Disinvestment of the Social Security Trust Funds

Testimony was given concerning specific issues and options associated with the disinvestment of social security trust funds. GAO noted that, when the Department of the Treasury's cash accounts lack sufficient funds to pay both social security benefits and other obligations and borrowing authority is limited or nonexistent, the Secretary is forced to either violate the investment requirements of the Social Security Act in order to gain sufficient borrowing authority or comply with the investment requirements and not pay benefits and other government obligations. GAO found that: (1) legislation prohibiting the disinvestment of social security trust funds could result in benefits not being paid during debt-ceiling crises; (2) although legislation would protect trust fund assets, it would also limit the Secretary's flexibility to ensure benefit payments; (3) it is important that Congress receive advance notice of any Treasury plan to disinvest trust funds to meet debt ceiling requirements; (4) the normalized-tax-transfer procedure generally reduces the need to redeem long-term securities during the month to pay benefits; and (5) it would be impossible to redeem trust fund assets to pay beneficiaries if Treasury could not borrow due to a limitation on regular debt.