Social Security is a lot of things. Social Security is a bedrock foundation for the U.S. social safety net. Social Security is an enormously successful anti-poverty program. Social Security is a financial risk for beneficiaries and the federal government alike, and in the absence of reforms will be unable to pay promised benefits in roughly a decade. This is all true.

And Social Security is simple. Payroll taxes get sent to the Social Security Administration (SSA), deposited in the Trust Fund, and then sent out as benefits when due. This is not true.

As Gordon Gray lays out in exquisite detail in “Social Security Financing: From FICA to the Trust Funds,” Social Security is primarily funded by Federal Insurance Contributions Act (FICA) tax (payroll taxes) at a 12.4 percent rate. As many people know, the tax is split evenly between the employer and employee. But even a bit deeper down, each 6.2 percent currently consists of 10.6 percentage points for Old Age and Survivor’s Insurance (OASI) and 1.8 percent for Disability Insurance (DI). (The allocation between OASI and DI has changed over time.)

Further, while taxes are withheld, they are not sent to the OASI and DI trust funds (yes, there are two). As Gray summarizes:

Whenever they are legally due, employers submit payroll tax payments to Treasury by electronic transfer to a Federal Reserve depository institution. Thus, the income for the Social Security program enters the Social Security system by first flowing into the Treasury Department General Fund as comingled U.S. dollars. Sorting which dollars go where is a multi-stage process that essentially begins with the imposition of the employer and employee FICA taxes and ends with the appropriate amount of funding credited to the Trust Funds through a process that can ultimately take years.

Trust me, Eakinomics is not going to wander through this entire maze (reproduced from the SSA):

Instead, simply note that the actual transfer from Treasury to the trust funds are non-marketable Treasury securities known as “specials,” and when SSA needs cash to send out benefits, it can send the specials back to Treasury. Gray points out that this is a real opportunity for tax policy. For example, to cut the burden of payroll taxes, the withholding could be reduced, but the Treasury could be directed to send specials equal to the amount that would have been collected at the 12.4 percent rate. The payment of benefits would be unaffected despite the payroll tax “cut.” He discusses other possibilities as well.

The bottom line is that there are many points in the financing system that Congress can touch and alter. Since Social Security reforms are inevitable, it will be useful to keep track both of what Congress intends to do and how it actually changes things to accomplish it. Trust Eakinomics, it will be anything but simple.