If by administered you mean how the program functions (or doesn't function, depending upon who you speak with), then the formula is relatively simple. Social Security began in what historians refer to as Franklin Roosevelt's 2nd New Deal... referring to a second batch of new programs aimed at revitalizing the U.S. economy in the late 1930's and early 1940's. At the time, the U.S. had a very young population, with many of those young people unable to find work. The original purpose of Social Security was to encourage older, more experienced workers to retire; in order to free up more jobs for the younger less experienced workers. In short, to begin the program, a new tax was administered on the paychecks of current workers to pay for a social security payment to current retirees. In other words, today's workers pay for today's retirees. This is essentially the way the system still works today... the issue is that today we have a much older population than in the thirties and forties... less workers paying in and more people trying to withdraw from the pool is slowly depleting the funds; hence all the current and frankly constant political debate on how to fix the system.