table 6).

On July 1, 1973, after the close of fiscal year 1973, the enactment of P.L. 93-53 further amended the provisions of 31 U.S.C. 752 by (1) removing the $10 billion limitation on the aggregate face amount of such bonds that may be issued and (2) limiting the amount of such bonds that may be held by the public at any one time to $10 billion.

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However, the interest rate on special issues acquired in June of each year 1966-71, as determined under section 201(d) of the Social Security Act, was higher than the maximum rate of 44-percent to which the interest rate on long-term issues (bonds) was limited. Thus, it was not possible to follow the former practice, and the entire available amounts were invested in short-term issues (notes). Since the practice of investing in relatively long-term bonds when interest rates are low, and in shorter-term notes when rates are high, would be disadvantageous to the trust funds in the long run, the 1971 Advisory Council recommended that the maturity dates on all special issues be equal to the maximum maturity date for Treasury notes. The Board of Trustees concurred with this recommendation.

Thus, on June 30, 1973, the old-age and survivors insurance trust fund acquired $4,547 million in special issues consisting of 7-year notes, making a total of $25,178 million invested in such 7-year notes that were distributed in varying amounts maturing on June 30 of each year 1974-80 (table 6). The investment operations of the fund in fiscal years 1972 and earlier are described in the 1973, and earlier, annual reports.

SUMMARY OF THE OPERATIONS OF THE FEDERAL DISABILITY INSURANCE TRUST FUND, FISCAL YEAR 1973

A statement of the income and disbursements of the Federal disability insurance trust fund during fiscal year 1973, and of the assets of the fund at the beginning and end of the fiscal year is presented in table 7. Comparable amounts for fiscal year 1972 are also shown in the table.

The total assets of the disability insurance trust fund amounted to $7,390 million on June 30, 1972. During fiscal year 1973, total receipts amounted to $5,947 million and total disbursements were $5,467 million. The assets of the trust fund thus increased $479 million during the year to a total of $7,869 million on June 30, 1973.

Included in total receipts were $4,961 million representing contributions appropriated to the fund, and $550 million representing amounts received by the Secretary of the Treasury in accordance with State coverage agreements and deposited in the fund. As an offset, $51 million was transferred from the trust fund into the Treasury as repayment for the estimated amount of contributions subject to refund to employees who worked for more than one employer during the course of a year and paid contributions on wages in excess of the statutory maximum earnings base.

Net contributions amounted to $5,461 million, an increase of 12.5 percent over the amount for the preceding fiscal year. This increase is accounted for by the same factors, insofar as they apply to contributions of the disability insurance trust fund, that accounted for the increase in contributions to the old-age and survivors insurance trust fund (described in the preceding section).

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TABLE 7.-STATEMENT OF OPERATIONS OF THE DISABILITY INSURANCE TRUST FUND DURING FISCAL YEARS

Net contributions..

489, 577

550, 447

4,900, 357

5,511,595

47,361

50,626

Transfer to railroad retirement account..

Reimbursement from general fund of the Treasury for costs of noncontributory credits for military service..

Disbursements:

Benefit payments.

4,852, 996

5,460,969

5.291.228

5.946, 549

A positive figure represents a transfer from the disability insurance trust fund to the other social security trust funds, A negative figure represents a transfer to the disability insurance trust fund from the other social security trust funds.

In addition, the trust fund received $51 million in December from the general fund of the Treasury, as reimbursement for the costs of noncontributory credits for military service.

The remaining $435 million of receipts consisted of interest on the investments of the fund, less interest on amounts of interfund trans

fers.

Of the $5,467 million in total disbursements, $5,162 million was for benefit payments, an increase of 27.6 percent over the corresponding amount paid in the fiscal year 1972. This increase is accounted for by the same factors insofar as they apply to disabled-worker bene

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ficiaries and their dependents, that resulted in the increase in benefit payments from the old-age and survivors insurance trust fund (described in the preceding section).

Provisions governing the financial interchanges between the railroad retirement account and the disability insurance trust fund are similar to those referred to in the preceding section relating to the old-age and survivors insurance trust fund. The determination made as of June 30, 1972, required that a transfer of $18,700,000 be made from the disability insurance trust fund to the railroad retirement account. This amount was transferred to the railroad retirement account in May 1973 together with interest to the date of transfer amounting to $803,000.

The remaining disbursements amounted to $247 million for net. administrative expenses and $39 million for the net cost of vocational rehabilitation services furnished to disabled-worker beneficiaries and to those dependents of disabled workers who are receiving benefits on the basis of disabilities that have continued since childhood.

As stated in an earlier section, the total amount of funds that may be made available in a fiscal year for payment for the costs of vocational rehabilitation services may not exceed a specified percentage of the benefits certified for payment in the preceding year from the old-age and survivors insurance and disability insurance trust funds to disabled persons receiving benefits because of their disability. This limitation on the amounts to be made available was 1 percent in each fiscal year through 1972 and 1%-percent in fiscal year 1973. The following data show the relationship between the total amount of payments for the costs of such rehabilitation services for each fiscal year, 196973, and the corresponding amount of benefits paid in the prior fiscal year from the trust funds to disabled beneficiaries:

1 The amounts shown represent the exepnditures for a fiscal year and differ from amounts expended in a fiscal year as shown in accounting statements of the trust funds on a cash basis. The amount shown for each fiscal year is subject to further change.

At the end of fiscal year 1973, some 3,416,000 persons were receiving monthly benefits from the disability insurance trust fund. The distribution of benefit payments in fiscal years 1972 and 1973, by type of beneficiary, is shown in table 8.

The assets of this fund at the end of fiscal year totaled $7,869 million, consisting of $7,802 million in the form of obligations of the U.S. Government and an undisbursed balance of $68 million. Table 9 shows a comparison of the total assets of the fund and their distribution at the end of fiscal years 1972 and 1973.