2015 

Technical Panel

on Assumptions 

and Methods

 report to the

Social Security Advisory Board

 september 2015
2015 Technical Panel on 

Assumptions and Methods

Report to the

Social Security Advisory Board

September 2015
ii | 2015 Technical Panel on Assumptions and Methods

NOTE: In a previous printing of this report, the data in Table 5 (p.26) were incorrect. 

This version of the report contains the corrected figures.
2015 Technical Panel on Assumptions and Methods | iii

Table of Contents

Members of the Technical Panel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iv

Panel Charter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v

Introduction and Acknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vi

Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

I. Demographic Assumptions and Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

II. Economic Assumptions and Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

III. Presentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Chapter 1. Demographic Assumptions and Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

1.1 Fertility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

1.2 Mortality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

1.3 Immigration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

1.4 Disability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Chapter 2. Economic Assumptions and Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

2.1 Labor Force Participation Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

2.2 Unemployment Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

2.3 Real Earnings Growth Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

2.4 Taxable Share of Total Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64

2.5 Inflation and Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

Chapter 3. Presentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

3.1 Presentation of Uncertainty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

3.2 Illustrating Scheduled Benefits Relative to Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80

3.3 Measures of Long-Run Financial Sustainability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

List of Figures and Tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
iv | 2015 Technical Panel on Assumptions and Methods

Members of the Technical Panel

Alicia H. Munnell, Chair

Director, Center for Retirement Research and Peter F. Drucker Professor of Management Sciences, 

Carroll School of Management

Boston College

Katharine G. Abraham

Professor of Economics and Survey Methodology and Director, Maryland Center for Economics and Policy

University of Maryland

David Autor

Associate Department Head

Department of Economics, Massachusetts Institute of Technology

Jeffrey R. Brown

Dean of the College of Business

University of Illinois at Urbana-Champaign

Peter Diamond

Institute Professor Emeritus

Department of Economics, Massachusetts Institute of Technology

Claudia Goldin

Henry Lee Professor of Economics at Harvard University

Director, Development of the American Economy Program

National Bureau of Economic Research

Sam Gutterman

Consulting Actuary

Michael S. Teitelbaum

Senior Research Associate

Labor and Worklife Program, Harvard Law School

Ronald R. Rindfuss

Research Professor of Sociology

Fellow, Carolina Population Center

University of North Carolina

Joseph J. Silvestri

Senior Actuary

U.S. Government Accountability Office
2015 Technical Panel on Assumptions and Methods | v

Panel Charter

The Panel of expert actuaries, economists and demographers appointed by the Social Security Advisory Board is 

charged with providing technical assistance to the Board 

by reviewing the assumptions specified by the Board of 

Trustees of the Old-Age and Survivors Insurance Trust Fund 

and the Disability Insurance Trust Fund and the methods 

used by the Social Security actuaries to project the future 

financial status of the programs. The Panel shall deliver a 

written report to the Advisory Board by September 2015.

Specifically the Panel is asked to:

1. Review the key economic and demographic assumptions.

2. Review and assess current projection methodologies.

3. Review ways to improve the presentation of key 

concepts in the Trustees Report so as to make them 

more accessible and informative to the public.

4. Review in particular:

a. The impact of the enactment of the Affordable Care 

Act on factors affecting OASDI financing such as 

labor force participation, retirement and disability 

claiming, and the earnings to compensation ratio.

b. Recent developments in labor force growth, participation rates, labor productivity, and dispersion 

in earnings.

c. The implications of trends in family formation on 

benefit projections and labor force trends.

5. Review and assess the status of the recommendations of previous Technical Panels appointed by the 

Advisory Board.
vi | 2015 Technical Panel on Assumptions and Methods

Introduction and Acknowledgments

The 2015 Technical Panel on Assumptions and Methods 

was convened by the Social Security Advisory Board (SSAB) 

in November 2014 to review the assumptions specified by 

the Board of Trustees and to evaluate the methods used 

by the Office of the Chief Actuary to project the future 

financial status of the Old-Age and Survivors Insurance and 

Disability Insurance Trust Funds. We have worked diligently 

over the past year, both individually and collectively, to 

fulfill this mandate.

The Technical Panel held a closed door planning meeting in 

November, five public meetings at the offices of the Social 

Security Advisory Board in Washington, DC, and one public 

meeting at the National Bureau of Economic Research in 

Cambridge MA, on the following dates:

• November 21, 2014

• December 12, 2014

• January 16, 2015 (Cambridge, MA)

• February 13, 2015

• March 13, 2015

• May 7–8, 2015

• June 19, 2015

We benefited greatly from the presentations made at those 

meetings and from the questions and comments of those 

in attendance and the ensuing discussion.

The staff in the Social Security Administration’s Office of 

the Chief Actuary attended all of our public meetings, made 

several presentations to the Technical Panel, answered 

countless questions, fielded many requests for data, 

and ran all of the projections presented in this report. We 

appreciate the tireless support of Stephen Goss (Chief 

Actuary), Alice Wade, Eli Donkar, Robert Weathers, Jason 

Schultz, Michael Morris, and Karen Glenn.

Robert Reischauer, a public trustee of the Social Security 

Trust Fund graciously met with the Technical Panel and 

attended most meetings. We appreciate his support and 

insights.

Our discussions were greatly informed by outside experts 

who participated in our meetings. On the difficult topic 

of mortality projections, our thinking was shaped by 

Samuel Preston and we thank Gary King and his co-authors 

Konstantin Kashin and Samir Soneji for their presentation.

On the equally complex topic of disability, Jeffrey Liebman’s 

insights were invaluable. On interest rates, John Campbell 

offered useful perspective. On long-term economic growth, 

Jim Stock provided helpful guidance.

In addition to those named above, we are grateful to the 

many individuals who spoke informally with members of 

the Technical Panel over the past year. We would also like 

to thank the entire staff of the Social Security Advisory 

Board for their excellent support.

Finally, Joel Feinleib, the Technical Panel’s executive 

director and the Social Security Advisory Board’s chief 

economist, has been “on loan” from the SSAB to support 

the Technical Panel. He has been a behind-the-scenes 

catalyst for our efforts, providing both sound guidance on 

details large and small and offering invaluable historical 

perspective on the deliberations of previous Technical 

Panels. Joel is a gem.

As the Chair, I am extremely grateful to the panelists for 

their service. We had an exceptionally talented group.

Each individual is a star in his or her own right so that the 

different perspectives and sheer intellectual horsepower 

that everyone offered made for an exciting process. The key 

ingredient that made it work was everyone’s willingness 

to compromise to present a consensus report.

Please note that this report reflects the views of the Technical 

Panel members and does not necessarily reflect the views 

of any organizations with which they are affiliated.

Alicia H. Munnell, Chair
2015 Technical Panel on Assumptions and Methods | 1

Executive Summary

The 2015 Technical Panel on Assumptions and Methods 

was created by the Social Security Advisory Board in 

September 2014 to review the assumptions specified by 

the Board of Trustees and to evaluate the methods used by 

the Office of the Chief Actuary (OCACT) to project the future 

financial status of the Old-Age and Survivors Insurance 

and Disability Insurance (OASDI) Trust Funds.

Social Security’s actuaries and Trustees have an enormously 

difficult task—projecting demographic and economic 

developments over the next 75 years and conveying to 

Congress and the public, in a comprehensible fashion, 

the health of the program and the associated risks. This 

Panel recognizes the immense challenges involved and, 

after reviewing the assumptions specified by the Trustees 

and the methods used by the actuaries, concludes that the 

assumptions and methodologies are basically sound. That 

said, the Panel makes a number of recommendations that 

it believes would improve the process. Before discussing 

the individual recommendations, the Panel would like to 

make an over-arching recommendation that the Trustees 

periodically compare their past projections—both for 

the individual assumptions and the program’s overall 

finances—to actual outcomes in order to inform OCACT, 

the Trustees, and users of the Trustees’ annual reports 

about the accuracy of the projections.

The following discussion begins with the demographic 

assumptions, then turns to the economic assumptions, 

and concludes with issues of presentation. The intermediate (Alternative II) set of assumptions represents 

the Trustees’ best estimate for future experience, while 

the low-cost (Alternative I) and high-cost (Alternative III) 

sets of assumptions represent more and less favorable 

scenarios, respectively, from the perspective of program 

financial balance.

■ I. Demographic Assumptions 

and Methods

Since Social Security operates basically on a pay-asyou-go basis, the number of people paying into the system 

compared with the number of people receiving benefits 

is a key component of program cost. Each of the demographic assumptions considered by the Panel affects both 

of these numbers. The contributor population includes 

current workers, future workers (fertility), and immigrants 

(immigration). The beneficiary population is influenced by 

how long people live (mortality) and how healthy they are 

(disability). The Panel’s recommendations regarding the 

assumptions for these variables argue for a slight decline in 

the fertility assumption; a significant increase in assumed 

future immigration; a larger reduction in mortality rates—

that is, a larger increase in life expectancy than current 

Trustees’ projections; and a reduction in the rate at which 

disability recipients are expected to leave the rolls.

Fertility

Shifts in fertility impact the relative number of workers 

and beneficiaries in the Social Security system, which in 

turn affects the relative size of revenues and costs. In the 

short term, roughly the first 20 years after a shift, the effect 

is quite small since it only affects the size of the potential 

dependent beneficiary population. In the medium term, 

20–65 years after a shift, fertility patterns will affect the 

number of workers paying into the system. In the longterm, 65 or more years, the size of future birth cohorts 

affects the number of old-age beneficiaries. The large 

increase in fertility rates in the post-war period followed 

by the sharp reduction and flattening out of fertility rates 

in subsequent decades to the present explain in large 

measure the changing fortunes of the OASDI trust funds 

being experienced now. As the large birth cohorts born 

during the baby boom enter retirement, relatively fewer 

workers will support relatively more beneficiaries, raising 

program costs sharply. Because fertility can have a major 

impact on financing, it is important that the high-cost and 

low-cost assumptions fully encompass the full range of 

plausible outcomes.

Assumption Recommendation. The Technical Panel recommends reducing the intermediate total fertility rate 

(TFR) assumption from 2.00 to 1.90. This Panel agrees with 

previous Technical Panels that asymmetry in the range 

between the intermediate and low-fertility and high-fertility 

values is appropriate. The Technical Panel recommends 

that, from 2025 on, the low-cost TFR be lowered from 2.2 

to 2.1, and the high-cost TFR be lowered from 1.8 to 1.6.

Mortality

No other assumption has been the subject of a more 

persistent and unresolved disagreement between the 

Trustees and successive Technical Panels than that of the 

assumed ultimate rate of improvement in mortality rates.

Five successive Panels in 1995, 1999, 2003, 2007, and 2011 

argued that the Trustees were assuming ultimate rates of 
2 | 2015 Technical Panel on Assumptions and Methods

mortality improvement below historical averages and that the 

Trustees’ rationale for those lower rates was unconvincing.

Each successive Panel expressed its recommendations in 

a slightly different way—for example, with and without an 

age gradient or with slower or faster convergence from initial 

to ultimate rates. Each used a slightly different method to 

reach its conclusion, although all employed some manner 

of extrapolation from past trends. Yet, all recommended 

the ultimate rate of mortality improvement be raised. The 

last three recommended that the use of a by-cause method 

of projection be discontinued.

The Technical Panel has four assumption recommendations:

Assumption Recommendation 1. The Technical Panel recommends increasing the rate of mortality improvement 

such that the ultimate average percentage reduction 

in age-sex-adjusted central death rates is 1.0 percent 

during the last 50 years of the projection horizon. This 

recommended rate is significantly above the Trustees’ 

currently assumed rate of 0.71 percent over the period 

2039–2089. The Panel’s recommendation would result 

in a projected unisex life expectancy at birth in 2090 of 

88.3 years, and a life expectancy at age 65 in 2090 of 25.3 

years, compared to 85.9 and 23.6 respectively assumed 

in the 2015 Trustees Report.

Assumption Recommendation 2. The Technical Panel 

recommends continuing to apply the same rate of ultimate 

mortality improvement for both males and females (as the 

Trustees currently do).

Assumption Recommendation 3. Retain the assumption 

that the projected mortality improvement rate varies by age 

and declines at older ages, as observed in historic data.

Assumption Recommendation 4. The Technical Panel 

recommends increasing the low-cost average mortality 

improvement rate from 0.4 percent to 0.5 percent and the 

high-cost rate from 1.2 percent to 1.5 percent.

The Technical Panel has three recommendations regarding 

methodology of mortality projections:

Method Recommendation 1. The Technical Panel recommends retaining the current mortality model that involves 

separate projections by cause of death.

Method Recommendation 2. The Technical Panel recommends investigating the utility of alternative approaches 

to projecting mortality and periodically publishing how 

their results compare to the current model. In particular, 

the Panel recommends conducting research into methods 

that formally incorporate drivers of mortality, such as 

smoking and obesity, and into methods that take account 

of cohort effects.

Method Recommendation 3. The Technical Panel recommends investigating alternative methods for establishing 

a starting point for the projections and for the process of 

transitioning from the current period to the ultimate rates 

of mortality improvement.

Immigration

The Technical Panel acknowledges that immigration is a 

volatile, unpredictable, poorly-understood, and increasingly politically-driven process, and that the long-range 

projections of immigration required of the Trustees therefore 

are exceptionally challenging. At the same time, the Panel 

recognizes that methods and assumptions about future 

U.S. immigration are important for the overall usefulness 

of the Trustees’ long-range projections. With these realities 

in mind, the Technical Panel offers three recommendations.

Assumption Recommendation 1: Net Immigration. The 

Technical Panel recommends that the Trustees raise their 

intermediate assumption for net total immigration from 

an average of 1,155,000 in the 2015 Trustees Report to 

1,298,000. And the Panel recommends that the low-cost 

and high-cost assumption be increased from an average 

of 1,465,000 to 1,655,000 and from 850,000 to 960,000, 

respectively. These recommendations were derived by averaging together two different sets of projections—one from 

the Trustees and one from the Census Bureau—that move 

in divergent directions. The Panel acknowledges that this 

procedure is not an acceptable way to create projections.

Therefore, we urge OCACT and the Census Bureau to work 

together to develop a set of projections that reflects the 

Panel’s judgment that the level of net total immigration 

is more likely to rise than decline.

The Trustees intermediate projections assume declining 

net immigration over the projection period. In contrast, 

the Panel concludes that net immigration is more likely to 

increase for three reasons. First, the absence under current 

law of numerical limits on legal permanent residence (LPR) 

visas for immediate family of U.S. citizens likely understates 

the number of family members who will obtain LPR status.

Second, the Trustees’ projections of legal emigration 

appear to be unduly influenced by outdated Census data 

that may overstate current emigration rates. And, third, 

the Trustees’ assumptions lead to an improbably large 

decline in “net other immigration.”

Assumption Recommendation 2: Executive Actions. The 

Technical Panel recognizes the inherent difficulties associated with any treatment of “executive actions” in long-range 

projections. The Trustees decided in their 2015 report to 

treat both the 2012 and 2014 executive actions as “current 

law” in their projections. The Technical Panel would have 

included the 2012 action but would have deferred inclusion 

of the more recent and more significant executive actions 

announced in late 2014. The Panel’s understanding is that 

the 2012 executive actions have already been implemented, 

but that the 2014 executive actions are being actively challenged in both the courts and in Congress, and that their 
2015 Technical Panel on Assumptions and Methods | 3

implementation currently is suspended under a preliminary injunction issued by a Federal District Court.

1

 These 

are hard calls, however, and the Technical Panel accepts 

the Trustees’ decision. In the treatment of any executive 

action, the Technical Panel urges the Trustees to modify 

their overall projections to reflect the positive feedbacks 

on “legal immigration.”

Presentation Recommendation. The Technical Panel 

recommends that the Trustees present graphical representations of all of the assumed trajectories included in 

its immigration projections, in addition to the data tables 

included in past Trustees Reports. Such graphical presentations would provide readers with a clearer understanding 

of the Trustees’ assumptions and their effects upon the 

immigration projection outcomes. Specifically, such graphs 

would clearly show that the downward trajectory of total 

net immigration that appears in the Trustees’ 2015 intermediate projection is being driven primarily by assumptions 

of future declines in “net other immigration.”

Disability

The secular rise in Social Security Disability Insurance 

(SSDI) prevalence (the ratio of all DI beneficiaries to the 

insured non-recipient population) over the past three 

decades stems from three distinct sources—rising incidence (the ratio of new beneficiaries to non-beneficiaries 

in a given year); population aging; and female catch-up 

in insurance coverage and incidence. These drivers of 

change to SSDI prevalence are not likely to recur in the 

years ahead, meaning that a further rise in SSDI prevalence is not inevitable. Historical experience accumulated 

since the prior Technical Panel regarding DI prevalence, 

incidence, allowance rates, and percent insured, all point 

to substantially slower program growth.

Assumption Recommendation 1. The Technical Panel accepts 

the Trustees’ current assumptions regarding DI incidence, 

specifically, an intermediate age-sex-adjusted incidence 

rate of 5.4 awards per 1,000 exposed, with low- and highcost values of 4.3 and 6.5 awards per 1,000 exposed.

Because the incidence rate appears to be undergoing rapid 

and, perhaps, unexpected changes, it will be important to 

closely monitor its evolution as experience accumulates.

Assumption Recommendation 2. The Technical Panel 

recommends lowering the intermediate, high-cost, and 

low-cost assumptions for the DI recovery rate from 10.4 

to 10.1 recoveries per 1,000. We recommend symmetric 

reductions to the low- and high-cost rates: from 12.6 and 8.3 

recoveries per 1,000 respectively to 12.3 and 8.0 per 1,000.

Assumption Recommendation 3. Accounting for the stabilization of the disability composition of the SSDI population 

and the adjustments to mortality estimates incorporated 

1 As of August 5, 2015.

by the Trustees since the prior Technical Panel’s report, this 

Technical Panel is comfortable with the Trustees’ current 

mortality assumptions for DI beneficiaries.

Method Recommendation 1. Given the complex and rapid 

changes in labor force participation rates among both 

sexes, and the difficulty of clearly distinguishing the shortand medium-run effects of the Great Recession from the 

long-run effects of shifting labor demand and evolving 

social norms and preferences (as discussed in Chapter 3), 

the Technical Panel recommends continued close study of 

the evolution of insured rates for both sexes. Given this 

uncertainty, and its consequences for program evolution, 

the Technical Panel further recommends maintaining a fairly 

wide confidence band around these estimates.

Method Recommendation 2. The Technical Panel recommends exploring in greater depth the recent changes in 

DI allowance rates to better understand whether recent 

declines are due entirely to cyclical factors (as per OCACT 

Actuarial Note #153), or whether other programmatic factors 

may be at work.

■ II. Economic Assumptions and 

Methods

The number of people working and contributing to Social 

Security depends on the labor force participation rate and 

the unemployment rate. Among those who are working, a 

key variable affecting the program’s finances is the growth 

rate in real earnings. Because an individual’s earnings 

are only subject to taxation only below a specific dollar 

threshold, the distribution of earnings in the economy 

determines the percentage of total earnings that is taxable.

Other economic variables affecting the program’s finances 

include nominal interest rates—components of which 

are the Consumer Price Index for Urban Wage Earners 

and Clerical Workers (CPI-W) plus the real interest rate.

Nominal interest rates affect projections of the fiscal status 

of the program, since the Trust Funds’ bonds are indexed 

to market rates and nominal interest rates are used for 

discounting future cash flows when computing summary 

measures of system finances.

Labor Force Participation Rate

Higher labor force participation, for any given unemployment rate, means that more people are working and paying 

into the Social Security system. For some people, added 

years of work will lead to higher benefit payments, but this 

will not be the case for everyone. Thus, the net effect of 

increased labor force participation generally is to reduce 

the shortfall in the actuarial balance. Because any increase 
4 | 2015 Technical Panel on Assumptions and Methods

in benefits will lag the increase in revenues, this effect is 

especially noticeable in the near term.

The Technical Panel has four recommendations:

Method Recommendation 1. The Technical Panel recommends that in developing the labor force projections, the 

Trustees should allow for likely future increases in the 

educational attainment of the population. One way, but 

not the only way, to do this would be to assume that U.S.

educational attainment will converge over time to the 

higher levels of education observed in a country such as 

Canada. Higher levels of education are likely to increase 

labor force participation rates, raising the level of labor 

force participation in the projections.

Method Recommendation 2. The Technical Panel recommends that the Trustees explore possible methods for 

incorporating labor-demand factors into the projections.

Countries that have experienced large changes in the relative 

size of different age cohorts could inform this exploration.

Method Recommendation 3. The Technical Panel recommends that the Trustees use alternative assumptions about 

educational attainment and, perhaps more ambitiously, 

labor demand to produce a more meaningful variation in 

labor force participation projections for incorporation in 

the low-cost and high-cost scenarios.

Presentation Recommendation. The Technical Panel recommends that information be included in the Trustees’ Report 

that would allow the reader to assess the sensitivity of the 

projected Trust Fund balances to variations in realized 

labor force participation rates. One way, but not the only 

way, to do this would be to consider labor force participation rates that are 10 percent higher or 10 percent lower 

than those incorporated in the intermediate projection.

These variations could be assumed to apply to the entire 

population or only to individuals in a certain age range.

Unemployment Rate

In the Trustees’ projections, lower unemployment is associated with a net improvement in Social Security’s finances, 

as the increased number of workers raises system revenues 

by more than it raises future benefits.

Assumption Recommendation. The Technical Panel recommends no change in the ultimate, long-run, age-sex-adjusted 

unemployment rate of 5.5 percent assumed in the 2015 

Trustees Report for the intermediate cost scenario. The 

Panel also recommends retaining the assumed values of 

4.5 percent and 6.5 percent in the low-cost and the highcost scenarios.

Real Earnings Growth Rate

The rate of real earnings growth is a crucial component 

of the Trustees’ projections. Under current law, initial 

benefits for each successive wave of retirees are determined by taking the highest 35 years of earnings indexed 

to the growth in average annual earnings up to age 60 

and nominal earnings thereafter.

2

 Once the benefit is 

determined at 62, it is indexed to inflation based on the 

CPI-W. An increase in real earnings will raise both taxable 

payroll and the benefits of each cohort of new retirees, 

but the benefits of existing retirees will be unaffected.

In effect, the growth in total benefits will lag behind the 

rise in revenues. Thus, faster growth in real earnings will 

lead to a significant increase in the actuarial balance and 

slower growth to a significant reduction.

The central driver of growth in real earnings is growth in 

labor productivity. The level of average real earnings is 

linked to the level of labor productivity (the first term to 

the right of the equal sign in the equation below) through 

four mediating factors (the remaining terms to the right 

of the equal sign in the equation): 1) labor compensation 

as a share of total GDP; 2) earnings as a share of labor 

compensation; 3) average hours per worker; and 4) the 

ratio of the GDP price deflator to the CPI:

Earnings/CPI

Employment = GDP/PGDPHours

×

Compensation

GDP

×

Earnings

Compensation

×

Hours

Employment ×

PGDP

CPI

Using the relationship in this equation, the Trustees then 

determine the average annual change for each indicator, 

which allows them to compute real earnings growth.

The Technical Panel has considered both the Trustees’ 2015 

assumption for productivity growth and its assumptions 

for the growth in the four mediating factors and sees no 

compelling reason to question the conclusions reached 

by the Trustees for these variables.

Assumption Recommendation. The Technical Panel recommends retaining the Trustees’ 2015 ultimate assumption for 

average annual real earnings growth of 1.17 percent. The 

Technical Panel also recommends retaining the low-cost and 

high-cost assumed growth rates of 1.80 and 0.55 percent.

Similarly, the Technical Panel recommends no changes 

to the assumptions for the underlying components that 

determine real earnings growth.

Taxable Share of Total Earnings

Only earnings below the contribution and benefit base 

(also known as the taxable maximum), set at $118,500 per 

year in 2015, are subject to OASDI payroll taxes and count 

2 Both Social Security’s income and benefits are linked to total covered earnings, 

which include both wages and net earnings from self-employment. 
2015 Technical Panel on Assumptions and Methods | 5

toward Social Security benefits.

3

 The taxable ratio refers 

to the fraction of total earnings in OASDI-covered jobs 

below this threshold and therefore subject to payroll tax.

This ratio, which varies with the dispersion of earnings, 

is important for Social Security costs; a lower ratio has an 

adverse effect on Social Security’s finances.

Assumption Recommendation. The Technical Panel recommends lowering the ultimate level for the taxable 

share of covered earnings from 82.5 percent in the 2015 

Trustees Report to 82.2 percent. The Panel also recommends 

expanding the range of uncertainty around the taxable ratio 

given that it could continue to shift in the coming years.

The Technical Panel recommends keeping the low-cost 

value at 84.0 percent, as the Trustees’ currently assume, 

and lowering the high-cost value from 81.0 percent to 79.0 

percent, a range that is modestly asymmetric around the 

recommended intermediate value.

Method Recommendation. The Technical Panel recommends 

that OCACT continue to study the ongoing fluctuations in 

the taxable ratio to develop a more precise understanding 

of its underlying causes and hence a firmer basis for projecting its trajectory.

Inflation and Interest Rates

Realized and expected rates of inflation, real interest rates, 

and nominal interest rates are important for projecting 

the operations of the Trust Funds and the Social Security 

program’s fiscal status. The Trust Funds are invested in 

special-issue Treasury securities with initial rates indexed to 

nominal market interest rates. In addition, nominal interest 

rates are used for discounting future cash flows when 

computing present values for various summary measures 

of system finances reported in the annual Trustees Report.

Assumption Recommendation 1: Inflation. The Technical 

Panel recommends that the Trustees lower their intermediate assumption for inflation from 2.7 percent to 2.5 

3 This limit changes annually with changes in the national Average Wage Index, 

although it does not rise in years when there is no Social Security cost of living 

increase, such as between 2009 and 2011.

percent. With a new intermediate estimate of 2.5 percent 

for CPI-W, and because the range of inflation surprises 

appears to be larger on the high side than the low side, 

the Panel recommends that the low-cost and high-cost 

assumptions be 3.5 percent and 1.8 percent, respectively.

Assumption Recommendation 2: Real Interest Rate. The 

Technical Panel recommends that the Trustees lower their 

intermediate assumption for the real interest rate from 2.9 

percent to 2.5 percent. The Panel recommends that the 

low-cost and high-cost assumptions for real rates should 

be 3.0 percent and 2.0 percent, respectively.

Assumption Recommendation 3: Nominal Interest Rate. 

Consistent with the recommended changes to inflation and 

the real interest rate, the Technical Panel recommends that 

the Trustees should lower their intermediate assumption 

for the nominal interest rate from 5.6 percent to 5.0 percent.

The Panel recommends that the low-cost and high-cost 

assumptions for nominal rates should be 6.5 percent and 

3.8 percent respectively.

Method Recommendation 1. As inflation, real interest 

rates, and nominal interest rates are linked theoretically 

and empirically, the Technical Panel recommends that 

they be analyzed and discussed together, not separately.

Method Recommendation 2. In addition to reporting 

comparisons of historical data and projections by other 

organizations, the Technical Panel believes that the Trustees 

and OCACT should also consider: 1) evidence from surveys 

of professional forecasters; and 2) evidence inferred from 

market outcomes.

Summary of Recommended Changes in 

Assumptions and Impact on System Finances

Table 1 compares the intermediate, low-cost, and highcost assumptions in the 2015 Trustees Report with those 

proposed by the Technical Panel. Table 2 shows the impact 

of the Panel’s recommendations on the 75-year actuarial 

balance; on the deficit in the 76th year (2090); and on the 

year that the combined OASDI trust funds reserves are 

projected to be depleted.
6 | 2015 Technical Panel on Assumptions and Methods

Table 1. Summary of 2015 Technical Panel Assumption Recommendations4 5

(ultimate assumption)

Assumption Intermediate Low cost High cost

Fertility rate

 2015 Trustees Report (from 2027–2089) 2.0 2.2 1.8

 2015 Technical Panel (from 2025–2089) 1.9 2.1 1.6

Mortality improvement rate4

 2015 Trustees Report 0.71% 0.40% 1.02%

 2015 Technical Panel 1.00% 0.50% 1.50%

Net immigration (average 2015–2089, in 1000s)

 2015 Trustees Report 1,155 1,465 850

 2015 Technical Panel 1,298 1,655 960

Disability

 Incidence rate (per 1000 exposed)

 2015 Trustees Report 5.4 4.3 6.5

 2015 Technical Panel 5.4 4.3 6.5

 Recovery rate (per 1000 exposed)

 2015 Trustees Report 10.4 12.6 8.3

 2015 Technical Panel 10.1 12.3 8.0

Unemployment rate

 2015 Trustees Report 5.5% 6.5% 4.5%

 2015 Technical Panel 5.5% 6.5% 4.5%

Real earnings growth rate5

 2015 Trustees Report 1.17% 1.80% 0.55%

 2015 Technical Panel 1.17% 1.80% 0.55%

Taxable share of total earnings

 2015 Trustees Report 82.5% 84.0% 81.0%

 2015 Technical Panel 82.2% 84.0% 79.0%

CPI-W growth rate

 2015 Trustees Report 2.7% 3.4% 2.0%

 2015 Technical Panel 2.5% 3.5% 1.8%

Real interest rate

 2015 Trustees Report 2.9% 3.4% 2.4%

 2015 Technical Panel 2.5% 3.0% 2.0%

Sources: 2015 Trustees Report and Technical Panel recommendations.

4 The mortality improvement rate is the ultimate average annual percentage reduction in the total age-sex-adjusted death rate (2039–89).

5 The real wage growth assumption is derived from the sum of the five separate assumptions described above. The Technical Panel recommends no change in the 

constituent assumptions, so they are not displayed in Table 1.
2015 Technical Panel on Assumptions and Methods | 7

Table 2. Effects of 2015 Technical Panel Assumption Recommendations on OASDI Actuarial Balance (as a 

Percent of Taxable Payroll)

75-year actuarial balance 2090 deficit Year of fund depletion

2015 Trustees Report -2.68% -4.69% 2034

Change due to:

 Fertility rate -0.23% -0.72% 2034

 Mortality improvement rate -0.30% -0.73% 2034

 Net immigration 0.06% 0.19% 2034

 Disability 0.00% 0.00% 2034

 Taxable share of total earnings -0.03% -0.02% 2033

 CPI-W growth rate -0.04% -0.07% 2034

 Real interest rate -0.17% 0.00% 2033

2015 Technical Panel -3.42% -6.08% 2033

Note: In order to project the results of the Panel’s recommended rate of mortality improvement of 1 percent per year, OCACT increased each of the Trustees’ 

age-sex-cause specific rates of decline by 58 percent (multiplied by 1.58). The Panel as a whole did not have the time to pursue a recommendation of a specific 

age gradient, although at least one Panel member thought that the age gradient should be more gradual then the Trustees assume through age 84.

Source: Office of the Chief Actuary’s calculations of the impact of Technical Panel recommendations.

■ III. Presentation

Presentation of Uncertainty

Past Technical Panels have consistently recommended 

improving the analysis and presentation of uncertainty 

about long-run Social Security finances in the Trustees 

Reports. With help from the Office of the Chief Actuary 

(OCACT), the Trustees have made significant progress 

toward these recommendations, including the development of stochastic modeling capabilities and changes in 

the presentation of data. The 2015 Technical Panel makes 

five recommendations that would continue the trend in 

improvement in the presentation of uncertainty.

Presentation Recommendation 1. The Technical Panel 

recommends that for the key individual assumptions the 

Trustees set and disclose standards for the selection of 

low-cost and high-cost alternative assumptions used to 

demonstrate the program’s financial sensitivity to each 

assumption. Acceptable standards would ensure that the 

alternative assumptions are plausible and comparable.

For example, the Trustees could conceptually target the 

10th and 90th percentile range of long-run averages for 

each assumption.

Presentation Recommendation 2. The Technical Panel 

recommends referring to the low-cost and high-cost 

alternatives as the “Higher Trust Fund Balance” and “Lower 

Trust Fund Balance” alternatives, respectively.

Presentation Recommendation 3. The Technical Panel 

recommends the use of plausible integrated scenarios 

to illustrate these Higher and Lower Trust Fund Balance 

estimates of the program’s long-run financial status. These 

scenarios would replace the low-cost and high-cost variants 

as currently presented in the Trustees Report.

Presentation Recommendation 4. The Technical Panel recommends periodic comparison of past key assumptions, 

cost rate projections, and taxable payroll projections to 

their realized values 5, 10 and 20 years later.

Presentation Recommendation 5. The Technical Panel 

recommends increasing the prominence of summary data 

about the uncertainty of projections. More specifically, 

the Panel recommends:

• Summarizing the effects of uncertainty about individual 

key assumptions in the Overview to the Trustees Report;

• Including summary data from stochastic analyses 

where uncertainty is discussed; and

• Summarizing large data sets disclosed in the body of 

the report in a way that provides analytical insight and 

disclosing the complete data sets in the appendices 

to the report or in online databases.
8 | 2015 Technical Panel on Assumptions and Methods

Illustrating Scheduled Benefits Relative to 

Earnings

From 1989 to 2000, Social Security reported benefits as 

a percentage of final earnings for three types of “steady 

earners.” Low, medium, and high earners were assumed 

to earn 45 percent, 100 percent, and 160 percent respectively of the Average Wage Index (AWI) in each year, and 

benefits were illustrated relative to the final year of these 

steady earnings. With steady earnings tracking AWI, this 

ratio was equivalent to using wage-indexed career-average 

earnings in the denominator of the benefits-to-earnings 

ratio. From 2002–2013, the Trustees replaced the steady 

earnings assumptions with assumptions that were more 

representative of actual earnings patterns called “scaled 

earners.”

The 2014 and 2015 Trustees Reports do not provide any 

measure of benefits as a percentage of earnings. Instead, 

they showed scheduled benefit amounts upon retirement 

at the full retirement age (FRA) and at age 65, calculated 

under intermediate assumptions for various hypothetical 

scaled earners attaining age 65 in 2014 and subsequent 

years (see table V.C7 in the 2014 and 2015 Trustees Reports).

Table V.C7 also shows the National Average Wage Index 

in constant dollars (in the year of the published Report) 

from which it is possible to compute some of the percentage-of-earnings measures provided in prior reports.

Presentation Recommendation. The Technical Panel recommends that the Trustees Report provide information on 

the relationships between benefits and earnings for three 

purposes. First, these ratios indicate an effect of changes 

to the benefit formula on the history of the program and the 

projection of its financial status. Second, measured on a 

lifetime basis, these ratios show the impact of improving 

mortality on the cost of individual benefits. Third, these ratios 

provide insights to workers, employers and policymakers 

about the role of Social Security benefits in individuals’ 

financial planning or employers’ retirement plan design.

Method Recommendation. The Technical Panel recommends 

that OCACT undertake research on this subject for several 

purposes, including: 1) to help inform some of the measures 

that we recommend be included in the Trustees Report; 2) 

to show benefits relative to earnings for a sample of actual 

workers, following up the work in Actuarial Note 155; and 

3) to show ratios involving auxiliary benefits.

Measures of Long-Run Financial Sustainability

Presentation Recommendation 1. The Technical Panel 

recommends enhancing the discussion of very long-run 

financial sustainability through: 1) reporting the cost-revenue gap in the 75th year in proportion to revenue and 

GDP; 2) reporting whether this gap is increasing, stable 

or decreasing; 3) explicitly discussing the financial consequences of any program features that are not expected 

to fully emerge during the 75-year valuation period; and 

4) providing a more extensive discussion of sustainable 

solvency than is currently included in the Trustees Reports.

Presentation Recommendation 2. At the same time that 

the above changes are made, the Technical Panel recommends eliminating the infinite horizon metric from the 

Trustees Report.
2015 Technical Panel on Assumptions and Methods | 9

Chapter 1. Demographic Assumptions and Methods

■ 1.1 Fertility

Shifts in fertility impact the relative number of workers and 

beneficiaries in the Social Security system, which affects 

the relative size of revenues and costs. In the short term, 

roughly the first 20 years after a shift, the effect is quite 

small since it only affects the size of the potential dependent beneficiary population. In the medium term, 20–65 

years after a shift, fertility patterns affect the number of 

workers paying into the system. In the long-term, 65 or more 

years, the size of past birth cohorts affects the number of 

old-age beneficiaries. The large increase in fertility rates 

in the post-war period followed by the sharp reduction and 

flattening out of fertility rates in subsequent decades to the 

present explains in large measure the changing fortunes 

of the OASDI trust funds. As the large birth cohorts born 

during the baby boom enter retirement, relatively fewer 

workers will have to support relatively more beneficiaries, 

raising program costs sharply. Because fertility can have a 

major impact on financing, it is important that the low-cost 

and high-cost assumptions fully encompass the full range 

of plausible outcomes.

Assumption Recommendation. The Technical Panel recommends reducing the intermediate total fertility rate 

(TFR) assumption from 2.00 to 1.90. This Panel agrees with 

previous Technical Panels that asymmetry in the range 

between the intermediate and low-fertility and high-fertility 

values is appropriate. The Technical Panel recommends 

that, from 2025 on, the low-cost TFR be lowered from 2.2 

to 2.1, and the high-cost TFR be lowered from 1.8 to 1.6.

Definition of Total Fertility Rate

The primary fertility assumption is summarized in terms 

of the total fertility rate, which is the average number of 

births per woman over her lifetime if she experienced the 

age-specific fertility rates of a given year and survived 

until the end of her childbearing years. This measure is 

period-based; it reflects both the ages at which women 

have children (tempo component) and the number of births 

women have (quantum component). If women delay having 

children to later ages, but still have the same number of 

total children, the period TFR will fall for a period of time 

(as younger women reduce their birth rates), then rise later 

(as older women increase their birth rates).

Historical Patterns

The TFR has remained within a narrow band of 1.74–2.12 

over the past 40 years, with a low of 1.74 in 1976 and a high 

of 2.12 in 2007. Before this period, when major changes in 

the TFR have occurred (e.g., the baby boom) the changes 

have tended to be fairly rapid (a decade or so).

Figure 1 shows the period TFR for the United States since 

1917. The broad contours of the trend are well-known: a 

decline from 1917 until a low point was reached during the 

Great Depression, an increase towards the end of World War 

II followed by the post-war Baby Boom, a decline from 1957 

until 1972, and relative stability during the past 40 years.
10 | 2015 Technical Panel on Assumptions and Methods

Figure 1. U.S. Total Fertility Rate, 1917–2014

0.0

1.0

2.0

3.0

4.0

1915 1935 1955 1975 1995 2015

Sources: Max Planck Institute for Demographic Research and Vienna Institute of Demography, Human Fertility Database; and U.S. National Vital Statistics 

Reports.

The period TFR is affected by both the ages when women 

have children and by how many they have.

6 Changes in 

the timing of childbearing were the largest component of 

the Baby Boom and the subsequent decline. One study 

estimates that 58 percent of the 1936–1957 increase in 

fertility was due to women having their children at younger 

ages and that 55 percent of the 1957–1972 decrease was 

due to women having their children at older ages.

7

 It has 

been tempting for demographers to dismiss timing effects 

on the TFR and to focus on the underlying change in the 

number of children that birth cohorts are having. Yet, from 

the perspective of the Social Security Program and its 

mandated payments, the tempo effects during the Baby 

Boom and subsequent decline have had a major impact.

Fertility declines in the late 1960s and early 1970s coincided with a number of fundamental shifts that led to both 

later childbearing and fewer women having more than two 

children. These shifts included a sustained increase in 

educational attainment for both men and women, with the 

increase being greater for women. Motivated by the desire 

to take advantage of their higher educational attainment, 

financial considerations, and the sense of satisfaction 

that work provides, women increased their labor force 

6 Bongaarts and Feeney (1998).

7 Ryder (1980).

participation. Over the same period, Americans became 

more open to using child care centers, as more women 

with preschool children entered the labor force. Many of 

these trends have continued past the early 1970s and, 

importantly for consideration of fertility assumptions, it 

is highly unlikely that they will be reversed. That is, the 

broad social forces leading to lower and later fertility are 

likely to continue operating for some time. The availability 

of effective contraception and legal abortion facilitated 

the trend to later and lower fertility, with recent abortion 

restrictions perhaps producing a slight upward pressure 

on fertility.

8

Figure 2 illustrates the shift to later childbearing. Plotted 

are the age-specific fertility rates for 1973 and 2014. The 

area under the curve, which is the TFR, is virtually identical for these two years, 1.88 and 1.86 respectively. But 

the 2014 curve has shifted substantially to the right. This 

trend shows no sign of reversing.

The decline in the number of births per woman over the 

past 70 years is shown in Figure 3. Women having more 

than three children dropped sharply over this period. First 

and second births now make up 71 percent of all births.

Again, these trends show no signs of reversing.

8 Goldin and Katz (2002). 
2015 Technical Panel on Assumptions and Methods | 11

Figure 2. Age-specific Fertility Rates, 1973 and 2014

2014

1973

0

50

100

150

15–19 20–24 25–29 30–34 35–39 40–44

Source: National Center for Health Statistics, “Births: Preliminary Data for 2014.”

Figure 3. Cumulative Percentage of Annual Births by Parity: United States 1934–2014

0%

25%

50%

75%

100%

1934 1954 1974 1994 2014

4th+ births

3rd births

2nd births

1st births

Sources: Max Planck Institute for Demographic Research and Vienna Institute of Demography, Human Fertility Database; and U.S. National Vital Statistics 

Reports.
12 | 2015 Technical Panel on Assumptions and Methods

In terms of recent developments, evidence for the United 

States9 and other countries10 suggests that fertility declines 

during a recession, and recovers thereafter. So far, however, 

fertility in the United States has shown little sign of recovering. The TFR declined every year from 2007, when it was 

2.12, to 1.86 in 2013. Preliminary estimates from CDC for 

2014 show a very modest increase of 0.2 percent.

11 The 

anticipated rebound could be delayed because of the 

severity of the Great Recession or could signal movement 

towards a period of lower fertility.

International Patterns

The United States is not the only country to have fertility 

rates below 2.1, a level widely considered to be replacement-level fertility. Indeed, all economically developed 

countries are currently below replacement level. Among 

countries12 that have a population over two million, a TFR 

below 2.1 in 1995 and a per capita GDP greater than $7,000 

in 2002, all but one currently have a TFR either above 1.75 

or below 1.50. Taiwan is the lowest with a TFR just above 

1.0, and New Zealand is the highest at approximately 2.1.

The only country with a TFR near 1.7 is Canada. A closer 

look at Canada reveals the policies enacted in Quebec to 

ease the incompatibility of the mother and worker roles, 

combined with policies that reduce the cost of childrearing, 

have increased fertility in Quebec. For example, Quebec 

has made publicly supported child care centers widely 

available at an affordable price. Such policies are not in 

effect in the rest of Canada and, therefore, the policies in 

place in Canada represent a blend of two different regimes.

Implications of Historical U.S. and International 

Patterns for Trustees Projections

The 2015 Trustees Report assumes an intermediate ultimate 

TFR of 2.0, a low-cost TFR of 2.2, and a high-cost TFR of 1.8.

Intermediate Assumption

In terms of the intermediate projection, the 2015 Trustees 

Report assumed that the TFR will rebound from artificially 

low levels in the wake of the Great Recession to reach 2.07 

9 Schneider (forthcoming); Morgan et al. (2011); Chelin et al. (2013).

10 Sobotka, Skirbekk and Philipov (2011).

11 The preliminary estimate for 2014 is 1.862 and the final estimate for 

2013 is 1.858 Table 1.1 of the Long Range Demographic Assumptions for 

2015 Trustees Report shows the 2013 TFR as 1.870 and 2014 as 1.884 We are 

unsure of the source of the Trustees numbers. See http://www.cdc.gov/nchs/

data/nvsr/nvsr64/nvsr64_06.pdf and http://www.socialsecurity.gov/OACT/

TR/2015/2015_Long-Range_Demographic_Assumptions.pdf. 

12 The countries are Australia, Austria, Belgium, Canada, Czech Republic, 

Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Japan, 

Netherlands, New Zealand, Norway, Poland, Portugal, Romania, Singapore, 

Spain, South Korea, Sweden, Switzerland, Taiwan, the United Kingdom, and the 

United States. Since it takes about a generation for behavior and institutions to 

settle into a stable pattern, countries created from the breakup of the former 

Soviet Union and Yugoslavia are excluded. Data from World Bank.

in 2022. So far, the TFR has shown no signs of a rebound, 

and the Technical Panel recommends deleting this specific 

assumption. The Panel thinks that a TFR of 1.9 should 

be adopted starting in 10 years, rather than the 12 years 

assumed by the Trustees, as the ultimate intermediate 

assumption. It is likely that short-term peaks and valleys 

in the U.S. TFR series will continue, but these fluctuations 

will have little impact on the Social Security system.

13

Low- and High-Cost Assumptions

The 2015 Trustees Report assumed a low-cost TFR assumption 

of 2.2 beginning in 2023. Not one of the 28 economically 

developed countries discussed above has a TFR higher 

than 2.1. The last time the United States had a TFR of 2.2 

was 1972, and it is highly unlikely that the United States 

will return to the social conditions facing American women 

in 1972. Hence, the Technical Panel recommends using 2.1 

as the upper bound.

The Technical Panel also thinks that the lower bound of 

1.8 in the 2015 Trustees Report (reached in 2032) is too 

high. The only country with a TFR between 1.5 and 1.75 is 

Canada, which reflects the effects of two different policy 

regimes—Quebec and the rest of Canada. Such a blend is 

unlikely to occur in the United States. Rather, if the United 

States has a fertility decline, it is likely to reach levels found 

in the lowest fertility countries. Given that low fertility can 

have a substantial impact on the Social Security system 

about 20 years after the decline, the Panel believes that 

it is important to assess the implications of a low-fertility 

scenario that is rooted in the empirical experience of other 

countries. Hence, the Technical Panel recommends a lower 

bound below 1.8. The experience of other economically 

developed countries mentioned above would suggest a 

lower bound TFR of 1.5 or lower. Such a lower bound is not 

unprecedented. The Trustees used a lower bound of 1.5 

in 1980. Further, the 1991 Technical Panel recommended 

a lower bound of 1.4, and the 2007 Technical Panel recommended a lower bound of 1.5. Some members of the 

Technical Panel, however, felt that a lower bound of 1.5 

was too far outside the U.S. historical experience, and 

so the Technical Panel recommends a lower TFR bound 

of 1.6, which was the recommendation of the 1995, 1999, 

and 2011 Technical Panels.

The reason for the asymmetry in the low- and high-cost 

assumptions is simply that the Panel believes anti-natalist social forces (including the education and labor 

force reasons mentioned above) are stronger than the 

pro-natalist forces. Indeed, the demographic literature 

on fertility does not have arguments about increases in 

13 The period conditions that can affect fertility, especially the timing of fertility, can be quite varied. To take a seemingly unlikely example, Rindfuss and 

colleagues (1978 Science) show that the 1954 Supreme Court decision, Brown versus 

Board of Education, depressed fertility among whites in the American South, 

but not in the rest of the country nor among African Americans in the South.
2015 Technical Panel on Assumptions and Methods | 13

period fertility levels beyond a slowing or cessation in 

the postponement of childbearing and improvements in 

assisted reproductive technologies. No one is predicting 

that either (or both) will push fertility into the 2.2 range.

And the Panel notes that the last two Technical Panels 

have recommended asymmetrical bounds around the 

intermediate fertility assumption.

Some suggest that the growing Hispanic population—which 

historically has had higher fertility rates—is a reason for 

projecting a higher TFR in the future. However, this argument 

is not compelling for three reasons: 1) the native countries 

of many Hispanic immigrants are experiencing declining 

fertility rates (for example the current TFR in Mexico is 

2.2, down from 6.7 in 1970); 2) recent research shows a 

considerable decline in Hispanic fertility, especially for 

second and higher generations; and 3) immigrants to the 

United States tend to postpone childbearing until they 

arrive and while such postponement makes their period 

TFR look relatively high, the actual number of children they 

have is not extremely high.

Finally, it is worth noting that the Trustees assumed as 

late as their 2014 report that it takes 25 years for the 

fertility rate to reach the ultimate level, but this period is 

longer than was required for the major changes that have 

occurred since World War II. In 1945, the U.S. TFR was 2.5.

It peaked in 1957 at 3.8—an increase of 1.3 in 12 years. In 

1960, the U.S. TFR was 3.7 and by 1970 it was 2.5—a decline 

of 1.2 in 10 years. Clearly, when major movements occur in 

the U.S. TFR, they occur more rapidly than 25 years. The 

Technical Panel recommends using a 10-year time frame.

The 2015 Trustees Report moves in the right direction for 

their intermediate- and low-cost assumptions. Their intermediate assumption reaches its ultimate level in 2027, or 

only 12 years from now and their low-cost assumption by 

2023, only 8 years from now. But the high-cost scenario 

is projected to reach its ultimate level in 2032, or 17 years 

from now. The logic for taking longer to reach the highcost fertility level is neither obvious nor spelled out in the 

2015 Trustees Report. We note that the TFR dropped from 

2.120 in 2007 to 1.858 in 201314—a decline of 0.262 in only 

6 years. We recommend that the Trustees reconsider the 

time assumed to reach the high-cost level.

■ 1.2 Mortality

No other assumption has been the subject of a more 

persistent and unresolved disagreement between the 

Trustees and successive Technical Panels than that of the 

assumed ultimate rate of improvement in mortality rates.

Five successive Panels in 1995, 1999, 2003, 2007, and 2011 

argued that the Trustees were assuming ultimate rates of 

14 http://www.cdc.gov/nchs/data/nvsr/nvsr64/nvsr64_01.pdf

mortality improvement below historical averages and that the 

Trustees’ rationale for those lower rates was unconvincing.

Each successive Panel expressed its recommendations in 

a slightly different way—for example, with and without an 

age gradient or with slower or faster convergence from initial 

to ultimate rates. Each used a slightly different method to 

reach its conclusion, although all employed some manner 

of extrapolation from past trends. Yet, all recommended 

the ultimate rate of mortality improvement be raised. The 

last three recommended that the use of a by-cause method 

of projection be discontinued.

In the published explanation of the Trustees’ demographic 

projections, OCACT does not comment on the level of 

improvement recommended by each Panel except to 

note that they assume larger rates of decline than do the 

Trustees.

15 They do comment on the manner in which the 

respective Panels made their recommendations. In the 

case of the 2007 and 2011 Panels, for example, OCACT is 

critical of the lack of an age gradient in the recommended 

improvement rate.

16

This Panel believes it is a mistake to focus on the presentational differences in the various recommendations and 

urges the Trustees to take note of the clear and remarkably consistent message across the years concerning the 

overall rate of improvement that should be the basis for 

the Trustees’ projections. Successive Panels recommended 

an age-sex-adjusted average annual reduction in central 

death rates of about 1.0 percent per year (see Figure 4).

17

(The 2011 Panel recommended an even faster rate of 

improvement, equivalent to 1.26 percent per year, and 

was the only Panel to extrapolate historical age-specific 

death rates while explicitly accounting for the effects of 

smoking and to make an empirically grounded adjustment 

for obesity.)

15 “The Long-Range Demographic Assumptions for The 2014 Trustees Report,” 

Office of The Chief Actuary, Social Security Administration, July 28, 2014.

16 OCACT’s documentation on the long-range demographic assumptions states: 

“We feel that the approach of the 2007 and 2011 Technical Panels fails to take 

into account significant deviations in the rates of reduction by age groups as 

evidenced by the data.... The rates of reduction at younger ages have been much 

larger than the rates experienced at older ages. While we agree that differences 

by age will diminish in the future, we do not believe they will vanish.... The 2007 

and 2011 Technical Panels’ recommendations stand in stark contrast to that 

of the 2003 Technical Panel, which recommended using the rates of reduction 

by age and year. (p7).” The document adds: “A key finding of the 2003 Technical 

Panel was their recognition of the likelihood that mortality improvement will 

decelerate in the future. This general concept is entirely consistent with the 

assumptions used in the Trustees Reports for decades. However, the panel’s 

approach was somewhat awkward .... We believe that the Trustees’ assumptions 

present a superior approach compared to the approach recommended by the 

2003 Technical Panel.” (p8).

17 An age-sex-adjusted rate assumes that the population proportions by age 

and sex are the same as in the base year.
14 | 2015 Technical Panel on Assumptions and Methods

Figure 4. Ultimate Average Annual Rate of Reduction in (Age-Sex-Adjusted) Central Death Rates: 

Trustees vs. Technical Panel Recommendations

Trustees’ intermediate

Panel 1995 Panel 1999

Panel 2003

Panel 2007

Panel 2011

Panel 2015

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1995 2000 2005 2010 2015

Sources: Trustees Reports, various years; Technical Panel reports various years; OCACT.

Despite our disagreement with OCACT’s specific assumptions, we find that the Trustees and OCACT have come 

to their conclusions after examination of historical data 

on mortality rates by age, sex, and cause of death. The 

Trustees’ assumptions are a plausible interpretation of 

the ways in which the future will be both similar to and 

different from the past. However, after our own deliberate 

study of the past trends, a close reading of past Technical 

Panel arguments, and consultation with OCACT and outside 

experts, we conclude that the Trustees have been and 

continue to be too pessimistic about the future rate of 

mortality improvement. Unlike the most recent Panels, 

however, we do support the continued use of the by-cause 

method of projection, but recommend supplementing it 

with other approaches.

Assumption Recommendations

The Technical Panel has four assumption recommendations:

Assumption Recommendation 1. Increase the rate of mortality 

improvement such that the ultimate average percentage 

reduction in age-sex-adjusted central death rates is 1.0 

percent during the last 50 years of the projection horizon.

This recommended rate is significantly above the Trustees’ 

currently assumed rate of 0.71 percent over the period 

2039–2089. The Panel’s recommendation would result 

in a projected unisex life expectancy at birth in 2090 of 

88.3 years, and a life expectancy at age 65 in 2090 of 25.3 

years, compared to 85.9 and 23.6 respectively assumed 

in the 2015 Trustees Report.

Assumption Recommendation 2. Apply the same rate of 

ultimate mortality improvement for both males and females 

(as the Trustees currently do).

Assumption Recommendation 3. Retain the assumption 

that the projected mortality improvement rate varies by age 

and declines at older ages, as observed in historic data.

Assumption Recommendation 4. Increase the low-cost 

average mortality improvement rate from 0.4 percent to 

0.5 percent and the high-cost rate from 1.0 percent to 1.5 

percent.

Rationale for Assumption Recommendations

(1) Ultimate Rate

The Panel recommends that the Trustees increase their 

ultimate assumed rates of mortality decline to be more 

consistent with the historical average since 1950, to be 

more consistent with international experience, and to reflect 

expert opinion regarding anticipated long-term mortality 

trends that more fully integrate the impact of smoking and 

obesity. Our rationale follows along the lines suggested 

by five successive prior Technical Panels.
2015 Technical Panel on Assumptions and Methods | 15

Figure 5. Average Annual Reduction in Age-Sex-Adjusted Central Death Rates for Rolling 10-Year Periods 

(Centered), 1950–2011, All Ages

Average 1950-2011

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

1950 1970 1990 2010

Source: 2015 Trustees Report, Panel calculations.

We find that the historical period since 1950 is a reasonable 

period on which to base future projections. It is sufficiently 

long to avoid giving too much weight to short-term trends, 

and it represents a time when many of the factors likely 

to play a role in future mortality improvement, such as 

breakthroughs in medicine and technology and largescale behavioral trends, became important The period 

also included one large-scale epidemic (HIV/AIDS). Figure 

5 illustrates that although the rate of improvement fluctuated significantly over the years since 1950, the Technical 

Panel’s recommendation of a 1.0 percent improvement in 

the age-sex-adjusted annual rate of reduction in central 

death rates is close to the average for the entire period 

(see black line, Figure 5).

When making long-term projections, it is tempting to speculate about whether specific historical, medical, social, 

economic, behavioral and technological developments will 

be replicated in the future. This Panel believes, however, 

that given our current state of knowledge, the best, albeit 

imperfect, guides to the future may be past trends and 

international experience. Trends have been surprisingly 

regular over the past half century, and international 

experience suggests at least a continuation and perhaps 

acceleration of long-term trends in the United States, at 

least at older ages.

18

Accounting for drivers of health: smoking and obesity. 

Research suggests that formally taking account of how 

smoking behavior affects patterns of mortality improvement by successive cohorts can improve projections.

19 For 

both males and females, smoking affects mortality with 

an average delay of two to three decades. The prevalence 

of smoking among men peaked at very high levels in the 

1940s-1950s and began to decline steadily in the 1960s. The 

unfavorable impact on mortality of males grew from 1950 

to 1990, after which the decline in smoking began to have a 

favorable effect on mortality improvement. Female smoking 

peaked more than a decade later, albeit at a much lower 

level than for males. The unfavorable impact of smoking 

on mortality of females increased from 1980 to 2000, 

and the favorable effect on mortality improvement from 

decreased smoking is just now beginning to be observed.

18 Some reasons to be cautious about assuming faster rates of improvement 

include 1) a reduction in improvement in mortality due to cardiovascular diseases 

may occur; 2) the mortality improvement from smoking cessation might wane 

after 25 years; 3) obesity is likely to have some adverse effect over the long 

term; 4) the favorable effects for males due to smaller smoking prevalence may 

be reduced over time; 5) the gains due to increases in educational achievement 

may have a smaller effect; 6) U.S. mortality at 90+ already compares favorably 

with that of other countries, leaving less space for improvement; and 7) future 

advancements in medical treatment and technology may be offset by adverse 

events or conditions, such as pandemics, climate change and terrorism.. 

19 Preston, Glei and Wilmoth (2010), Bongaarts (2006), TPAM 2011.
16 | 2015 Technical Panel on Assumptions and Methods

Figure 6. Projections of Male Life Expectancy at Age 65 from 1982–2015 Trustees Reports versus Actual 

Experience

14

16

18

20

22

1980 2000 2020 2040

Expected years of life remaining

Actual

1982

1987

1992

1997

2002

2007

2012

2015

Source: Trustees Report, various years.

In short, smoking explains a large part of the observed 

slowdown in mortality improvement for males in the 1960s 

through the 1980s, and the speedup thereafter. Conversely, 

it has had a negative effect for females since the 1980s 

until recently. If smoking prevalence continues to wane, 

mortality is likely to improve well into the future.

The prevalence of obesity has grown rapidly since 1970, 

although it appears to have been stabilizing recently.

The impact of obesity on mortality is less clear cut than 

for smoking, but the current longer exposure and prevalence of obesity may result in slower improvements in 

mortality rates.

Recent experience. The Trustees’ projections of mortality 

improvement over the recent past have tended to underestimate the actual rate of improvement in the short to 

medium term. While improvement in the short term does 

not mean sustained improvement over the long term, actual 

experience is more consistent with the past Technical 

Panel projections than with the Trustees’ expectations. For 

example, Figure 6 shows the implications of assumptions 

about improvement in mortality for life expectancy at age 

65 for males. Actual experience quickly exceeded the 

Trustees’ projections from 1987–2007. The 1982 projection 

was higher than actual experience for a few years but was 

well below life expectancy achieved from 2002 through 

2010. On the other hand, mortality improvement between 

2009 and 2013 appears to be well below the trend of the 

prior 10 years, and it will be important to watch whether 

this pattern continues.
2015 Technical Panel on Assumptions and Methods | 17

Figure 7A. International Comparison: Female Life Expectancy at Age 65 Trends 1960–2012

10

14

18

22

1960 1970 1980 1990 2000 2010

Australia Canada

France Germany

Italy Japan

Netherlands Spain

UK US

Source: OECD, 2015.

Some critics suggest that OCACT’s underestimates of 

mortality improvement since 2000 reflect an intellectual 

bias in the face of increased political pressure to show a 

more favorable condition for Social Security finances.

20

The Panel does not find this explanation persuasive or 

useful. The most likely explanation involves the inability 

of OCACT’s projection methodology to effectively cope 

with turning points—a common problem in projections of 

various kinds. OCACT’s methodology relies on mortality 

data that occur with a lag of several years, so the shortterm projection requires two steps. First, OCACT estimates 

the most recent several years of historical data. Then they 

project rates of improvement (by cause, age and sex) that 

converge to the “ultimate” rates of mortality improvement 

in years 25 through 75 of the projection period assumed 

by the Trustees. The necessity of estimating before projecting makes it impossible to spot turning points. Given 

20 Kashin, King, and Soneji (2015).

the importance of mortality in OCACT’s overall projection 

of SSA’s fiscal solvency, research into improved methods 

for short-term mortality estimates and projections should 

be high on OCACT’s research agenda.

International comparisons. The Panel agrees with several 

of the past Panels that comparing the U.S. experience to 

that of other similarly economically developed, low-mortality countries can help inform our projections, as they 

show that achievement of future mortality improvement 

is achievable. Figures 7A and 7B illustrate that improvements in life expectancy at age 65 and above for females 

and males in the United States have been slower than for 

nine of their peer countries from 1960 to 2010. For males 

that pattern is most evident during the period 1970–1995, 

and for females, from 1980 through the present, closely 

related to adverse periods in American mortality due to 

relatively high smoking prevalence.
18 | 2015 Technical Panel on Assumptions and Methods

Figure 7B. International Comparison: Male Life Expectancy at Age 65 Trends: 1960–2012

10

14

18

22

1960 1970 1980 1990 2000 2010

Australia Canada

France Germany

Italy Japan

Netherlands Spain

UK US

Source: OECD, 2015.

To the extent that many other countries have already 

attained higher levels of life expectancy and have experienced more prolonged rapid improvement in mortality 

rates, it is hard to argue that the United States faces any 

technological or biomedical barriers to achieving similar 

rates of improvement. The current Trustees’ projections 

mean that it will take U.S. men 25 years to reach the level 

of life expectancy at birth experienced by Australian men 

today; and for American women it will take 40 years to 

reach the level attained by French women today.

Moreover, the relative slowdown in mortality improvement 

for U.S. males and then for U.S. females appears anomalous 

in the international context. A recent National Research 

Council study concludes that the differences in life expectancy between the United States and other similar countries 

can largely be explained by historical patterns of smoking 

and to a lesser extent the prevalence of obesity.

21 Given 

the earlier decline in smoking prevalence in the United 

States, the future rates of U.S. mortality improvement 

may become more consistent with the experience of many 

other countries.

One final note, in contrast to mortality at other ages, 

Americans older than age 85—and particularly those over 

age 90—are experiencing favorable mortality relative to 

that of many other countries.

21 National Research Council of the National Academies (2011).

(2) Convergence of Rates of Improvement for Men 

and Women

Mortality improvements were faster for American females 

through about 1980, and faster for males thereafter. As 

discussed above, the leading explanation for this reversal 

is smoking behavior. As smoking prevalence has begun to 

converge at a much lower level, it is reasonable to assume 

that mortality improvement for females will become similar 

to that for males after 2040, the ultimate period for mortality 

improvement assumptions. In recognition of these trends, 

since 2011 the Trustees’ ultimate assumptions are the same 

for males and females. We find this reasoning sound and 

support continuing this practice.

(3) Age Gradient

Historical data show that mortality rates have tended to 

improve faster at younger ages and slower at older ages. Over 

time, however, the rate of improvement has slowed at younger 

ages and accelerated at older ages, resulting in a flatter but 

still clear age gradient of mortality improvements (See Table 

3). Some, including the 2007 and 2011 Panels, believed the 

uncertainties inherent in mortality projections and the subjective nature of projecting age-varying mortality improvements 

should favor assuming a constant rate of improvement in 

mortality for all ages. The Panel, however, believes that if 

relevant historical experience supports a slower rate of mortality improvement with advancing age and the underlying 

factors involved can be identified and reasonably estimated, 

the projections should reflect an age gradient. We recommend 

that the Trustees continue to assume an age gradient.
2015 Technical Panel on Assumptions and Methods | 19

Table 3. Average Rates of Mortality Improvement by Sex, Age, and Period, and Trustees Assumptions 

2039–2089.

Age 

Groups

Male Female Trustees 

Assumptions

1950–2011 1980–2011 2000–2011 1950–2011 1980–2011 2000–2011 2039–2089

0–14 2.94% 2.46% 1.72% 2.82% 2.26% 1.53% 1.57%

15–49 0.99% 1.12% 1.28% 1.25% 0.53% 0.63% 0.90%

50–64 1.49% 1.71% 1.14% 1.19% 1.19% 1.41% 1.06%

65–84 1.07% 1.59% 2.32% 1.14% 0.74% 1.74% 0.74%

85+ 0.42% 0.26% 1.50% 0.77% 0.06% 1.17% 0.48%

All Ages 1.02% 1.23% 1.78% 1.08% 0.61% 1.43% 0.71%

Source: The Long-Range Demographic Assumptions for The 2015 Trustees Report; historical data provided by OCACT.

(4) Low-Cost and High-Cost Assumptions

The Technical Panel recommends increasing the low-cost 

average mortality improvement rate from 0.4 percent to 

0.5 percent and the high-cost rate from 1.0 percent to 1.5 

percent. Thus, the mortality improvement assumption for 

periods after 2039 would remain roughly symmetric around 

the intermediate projection assumption. This pattern reflects 

the Panel’s belief that potentially favorable developments 

such as future medical breakthroughs are expected to be 

as likely as potentially unfavorable developments such as 

new epidemics or pandemics.

Methodology Recommendations

The Technical Panel has four recommendations regarding 

methodology:

Method Recommendation 1. The Technical Panel recommends retaining the current mortality model that involves 

separate projections by cause of death.

Method Recommendation 2. The Technical Panel recommends investigating the utility of alternative approaches 

to projecting mortality and periodically publishing how 

their results compare to the current model. In particular, 

the Panel recommends conducting research into methods 

that formally incorporate drivers of mortality, such as 

smoking and obesity, and into methods that take account 

of cohort effects.

Method Recommendation 3. The Technical Panel recommends investigating alternative methods for establishing 

a starting point for the projections and for the process of 

transitioning from the current period to the ultimate rates 

of mortality improvement.

Rationale for Methodology Recommendations

Projections by Cause of Death

The primary methodology used by OCACT for projecting 

mortality rate improvements is a “by-cause” model, 

incorporating five categories of causes of death (cardiovascular disease, malignant neoplasms (cancer), respiratory 

disease, violence, and all others). The by-cause model is 

used for projecting the ultimate mortality assumption, 

which covers years 25–75 of the projection period. For 

shorter-term projections, OCACT relies on recent historical 

data, gradually moving from these values to the ultimate 

assumption in projection year 25.

Past Technical Panels have been critical of the Trustees’ 

reliance on projections by cause of death and have suggested that the information gained from a formal by-cause 

model is unlikely to improve the projections. They have 

said that by-cause models are too complex, with too many 

parameters to be selected and that future mortality cannot 

be known in sufficient detail to estimate separate rates 

of improvement for each cause. In addition, at worst the 

use of this model may bias improvement rates downward, 

since cause categories with lower assumed improvement 

rates will tend to dominate others over time.

The Panel appreciates the varied criticism of the by-cause 

method, but does not recommend that the Trustees discontinue using it at this time. First, most mortality projections 

are developed in consultation with medical professionals 

about causes of death; incorporating mortality improvement by cause of death directly makes these assumptions 

explicit and transparent. Second, partly reflecting input 

from prior Panels, OCACT has taken steps to simplify 

its model by decreasing the number of cause of death 

categories from eight to five and using a common rate of 

mortality improvement for males and females, thus reducing 

the number of explicit parameters needed to derive the 
20 | 2015 Technical Panel on Assumptions and Methods

mortality projections. These changes make the model more 

tractable. Third, methods of extrapolating past trends into 

the future have their own shortcomings: for example, the 

selection of the historical period from which to base the 

extrapolation is by definition arbitrary. The Panel believes 

that both by-cause methods and extrapolation methods 

are useful.

While the Panel recommends that OCACT continue to use 

the by-cause method as its primary projection tool, it 

recommends that OCACT: 1) investigate the desirability 

of further simplifying the model by reducing the number 

of cause categories; 2) provide more detail on the basis 

from which the ultimate rates of mortality improvement 

are chosen; and 3) periodically publish projections of 

alternative all-cause models, and describe the ways in 

which the by-cause model improves the resulting projections. If OCACT does not have the resources to adequately 

test alternative methods and benchmark them against 

each other, they should provide sufficient data to outside 

researchers to enable replication of OCACT’s projections 

and to develop alternative projections.

Acknowledging the tension between a call for simplification 

and incorporating new drivers, the Panel nevertheless recommends that OCACT evaluate ways of formally incorporating 

smoking and obesity into the projection methodology as well 

as birth-cohort-related mortality patterns as appropriate.

Since the effect of improvement in mortality is concentrated 

at older ages, OCACT and the Trustees should invest more 

heavily in research on mortality at age 60 and above, for 

example on the effect of increasing reported mortality due 

to dementia (including Alzheimer’s).

Methods of Transitioning from Year of the Trustees 

Report to Ultimate Assumptions

The Panel recognizes the difficulty in estimating the slope 

and turning points in projecting rates of mortality improvement, which in part has resulted in the underestimation 

of mortality rates referred to above. Nevertheless, the 

Panel believes that the use of alternative approaches to 

transitioning from the most recently available rates of 

mortality improvement to the ultimate rates should also 

be considered to attempt to better capture trends and 

turning points in mortality improvement rates.

Socio-economic Factors

Differences in mortality due to socio-economic factors 

are reflected by the Trustees in the projections of future 

trends in the average size of benefits. Currently, average 

benefits after the date of entitlement are assumed to 

grow by about 0.45 percent annually due to the fact that 

those with the highest benefits (based on higher lifetime 

earnings) are also expected to have longer life spans.

The Panel believes that reflecting these trends through 

a series of “post-entitlement factors” is reasonable. The 

Panel encourages the Trustees/OCACT to continue to 

monitor future trends in differential mortality by income 

and education to determine whether the estimated effect 

on benefit growth should be adjusted in the future.

■ 1.3 Immigration

The Technical Panel acknowledges that immigration is a 

volatile, unpredictable, poorly-understood, and increasingly 

politically-driven process, and that the long-range projections required of the Trustees therefore are exceptionally 

challenging. At the same time, the Panel recognizes that 

methods and assumptions about future U.S. immigration 

are becoming increasingly important for the overall usefulness of the Trustees’ long-range projections. With these 

realities in mind, the Technical Panel respectfully offers 

three recommendations.

Assumption Recommendation 1: Net Total Immigration. 

The Trustees intermediate projections assume declining 

net total immigration over the projection period. However, 

the Technical Panel concludes that net total immigration 

is more likely to increase for the reasons discussed below.

Therefore, the Panel recommends that the Trustees raise 

their intermediate assumption for net total immigration 

from an average of 1,155,000 in the 2015 Trustees Report to 

1,298,000. And the Panel recommends that the low-cost 

and high-cost projections be increased from an average 

of 1,465,000 to 1,655,000 and from 850,000 to 960,000, 

respectively.

These recommendations are intended to serve only as 

interim adjustments; they were derived by averaging together 

two different sets of projections—one from the Trustees 

and one from the Census Bureau—that move in divergent 

directions. The Panel acknowledges that this procedure is 

not an acceptable way to create credible long-range projections. Therefore, our primary recommendation is that 

OCACT and the Census Bureau work together to develop a 

set of improved projections that we expect will reflect the 

Panel’s judgment that the level of net total immigration is 

more likely to rise than decline.

The Panel is not suggesting a mechanistic approach, such 

as an assumption that net total immigration will be at a 

constant rate applied to a growing U.S. population base, 

but instead wishes to draw the attention of the Trustees 

to the following components:
2015 Technical Panel on Assumptions and Methods | 21

a. “Legal immigration:” The Panel recommends that 

revised assumptions of increasing “legal immigration” 

be adopted for the Trustees’ intermediate scenario.

The key reason is the absence under current law of 

any numerical limits on legal permanent residence 

(LPR) visas available for immediate relatives (spouse, 

widow(er), unmarried minor children, and parents) of 

U.S. citizens. This lack of constraint means that those 

who naturalize from among the large numbers of earlier 

legal immigrants will be able to obtain LPR visas for 

their immediate relatives, without numerical limits. In 

addition, anyone from among the expanding numbers 

of temporary visa holders who marries a U.S. citizen 

and naturalizes also is entitled to obtain LPR visas 

for their immediate relatives. As a result, the future 

volume of legal immigration under “current law” is 

more likely to rise than to decline or remain constant.

b. “Legal emigration:” The Panel recommends that 

OCACT, in collaboration with the Census Bureau, 

develop more current estimates of legal emigration 

(i.e. departure of U.S. citizens and legal permanent 

residents from the Social Security Area population).

We are concerned that past Trustees’ projections have 

been unduly influenced by out-of-date estimates of 

such emigration derived from Census data that are 

now 25–35 years old, when circumstances were very 

different.

c. “Net other immigration:” The Panel recommends 

that the Trustees long-range projections assume 

increases rather than declines in the volume of “net 

other immigration.” This recommendation reflects our 

reservations about the Trustees’ assumption to hold 

essentially constant the annual rate of “other emigration” over the long term, which—when applied to the 

projected growing pool of “other immigrants”—leads 

to an improbably large decline in projected “net other 

immigration.”

Assumption Recommendation 2: Executive Actions. The 

Technical Panel recognizes the inherent difficulties associated with any treatment of “executive actions” in long-range 

projections. The Trustees decided in their 2015 report to 

treat both the 2012 and 2014 executive actions as “current 

law” in their projections. The Technical Panel would have 

included the 2012 action but would have deferred inclusion 

of the more recent and more significant executive actions 

announced in late 2014. The Panel’s understanding is that 

the 2012 executive actions have already been implemented, 

but that the 2014 executive actions are being actively challenged in both the courts and in Congress, and that their 

implementation currently is suspended under a preliminary injunction issued by a Federal District Court.

22 These 

are hard calls, however, and the Technical Panel accepts 

the Trustees’ decision. In the treatment of any executive 

action, the Technical Panel urges the Trustees to modify 

their overall projections to reflect the positive feedbacks 

on “legal immigration.”

Presentation Recommendation. The Panel recommends 

that the Trustees present graphical representations of all 

of the assumed trajectories included in its immigration 

projections, in addition to the data tables included in past 

reports. Such graphical presentations would provide readers 

with a clearer understanding of the Trustees’ assumptions and their effects upon the immigration projection 

outcomes. Specifically, such graphs would clearly show 

that the downward trajectory of net total immigration that 

appears in the Trustees’ 2015 intermediate projection is 

being driven primarily by assumptions of future declines 

in “net other immigration.”

These recommendations reflect the Technical Panel’s recognition that methods and assumptions about future U.S.

immigration are very important to the overall usefulness 

of the Trustees’ long-range projections. Since the 1970s, 

immigration to the United States has been increasing 

substantially, while fertility rates over the same period 

have trended lower (though they remain much higher 

than those of most OECD countries). The combination of 

these two trends has greatly increased the demographic 

significance of international migration.

Estimates of current U.S. net immigration (about 1.3 million 

per year) are roughly comparable to those of “natural 

increase,” i.e. births minus deaths of about 1.3 million, 

meaning that net immigration now accounts for about half 

of U.S. population growth. If, in addition, U.S. births to 

immigrants are counted as a demographic effect of immigration, net immigration is accounting for over one-half of 

U.S. population growth.

Oddly enough, while immigration is a more important contributor to demographic increase than often appreciated, 

its effects upon the age distribution of the population are 

frequently overstated. It is often argued that increasing 

immigration would compensate for declining percentages 

in the “working ages” (e.g. 18–64) in the projected U.S.

population, because a higher proportion of immigrants 

are in these age groups. Most quantitative analyses of 

such effects, however, show that increasing immigration 

from current levels would produce quite small impacts on 

the overall percentage of the “working age” population.

22 As of August 5, 2015.
22 | 2015 Technical Panel on Assumptions and Methods

Methodology

While immigration has become a very important component 

of U.S. demographic change, developing credible long-range 

immigration projections involves daunting challenges:

1. U.S. immigration data have serious and longstanding 

weaknesses, meaning that official data for both baselines and trends that are essential for projections 

are unusually problematic. Such data weaknesses 

required the Census Bureau in 2009 to extensively 

revise projections of the 2050 U.S. population that 

it had published only a year earlier.

23 In comparison, 

recent Government data on births and deaths are 

far better.

2. Trends in both immigration and emigration have proved 

to be volatile, making assumptions over the long-term 

more problematic than those for the less-volatile 

trends in fertility and mortality.

3. The research literature on immigration has produced 

no credible theory that might assist the Trustees in 

developing their projection assumptions for U.S.

immigration. In contrast, theoretical understanding 

of fertility and mortality is far more robust.

In addition, immigration patterns are more affected by 

legislation, judicial rulings, and executive actions and 

administrative practices than are fertility and mortality.

Global demand for access to U.S. immigration visas far 

exceeds supply, and hence actual net immigration numbers 

depend substantially upon legislative, judicial, and executive/administrative decisions.

Moreover, the U.S. immigration system is highly complex: 

the law includes a surprisingly large number of visa categories, many of which interact with other categories in 

ways that often have not been considered or well understood by policymakers. One result is that many effects of 

past policy changes have been very different from those 

intended or promised, often surprising both proponents 

and opponents of such measures.

24 Moreover sponsors 

of recent immigration legislation have explicitly declined 

to offer any estimates of the numerical effects of their 

proposals, leading to wildly different numbers emerging 

from different government agencies, think-tanks, and 

interest groups.

25

23 http://www.census.gov/population/projections/data/national/2009/

2009comparisonfiles.htm.

24 Many of the effects of immigration legislation enacted in 1965, 1986, and 

1990 were not anticipated even by sponsors of these Acts. For example, the 

reforms in 1986 and 2000 were both described as enhancing enforcement, yet 

the size of the unauthorized/undocumented/illegal pool increased substantially 

after their implementation. 

25 See report on an expert meeting to discuss the underlying differences 

between these projections in Lowell and Bump (2006). See also Lowell (2014). 

In summary, immigration is a volatile, unpredictable, 

poorly-understood, and increasingly politically-driven 

process. Yet the Trustees are obliged to produce 75-year 

projections for the U.S. population, and net total immigration has become a major driver of U.S. population change.

The shaded text box (opposite page) defines the migration 

categories used by the Trustees. A variety of misunderstandings can arise from these categories and other aspects of 

the Trustees’ assumptions.

Limiting “legal immigration” solely to those granted legal 

permanent residence is consistent with usage by other U.S.

government agencies, but very different from everyday 

parlance and journalistic usage, in which persons residing 

lawfully within the United States on long-term but not permanent visas generally are considered “legal immigrants.”

The Trustees’ assumptions for “legal immigration” include 

little or no increase in volume over the 75-year projection 

period, on grounds that current law includes numerical caps 

on most sub-categories of legal permanent residence visas.

However, the largest single sub-category of such visas—

that for immediate family of U.S. citizens—actually is not 

subject to any numerical limits. Moreover, large numbers 

initially admitted under temporary visas “adjust status” 

to that of legal permanent resident (mostly by obtaining 

permanent employment-based visas or through marriage to 

a U.S. citizen), and then are eligible to become U.S. citizens 

after relatively short waiting periods,26 thereby creating 

feedbacks between the temporary and permanent visa 

sub-systems. This relationship suggests that an upward 

rather than static trajectory would be more likely in the 

numerically-unlimited immediate family sub-category of 

“legal immigration” over the longer term.

As noted above, the “other immigrant” category used by 

the Trustees consists primarily of unauthorized/undocumented/illegal immigrants. However it also includes those 

admitted quite lawfully on “temporary” or time-limited 

visas, thereby diverging from usage in U.S. immigration 

law and by other government agencies, which classify 

such visas as “non-immigrant.” Many of those now classified as “other immigrants” are legally-resident, Social 

Security-eligible, and on visas that allow for very lengthy 

(though not permanent) residence in the United States, in 

many cases for more than the 40 quarters of employment 

required to qualify for Social Security benefits. This group 

has become quite large and continues to increase.

26 Typically 5 years, sometimes shorter.
2015 Technical Panel on Assumptions and Methods | 23

Migration Categories Used by Trustees

In describing the assumptions about immigration used in the Trustees’ long-term projections, it is important to 

note that the migration categories they address differ from those used by other government agencies. Moreover, 

in many respects, governmental terminology differs considerably from everyday usage of the same English words.

Both kinds of differences contribute to misunderstanding and confusion. The categories and definitions used by 

the Trustees are as follows (emphasis added for clarity):

“Legal immigration”: defined as the annual number of persons granted legal permanent residence (LPR) status.

“Legal emigration”: the annual number of U.S. citizens & LPRs who leave the “Social Security area population.”

“Net legal immigration”: the difference between these two

“Other immigration”: persons who enter the Social Security area population in a given year and stay through the 

end of that year but do not acquire legal permanent residence status. This category includes disparate sub-categories, including:

• Unauthorized/undocumented/illegal migrants: This is the largest sub-category, itself divided between those 

who enter U.S. territory without permission or inspection, and those who enter on lawful visas (e.g. as tourists) 

but then violate the terms of those visas.

• Foreign workers who enter lawfully on “temporary” or time-limited visas and do not violate their terms. Hence 

they are legally present, but have not been granted the legal permanent residence visas required by the “legal 

immigration” definition; and

• International students, also admitted lawfully for educational purposes but not for permanent residence.

“Other emigration”: those in the “other immigrant” category who leave the Social Security area population, or who 

adjust their immigration status to become legal permanent residents.

“Net other immigrants”: the difference between “other immigration” minus “other emigration.”

“Net total immigration” then is simply the sum of “net legal immigration” and “net other immigration.”

The Trustees’ understandable use of “Social Security 

area population” as part of their definitions adds further 

complexity, since it includes both non-citizens and citizens 

alike who are living outside U.S. territory but are entitled 

to payment of Social Security benefits due to past employment-based contributions or other types of eligibility.

It injects a further definitional difference between the 

populations being projected when compared with those 

projected by other Federal agencies such as the Census 

Bureau.

Finally, the Trustees’ projections include alternate assumptions about net immigration that are termed low-cost, 

intermediate, and high-cost—though such usage may lead 

to misunderstandings for those unaware that these “cost” 

estimates relate solely to net payouts from the Social 

Security system itself, rather than to overall governmental 

costs (and of course benefits) of net immigration for Federal, 

State, and local governments, and to U.S. society and the 

economy more generally.

27

Assumptions

“Legal immigration”: With respect to legal immigration (also 

sometimes termed “gross legal”), the Trustees’ assume 

essentially constant annual inflows over the projection 

period 2020–2080 (see Table 4). For the intermediate 

projection, this number is set at 1,060,000 per year. The 

low-cost and high-cost variants are also assumed to be 

essentially constant over the projection period, differing 

above and below the intermediate assumption by a constant 

200,000 per year.

27 See also Panel recommendation #2 in the Presentation of Uncertainty 

section about “low-cost” and “high-cost” terminology.
24 | 2015 Technical Panel on Assumptions and Methods

Table 4. Immigration Values Used for 2015 Trustees Report

Alternative Year Gross legal Net legal Gross other Net other

Intermediate 2015 1,060,000 795,000 1,400,000 670,000

2030 1,060,000 795,000 1,350,000 395,000

2040 1,060,000 795,000 1,350,000 340,000

2050 1,060,000 795,000 1,350,000 315,000

2060 1,060,000 795,000 1,350,000 300,000

2070 1,060,000 795,000 1,350,000 290,000

2080 1,060,000 795,000 1,350,000 290,000

2090 1,060,000 795,000 1,350,000 285,000

Low cost 2015 1,185,000 950,000 1,500,000 695,000

2030 1,260,000 1,010,000 1,650,000 530,000

2040 1,260,000 1,010,000 1,650,000 440,000

2050 1,260,000 1,010,000 1,650,000 400,000

2060 1,260,000 1,010,000 1,650,000 375,000

2070 1,260,000 1,010,000 1,650,000 365,000

2080 1,260,000 1,010,000 1,650,000 360,000

2090 1,260,000 1,010,000 1,650,000 355,000

High cost 2015 910,000 635,000 1,100,000 445,000

2030 860,000 600,000 1,050,000 310,000

2040 860,000 600,000 1,050,000 265,000

2050 860,000 600,000 1,050,000 245,000

2060 860,000 600,000 1,050,000 235,000

2070 860,000 600,000 1,050,000 225,000

2080 860,000 600,000 1,050,000 220,000

2090 860,000 600,000 1,050,000 220,000

Source: The Long-Range Demographic Assumptions for the 2015 Trustees Report, Table 3.1, 2015.

“Legal emigration”: The Chief Actuary notes that “statistics on emigration are sparse and most analysis is based 

on estimates.”28 Our understanding is that the estimates 

currently being used are actually 25–35 years old, based 

upon data from the 1980 and 1990 Censuses. On the basis 

of such data, the Trustees assume that the number of 

legal emigrants per year is a constant 25 percent of legal 

immigration per year from 2020–2080. For the low-cost and 

high-cost variants, the percentages are set at 20 percent 

and 30 percent respectively.

“Net legal immigration”: Based on the assumptions above, 

“net legal immigration” under the intermediate variant 

is set at a constant 795,000 per year. The low-cost and 

high-cost variants are also based on assumed constant 

numbers per year from 2020–2080, at 1,010,000 and 

600,000 respectively.

28 Office of the Chief Actuary, The Long-Range Demographic Assumptions for the 

2014 Trustees Report, 2014. Section 3. Immigration p. 4. 

“Other immigration”: The Trustees’ projections assume 

that “other immigration” will increase over the very short 

term, from around 1,400,000 in 2015 to 1,550,000 in 

2018/19 (intermediate projection), “reflecting a recovery 

from recession-depleted levels of the other-immigrant 

population.”29 “Other immigration” is then assumed to 

decline back to 1,350,000 by 2022, due to assumptions 

of more effective enforcement and a waning of the projected “recovery” increase, and from then on to remain 

constant at that level through 2080. Alternative low-cost 

and high-cost projections also assume constant annual 

flows of “other immigrants” over most of the projection 

period, but at annual levels 300,000 higher and 300,000 

lower than the intermediate.

29 Trustees 2014, p. 82.
2015 Technical Panel on Assumptions and Methods | 25

Figure 8. Net Immigration Estimates/Projections, Trustees 2015 Intermediate, 1980–2090

Net Other

Net Legal

Net Total

-1,000,000

0

1,000,000

2,000,000

3,000,000

1980 2000 2020 2040 2060 2080

Source: 2015 Trustees Report, Table V.A1.

“Other emigration”: Meanwhile the 2015 Trustees’ projections assume substantial increases in “other emigration” 

over the projection period. This outcome is driven by the 

assumption that future departures are best represented 

by a nearly constant percentage from the pool of “other 

immigrants”—specifically assuming an emigration rate 

of 2.8 percent annually, declining slightly to 2.5 percent 

late in the projection period. Since other assumptions 

about “other immigration” result in a substantial growth 

in the projected pool of “other immigrants” (the stock as 

opposed to the flow), the result of applying this near-constant percent departure rate is a substantially increasing 

trend in annual emigration.

“Net other immigration”: Because the projections assume 

essentially constant annual volumes of “other immigration” while also assuming substantial increases in “other 

emigration,” the resulting projection from 2020 onward 

shows a long-term trend of substantial declines in “net 

other immigration.” From the 2015 estimate of 670,000 

“net other immigrants,”30 the intermediate projection 

assumes declines to 435,000 by 2025, 340,000 by 2040, 

and 290,000 by 2070. In percentage terms, these represent 

declines of about 50 percent by 2040 and just under 60 

percent by 2070.

30 As noted, a short-term “recovery” of “other immigration” is assumed, with 

a peak in 2018/19.

Assessment of Methodology and Assumptions

In the Trustees’ 2015 immigration projections, most of 

the components are held constant or near-constant over 

the projection period. A notable exception is assumed 

declines in “net other immigration,” which drops by about 

50 percent over 25 years from 670,000 (2015) to 340,000 

(2040). As discussed, this decline is attributable primarily 

to the assumed increases in “other emigration” after 2022.

The projections based on these assumptions produce 

declining absolute levels of “net total immigration” (the 

sum of “net legal” and “net other”) in the intermediate 

projection from 1,465,000 in 2015 to 1,080,000 in 2090—a 

decline of over 25 percent over the projection period. As 

shown in Figure 8, the decline in projected net immigration 

is being driven primarily by the assumed declines in “net 

other immigration.”

Over the same period the U.S. population is projected to 

increase substantially. As a result “net total immigration” 

expressed as a proportion of the projected U.S. population 

would decline by well over one-half, from 4.05 to 1.76 per 

1,000 population.

To what extent should these projected downward trends in 

“net total immigration” be considered possible, plausible, or 

likely for future decades? Certainly some arguments would 

support them. With respect to the large proportion of “other 

immigration” that is unauthorized/undocumented/illegal:
26 | 2015 Technical Panel on Assumptions and Methods

Table 5. Comparisons of Net Total Immigration Assumptions by SSA and Census Bureau for 2015–2060

 Net total, SSA 

Intermediate 

 Census 2014 

projections 

 SSA less 

Census 

SSA and Census 

Average

2015 1,465,000 1,241,000 224,000 1,353,000

2020 1,395,000 1,271,000 124,000 1,333,500

2030 1,190,000 1,355,000 -165,000 1,272,500

2040 1,135,000 1,426,000 -291,000 1,280,500

2050 1,110,000 1,473,000 -363,000 1,291,000

2060 1,095,000 1,495,000 -400,000 1,295,500

2070 1,085,000 1,515,000* -430,000 1,300,000

2080 1,085,000 1,535,000* -450,000 1,310,000

*Note: Technical Panel extrapolations for years after 2060.

Sources: SSA projections from 2015Trustees Report, Table 3.1, 2015. Census projections from U.S. Census Bureau, Table 1. Projections of the Population 

and Components of Change for the United States, 2015 to 2060 (NP2014-T1).

• Enforcement of U.S. immigration laws could become 

more effective in future decades. Proponents of so-far 

unsuccessful legislative proposals for “comprehensive immigration reform” argue that their proposals 

include measures that would substantially enhance 

enforcement, and others have proposed legislation 

focused upon enforcement per se. However, the Trustees 

base their projections on “current law,” and hence 

any possible future legislative changes that would 

increase enforcement efficacy would not normally be 

included in their projections. In addition, we recognize 

that past immigration reforms, such as those enacted 

in 1986 and 2000, also were described as enhancing 

enforcement, yet the size of the unauthorized/undocumented/illegal pool increased substantially after 

their implementation.

• Economic and other incentives favoring out-migration 

from current primary source countries to the United 

States could decline over the projection period. In 

part this could be one effect of the substantial fertility 

declines that have taken place in Mexico, which after 

a lag of 20 or more years should result in slowing 

growth among the young adult cohorts that have the 

highest propensities to emigrate.

With respect to lawful immigration, whether with legal 

permanent residence visas (and hence counted as “legal 

immigration”) or in the form of temporary visas (and hence 

placed under the Trustees’ “other immigration” category):

• Some believe that global “competition” among destination countries will grow, especially for those who 

have developed knowledge and skills that are valued 

in advanced economies. This outcome, while possible, 

depends heavily upon trends in economic growth, 

technology, and other hard-to-predict elements.

• Expansion of temporary visas, whether “skilled” or 

not, has been driven by effective political advocacy 

by interest groups, often employers. It is possible 

that such advocacy efforts will decline over time, as 

employers find other ways to limit expenditures on 

their U.S. workforce (e.g. investment in labor-saving 

technologies, and offshore outsourcing of their activities to low-wage countries), but again this is virtually 

impossible to anticipate with any confidence.

While these and other changes are possible and would be 

consistent with the downward trends in net immigration 

assumed in the Trustees’ projections, they seem less 

plausible than several alternatives, such as:

• Increases in “net other immigration” might result 

from the recently-announced (though contested) 

2014 executive actions to provide legal status to 4–5 

million persons who are currently in unauthorized/

undocumented/illegal status.

• Promised enhanced enforcement of immigration law 

may not occur, or even weaken under “current law,” 

as a result of administrative or judicial decisions.

• Whether or not emigration from current primary-source 

countries will decline as argued by some, additional 

“other migration” pathways may appear from source 

countries that are not currently the origin of large 

numbers of such migrants.

• Employers and their representatives may continue 

or strengthen their advocacy for expansions in temporary visas.

• Under the “legal immigration” category, the numerically-unlimited category of legal permanent residence 

visas for immediate family of U.S. citizens would 
2015 Technical Panel on Assumptions and Methods | 27

likely increase due to the feedback loops built into 

current law.

Given these plausible developments, the Technical Panel 

recommends that the Trustees increase their estimates 

of “legal immigration” and “net other immigration” for 

the intermediate projections. It is worth noting that the 

Census Bureau’s 2012 long-range immigration projections 

provided variants of net international immigration—“low,” 

“middle,” “high,” and “constant”—and that all of these 

variants (other than the “constant” variant, by definition) 

showed increases. The Panel is not suggesting that the 

projection assumptions of the Census Bureau are superior 

to those of the Social Security Administration—only that 

the projection series being produced by these two technically-proficient government agencies have become quite 

divergent (see Table 5).

How Should the Trustees Project the Impact of 

“Executive Actions?”

The Trustees understandably prefer to base their projections 

upon “current law.” As can be seen from the accumulation 

of 10–11 million unauthorized migrants in the United States 

during the past two decades, current U.S. immigration law 

appears to be very difficult to enforce. Moreover, immigration 

outcomes also depend heavily upon decisions by both the 

executive and judicial branches that were not contemplated 

when controlling legislation was being adopted.

Uncertainties about the meaning of “current law” with 

respect to immigration have been thrown into sharp 

relief by “executive actions” announced by the Obama 

Administration in 2012 and 2014.

31 In the absence of 

Congressional agreement on proposed “comprehensive 

immigration reform,” the 2014 executive actions seek 

to provide temporary legal status to some 4–5 million 

persons currently living in the United States without legal 

authorization. These actions, in turn, have been vigorously 

challenged, and future outcomes remain clouded. Under 

these conditions, the Trustees are faced with a difficult 

decision as to whether executive actions announced by the 

Administration and affecting large numbers of would-be 

immigrants should, or should not, be considered part of 

“current law.”

31 The Obama Administration’s 2012 executive action on immigration is 

known as “Deferred Action on Childhood Arrivals” (DACA) and permits certain 

undocumented immigrants who entered the United States before age 16 and 

before June, 2007 to receive renewable two-year work permits and exemption 

from deportation. The action was expanded in 2014 to include those who entered 

the United States before 2010 and eliminated a requirement that applicants be 

under 31 years of age. The 2014 executive action is known as “Deferred Action 

for Parents of Americans and Lawful Permanent Residents” or as “Deferred 

Action for Parental Accountability” (DAPA) and allows certain undocumented 

immigrants who have lived in the United States since 2010 and have children who 

are American citizens or lawful permanent residents to apply for a three-year, 

renewable work permit and grants exemption from deportation. A federal judge 

issued a temporary injunction on the enforcement of DAPA in February of 2015.

The Trustees decided in their 2015 report to treat both the 

2012 and 2014 executive actions as “current law” in their 

projections. The Technical Panel would have included the 

2012 action but would have deferred any inclusion of the 

more recent and larger executive actions announced in 

late 2014. The Panel understands that the 2012 actions 

have already been implemented, but that the 2014 actions 

have been challenged in both the courts and in Congress, 

and their implementation is currently suspended under a 

preliminary injunction issued by a Federal District Court. In 

late May 2015, an appeal by the executive branch seeking 

termination of this injunction was rejected by a panel of 

the 5th Circuit of Appeals. Evidently the legal status of 

the 2014 executive actions remains unclear.

32 Despite its 

reservations, the Technical Panel accepts the Trustees’ 

decision to include the 2014 executive action.

The Technical Panel further notes that, in the treatment 

of any executive action, the Trustees may also need to 

modify their overall immigration projections to reflect that:

• Such actions may result in substantial positive feedbacks upon future “legal immigration.”

• The numbers involved in the 2014 executive actions 

are large (4–5 million), but the announced actions are 

effective over a 2- or 3-year period after which they 

may or may not be renewed. Hence the beneficiaries 

of such actions presumably would not be shifted into 

the “legal immigrants” category since their status is 

not that of legal permanent residents.

• Beneficiaries of both the 2012 and 2014 executive 

actions, if ultimately implemented, would be eligible 

to receive Social Security numbers and work permits.

33

• If a significant number of beneficiaries of executive 

actions ultimately are able to adjust their status to 

legal permanent residents (LPRs), they would shift 

from the Trustees’ category “other immigrant” to their 

“legal immigrant” category.

• If substantial numbers subsequently were to naturalize, they would become eligible to petition for legal 

permanent resident (LPR) visas for their immediate 

family members, without numerical limits, and so the 

projected numbers in this category would presumably 

need to be adjusted upward.

32 As of May 31, 2015.

33 Past Trustee projections have assumed that Social Security benefits are 

not available to anyone who never had a “work-authorized SSN at some point 

in time.” However, the planned issuance of Social Security numbers to large 

numbers of beneficiaries of the announced executive actions would presumably 

require adjustments in projection assumptions regarding the numbers eligible 

to claim Social Security benefits. Social Security Administration, Office of the 

Chief Actuary, “Effects of Unauthorized Immigration on the Actuarial Status of 

the Social Security Trust Funds,” Actuarial Note 151, April 2013, p. 2.
28 | 2015 Technical Panel on Assumptions and Methods

Presentation

The Technical Panel recommends that the Trustees ensure 

that all components of projected future immigration be 

presented in clear graphic form, in addition to the data 

tables that have been included in past reports. The Panel 

believes that graphs, such as Figure 8, would provide 

readers of the reports with a clearer understanding of 

the underlying assumptions and their effects over the 

projection period. The most obvious example is the fact 

that the downward trajectory of total net immigration 

projected in the Trustees’ 2015 intermediate projection 

is driven by the combination of assumed constant levels 

of net legal immigration along with assumed declines in 

net other immigration. Such figures (which usefully could 

be extended back several more decades) would also show 

the erratic and unpredictable trajectories of U.S. immigration over the past half-century, thereby illustrating the 

difficulties faced by the Trustees in using trends from past 

decades as a basis for 75-year forward projections. The 

Panel also recommends the Trustees consider including 

graphics reflecting immigration projections produced 

by other Federal agencies, such as the Census Bureau, 

to highlight the uncertainties embodied in projections 

produced by professional analysts.

A Humbling Record for Past Projections and 

Recommendations

The Technical Panel offers its recommendations against a 

humbling background of past efforts to project U.S. immigration. As mentioned earlier, the Census Bureau in 2009 

found it necessary to substantially revise the long-range 

projections of U.S. demography that it had published only 

one year earlier. Census had based its assumptions on the 

31-year historical trend in immigration up to 2003, but by 

2009 data from the American Community Survey made it 

clear that the immigration trends assumed on the basis 

of such historical data were much too high. As a result 

of the revision to the immigration assumptions, Census 

projections of the U.S. population in 2050 were substantially different from those produced only a year earlier.

34

Such experiences led the Census Bureau to completely 

change the methods and assumptions used in subsequent 

projections of U.S. immigration. Instead of assuming 

continuation of past immigration patterns, it developed 

its revised projections of future annual immigration by 

shifting “the perspective from the receiving nation [United 

34 U.S. Census Bureau, 2009, “Methodology Statement for the 2009 National 

Projections,” p. 2. http://www.census.gov/population/projections/files/methodstatement09.pdf

States] to the source countries by incorporating information 

on the trends in population in sending countries.” First, it 

estimated immigration numbers to the United States over 

1980–2011 for six “country of birth groupings.”35 For each 

of these regional groupings it then calculated “emigration 

rates” by dividing the region’s 1980–2011 U.S. immigration 

estimates by the region’s overall population for the same 

years. Using these historical emigration rates by sending 

region, it then projected forward to 2060 a single series 

of net international migration to the United States, using 

a linear power function.

36

It remains to be seen whether this methodological shift 

by the Census Bureau toward basing its U.S. immigration 

projections upon demographic trends in sending countries 

will prove superior to the methods that proved so unsatisfactory in the recent past. At least two obvious questions 

are apparent: First, is it reasonable to assume that past 

patterns in the average emigration rate for a set of source 

countries between 1980 and 2011 will continue through 

2060? Or will economic and political developments in such 

regions and countries or fluctuations in U.S. enforcement 

lead to changes in such emigration rates? Second, how 

well will the new method perform if the primary source 

countries and regions for U.S. immigrants change over time?

The Technical Panels of 2003, 2007, and 2011 all identified 

some problems with the methods being used to project 

future immigration in Trustees reports and offered a number 

of recommendations.

The 2003 Technical Panel suggested that the Trustees 

simply assume a future growth rate for net immigration.

Drawing upon evidence from the past, they recommended 

this rate be set at one-half the projected growth rate for 

the total population. When compared with subsequent 

data, this assumption does not appear to have been a 

promising one.

The 2007 Technical Panel recommended that the Trustees 

assume that net total immigration was about 1,350,000 in 

that year, and that this number would increase by 1 percent 

per year for 25 years. This assumption has the virtue of 

simplicity, but implied that by 2014 net total immigration 

would have been about 1,450,000, which most data suggest 

did not take place. Of course part of this might have been 

related to the Great Recession that ensued after 2007, 

which the 2007 Technical Panel could not have foreseen.

35 Mexico; Latin America/Caribbean/South America; Asia; Sub-Saharan Africa; 

Near East/North Africa; Europe/Canada/Oceania.

36 U.S. Census Bureau, 2014, “Methodology, Assumptions, and Input for the 

2014 National Projections,” https://www.census.gov/population/projections/

files/methodology/methodstatement14.pdf, pp. 9–10
2015 Technical Panel on Assumptions and Methods | 29

Figure 9. Prevalence of SSDI Receipt: Worker Beneficiaries per 1000 Insured, 1975–2014

Male

Female

0

20

40

60

10

30

50

70

1975 1980 1985 1990 1995 2005 2005 2010 2015

DI workers

per 1000 insured

Source: Data provided by the Office of the Chief Actuary, based on 2015 Trustees Report.

The 2011 Technical Panel recommended an entirely different 

approach to projecting U.S. net total immigration—that 

net total immigration in the future be projected simply 

as a constant percentage of the overall U.S. population.

Its recommended “intermediate” assumption for this 

approach was 3.2 per 1000, a number estimated from long 

time-series data—a 110-year series (1900–2010), and a 

190-year series (1820–2010). While such a number may 

be a reasonable average for the past centuries, the basis 

for assuming that it would continue for 75 years into the 

future was not very compelling.

Over the past two centuries, U.S. net immigration has fluctuated greatly, peaking in the decades around the turn of 

the 20th Century, followed by deep nadirs during the 1930s 

and 1940s, followed by generally rising but erratic trends 

in subsequent decades. The unsatisfactory outcomes of 

the Census Bureau’s assumptions in its 2008 projections, 

discussed above, were based on the 31-year historical 

record, and suggest a need for caution in assuming that 

long-run past trends in immigration can be used as a basis 

for long-range projections.

In short, this Technical Panel does not see any easy solutions 

emerging from other agencies or from past Technical Panels.

■ 1.4 Disability

Assumption Recommendation 1. The Technical Panel accepts 

the Trustees’ current assumptions regarding DI incidence, 

specifically, an intermediate age-sex-adjusted incidence 

rate of 5.4 awards per 1,000 exposed, with low-cost and 

high-cost values of 4.3 and 6.5 awards per 1,000 exposed.

Because the incidence rate appears to be undergoing rapid 

and, perhaps, unexpected changes, it will be important to 

closely monitor its evolution as experience accumulates.

Assumption Recommendation 2. The Technical Panel 

recommends lowering the intermediate, high-cost, and 

low-cost assumptions for the DI recovery rate from 10.4 

to 10.1 recoveries per 1,000. We recommend symmetric 

reductions to the low-cost and high-cost rates: from 12.6 

and 8.3 recoveries per 1,000 respectively to 12.3 and 8.0 

per 1,000.

Assumption Recommendation 3. Accounting for the stabilization of the disability composition of the SSDI population 

and the adjustments to mortality estimates incorporated 

by the Trustees since the prior Technical Panel’s report, this 

Technical Panel is comfortable with the Trustees’ current 

mortality assumptions for DI beneficiaries.
30 | 2015 Technical Panel on Assumptions and Methods

Method Recommendation 1. Given the complex and rapid 

changes in labor force participation rates among both sexes, 

and the difficulty of fully distinguishing the short- and medium-run effects of the Great Recession from the long-run 

effects of shifting labor demand and evolving social norms 

and preferences (as discussed in the Labor Force section), 

the Technical Panel recommends continued close study of 

the evolution of insured rates for both sexes. Given this 

uncertainty, and its consequences for program evolution, 

the Technical Panel further recommends maintaining a fairly 

wide confidence band around these estimates.

Method Recommendation 2. The Technical Panel recommends exploring in greater depth the recent changes in 

DI allowance rates to better understand whether recent 

declines are due entirely to cyclical factors (as per OCACT 

Actuarial Note #153), or whether other programmatic factors 

may be at work.

The Drivers of the DI Program

OCACT estimates the number of individuals receiving DI 

benefits in future years in four steps. First, it projects the 

number of males and females in each age group. Second, 

it projects the share of males and females in each age 

group insured for DI benefits. A person must have worked 

in at least 5 of the 10 most recent years to be eligible for DI 

benefits. Third, it projects the incidence rate—the fraction 

of individuals in each age group insured for DI who are 

awarded benefits during the year. Fourth, it projects the 

termination rate for men and women in each age group 

who receive DI. Individuals exit the DI program for three 

main reasons: conversion to retired worker benefits at full 

retirement age; death; and recovery. The projections of 

the 1) population size; 2) fraction of the population that 

is DI-insured; 3) incidence rate; and 4) termination rate 

in each age group drive the projections of DI enrollment 

among men and women. Changes in any one factor translate 

directly into changes in the projected size of the program.

Historical Background

Some background is necessary to understand why the 

fraction of non-elderly adults receiving SSDI benefits 

has increased substantially over the past thirty years, 

and why this increase is likely to be considerably slower 

in the years ahead.

Following its inception in 1956, SSDI prevalence rose steadily 

over the next twenty years, reaching a high water mark 

in 1977. It then fell sharply between 1977 and 1984, rose 

modestly from 1984 through 1989, and then experienced 

a steep and continuous rise for the next 24 years, leveling 

off in 2013 (see Figure 9). The prevalence rate for women 

used to be much lower than the rate for men. But, during 

this 24-year period, the two rates rapidly converged. In 

1984, approximately one and a half non-elderly males were 

receiving SSDI for every non-elderly female; by 2008, this 

ratio was close to parity.

Several forces account for these marked changes in the 

relative size and sex composition of the SSDI beneficiary 

population.

37 During the late 1970s, concern over swelling 

disability rolls spurred the Social Security Administration 

(SSA) to tighten medical eligibility criteria and exercise 

greater control over the state Disability Determination 

Service (DDS) offices.

38 The fraction of applicants awarded 

benefits (the “award rate”) fell from 45 percent in 1976 

to 32 percent in 1980. Augmenting this administrative 

action, Congress passed legislation in 1980 mandating 

that SSA conduct more frequent beneficiary health reassessments (Continuing Disability Reviews or CDRs). In the 

subsequent three years, SSA determined that 40 percent 

of cases reviewed no longer met medical standards and 

terminated their benefits.

39 Congress also required SSA to 

further tighten medical criteria, accelerating the decline 

in award rates. This large-scale curtailment of benefits, 

occurring during the deepest postwar U.S. recession, was 

met with intense public criticism. Citing violations of due 

process, seventeen states refused to comply with the DI 

review effort during 1983 and 1984.

37 These forces have been detailed recently in Liebman (2015) and in earlier 

work by Autor and Duggan (2003, 2006) and Kearney (2005/2006).

38 The discussion of the SSDI program clampdown and subsequent reforms 

is drawn from Autor and Duggan (2003, pp. 161–162).

39 Rupp and Scott (1998).
2015 Technical Panel on Assumptions and Methods | 31

Responding to the backlash, Congress passed legislation 

in 1984 that altered the disability determination system, 

yielding a broader definition of disability and providing 

applicants and medical providers with greater opportunity 

to influence the decision process.

40 Contemporaneously, 

CDRs came to a near halt. In the five years from 1985 through 

1989, SSA terminated fewer individuals than it had in the 

first five months of 1982.

The 1985 Congressional reforms set the stage for subsequent 

growth of the SSDI program—although it was hardly the only 

factor, as discussed below. After adjusting for the impact 

of both age composition and the U.S. unemployment rate, 

the incidence of disability enrollments rose substantially 

between 1982 and 1992.

41 After 1992, the adjusted incidence 

rate stabilized among men, but continued to rise among 

women throughout the 1990s and 2000s, albeit at a much 

more modest clip than in the 1980s.

Although the rise in SSDI incidence slowed for females 

and reached a plateau for males in the early 1990s, the 

40 SSA was required to 1) relax its strict screening of mental illness by placing 

less weight on diagnostic and medical factors and relatively more on functional 

factors, such as ability to function in a work or work-like setting; 2) consider 

source evidence provided by the applicant’s own health care provider prior to 

the results of SSA consultative examination; 3) give additional weight to pain 

and related factors; 4) consider multiple non-severe impairments as constituting 

a disability during the initial determination (whereas prior to 1984, applicants 

were automatically denied awards during the initial determination if all impairments were judged to be non-severe); 5) desist from terminating benefits for 

any individual for whom SSA could not demonstrate substantial evidence of 

medical improvement; 6) provide benefits for those former recipients whose 

terminations were under appeal; and 7) suspend Continuing Disability Reviews 

(CDRs) for mental impairments and pain until appropriate guidelines could be 

developed. In 1991, due to successful court challenges to SSA’s treatment of source 

evidence, regulations were adopted placing further weight on the information 

provided by an SSI or DI applicant’s own medical provider.

41 Liebman (2015).

prevalence continued to rise steeply over the subsequent 

two decades for three reasons. First, SSDI incidence is a 

measure of inflows into the SSDI program; by contrast 

prevalence—the number of current beneficiaries—is a 

stock. The stock of beneficiaries is said to be in “steadystate” when inflows equal outflows. When inflows exceed 

outflows, the stock of beneficiaries rises. If starting from 

an initial steady state, incidence rises—as it did between 

1982 and 1992—the stock of beneficiaries does not immediately reach a new steady state. Instead, this stock will 

typically grow for multiple years until the program reaches 

a new size where outflows again equal inflows. Thus, a 

discrete rise in SSDI incidence will generate many years 

of program growth after incidence has stopped rising.

42

Liebman (2015) estimates that the post-1985 rise in SSDI 

incidence accounted for half (51 percent) of the rise in SSDI 

prevalence from 1985 to 2007 (see Figure 10).

42 Outflows from the program are the product of the current stock and the 

exit rate. Assuming the exit rate is roughly constant (which is roughly true for 

the past several decades), outflows from the program rise as the stock of current 

beneficiaries grows. When inflows rise due to an increase in the incidence rate, 

the stock of beneficiaries rises as well. But it does not rise indefinitely. As the 

stock grows, the number of beneficiaries exiting annually rises along with it. 

When the stock is sufficiently large that exits are again equal to inflows, the 

program is back in steady state—but now with a larger stock of beneficiaries. 

The number of years required to reach a new steady state depends on the magnitude of the incidence change relative to the program’s exit rate. A steep rise 

in incidence can take a decade or longer to work through.
32 | 2015 Technical Panel on Assumptions and Methods

Figure 10. Decomposition of Various Factors’ Impact on the Percent of the Working-Age Population 

Receiving Disability Insurance, 1985–2007

-3% 0% -

1%

59%

45%

51%

28%

15%

20%

3%

18%

12%

4%

19% 13%

8% 3% 5%

-5%

10%

25%

40%

55%

70%

85%

100%

Men Women Total

Changing mortality rates (1985 trend base)

Interaction term

Changing insured rates (84 base)

Population aging

Changing incidence rates (1985

unemployment adjusted base)

Changing recovery rates (1989 base)

Source: Liebman (2015).

The next largest factor was population aging. When the 

Baby Boom began aging into their peak disability years in 

the mid-1990s, population aging became a central force 

driving rising SSDI prevalence. Liebman (2015) estimates 

that population aging accounted for 20 percent of the rise 

in prevalence between 1985 and 2007, and 46 percent of 

the rise in prevalence over the shorter 1993–2007 interval.

Furthermore, the earlier rise in SSDI incidence magnified 

the subsequent impact of population aging. In effect, the 

baby boom generation ‘aged into’ higher incidence rates 

than had prevailed ten years earlier. Liebman (2015) estimates that the interaction between rising incidence and 

population aging explains an additional 13 percent of the 

rise in prevalence between 1985 and 2007.

The third key factor in the growing SSDI rolls is the rapid 

convergence of female SSDI prevalence towards that of 

men. One contributor to this convergence is the secular 

rise in female labor force participation, which increases 

the fraction of women eligible by their work history to 

receive disability benefits. Liebman (2015) reports that 

the fraction of women ages 50 to 64 covered by SSDI rose 

from 46 percent to 72 percent between 1980 and 2007, 

which explains 18 percent of the increase in SSDI prevalence among women between 1985 and 2007. Surprisingly, 

rising insured rates played a considerably smaller role for 

women than did rising incidence; incidence explains 45 

percent of the rise in female SSDI prevalence in the same 

interval, two-and-a-half times as large as the contribution 

of insured rates.

43

Thus, SSDI growth over the last three decades was driven 

by three central factors: rising incidence (e.g., following the 

1984 Congressional reforms), population aging, and female 

‘catch-up’ in SSDI incidence. The interaction between rising 

SSDI incidence and subsequent population aging also plays 

an important role. Perhaps surprisingly, changing mortality 

and recovery rates make only a trivial contribution.

44

43 As noted above, female SSDI incidence continued to inch upward throughout 

the 1990s and 2000s, distinct from the pattern of leveling off observed for males. 

One reason why this may have occurred is that rising female employment and 

earnings increased both the fraction of women insured for disability and the 

size of the cash benefit for which they were eligible in the event of disability 

(since benefit payments are an increasing function of prior earnings). All else 

equal, higher cash benefit levels would be expected to increase the fraction of 

insured women claiming benefits. 

44 This point is also underscored by Autor and Duggan (2006) and Duggan 

and Imberman (2009). 
2015 Technical Panel on Assumptions and Methods | 33

Figure 11. Percentage Insured for DI, Men and Women, Ages 50–54: 1977–2032, by Year of Projection, 2010 

vs. 2015

Men

Women

40%

50%

60%

70%

80%

90%

1977 1987 1997 2007 2017 2027

TR 2010 Projection men

TR 2010 Projection women

TR 2015 Projection men

TR 2015 Projection women

Source: Data provided by the Office of the Chief Actuary, based on 2015 Trustees Report.

The factors that led to the secular rise in SSDI prevalence 

over the past three decades are not likely to occur again, 

meaning that a further rise in SSDI prevalence is not inevitable. Indeed, two recent developments strongly hint that 

the trajectory of the program is already shifting rapidly.

First, in 2015 the SSDI program appears poised to notch 

its first year-over-year decline in the stock of beneficiaries 

in more than 30 years.

45 Second, SSA data document an 

unusually steep and prolonged decline in SSDI allowance 

rates since 2000, particularly allowances granted at the 

appeal level. While this decline may in part reflect the 

impact of the Great Recession (since SSDI application rates 

typically rise and allowance rates typically fall during an 

economic downturn), the Technical Panel suspects that 

a regime shift in the SSDI adjudication process may be 

underway.

46 If this inference is correct, the SSDI rolls will 

decline further than current projections would suggest.

45 The number of SSDI beneficiaries in current payment status fell very slightly 

in 2014 Q4 and 2015 Q1 and rose very slightly in 2015 Q2, the last period for 

which data are available. (http://www.ssa.gov/OCACT/STATS/dibStat.html, 

accessed 6/7/2015). 

46 SSA OCACT Note #153 (August 2013) ascribes this decline entirely to the 

counter-cyclicality of SSDI application rates and pro-cyclicality of allowance 

rates. The Technical Panel is not entirely persuaded by this evidence. 

DI Assumptions and Technical Panel 

Recommendations

The following section assesses each of the Trustees’ 

assumptions that drive the DI projections and offers the 

Panel’s recommendations.

Percent Insured

The percent of individuals insured has changed over time.

Most notably, the increase in female labor force participation in recent decades has led to a steady rise in the 

fraction of women insured for DI (see Figure 11). The share 

of women who are DI-insured is projected to decline by 1.4 

percentage points between 2014 and 2027, and then to 

rebound modestly to 76.2 percent between 2027 and 2032.

The projection partly reflects the Trustees’ assumptions 

that female labor force participation will not change much 

in the years ahead, but it may also reflect an increase in 

the projected share of other-than-legal immigrants in this 

group, who are much less likely to be insured.
34 | 2015 Technical Panel on Assumptions and Methods

Figure 12A. SSDI Incidence per 1,000 Exposed, Men Ages 20–64

0

5

10

15

20

25

20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64

DI awards per 1000 exposed

1979 1989 1999 2013 2014

Source: Data provided by the Office of the Chief Actuary, based on 2015 Trustees Report.

Figure 12B. SSDI Incidence per 1,000 Exposed, Women Ages 20–64

0

5

10

15

20

25

20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64

DI awards per 1000 exposed

1979 1989 1999 2013 2014

Source: Data provided by the Office of the Chief Actuary, based on 2015 Trustees Report.
2015 Technical Panel on Assumptions and Methods | 35

The share of men aged 50–54 insured for DI, which has 

gradually increased since the early 1980s, only to fall 

modestly between 2007 and 2014 (likely due to the Great 

Recession), is projected to fall another 4 percentage points 

in the coming decades (see Figure 11). The Trustees Report

does not discuss this substantial change. The projections for other age groups among both men and women 

are qualitatively similar, with a leveling off projected for 

women and substantial declines projected for men (before 

a rebounding to gradually increasing rates after 2030).

Given OCACT’s methodology, the assumed declines in 

the share of DI-insured reduce the number of individuals 

projected to receive DI benefits. The 2011 Technical Panel 

recommended (Method Recommendation M-9) that the 

Trustees expand the discussion of the factors leading to the 

projected decline and carefully monitor developments to see 

if the recent declines among younger men carry forward to 

men at older ages. OCACT accepted this recommendation, 

and the 2014 and 2015 Trustees Reports made a modest 

upward revision to projected male insurance rates. The 

Reports also included a modest downward revision to 

projected female insurance rates, partly to accord with 

the fact that realized female insurance rates in 2012 fell 

below the level projected by the 2010 Trustees Report.

Given the complex and rapid changes in labor force participation rates among both sexes, and the difficulty of fully 

distinguishing the short- and medium-run effects of the 

Great Recession from the long-run effects of shifting labor 

demand and evolving social norms and preferences (as 

discussed in Chapter 3), the Technical Panel recommends 

continued close study of the evolution of insured rates for 

both sexes. Given this uncertainty, and its consequences 

for program evolution, the Technical Panel further recommends maintaining a wide confidence band around these 

estimates.

Incidence Rates

Incidence rates are a critical determinant of projected 

DI enrollment. Although the administration of the SSDI 

program and the state of the economy both affect incidence 

rates, the most important determinant is the age structure 

of the population. Holding constant both the size of the 

working-age population and the SSDI incidence rate at each 

age, an increase in the fraction of working-age adults who 

are ages 50 and above has a dramatic effect on aggregate 

SSDI incidence because age-specific incidence rates rise 

steeply with age. Figure 12A shows the pattern for men; 

Figure 12B shows a similar pattern for women.

47

Incidence rates are also highly cyclical (see Figures 13A and 

13B).

48 The incidence rate for both men and women rose 

substantially from 1989 to 1992, a period encompassing 

the 1991 recession, in the early 2000s, and again from 

2007 to 2009 during the Great Recession. As the recession 

abated between 2010 and 2013, incidence rates for men 

and women returned to the levels seen in 2000 (35–49 year 

old men fell to a level lower than at any time since 1985).

47 1979, 1989, and 1999 are all business cycle peaks, which generally correspond 

to low incidence rates. We use 2013 and 2014 (the latest year available) rather 

than 2009 to avoid the lingering effects of the Great Recession on SSDI incidence. 

48 A number of researchers have identified this cyclical pattern; see Black, 

Daniel, and Sanders (2002); Autor and Duggan (2003); Duggan and Imberman 

(2009); and Liebman (2015). 
36 | 2015 Technical Panel on Assumptions and Methods

Figure 13A. DI Incidence (per 1000 insured) among Men, by Age Category, 1985–2040 Projected in 2010 vs.

Projected in 2015

Age 50–64 actual

Age 35–49 actual

Age 20–34 actual

0

5

10

15

20

1985 1995 2005 2015 2025 2035

DI awards per 1000 insured

TR 2010 Projection

TR 2015 Projection

Source: Data provided by Office of the Chief Actuary, based on Trustees Reports 2010 and 2015.

Figure 13B. DI Incidence (per 1000 insured) among Women, by Age Category, 1985–2040 Projected in 2010 

vs. Projected in 2015

Age 50–64 actual

Age 35–49 actual

Age 20–34 actual

0

5

10

15

20

1985 1995 2005 2015 2025 2035

DI awards per 1000 insured

TR 2010 Projection

TR 2015 Projection

Source: Data provided by Office of the Chief Actuary, based on Trustees Reports 2010 and 2015.
2015 Technical Panel on Assumptions and Methods | 37

In reviewing the incidence data through 2009, the 2011 

Technical Panel recommended increasing the age-sexadjusted disability incidence rate (the incidence rate if 

the population proportions by age and sex were the same 

as in the base year) from 5.2, which was assumed in the 

2011 Trustees Report, to 5.8 per 1,000 insured workers, 

with somewhat larger increases for women and smaller 

increases for men. Responding to this input, the Trustees 

in 2013 raised the age-sex-adjusted disability incidence 

rate to 5.4 per 1,000 insured workers, a projection that 

was maintained in the 2014 and 2015 Trustees Reports.

Notably, realized incidence rates between 2010 and 2014 

declined slightly faster from their Great Recession levels 

than the Trustees had projected for all groups except 

women ages 50–64 for whom experience tracked the 

2010 projections closely. The projections from the 2015 

Trustees Report anticipate a slight increase in incidence 

among both sexes and all three broad age brackets during 

the years 2014–2019. As explained in the Report, the 

Trustees assume that the Great Recession accelerated 

some DI enrollments that would otherwise have occurred 

a few years later, yielding the opposite of a backlog in the 

recession’s wake. If so, this temporary depression of DI 

incidence is likely to be both modest and brief. Given the 

evolution of DI incidence since the prior Technical Panel 

reviewed DI program data—and particular the sharp decline 

in allowances discussed immediately below—this Technical 

Panel accepts the Trustees’ current assumptions regarding 

DI incidence, specifically, an intermediate age-sex-adjusted incidence rate of 5.4 awards per 1,000 exposed, 

with low- and high-cost values of 4.3 and 6.5 awards per 

1,000 exposed. Because the incidence rate appears to be 

undergoing rapid and, perhaps, unexpected changes, it 

is important to closely monitor the evolution of incidence 

as experience accumulates.

Allowance Rates

Changes in the total allowance rate of SSDI applicants, 

which is equal to the fraction of all initial DI claimants 

who are ultimately allowed benefits (excluding applicants 

disqualified for non-medical reasons, such as not being 

DI-insured), may substantially impact DI incidence in 

the years ahead.

49 The total allowance rate is generally 

countercyclical: DI applications increase when the unemployment rate rises but the allowance rate generally falls 

after a one- to two-year lag, likely because a larger share of 

applications filed during a recession is spurred by financial 

hardship rather than medical disability.

50

Since 2001, however, the allowance rate has declined 

steadily (see Figure 14). A sustained reduction in allowance 

rates has the potential to dampen long-term DI incidence 

and prevalence. In addition, a decline creates a subtle but 

potentially important feedback between the allowance rate 

and the application rate: when DDS offices tighten eligibility 

criteria, both allowances and, ultimately, applications 

fall as potential applicants are discouraged from seeking 

benefits.

51 This interaction was particularly evident during 

the major retrenchment of DI determinations during the 

late 1970s and early 1980s.

52

49 OCACT Actuarial Note #153 defined the total allowance rate as “all 

allowances made for claims filed in each year at the Disability Determination 

Services (DDS), both initial and reconsideration determinations, as well as 

allowances made for those claims on subsequent appeals. Rates are expressed 

as a percent of initial claims received at the DDS after screening for disability 

insured status and other non-medical criteria, generally at the time of receipt 

of claim at Social Security field offices.”

50 Although the allowance rate normally falls during an economic downturn, this 

pattern does not fully offset the rise in applications: as Figure 13 underscores, the 

net effect of economic downturns on DI incidence is generally strongly positive. 

51 See Autor and Duggan 2003.

52 Between 1977 and 1983, the fraction of DI applicants awarded benefits 

fell from 46.1 percent to 30.6 percent. (These statistics, from Table 26 of the 

2000 Annual Statistical Report on the Social Security Disability Insurance Program, 

include both medical and non-medical determinations and hence are not 

directly comparable to the total allowance rate reported in OCACT Actuarial 

Note #153). One might speculate that the falling allowance rate was spurred 

by a surge in economically-motivated DI applications stemming from the deep 

early 1980s U.S. recession. But no such surge occurred: applications per 1,000 

insured fell from 14.1 to 9.8 in the same six-year period. It appears instead that 

the tightening of disability determination criteria during these years reduced 

the allowance rate and deterred applications. 
38 | 2015 Technical Panel on Assumptions and Methods

Figure 14. Total Allowance Rate for Disabled-Worker DDS Claims by Filing Year, Actual Vs. Modeled

46%

50%

54%

58%

62%

1988 1993 1998 2003 2008 2013

Percent of cases allowed

Actual allowance rate

Predictive model 1

Predictive model 2

Source: OCACT Actuarial Note No. 153, August 2013.

The relevant question for the Technical Panel, and for 

SSDI projections, is whether the substantial decline in 

final allowance rates since 2001 indicates a regime shift 

or merely a particularly steep and prolonged, but ultimately cyclical, fall in allowances. OCACT Actuarial Note 

#153 offers one answer to this question. Fitting a pair of 

time-series regression models that relate total allowance 

rates to lagged values of the U.S. unemployment rate and, 

potentially, lagged values of the allowance rate itself, 

OCACT draws the conclusion that the general decline in 

allowance rates seen since 2000, and particularly after 

2009, is attributable to fluctuations in the unemployment 

rate rather than changes in the DI determination process.

The Technical Panel is not entirely convinced by this conclusion. The good fit of OCACT’s model is in part a reflection 

of the fact that it makes an in-sample prediction—that is, 

it does not extrapolate to outcome years that were not 

used to produce the original regression line. Even given 

this fact, shortcomings are apparent. First, this model 

generally under-predicts the cyclical fluctuations of the 

total allowance rate in the 1988 through 2002 period, 

and then over-predicts this relationship after 2002. This 

pattern suggests that the downward trend in total allowance rates may in part be explained by secular declines in 

allowance rates rather than cyclical fluctuations. Second, 

the predictive model implies a very sharp rebound in total 

allowances over 2012–2015, reflecting the lagged effect of 

the falling unemployment rate. Whether this prediction will 

prove accurate is unknown at present, but it highlights 

that the program is currently operating in a realm of very 

low total allowance rates that, if maintained for a couple 

of additional years, would almost certainly indicate a 

regime shift.

A final piece of evidence hinting that a regime shift may 

be underway in DI adjudications is given by Figures 15A 

and 15B. Figure 15A shows that since 2009 the percent of 

cases approved by Administrative Law Judge has fallen 

steeply with some evidence of a leveling off in the first 

half of 2015. Figure 15B plots mean Administrative Law 

Judge (ALJ) allowance rates by ALJ cohort, that is, the 

year in which the ALJs began their service. For example, 

the 2009 cohort includes those judges who were hired (or 

first began deciding cases) in 2009 and remain in service 

through 2014, and similarly for subsequent years. The 

data indicate that for all cohorts of ALJs, approval rates 

have declined year over year ever since 2009. Although 

allowance rates generally fall as ALJs gain experience, 

Figure 15B shows that more recent cohorts of ALJs have 

lower allowance rates than did earlier cohorts with the 

same level of experience.
2015 Technical Panel on Assumptions and Methods | 39

Figure 15A. Allowance Rate for Cases Decided by Administrative Law Judges, 2005–2015 (July)

0%

20%

40%

60%

80%

2005 2007 2009 2011 2013 2015

Percent of decisions

Percent of dispositions

Note: Case dispositions include decisions (allowances or denials) and dismissals.

Source: ALJ disposition data, fiscal years 2005–2014, and fiscal year 2015 through July 31 and Social Security Administration, Office of Disability 

Adjudication and Review.

Figure 15B. Percent of Decisions Allowed by ALJ Cohort 2005–2014: Judges Active in 2014, Who Worked at 

Least 100 Cases in the Year

40%

45%

50%

55%

60%

65%

70%

75%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

2005

2009

2010

2011

2012

2013

2014

Note: This chart shows the mean approval rate in FYs 2005–2014, by the year in which the ALJs began their service for those judges who were still active in 

2014. The 2005 cohort actually refers to all the judges who were in service as of 2005 (the first year our data begin) who were still working in 2014. The 2009 

cohort includes those judges who were hired (or first began deciding cases) in 2009 and remain in service through 2014, and similarly for subsequent years. 

Approval rates are calculated only for those judges with more than 100 dispositions in a year.

Source: ALJ disposition data, 2005–2014, Social Security Administration, Office of Disability Adjudication and Review.
40 | 2015 Technical Panel on Assumptions and Methods

Figure 16. DI Recipients Converting to Retired Worker Benefits (per 1000 Recipients), Projections of 2011 and 

2015 Trustees Reports

0

20

40

60

80

1980 2000 2020 2040 2060 2080

Historical

TR 2015 Projection

TR 2011 Projection

Source: Trustees Report 2011, 2015.

The overall evidence leads the Technical Panel to suspect 

that total allowance rates may have entered a decline beyond 

that attributable to the business cycle. Hence, the Panel 

calls for further monitoring and study of the factors that 

contribute to the recent decline in DI total allowance rates.

Termination Rates

Individuals may exit the DI program for one of three 

reasons: 1) conversion to retired worker benefits at full 

retirement age (FRA); 2) death; or 3) recovery. Of the 

769,171 disabled workers exiting from the SSDI program 

in 2013, 58.9 percent exited due to conversion to retired 

worker benefits, 32.6 percent due to death, and 7.7 percent 

because their earnings exceeded the substantial gainful 

activity level or they no longer met the program’s medical 

eligibility criteria.

53 From 1985 to 2013, the annual exit rate 

from DI fell from 12.8 percent to 8.6 percent. On average 

53 All figures in this paragraph are from the Annual Statistical Report on the 

Social Security Disability Insurance Program, 2013, Tables 49 and 50. 

DI beneficiaries now remain in the program longer than 

their counterparts of earlier years.

Conversion to retired worker benefits. DI recipients who 

reach the FRA convert to retired worker benefits.

54 Thus, 

the exit rate associated with the FRA is a function of the 

DI population’s age distribution. As shown in Figure 16, 

the FRA exit rate trended down during the late 1980s and 

through the late 1990s as DI enrollment rates increased 

especially rapidly among younger adults and a decreasing 

share of DI recipients was just under the FRA. The rate 

was fairly stable in the early 2000s and artificially low 

from 2003 through 2008 because of the increase in the 

FRA that occurred during that period.

55 The FRA exit rate 

increased between 2011 and 2014, as the oldest members 

of the Baby Boom generation (born in 1946) reached their 

FRA in 2012.

54 The FRA is age 66 for those born from 1943 to 1954.

55 Only DI recipients born from January 1938 through October 1938 would 

have converted to retired worker benefits in 2003 because the FRA for the group 

had increased by two months to 65 years and two months. Similarly, only DI 

recipients born from November 1938 through August 1939 would have converted 

to retired worker benefits in 2004. In other words, from 2003 through 2008, 

the size of the cohorts converting to retired worker benefits were about onesixth smaller because of the policy change, thereby explaining the substantial 

increase in the exit rate from 2008 to 2009 per Figure 8.
2015 Technical Panel on Assumptions and Methods | 41

Figure 17. DI Awards by Diagnosis per 1,000 DI-Insured: 1983, 1989, 1999, 2009, 2013

0.0

0.5

1.0

1.5

2.0

2.5

Mental Musculoskeletal Circulatory Neoplasms Nervous Other

1983 1989 1999 2009 2013

Source: Annual Statistical Report on the Social Security Disability Insurance Program, 2013 (December 2014); Annual Statistical Supplement, 2014 

(April 2015).

OCACT projects substantial increases in the exit rate in 

subsequent years, with eventual stabilization at around 60 

per 1,000, a rate not seen since the 1980s. The rationale for 

this predicted rise is the aging of the beneficiary population.

The distinct notch in Figure 16 for exit rates predicted for 

2021 through 2026 reflects the impact of the rise in FRA 

from age 66 to age 67 for cohorts born between 1955 and 

1960. A one-time rise in the FRA generates a temporary 

decline and subsequent catch up in FRA exit rates.

The 2011 Technical Panel was skeptical of the Trustee’s 

assumptions of a gradual rise in the FRA exit rate after 

2026. The current Technical Panel does not see a basis 

for questioning this assumption.

Mortality. The mortality rate of DI recipients has declined 

steadily and rapidly in recent years. The age-sex-adjusted 

mortality rate fell from 4.70 percent in 1985 to 2.51 percent 

by 2015. This decline was substantially greater than for 

all non-elderly adults during the same period. To some 

extent, the decline in the mortality rate since 1985 reflects 

the increase in the share of female DI recipients whose 

mortality rates are much lower than those of comparably 

aged males.

An even more important factor, however, is the shift in 

program-qualifying conditions (see Figure 17). In the 

early 1980s, the most common conditions among DI 

recipients were cancer and heart disorders. Following a 

liberalization of the program’s medical eligibility criteria 

in 1984, applicants could more easily qualify for DI based 

upon mental and musculo-skeletal conditions, which are 

difficult to verify but may nevertheless inhibit individuals 

from functioning in a work-like setting.
42 | 2015 Technical Panel on Assumptions and Methods

Figure 18. Age-Sex-Adjusted Recovery Rate (per 1000 DI Recipients), Projections of 2011 and 2015 Trustees Reports

0

5

10

15

20

25

1985 1995 2005 2015 2025 2035 2045

Historical recovery rate

TR 2011 Projection

TR 2015 Projection

Source: Data provided by Office of the Chief Actuary, based on Trustees Reports 2011and 2015.

In reviewing these data, the 2011 Technical Panel was 

concerned that, in projecting mortality rates among DI 

beneficiaries, the Trustees were not adequately accounting 

for secular shifts in the composition of disorders towards 

conditions with low mortality and prolonged morbidity. This 

concern was amplified by an error in the 2010 Trustees Report

(since corrected), which projected a ten-year near-hiatus 

in mortality declines between 2020 and 2030.

Since the 2011 Technical Panel did its work, three developments have placed the 2015 Technical Panel at greater 

ease with the Trustees’ current projections. First, as noted, 

the Trustees have corrected the prior error that yielded an 

unrealistically slow decline in mortality rates. Second, 

the fraction of current DI beneficiaries that qualified with 

low mortality disorders (mental and musculo-skeletal) 

appears to have roughly stabilized at 60 percent between 

2010 and 2013. Finally, while DI awards per insured population were roughly stable or declining across almost 

all categories between 2009 and 2013, the largest fall in 

awards (both proportionately and in level terms) was for 

mental disorders.

56

Accounting for the factors above and the adjustments 

incorporated since the prior Technical Panel’s report, the 

current Technical Panel is comfortable with the Trustees’ 

current mortality assumptions for DI beneficiaries.

56 The extraordinarily steep fall in awards for mental disorders provides a 

further piece of evidence that a regime shift in DI determinations is underway.

Recovery. The third channel by which DI beneficiaries exit 

the program is recovery. Beneficiaries are deemed recovered 

if their reported earnings exceed the substantial gainful 

activity amount over two-plus years, or if SSA conducts a 

Continuing Disability Review (CDR) and determines that 

their condition no longer meets medical eligibility criteria.

57

Returns to the workforce are likely to increase in response 

to improving economic conditions. The number of CDRs 

conducted by SSA will largely determine involuntary 

medical recovery exits.

58

Figure 18 presents the age-sex-adjusted recovery rate for 

DI beneficiaries from 1985 through 2014 and the Trustees’ 

long-range projections made in the 2010 and 2015 Trustees 

Reports. The recovery rate was particularly high in 1997, 

due to a federal policy change that terminated benefits for 

beneficiaries who qualified for DI due to drug or alcohol 

addiction. In a typical year, approximately one percent of 

all DI beneficiaries exit the program because they voluntarily return to work or SSA terminates their benefits due 

to medical improvement.

57 The 1984 disability reforms made it substantially harder for SSA to terminate DI benefits due to medical recovery. Prior to 1984, SSA could terminate 

beneficiaries who were found during a CDR to no longer meet medical eligibility. 

Following the reforms, SSA could only terminate benefits if the examiner could 

document that the beneficiary’s qualifying impairment had improved since 

the initial allowance. 

58 We focus on medical CDRs rather than on CDR mailings given that the 

former are much more likely to result in program exit. The mailings sent to DI 

recipients ask questions such as, “Has your condition improved?” Perhaps not 

surprisingly, a very small share leads to benefit termination.
2015 Technical Panel on Assumptions and Methods | 43

In addition to the state of the labor market, a key determinant of DI recoveries is the number of CDRs performed 

by SSA. The CDR rate (that is, the fraction of current DI 

beneficiaries receiving a CDR) rose steeply between 1993 

and 2001, and then fell by more than 50 percent, as did the 

DI recovery rate. While only five to seven percent of CDRs 

result in benefits termination, CDRs nevertheless account 

for a substantial share of DI recoveries.

59

In their 2011 report, the Trustees projected a substantial 

increase in recoveries between 2011 and 2014. This increase 

did not occur—in fact, recoveries continued their trend 

decline in these years (see Figure 18)—until 2014. The 

2011 Technical Panel noted that the assumption of a sharp 

increase sustained over the long term seemed to rest on an 

optimistic forecast of SSA’s ability to process more CDRs, 

which in turn depended upon ongoing Congressional budget 

authorizations to support this activity.

60 Seeing little case 

for optimism, the 2011 Technical Panel recommended an 

almost 20-percent reduction in the intermediate-case 

assumption for recoveries, and a significantly larger uncertainty range between the intermediate-cost, low-cost, and 

high-cost scenarios. Specifically the 2011 TP recommended 

reducing the estimated recovery rate from 10.9 to 8.7 per 

1,000 beneficiaries, with high-cost and low-cost scenario 

estimates of 6.0 and 11.4 recoveries per 1,000.

The Trustees did not, for the most part, heed this recommendation. The 2014 and 2015 Trustees Reports reduced 

the estimated recovery rate to 10.4 recoveries per 1,000 

59 In 2001, for example, 6.8 percent of beneficiaries received a CDR and 4.0 

percent of those were terminated. These 20,592 terminated beneficiaries accounted 

for 38 percent of all recoveries in 2007, with the remainder accounted for by 

beneficiaries who were terminated due to earnings above SGA (Annual Statistical 

Report on the Social Security Disability Insurance Program, 2007, Table 50). 

60 As the prior Technical Panel noted, OCACT estimates that CDR expenditures 

reduce subsequent program outlays by approximately seven to ten dollars per 

CDR dollar spent. 

beneficiaries (approximately 20 percent of the suggested 

reduction), and reduced the high- and low-cost estimates 

to 8.3 and 12.6 recoveries per thousand. The Trustees 

currently project a steep increase in recoveries between 

2013 and 2015, a modest decline in recoveries between 

2014 and 2032, and a convergence to a long-run recovery 

rate of 10.4 per 1,000 DI recipients, with low-cost and 

high-cost estimates of 12.6 and 8.3 respectively.

The data that have accrued since the prior Technical Panel 

provide qualified support for the Trustees’ prior optimism 

regarding recoveries. The percentage of DI recipients 

receiving CDRs increased by 60 percent between 2011 and 

2014, and is projected to rise substantially further in 2015 

(Figure 19). The apparent halt to the secular rise in awards 

for low-mortality mental and musculo-skeletal disorders 

(Figure 17) further suggests that the duration of new DI 

spells may stabilize or decline—though this stabilization 

is likely to affect the mortality rate more than the recovery 

rate. In light of these developments, this Technical Panel 

believes that the Trustees’ current assumptions remain 

too optimistic, but not by as much as the previous Panel.

The Technical Panel recommends lowering the intermediate, 

high-cost, and low-cost assumptions for the DI recovery rate 

from 10.4 to 10.1 recoveries per 1,000 (a level last seen in 

2007). We recommend symmetric downward increments to 

the low- and high-cost rates: from 12.6 and 8.3 recoveries 

per 1,000 respectively to 12.3 and 8.0 per 1,000.
44 | 2015 Technical Panel on Assumptions and Methods

Figure 19. Percentage of DI Recipients in Current Payment Status (a) Receiving Full Medical Continuing 

Disability Reviews and (b) Initially Ceased due to Medical Review, 1993–2015

0.2%

1.3%

2.4%

3.1%

5.6%

8.6%

6.2%

7.5%

8.5%

6.8%

3.6%3.6% 3.3%

2.6%

0.9%

1.5%1.5%1.5%1.6%

2.1%2.0%

2.6%

4.2%

0%

2%

4%

6%

8%

10%

1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015

Full medical reviews

Initial cessations

Source: OCACT, June 2015.

Conclusion

The secular rise in SSDI prevalence over the past three 

decades stems from three distinct sources, at least two 

of which (aging and incidence) reinforced one another.

These contributing factors are not likely to recur, meaning 

that a further rise in SSDI prevalence is not inevitable.

Thus, in projecting the evolution of the SSDI program, 

the Technical Panel recognizes that the years ahead are 

unlikely to closely resemble the preceding decades. The 

data that have accumulated since the prior Technical 

Panel regarding DI prevalence, incidence, allowance 

rates, and percent insured, all point to substantially 

slower program growth. In addition, the Trustees have 

adjusted some prior assumptions in response to the 

2011 Technical Panel’s recommendations, most notably 

regarding mortality. Thus, the current Technical Panel is 

more sanguine about the Trustees’ projections for the DI 

program than was the prior Technical Panel. Other than 

the issue of program finances, which is outside the scope 

of the Technical Panel, we remain concerned about three 

factors: the unprecedented decline in DI-insured rates 

among men and the simultaneous plateau in insurance 

rates among women; the steep fall in total DI allowance 

rates, which may or may not reverse as the U.S. economy 

completes its recovery from the Great Recession; and the 

Trustees’ somewhat optimistic projections about future 

DI recovery rates.
2015 Technical Panel on Assumptions and Methods | 45

Chapter 2. Economic Assumptions and Methods

■ 2.1 Labor Force Participation 

Rate

Higher labor force participation, for any given unemployment 

rate, means that more people are working and paying into 

the Social Security system. For some people, added years 

of work will lead to higher benefit payments, but this will 

not be the case for everyone. Benefits would not rise, for 

example, for married individuals whose spousal benefits 

still exceeded that to which they were entitled based on 

their own account. And benefits would not increase for 

an older person with a long career of steady work whose 

Average Indexed Monthly Earnings (AIME) was unaffected 

by additional earnings. Even for those, claiming on their own 

account, whose AIME does rise, the formula through which 

AIME is translated into benefits will result in only modest 

benefit increases for all but the very low earners. The net 

effect of increased labor force participation generally is to 

reduce the shortfall in the actuarial balance. Because any 

increase in benefits will lag the increase in revenues, this 

effect is especially noticeable in the near term.

The Technical Panel has four recommendations:

Method Recommendation 1. The Technical Panel recommends that in developing the labor force projections, the 

Trustees should allow for likely future increases in the 

educational attainment of the population. One way, but 

not the only way, to do this would be to assume that U.S.

educational attainment will converge over time to the 

higher levels of education observed in a country such as 

Canada. Higher levels of education are likely to increase 

labor force participation rates, raising the level of labor 

force participation in the projections.

Method Recommendation 2. The Technical Panel recommends that the Trustees explore possible methods for 

incorporating labor-demand factors into the projections.

Countries that have experienced large changes in the relative 

size of different age cohorts could inform this exploration.

Method Recommendation 3. The Technical Panel recommends that the Trustees use alternative assumptions about 

educational attainment and, perhaps more ambitiously, 

labor demand to produce a more meaningful variation in 

labor force participation projections for incorporation in 

the low-cost and high-cost scenarios.

Presentation Recommendation. The Technical Panel recommends that information be included in the Trustees’ Report 

that would allow the reader to assess the sensitivity of the 

projected Trust Fund balances to variations in realized 

labor force participation rates. One way, but not the only 

way, to do this would be to consider labor force participation rates that are 10 percent higher or 10 percent lower 

than those incorporated in the intermediate projection.

These variations could be assumed to apply to the entire 

population or only to individuals in a certain age range.

Recent Trends in Labor Force Participation

As can be seen in Figure 20, overall labor force participation rose through about 1990 and has fallen since about 

2000. The overall figures, however, hide considerable 

variation by group.

The decline in labor force participation began long ago 

for men but also has begun to appear in recent years for 

women. Among both men and women the pattern differs 

considerably by age and education. Because much of the 

recent decline is attributable to changing demographics, 

it is crucial to look at participation by narrow age groups.
46 | 2015 Technical Panel on Assumptions and Methods

Figure 20. Labor Force Participation Rates, Total, Male and Female, 1960–2014

30%

40%

50%

60%

70%

80%

1960 1970 1980 1990 2000 2010

Total Women Men

Source: Bureau of Labor Statistics. (Shaded areas represent recessions)

Broadly speaking, labor force participation starts out low 

during the teen and young-adult years, rises during the 

middle years, and then falls again as retirement becomes 

an option. In the United States, the outsized Baby Boom 

cohort—the group born from 1946 to 1964—contributed 

to the overall growth in participation from the mid-1960s 

through the mid-1980s, as its members flowed into the 

workforce. Now, however, the Boomers are starting to 

retire and overall participation naturally has begun to 

fall. The well-understood effects of population aging on 

the overall labor force participation rate will continue to 

play out across the coming decades.

Figures 21A and 21B show how labor force participation 

rates have changed since the mid-1970s for men and women 

ages 16–19 and 20–24 (left panel), ages 25–54 and 55–59 

(middle panel), and ages 60–64, 65–69 and 70 plus (right 

panel). A complication in interpreting the participation 

rates of all these groups is the difficulty sorting out how 

much of the recent experience is a temporary consequence 

of the Great Recession and how much reflects longer-term 

structural influences. Available evidence suggests both 

have been important.
2015 Technical Panel on Assumptions and Methods | 47

Figure 21A. Male Labor Force Participation Rates, 1977–2014

0%

20%

40%

60%

80%

100%

1977 1984 1992 1999 2007 2014

0%

20%

40%

60%

80%

100%

1977 1984 1992 1999 2007 2014

0%

20%

40%

60%

80%

100%

1977 1984 1992 1999 2007 2014

Young Men Prime-Age Men Older Men

60–64

25–54

55–59

20–24

16–19

65–69

70+

Figure 21B. Female Labor Force Participation Rates, 1977–2014

0%

20%

40%

60%

80%

100%

1977 1984 1992 1999 2007 2014

0%

20%

40%

60%

80%

100%

1977 1984 1992 1999 2007 2014

0%

20%

40%

60%

80%

100%

1977 1984 1992 1999 2007 2014

Young Women Prime-Age Women Older Women

60–64

25–54

55–59

20–24

16–19

65–69

70+

Source: Bureau of Labor Statistics. (Shaded areas represent recessions)
48 | 2015 Technical Panel on Assumptions and Methods

Participation among both teenagers and young adults aged 

20–24 has declined since about 2000. This trend largely 

reflects the rising share of teens and young adults who 

are in school and the falling share of those in school who 

choose to work. To the extent that additional education 

tends to be associated with higher participation at older 

ages, the low participation rates among today’s younger 

cohorts is apt to be a misleading indicator of their likely 

future participation levels.

Less pronounced slides in labor force participation among 

men aged 25–54 are also apparent. For women aged 

25–54 a leveling off and recent decline in participation 

has followed decades of increase. Similarly, for women 

55–59 the increases of the past have leveled off and a 

slight decrease may have occurred recently.

Much of the long-term decline in participation among 

prime-age men reflects a deterioration of job opportunities 

for less-educated workers, driven by changes in technology 

and the increasing openness of the economy to foreign 

competition. For less-skilled men whose job opportunities are limited, disability benefits can offer an attractive 

alternative to remaining in the labor market—and the same 

seems increasingly to have been true for less-educated 

women. However, as explained elsewhere in this Report, 

increases in age-specific disability prevalence related 

to changes in the criteria used to determine disability 

benefit eligibility appear to have played themselves out 

and are not likely to be an important driver of labor force 

participation going forward.

Among prime-age women, other factors also may be 

affecting recent trends in labor force participation. In the 

early 1990s, after increasing steadily for decades, the 

share of prime-age women active in the U.S. labor market 

equaled or exceeded the share in many developed countries 

including the United Kingdom and Canada. But since the 

late 1990s, female participation has stagnated and even 

declined here, while continuing to grow elsewhere.

61 Recent 

research has identified the absence of family-friendly 

policies, such as paid parental leave, flexibility in hours 

of work for working parents, and publicly-supported day 

care for young children, as an important factor limiting the 

growth of female participation. Labor force participation 

among prime-age women in the United States is now well 

below the levels prevailing in Canada, France, Germany, 

the Netherlands and Sweden—and only slightly higher than 

in Japan, where women’s low participation has become a 

high-profile issue.

In contrast to the recent declines at younger ages, participation has risen substantially for older Americans—both 

men and women—since the mid-1980s. Reforms to the 

61 OECD Employment and Labour Market Statistics on the web. 

Social Security system—including the increase in the 

normal retirement age, the elimination of the earnings 

test for those past the normal retirement age, and the 

increase over time in the generosity of the delayed retirement credit—are one set of factors that seem likely to have 

affected participation at older ages. For women, however, 

the increase in participation at older ages began before the 

Social Security changes took effect, and it is not yet clear 

to researchers how important those changes have been in 

explaining the growth in participation among older women.

Changes in the private pension landscape also undoubtedly 

have contributed to increasing participation at older ages.

Fewer of today’s retirees are receiving traditional, annuity-like defined benefit pensions that encourage retirement 

once the maximum benefit level has been reached, while 

more have defined contribution plans such as 401(k)s 

that reward additional years of work. Further, with defined 

benefit pension plans less common and people concerned 

about their 401(k) balances, many would-be retirees may 

feel they have no choice but to continue working.

Much of the change in participation among older women 

appears to have been due to “cohort” effects—that is, 

persistent differences related to earlier participation 

patterns that vary by birth cohort. Trends in education 

can be an important driver of cohort effects, but other 

factors that may shape the labor market attachment of 

particular cohorts include economic conditions at the 

time the group first entered the labor market, changes in 

divorce laws and contraceptive advances that enable later 

and better-timed births.

62

As shown in Figure 22, participation rates for women 

60–64 years of age increased from 37 percent to 49 percent 

for the cohorts born from 1929 to 1948. The increase in 

participation at older ages for these cohorts could have 

been predicted fairly accurately by the experiences of the 

same birth cohorts when they were younger. But for the 

cohorts born after about 1948, although participation still 

increases at younger ages, it decreases somewhat in the 

middle ages, and it is not yet clear what the changes will 

be at the older ages.

A final factor likely to have affected both male and female 

participation at older ages is the ongoing increase in life 

expectancy. In 1980, then-current mortality rates implied 

that the typical 60-year-old man could expect to live another 

17.3 years; by 2010, the average 60-year-old man could 

expect to live another 21.3 years.

63 Improvements in health 

at older ages along with shifts in the mix of employment 

away from physically demanding jobs likely have reinforced 

the impact of increasing longevity.

62 Goldin and Katz (2002).

63 Bell and Miller (2005); OCACT (2010), table on period life expectancy.
2015 Technical Panel on Assumptions and Methods | 49

Figure 22. Female Labor Force Participation Rate by Five-Year Age Groups and Birth Cohorts

0%

30%

60%

90%

25 35 45 55 65 75

1929-1933 1934-1938 1939-1943

1944-1948 1949-1953 1954-1958

1959-1963 1964-1968 1969-1973

Note: All birth cohort and age group observations are averages of 25 data points (e.g., women born in 1929–1933 observed at ages 25–29).

Source: Bureau of Labor Statistics, Current Population Survey, Annual Social and Economic Supplement.

The Current Labor Force Participation Model

The model used by the Trustees to develop its labor 

force projections accounts for many of the factors just 

described, though some better than others. The model 

consists of 153 separate equations for groups defined 

on the basis of age and sex and, in some cases, marital 

status and the presence of children under the age of six.

Depending on the specific group, the factors deemed to 

affect participation include some combination of current 

economic conditions as captured by the unemployment 

rate; the disability prevalence rate; educational attainment; 

marital status; the number or presence of children; and the 

Social Security replacement rate. Older men’s participation 

is linked to the participation rates projected for women 

two years younger, to account for husbands remaining in 

the labor force longer if their wives are working. Linear 

cohort effects by birth year are modeled for women born 

up through 1948, as are lagged cohort effects for those age 

75 and older. The parameters that summarize the assumed 

response in specific groups to changes in these drivers of 

participation are based loosely on empirical estimates of 

the historical relationships.

A final component of the age-sex specific models is the 

so-called life expectancy add factor, calculated as follows.

First, age-sex specific labor force participation projections 

that do not directly account for changes in life expectancy 

are prepared. Then, for each sex and target age in each 

future projection year, the modeler determines the base 

year age for a person of the same sex for which remaining 

life expectancy is the same as for the person of the target 

age in the selected projection year.

The next step is to determine the difference in projected 

participation between the two age groups prior to accounting 

for the effects of longevity changes. Because the effects 

of other factors on age-specific participation rates largely 

play themselves out within a relatively few years, it does 

not matter exactly which year is chosen for determining 

these participation rate differences. The projected differences in 2050 are used in the calculations.

To illustrate, suppose that a man who is 60 years old in 

2030 is projected to have 25 more years to live and that a 

58 year old in 2015 had the same expected 25 additional 

years of life. The longevity add factor for 60 year olds in 

2030 is set equal to 40 percent of the difference between 

age 58 (initially projected) participation and age 60 (initially 

projected) participation in 2050. So, if the 58 year old had 

a projected participation rate of 69 percent and the 60 

year old had a projected participation rate of 64 percent 

in 2050, the 5-percentage-point difference between these 

projected participation rates would be multiplied by 0.4, 

and 2 percentage points added to the 64-percent figure 

initially projected for the 60 year old in 2030.
50 | 2015 Technical Panel on Assumptions and Methods

Figure 23A. Projected Male Labor Force Participation Rates, by Age, 2014, 2024, and 2089

0%

20%

40%

60%

80%

100%

16-17 18-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70+

2014 2024 2089

Source: Social Security Administration, Office of the Chief Actuary, based on 2015 Trustees Report.

The life expectancy adjustment is essentially ad hoc, but 

it has the plausible underlying rationale that a longer 

lifetime requires more income to support it. Estimating how 

longevity affects participation directly may be problematic 

because longevity has changed smoothly over time, and 

the limited variation makes it difficult to identify its impact.

In addition, past increases in longevity often have been 

associated with decreased participation, likely because 

income and wealth were increasing at the same time as a 

result of rising wages and the expansion of Social Security 

and the private pension system.

Despite its obvious comprehensiveness and complexity, 

the labor force participation rate model does not incorporate explicitly some potentially important factors, such as 

changes in the private pension system and shifts in the 

demand for different types of labor. Further, in practice most 

of the factors that are considered in the model have little 

effect on projected age-and-sex-specific participation rates.

This finding is largely because the inputs to the model are 

not projected to change much in future years. As is typical 

in economic projections, for example, unemployment is 

assumed to rebound to its natural rate and then remain 

at that level, so that changes in economic conditions do 

not affect projected participation rates after the first few 

years of the projection period.

More troubling to the Panel is the assumption that completed educational attainment will be the same for all 

future cohorts as observed for those currently age 35.

Although the growth of completed educational attainment 

may have slowed, school enrollment rates have picked 

up considerably in recent years, especially for women, 

calling into question the assumption of no future changes 

in completed educational attainment.

The one exception to the generalization that the factors 

in the model have little impact on projected future participation is the life expectancy add factor. That adjustment 

continues to exert an influence on projected participation 

at older ages since life expectancy is projected to rise 

throughout the forecast period.

Figure 23A plots the actual 2014 and projected 2024 and 

2089 labor force participation rates based on the Trustees’ 

intermediate 2015 projections by age for men; Figure 23B 

plots the same information for women. Although three 

lines are plotted, only two are visible across most of the 

age distribution since, at most ages, the line for 2089 lies 

directly on top of the line for 2024. Projected participation 

at younger ages is anticipated to rebound as unemployment 

returns to more normal levels, but to change little after that 

time. At older ages, the life expectancy add factor leads to 

projections of continuing increases in participation over 

time. Participation rates by age and sex are projected to 

change little for those of prime working age.
2015 Technical Panel on Assumptions and Methods | 51

Figure 23B. Projected Female Labor Force Participation Rates, by Age, 2014, 2024, and 2089

0%

20%

40%

60%

80%

100%

16-17 18-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70+

2014 2024 2089

Source: Social Security Administration, Office of the Chief Actuary, based on 2015 Trustees Report.

Improving the Performance of the Labor Force 

Participation Model

Past OCACT projections of labor force participation for 

older women have been substantially too low. Much of the 

difference between the actual and the projected numbers 

appears due to the projections not having adequately 

captured cohort-specific factors, such as education, that 

were associated with higher participation earlier in these 

women’s lifetimes.

As an example, consider the participation rates at age 

60–64 years for women in the cohort born in the fiveyear interval 1946–50 shown in Table 6. In 1984, OCACT 

projected that these women would have a participation 

rate of 37.5 percent in 2010. In 1992, the 2010 projection 

for the same group was even lower (35.0 percent). Yet the 

actual participation rate for 60–64 year old women in 2010 

was 51.0 percent, meaning that OCACT projections made 

in 1984 and 1992 were too low by 13.5 and 16 percentage 

points, respectively. Interestingly, the participation rate 

of a cohort 25 years older than the one under consideration—women in the 1920–24 birth year cohort who were 

60–64 years old in 1984—was already known in 1984 to 

be about the same (34.0 percent) as the level that OCACT 

projected for the younger cohort.

Table 6. Projected and Actual Labor Force Participation Rates for Women 60–64 Years Old

(a) OCACT projection for 1946–50 birth cohorts made in 1984 for 2010 37.5%

(b) OCACT projection for 1946–50 birth cohorts made in 1992 for 2010 35.0%

(c) Actual data in 1984 for 1920–24 birth cohorts 34.0%

(d) Actual data in 2010 for 1946–50 birth cohorts 51.0%

Source: Goss, Glanz, and An (1985); Yang and Goss (1992); and OCACT, 2015.
52 | 2015 Technical Panel on Assumptions and Methods

Although we were not able to determine exactly what 

model was used in 1984 and 1992 to make these labor 

force projections, it seems clear that cohort-specific influences were not adequately considered, in particular the 

large increases in education between the 1920–24 birth 

year cohorts and the 1946–50 birth year cohorts. In 1984 

most women in the cohort born in 1946–50 had already 

finished their schooling and their completed education 

levels therefore could be observed. Data available at the 

time would have shown that they were considerably more 

educated than those in preceding cohorts, and cross-section estimates would have suggested that more educated 

women could be expected to have longer working lives.

Examination of these older projections offers several 

lessons for the current model. First, cohort effects historically have been very important. The model(s) used 

to produce the 1984 and 1992 projections may not have 

included cohort effects; the current model does include 

them, but assumes that the cohort effect will be the same 

for any cohorts born in 1949 or later as for the 1948 birth 

year cohort. The current model also incorporates effects 

attributable to cohort differences in education, but these 

effects seem too small (an example is the predictions for 

women aged 60–64 for the period from 2023 to 2088).

Second, because completed educational attainment for 

a cohort is largely known by the time the cohort reaches 

around age 30—three decades before the cohort enters 

its 60s—projections using such data can be formulated 

on a sound basis.

As already noted, labor force participation rates for women 

in their 40s have decreased somewhat over time. The cohort 

graph referenced earlier (Figure 22) shows that for younger 

women born after 1944–48, five-year cohort participation 

rates are actually somewhat lower around age 40 than for the 

older 1944–48 cohort. But the line for each of the younger 

cohorts is higher at age 30 and only later do these lines 

“twist.” It is still unclear to researchers exactly why this is 

the case; some evidence suggests that it may be related 

to the delay of child-bearing. The important point is that 

participation among the younger cohorts may rebound, 

raising participation for these women in their older years.

One hint that the cohort effects for women in their later 

ages will continue to rise is that younger cohorts have far 

greater educational attainment than the older cohorts just 

mentioned. More specifically, a far greater fraction of the 

younger women have graduated from college. Data on the 

educational attainment of native-born men and women 

by birth year as of age 30 are shown in Figures 24A and 

24B. Among (native-born) U.S. women born in 1948, 19.1 

percent had graduated from college by age 30. For those 

born in 1958, 22.2 percent were college graduates by age 

30; among those born in 1968, the figure was 28.2 percent; 

and among those born in 1978, 37.3 percent. College 

attendance and graduation rates for women have been 

increasing for quite some time.

The situation for men is somewhat more complicated.

Indicators of male educational attainment stagnated 

between the birth cohorts of 1948 and 1966, but cohorts 

born in the 1940s had greatly increased college attendance 

and graduation because, for some period, college enrollment allowed men to qualify for Vietnam draft deferments.

As can be seen in Figure 24B, years of education among 

males seem to have been drifting upwards for all cohorts 

since the 1966 birth cohort, albeit at a slower and less 

consistent pace than among women.

All of this leads the Panel to recommend reconsideration 

of the assumption that educational attainment among 

cohorts currently under age 35, including those that 

have not yet been born, will look exactly like educational 

attainment among today’s 35 year olds. The substantial 

earnings premium associated with higher education and 

the current focus on raising college graduation rates by 

U.S. policy officials across the political spectrum suggests 

the share of people with higher education credentials will 

continue to expand. The relationship between education 

and participation observed in the cross section may 

suggest a stronger effect than overall increases in the level 

of education will have on participation over time. Still, to 

the extent that demand for educated workers continues 

to be strong and more-educated individuals continue to 

find jobs that are well paid, reasonably stimulating, and 

not especially physically demanding, we should expect 

growth in educational attainment to be associated with 

higher labor force participation.

The discussion about education leads to a related point 

regarding the labor force participation projections, namely 

that, as presently structured, the projection methodology 

omits observable factors that likely have had an important 

influence on labor force participation rates. One such 

factor is change in the structure of the private pension 

system. Fewer of those retiring in the future will have a 

defined benefit pension, and this could encourage them 

to work longer. This effect may be part of what implicitly is 

captured in the longevity “add factor” already discussed.
2015 Technical Panel on Assumptions and Methods | 53

Figure 24A. Percentage of College Graduates by Sex and Year of Birth (U.S. Born) at Age 30

0%

10%

20%

30%

40%

1930 1940 1950 1960 1970 1980 1990

All

Females

Males

Source: March, Current Population Survey, micro data.

Figure 24B. Mean Years of Education by Sex and Year of Birth (U.S. Born) at Age 30

11

12

13

14

15

1930 1940 1950 1960 1970 1980 1990

All

Females

Males

Source: March, Current Population Survey, micro data.
54 | 2015 Technical Panel on Assumptions and Methods

Table 7. Labor Force Participation Rate Projections for 2089, by Trustees’ Scenarios

Sex

Projected age-adjusted participation rate 

Low-cost scenario Intermediate-cost scenario High-cost scenario

Men 16 plus 73.5% 73.4% 73.3%

Women 16 plus 61.6% 61.0% 60.0%

Source: 2015 Trustees Report, Section V.B.5.

The current projections also give short shrift to the role of 

labor demand, focusing almost exclusively on the role of 

factors expected to affect the labor supply curve. Ample 

evidence suggests that labor demand can have an important 

influence on the labor force participation rate. Generically, 

any outward shift in the demand for labor relative to the 

supply of labor can be expected to produce both higher 

wages and higher participation; inward shifts in the demand 

for labor can be expected to have the opposite effect. In 

the recent past, technology and globalization are widely 

understood to have produced adverse shifts in the demand 

for low-skilled prime-age workers, lowering their potential 

wages and thus their labor force participation rates.

It is difficult to predict how labor demand is likely to 

evolve in the future. On the one hand, some have argued 

that accelerating changes in technology and continued 

globalization will translate into lower wages, fewer jobs 

and lower participation rates in the future. On the other 

hand, it is not entirely clear that these trends will continue.

Furthermore, they could be offset by demographic changes 

over the coming decades that will reduce the share of the 

population in the prime working years and by educational 

and training upgrading.

To the extent that these demographic changes mean that, 

all else the same, fewer workers will be available relative 

to the size of the population, they could lead employers to 

work harder to retain older workers or to be more accommodating of prime-age women who would like to work 

but also have family responsibilities, raising labor force 

participation among both groups. These are by no means 

necessary outcomes—employers facing a labor shortfall 

also have a variety of other options potentially available 

to them, such as increasing the capital intensity of their 

workplaces or increasing their reliance on immigrant 

workers—but they are at least plausible outcomes. The 

Panel recommends that the Trustees explore ways in which 

demand factors might be incorporated more directly into 

the projections model.

Recognizing the Uncertainty about Future Labor 

Force Participation

Although the Trustees Report is focused on the intermediate-cost projections, the low-cost and high-cost scenarios 

are also important. In contrast to some other variables, 

the values for labor force participation associated with 

the low-cost and high-cost scenarios are derived rather 

than assumed directly. The starting points for these labor 

force values are the low-cost and high-cost assumptions 

for other parts of the model that determine the values of 

variables that are inputs to the labor force participation 

model—unemployment, mortality, marital status, fertility, 

disability prevalence and the replacement rate. Values 

for these explanatory variables are entered into the labor 

force model and the resulting age-adjusted labor force 

participation rates then calculated. As can be seen in Table 

7, the participation rates projected for 2089 adjusted to 

match the 2011 population age distribution are very close 

across the three scenarios:

This close similarity is partly because the full set of changes 

in other variables associated with moving from, say, the 

intermediate-cost scenario to the high-cost scenario have 

offsetting effects on labor force participation. For example, 

both life expectancy and disability prevalence are higher 

in the high-cost scenario, but their effects on labor force 

participation go in opposite directions.

Rather than being derived purely from assumptions about 

other variables that themselves might be expected to 

raise costs or lower costs, uncertainty about the future 

path of labor force participation could be incorporated 

more directly into the projection methodology. To illustrate, if the doom-and-gloom technologists are right, the 

future demand for labor and thus future age-adjusted 

participation rates could be far lower than implied by the 

intermediate-cost base case. On the other hand, rising 

educational attainment could produce notably higher 

labor force participation rates.
2015 Technical Panel on Assumptions and Methods | 55

The Panel’s final recommendation with regard to the 

labor force component of the projections relates to the 

sensitivity of the trust fund balance to alternative participation rate outcomes. This is not something that OCACT 

addresses routinely, but testimony given by Chief Actuary 

Stephen Goss in July of 2010 before the Senate Finance 

Committee described what would happen to the trust 

fund if older workers were to delay their retirements. One 

of the scenarios he considered was an increase in labor 

force participation rates at age 45 and above to the rates 

that prevailed for men in 1950. According to his estimates, 

this change would have reduced the actuarial deficit over 

the 75 years then being projected from 2.00 percent of 

taxable payroll to 1.02 percent of taxable payroll, a decline 

of 0.98 percent of taxable payroll; the decline in the annual 

deficit projected for the 75th year of the projection would 

have been smaller, but still sizable at 0.54 percentage of 

taxable payroll. While this particular change is larger than 

seems plausible, these estimates nonetheless highlight 

the potential sensitivity of the sustainability of the trust 

funds to higher or lower labor force participation.

■ 2.2 Unemployment Rate

In the Trustees’ projections, lower unemployment is associated with a net improvement in Social Security’s finances, 

as the increased number of workers raises system revenues 

by more than it raises future benefits.

Assumption Recommendation. The Technical Panel recommends no change in the ultimate, long-run, age-sex-adjusted 

unemployment rate of 5.5 percent assumed in the 2015 

Trustees Report for the intermediate cost scenario. The 

Panel also recommends retaining the assumed values of 

4.5 percent and 6.5 percent in the low-cost and the highcost scenarios.

Rationale for Unemployment Rate Assumption

Unemployment and labor force participation are related 

to the employment rate as follows:

EMP/POP = LFPR * (1 – UR)

where EMP is employment, POP is population, LFPR is the 

labor force participation rate, and UR is the unemployment 

rate. Though not a point the Panel has pursued, this identity 

does suggest that, in the development of the projections, 

labor force and unemployment could be considered jointly 

rather than separately.

Figure 25 plots the unemployment rate for the period from 

1966 through the present. Both unadjusted and age-sexadjusted unemployment rates are shown, with the age-sex 

distribution that prevailed in 2011 used to construct the 

latter. The age-sex-adjusted rate is the target of the Trustees’ 

assumptions. Because of the systematic differences in 

unemployment, especially by age, the Panel is comfortable 

with focusing on the adjusted rather than the unadjusted 

unemployment rate in making the projections.

Over the whole period from 1966–2013, the age-sex-adjusted unemployment rate averaged 5.57 percent, slightly 

above the assumed long-run ultimate value of 5.5 percent.

The age-sex-adjusted rate was substantially lower over the 

first completed business cycle for which data are shown 

(averaging 3.8 percent from 1966–1972) and has been 

substantially higher since 2007 (averaging 7.6 percent 

from 2007–2013). OCACT believes that the demographic 

shifts associated with the aging of the Baby Boom are likely 

to change the balance between labor demand and labor 

supply in coming decades, putting downward pressure on 

the unemployment rate so that it averages slightly below 

the average of the rates since 1966. The Panel finds this 

expectation plausible and sees no reason to recommend a 

change in the Trustees’ assumed ultimate unemployment 

rate of 5.5 percent. Similarly, the Panel sees no compelling 

reason to recommend a change in the unemployment rate 

assumptions of 4.5 percent for the low-cost scenario and 

6.5 percent for the high-cost scenario.
56 | 2015 Technical Panel on Assumptions and Methods

Figure 25. Unadjusted and Age-Sex-Adjusted Annual Unemployment Rates, 1966–2013

0%

2%

4%

6%

8%

10%

1966 1976 1986 1996 2006 2016

Percent

u

nemployed

Unemployment rate

Age-sex adjusted unemployment rate

Source: The Long-Range Economic Assumptions for the 2015 Trustees Report, Table 4.3, July 22, 2015.

■ 2.3 Real Earnings Growth Rate

The rate of real earnings growth is a crucial component 

of the Trustees’ projections. Under current law, initial 

benefits for each successive wave of retirees are determined by taking the highest 35 years of earnings indexed 

to the growth in average annual earnings up to age 60 

and nominal earnings thereafter.

64 Once the benefit is 

determined at 62, it is indexed to inflation based on the 

CPI-W. An increase in real earnings will raise both taxable 

payroll and the benefits of each cohort of new retirees, 

but the benefits of existing retirees will be unaffected.

In effect, the growth in total benefits will lag behind the 

rise in revenues. Thus, faster growth in real earnings will 

lead to a significant increase in the actuarial balance and 

slower growth to a significant reduction.

Assumption Recommendation. The Technical Panel recommends retaining the Trustees’ 2015 ultimate assumption for 

average annual real earnings growth of 1.17 percent. The 

Technical Panel also recommends retaining the low- and 

high-cost assumed growth rates of, respectively, 1.80 and 

0.55 percent. Similarly, the Technical Panel recommends no 

changes to the assumptions for the underlying components 

64 Both Social Security’s income and benefits are linked to total covered 

earnings, which include both wages and net earnings from self-employment. 

that determine real earnings growth (see Assumption 

Recommendations (a)—(d)).

Overview of Real Earnings Calculation

The central driver of growth in real earnings is what happens 

to labor productivity. The level of average real earnings is 

linked to labor productivity (the first term to the right of 

the equal sign in the equation below) through four mediating factors (the remaining terms to the right of the equal 

sign in the equation): 1) labor compensation as a share of 

total GDP; 2) earnings as a share of labor compensation; 

3) average hours per worker; and 4) the ratio of the GDP 

price deflator to the CPI:

Earnings/CPI

Employment = GDP/PGDPHours

×

Compensation

GDP

×

Earnings

Compensation

×

Hours

Employment ×

PGDP

CPI

Using the relationship in this equation, the Trustees then 

determine the average annual change for each indicator, 

which allows them to compute real earnings growth. More 

precisely, as the calculation of the level of real earnings 

involves multiplying the level of productivity by the level

of each link, the growth of real earnings is the product of 

the growth in each component, where growth is expressed 

as a ratio.
2015 Technical Panel on Assumptions and Methods | 57

Figure 26. Annual Productivity Growth and Five-Year Moving Average (Centered), 1960–2014

-2%

0%

2%

4%

1960 1970 1980 1990 2000 2010

Ann

ual percent change

Annual productivity growth

5-year moving average

Source: 2015 Trustees Report, Table V.B1.

For example, if productivity grew by 5 percent from one year 

to the next, the productivity term in the equation for the 

change in that year would be 1.05. As an approximation, 

the growth of real earnings can be thought of as the sum 

of the growth rates of the five terms on the right-hand side 

of the equation.

The Panel examined both the productivity growth assumption and the assumptions for each of the four mediating 

factors that link productivity to real earnings.

Productivity

The growth in total-economy productivity is the largest 

component of the growth in real earnings. Figure 26 presents 

productivity growth rates since 1960, with the dashed line 

showing annual values and the solid line showing a five-year 

moving average of annual values.

65 Historically, shifts of 

workers from major sectors with relatively low productivity 

to major sectors with relatively high productivity, especially the shift out of agriculture into other sectors, have 

65 The concept of productivity used by the Trustees pertains to the entire 

economy, whereas the measure of productivity most commonly discussed in 

the academic and business communities pertains only to the non-farm business 

sector. The latter excludes the agricultural sector, along with governments, 

households, and non-profits. The non-farm business sector is the largest sector 

of the economy, and its measured productivity growth is typically a few tenths of 

a percentage point higher than productivity growth in the economy as a whole.

contributed to overall productivity growth. This process 

largely has played itself out and is not expected to be an 

important source of productivity growth in the future. In its 

projections for future productivity growth, OCACT sets a 

long-range value for each major sector and then calculates 

the total as a weighted average across the sectors (farm, 

non-farm business, and household), treating the share of 

employment in each sector as fixed. The ultimate growth 

rates in productivity for the non-profit and government 

sectors are assumed to be zero.

While the annual rate of productivity growth has fluctuated 

considerably, the intermediate assumption of 1.7 percent 

per year for productivity growth is close to the annual 

average growth in productivity over the last 40 years.

Assumption Recommendation (a). Like the 2003, 2007, and 

2011 Panels, this Panel recommends a productivity growth 

rate assumption of 1.7 percent per year, consistent with 

the level assumed in the Trustees’ Report since 2006. The 

Panel also recommends retaining the low- and high-cost 

assumed growth rates of 2.0 and 1.4 percent, respectively.
58 | 2015 Technical Panel on Assumptions and Methods

Figure 27. Compensation Share of Gross Domestic Product, Annual and Five-Year Moving Average 

(Centered), 1948–2014

52%

54%

56%

58%

60%

1948 1958 1968 1978 1988 1998 2008 2018

Percent of G

DP

Compensation share of GDP

5-year moving average

Source: National Income and Product Accounts, Tables 1.1.5 and 2.1, January 30, 2015.

Figure 28. Earnings as a Percent of Total Compensation, 1948–2014

80%

84%

88%

92%

96%

1940 1960 1980 2000 2020

Percent of total com

pensation

Source: National Income and Product Accounts, Table 2.1, February 27, 2015.
2015 Technical Panel on Assumptions and Methods | 59

Figure 29. Employer Contributions for Earnings Supplements as a Percent of Total Compensation, 

1950–2014

0%

2%

4%

6%

8%

1940 1960 1980 2000 2020

Percent of total com

pensation

Pension accruals

Contributions for social insurance

Contributions for group health

Source: National Income and Product Accounts, Tables 2.1 (February 27, 2015) and 7.8 (August 6, 2015).

Compensation Share of GDP

Total labor compensation (total labor earnings plus employee 

benefits and wage-related employer taxes) can be viewed 

as “labor’s share” of GDP. Figure 27 shows that the compensation share of GDP has declined in recent years. It is 

conceivable that the overall downward trend will continue, 

but it is also possible that the compensation share will 

stabilize at or close to recent values. The Trustees expect 

that the labor and capital shares will be approximately 

constant in the future, and therefore set the ultimate 

annual rate of change in the compensation ratio to zero.

This assumed growth rate is broadly consistent with the 

-0.09 percent experienced over the five economic cycles 

that preceded the Great Recession (the 41-year period from 

1967 through 2007). The Panel has no convincing reasons 

to propose an alternative assumption.

Assumption Recommendation (b). The Technical Panel 

recommends retaining the Trustees’ assumption of no 

change in the ratio of compensation to GDP under the 

intermediate as well as the low and high cost scenarios.

Earnings to Compensation Ratio

The earnings-to-compensation ratio is the ratio of total 

labor earnings, including wages and self-employment 

income, to total labor compensation. Figure 28 shows 

that this ratio declined sharply over the three decades 

leading up to 1980 but since has stabilized.

66 The pre-1980 

decline reflected increases in employer contributions for 

government social insurance and group health insurance, 

as well as growth in pension accruals, that outpaced the 

growth in earnings

After rising for several decades, employer contributions 

to government social insurance stabilized as a share of 

total compensation in the early 1980s (see Figure 29), as 

ad hoc increases in the Social Security maximum taxable 

earnings and the payroll tax rate gave way to the present 

configuration of tax rates and wage indexing under the 

1983 Social Security Amendments. In addition, much of the 

growth in total earnings since the mid-1980s has occurred 

above the Social Security maximum taxable earnings 

level, holding down the ratio of contributions for social 

insurance as a share of total compensation.

66 The earnings ratio as presented here includes proprietors’ income in both 

the numerator and denominator.
60 | 2015 Technical Panel on Assumptions and Methods

Figure 30. Average Hours Worked: Annual Percent Change and 5-Year Moving Average (Centered), 1960–2014

-2.5%

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

1960 1970 1980 1990 2000 2010

Ann

ual percent change

Change in average hours worked

5-year moving average

Source: 2015 Trustees Report, Table V.B1.

The pension line displayed in Figure 29 reflects the current 

Bureau of Economic Analysis (BEA) methodology used for 

pensions in the national accounts. BEA switched from 

a cash accounting to an accrual accounting method in 

2013, meaning that the data shown in the figure are not 

comparable to the more volatile data on employers’ cash 

spending on their pension plans available for previous 

Panels to review. The newer data show that total public 

and private pension accruals increased up to about 1970 

and then stabilized.

67

The greatest uncertainty with regard to future non-wage 

compensation costs relates to employer-provided health 

care. The costs of employer-provided group health insurance have grown steadily as a share of total compensation 

throughout the period shown in Figure 29. Following the 

passage of the Patient Protection and Affordable Care Act 

of 2010 (ACA), the Trustees lowered the projected rate of 

decline in the ratio of earnings to total compensation by 

0.1 percentage point per year. This change reflects their 

view that the ACA provision that imposes an excise tax on 

employer-sponsored group health insurance, to be phased 

in later in the current decade, will slow the rate of growth in 

employer health care expenditures. The tax initially applies 

only to very generous health plans, but if health care costs 

continue to rise more rapidly than GDP it will affect more 

plans over time, encouraging firms and workers to shift 

compensation out of health insurance and into earnings.

67 For more information on the change in BEA’s pension accounting methods, 

go to www.bea.gov/gdp-revisions.

In their 2015 Report, the Trustees further slowed the rate 

of decline of the earnings to compensation ratio based 

on recent evidence and the expectations of the Medicare 

Trustees of slower growth in employer-sponsored group 

health insurance premiums in the future. Because health 

insurance premiums are not subject to payroll tax, slower 

growth in this part of compensation means that a greater 

share will be in the form of taxable wages.

This Technical Panel believes these gradual adjustments 

based on historical experience are reasonable. Though, 

similar to the previous Panel, we also would recommend 

that evidence on the ACA’s continued impact on health 

care costs be monitored carefully as it becomes available.

Assumption Recommendation (c). On balance, the Panel 

sees no compelling reason to recommend a different 

assumption regarding the earnings-to-compensation ratio 

than the Trustees’ current assumptions.

Average Hours

Figure 30 shows annual percentage changes in average 

hours worked per week, using a series from the Bureau of 

Labor Statistics for the entire economy. While the annual 

changes fluctuate considerably, the five-year moving 

average shows only one period in the 1990s with sustained 

positive values.

Going forward, two factors are likely to affect hours worked.

On the one hand, continued increases in productivity will 
2015 Technical Panel on Assumptions and Methods | 61

allow workers to reduce hours somewhat and still maintain 

their level of real earnings. On the other hand, the continued increases in life expectancy—and the decline in 

Social Security replacement rates as the Full Retirement 

Age moves to 67—can be expected to raise the labor force 

participation of older workers. The age-sex-education mix 

of the population will change and that also could affect 

average hours worked, but OCACT finds that the effects 

of the changing characteristics of the workforce will have 

little effect on balance.

Assumption Recommendation (d). The Trustees assume an 

ultimate slight decline in hours worked of 0.05 percent per 

year, and the Panel sees no reason to alter this assumption.

The Panel also recommends retaining the low- and highcost assumptions of 0.05 and -0.15 percent, respectively.

Price Differential

The final link between the productivity growth rate and 

real earnings growth is the differential in growth rates 

between the GDP price deflator (PGDP) and the CPI-W. In 

the context of the equation for calculating real earnings 

growth, including this ratio is necessary because productivity depends on real GDP, calculated as nominal 

GDP deflated by PGDP, but real earnings are calculated 

as nominal earnings deflated by the CPI-W. If the CPI-W 

increases more rapidly than PGDP, the effect is to lower 

the growth rate of real earnings relative to the growth rate 

of productivity.

The Trustees assume that the PGDP will grow more slowly 

than the CPI-W. One reason for this assumption is that the 

two measures are computed using different index number 

formulas. For the CPI-W, the price changes for broad groups 

of goods and services are aggregated using weights that 

are constant over 2-year periods, reflecting the distribution 

of purchases at the beginning of the period. For the GDP 

deflator, changes in the distribution of purchases from 

one quarter to the next are reflected in the computation 

of quarterly increases in price levels. The GDP deflator 

immediately reflects the fact that consumers shift their 

expenditures when the price for some groups of goods 

or services rise relative to the prices of other groups of 

goods and services. As a result, the GDP deflator tends 

to rise more slowly than the CPI-W. The Bureau of Labor 

Statistics reports that reflecting the behavioral response 

of consumers to relative price changes would have lowered 

the average annual growth rate in the CPI-U (and therefore 

the CPI-W) between 1990 and 2011 by about 0.3 percentage 

point per year.

The second important difference between the GDP deflator 

and the CPI-W is coverage. The GDP deflator reflects the 

annual growth rate in prices for the items included in 

consumption, investment, and government expenditures, 

whereas the CPI-W measures the annual growth rate in 

prices only for the items included in consumer expenditures. Investment expenditures include growing amounts 

for computers and software, two goods whose prices 

have fallen over the last twenty-five years and are likely 

to continue falling. OCACT expects that the overall price of 

investment goods will grow more slowly than the overall 

price of consumer goods. On the other hand, the prices of 

the items in the government expenditure bundle, which 

consist mainly of employee compensation, are expected to 

grow faster than the overall price of consumer goods. The 

Trustees assume the net effect of differences in coverage 

will be to lower growth in the GDP deflator by about 0.1 

percentage point relative to the CPI-W. The Technical Panel 

considers the Trustees’ assumption to be reasonable.

Thus, the Trustees set the ultimate long-range average 

annual growth rate in the GDP deflator to 2.3 percent, 

or 0.4 percentage point below the 2.7 percent ultimate 

long-range average annual growth rate in the CPI-W. This 

difference is consistent with historical experience and 

seems reasonable to the Panel (see Table 8).

Assumption Recommendation (e). The Technical Panel 

recommends retaining the Trustees’ assumption of a price 

differential between the GDP deflator and the CPI-W of 

-0.4 percent. The Panel also recommends retaining the 

low- and high-cost assumptions of -0.3 and -0.5 percent, 

respectively.

Summary

The Technical Panel recommends no change in the Trustees’ 

assumption for the ultimate level of the real earnings 

differential. Taken together, the Trustees’ assumptions 

for productivity growth and the four linkages generate an 

intermediate real earnings growth rate of 1.15 percent per 

year, with low- and high-cost values of, respectively, 1.74 

and 0.57 percent. The assumptions for real earnings and its 

components are in Table 9, with historical data in Table 10.
62 | 2015 Technical Panel on Assumptions and Methods

Table 8. Average Annual Percent Change in GDP Deflator and CPI-W, by Decade

Decade GDP Deflator CPI-W Difference

2003–2013 2.10 2.47 - 0.37

1993–2003 1.83 2.22 -0.39

1983–1993 3.03 3.30 -0.27

1973–1983 7.30 7.60 -0.30

1963–1973 3.72 3.34 0.38

Note: Differences may not equal the numbers reported in the columns due to rounding.

Source: The Long-Range Economic Assumptions for the 2015 Trustees Report, Tables 2.4,2.5, 3.3., 2015.

Table 9. Technical Panel Recommendations for Average Annual Real Earnings Assumptions (2025–2089)

Scenario

Average 

Real 

Earnings

Productivity 

Growth

Compensation 

Share

Earnings 

Ratio

Average 

Hours

Price

Differential

Low-Cost 1.74 1.98 0.00 0.00 0.05 -0.29

Intermediate 1.15 1.68 0.00 -0.08 -0.05 -0.39

High-Cost 0.57 1.38 0.00 -0.16 -0.15 -0.49

Source: The Long-Range Economic Assumptions for the 2015 Trustees Report, Table 3.3, 2015.
2015 Technical Panel on Assumptions and Methods | 63

Table 10. Average Annual Real Percent Change in Average Earnings and Its Components, 1963–2013

Period Productivity Compensation 

to GDP

Earnings to 

compensation

Hours per 

week

Price 

differential Residual Average real earnings

 By 10-year historical period

 1963–1973 2.59% 0.17% -0.28% -0.35% 0.37% 0.00% 2.50%

 1973–1983 1.20% -0.71% -0.44% -0.55% -0.28% 0.00% -0.81%

 1983–1993 1.60% 0.22% -0.26% 0.07% -0.26% 0.00% 1.38%

 1993–2003 2.13% 0.21% 0.07% 0.04% -0.38% 0.00% 2.08%

 2003–2013 1.41% -0.39% 0.00% -0.21% -0.36% 0.00% 0.44%

By recent historical periods (to 2013)

 1963–2013 1.79% -0.10% -0.18% -0.20% -0.18% 0.00% 1.11%

 1973–2013 1.58% -0.17% -0.16% -0.16% -0.32% 0.00% 0.77%

 1983–2013 1.71% 0.01% -0.06% -0.03% -0.33% 0.00% 1.30%

 1993–2013 1.77% -0.09% 0.03% -0.08% -0.37% 0.00% 1.26%

 2003–2013 1.41% -0.39% 0.00% -0.21% -0.36% 0.00% 0.44%

By economic cycle (peak-to-peak)

Individual cycle

 1966–1973 2.37% 0.30% -0.29% -0.72% 0.43% 0.00% 2.08%

 1973–1979 1.22% -0.48% -0.43% -0.57% -0.16% 0.00% -0.46%

 1979–1989 1.38% -0.24% -0.28% -0.07% -0.32% 0.00% 0.48%

 1989–2000 1.78% 0.39% 0.05% 0.26% -0.42% 0.00% 2.08%

 2000–2007 2.14% -0.68% -0.23% -0.51% -0.14% 0.00% 0.55%

 Last two cycles

 1989–2007 1.92% -0.02% -0.06% -0.04% -0.31% 0.00% 1.48%

 Last three cycles

 1979–2007 1.73% -0.10% -0.14% -0.05% -0.31% 0.00% 1.12%

 Last four cycles

 1973–2007 1.64% -0.17% -0.19% -0.14% -0.29% 0.00% 0.84%

 Last five cycles

 1966–2007 1.76% -0.09% -0.20% -0.24% -0.17% 0.00% 1.05%

Source: The Long-Range Economic Assumptions for the 2015 Trustees Report, Table 3.3., 2015.
64 | 2015 Technical Panel on Assumptions and Methods

Figure 31. Historical and Projected Values of the Ratio of Taxable Payroll to Covered Earnings: Trustees’ 

Assumptions and Technical Panel Recommendations

88%

82%

85%

84.0%

TR intermediate 82.5%

81.0%

Panel low cost

Panel intermediate

82.2%

Panel high cost

79.0%

78%

82%

86%

90%

1980 1990 2000 2010 2020 2030 2040

Source: OCACT. Shaded areas represent recessions.

■ 2.4 Taxable Share of Total 

Earnings

Only earnings below the contribution and benefit base 

(also known as the taxable maximum), set at $118,500 

per year in 2015, are subject to OASDI payroll taxes and 

count toward Social Security benefits.

68 The taxable ratio 

refers to the fraction of total earnings in OASDI-covered 

jobs below this threshold and therefore subject to OASDI 

payroll tax. This ratio, which varies with the dispersion of 

earnings, is important for Social Security costs; a lower 

ratio has an adverse effect on Social Security’s finances.

Assumption Recommendation. The Technical Panel recommends lowering the ultimate level for the taxable 

share of covered earnings from 82.5 percent in the 2015 

Trustees Report to 82.2 percent. The Panel also recommends 

expanding the range of uncertainty around the taxable ratio 

given that it could continue to shift in the coming years.

The Technical Panel recommends keeping the low-cost 

value at 84.0 percent, as the Trustees’ currently assume, 

and lowering the high-cost value from 81.0 percent to 79.0 

percent, a range that is modestly asymmetric around the 

recommended intermediate value.

68 This limit changes annually with changes in the national Average Wage 

Index, although it did not rise between 2009 and 2011, when there was no 

Social Security Cost of Living Adjustment (COLA). 

Method Recommendation. The Technical Panel recommends 

that OCACT continue to study the ongoing fluctuations in 

the taxable ratio to develop a more precise understanding 

of its underlying causes and hence a firmer basis for projecting its trajectory.

Rationale for Taxable Share Recommendations

Since 1984, the taxable ratio has steadily trended downward, 

as shown in Figure 31, declining from 88.1 percent in 1984 

to 82.4 percent in 2014. The exceptions to this long-running 

decline have been periods of recession (and the recession’s 

immediate aftermath), when the taxable ratio briefly 

turned upward, only to continue its decline shortly after 

the recession’s end.

69 Noting this countercyclical pattern, 

the 2011 Technical Panel anticipated a near-term decline 

in the taxable ratio to a lower post-recession level. That 

expectation proved accurate: the taxable ratio fell from 85.0 

percent in 2009 to 82.4 percent in 2014, a level comparable 

to that at the peak of the prior two business cycles. In its 

2015 Long Term Budget Outlook, the Congressional Budget 

Office projected that this ratio would fall to 79.0 percent 

by 2025, and would decline slightly thereafter (CBO 2015).

69 See the detailed discussion of the taxable maximum in Whitman and 

Shoffner (2011). 
2015 Technical Panel on Assumptions and Methods | 65

Figure 32. Percent of Workers with Earnings Above the Annual Taxable Maximum, 1980–2012

0%

2%

4%

6%

8%

10%

1980 1988 1996 2004 2012

Source: Social Security Administration, Annual Statistical Supplement, 2014, Table 4.B4.

As discussed in further detail in the 2011 Technical Panel 

report, the driving force behind the declining share of 

taxable payroll to covered earnings is the rising share of 

covered earnings paid to the highest earners. This trend 

reduces the fraction of covered earnings that is taxable 

since a larger share of covered earnings falls above the 

taxable maximum. As shown in Figure 32, the fraction of 

workers with earnings above the taxable maximum has 

fluctuated in a narrow range since 1984 (between 5.5 percent 

and 6.5 percent of workers).

70 Nevertheless, evidence 

presented below suggests that these fluctuations in the 

fraction covered are tightly correlated with fluctuations 

in the taxable ratio.

If Social Security benefits rose or fell in lockstep with the 

level of taxable payroll, a decline in the ratio of taxable 

payroll to covered earnings would have no ramifications 

for program finances. In reality, a decline in the taxable 

ratio adversely affects the system’s finances through two 

channels. To understand the effects of both channels, 

70 The decline in the share earning above the taxable maximum between 

1980 and 1983 is attributable to rapid increases in the taxable maximum in 

1981, 1982 and 1983. 

assume that average wage growth for workers overall is 

constant, but that the growth shifts to the upper end of 

the income distribution.

The first channel is through the progressivity of the Social 

Security benefit formula used to calculate retirement and 

disability benefits. This formula is a progressive function 

of prior earnings—that is, the replacement rate of taxable 

earnings for low-earnings workers is higher than for 

high-earnings workers. Consequently, a rise in the share 

of covered earnings above the taxable cap means relatively

lower earnings growth for workers of modest means. This 

slower earnings growth means less tax revenue for Social 

Security. However—because of the progressive benefit 

formula—the slower earnings growth does not reduce 

workers’ future benefits by a commensurate amount.

Therefore, a rise in the taxable ratio reduces the system’s 

revenues by more than it reduces its benefits.
66 | 2015 Technical Panel on Assumptions and Methods

Figure 33. The Top Decile Income Share in the U.S., 1917–2013, Excluding Capital Gains

30%

35%

40%

45%

50%

1917 1927 1937 1947 1957 1967 1977 1987 1997 2007

Top 10% income share

Note: Income is defined as market income (and excludes government transfers). In 2013, the top decile includes all families with annual income above $116,500.

Source: Piketty and Saez (2013).

A second channel by which rising income concentration 

erodes Social Security’s finances—separate from the 

progressive benefit formula—is through the Average 

Wage Index (AWI), which includes covered earnings above 

the taxable maximum. A rise in the AWI that is driven by 

growth in income for workers above the taxable maximum 

generates no additional tax revenue. But such a rise in AWI 

does increase benefits because the AWI is used to inflate 

workers’ prior earnings to current dollars when calculating 

their benefit levels.

71 Thus, a low- or moderate-income 

worker gets a boost in their earnings base not from the 

wage growth that they actually experienced but from the 

growth in the wages of high-income workers. Hence, a rise 

in covered earnings above the taxable maximum increases 

benefits but does not raise tax receipts.

Since a key driver of the falling taxable ratio, the rising 

concentration of top incomes in the United States, has 

few historical precedents, projecting the evolution of 

the taxable ratio is challenging. As shown in Figure 33, 

71 Specifically, in calculating a worker’s OASDI benefit, SSA first translates a 

workers earnings history into her Average Insured Monthly Earnings (AIME) 

by “inflating” her earnings history by the rise in AWI in the intervening years. 

AIME is then converted to PIA using the progressive replacement rate formula 

noted above. This chain of calculations means that a higher growth rate of 

AWI increases AIME, PIA, and benefits owed. A rise in AWI spurred by rising 

earnings above the taxable maximum therefore increases OASDI program 

liabilities without increasing program revenues. 

the share of U.S. wage and salary income accruing to the 

top 10 percent of households has risen from 32 percent 

to 47 percent between the late 1970s and the present.

Remarkably, the advent of the Great Recession, which 

wreaked havoc in much of the U.S. financial sector, had 

almost no visible impact on the trend rise in the top decile 

income share.

72 Simultaneously, the taxable ratio data in 

Figure 31 do not indicate that the taxable ratio has fallen 

appreciably since the year 2000 (a business cycle peak).

The taxable ratio reached a low of 82.4 percent in 2000, 

and the subsequent two cyclical lows (82.3 percent in 

2007 and 82.4 percent in 2014) have not so far broken 

through this floor. It remains possible, however, that a 

sufficiently robust expansion—akin to the 1995 through 

2000 expansion—will drive the taxable ratio still lower.

Moreover, each of the prior three peaks of the taxable ratio 

(in 1993, 2002, and 2009) has been lower than the peak 

preceding it. This pattern suggests that the taxable ratio 

is likely still trending downward.

72 The adverse impact of the Great Recession on household income shares is 

far more visible for the top 1 percent of households, though this effect is quite 

short-lived (Piketty and Saez, 2013). 
2015 Technical Panel on Assumptions and Methods | 67

Figure 34. Taxable Share of Earnings and the Percent of Workers with Earnings Below the Annual Taxable 

Maximum, 1984–2012

91%

92%

93%

94%

95%

81%

83%

85%

87%

89%

1984 1988 1992 1996 2000 2004 2008 2012

Percent of workers with earnings below cap

Taxable share of earnings

Taxable share

(lefthand axis)

Percent below cap

(righthand axis)

Sources: See Figures 31 and 32.

Comparing Figures 31 and 33 yields one potentially surprising 

contrast: while top income shares have risen continuously 

throughout the last three U.S. expansions and contractions, the taxable ratio has risen during contractions and 

fallen sharply during each expansion. The coexistence of 

strong cyclical fluctuations in the taxable ratio with everrising top income shares suggests that movements in the 

taxable ratio are not exclusively tied to top income shares, 

though clearly the two are related.

73 Indeed, as shown in 

Figure 34, the taxable ratio generally rises and falls with 

the fraction of workers receiving covered earnings below 

the annual taxable maximum. The structural fall in the 

taxable ratio may have been concentrated in the years 

1991 through 2000; subsequent movements since 2000 

may be primarily cyclical in nature. The Technical Panel 

recommends that OCACT explore this relationship further.

This Technical Panel’s recommendations for the taxable 

ratio echo those of the prior two Technical Panels (2007 

and 2011):

• This Panel believes that the argument that the 

downward trend in the taxable ratio is likely to continue 

is somewhat stronger than the argument that the 

trend will soon reverse. But it does recognize that the 

73 These years are the ones for which both series are currently available. 

trend is unlikely to continue indefinitely. We therefore 

recommend a long-range intermediate assumption 

of 82.2 percent, which is very modestly below the 

Trustees’ current assumption of 82.5 percent.

• This Panel believes that the uncertainty about the 

future distribution of earnings is particularly high 

and that the currently assumed range between the 

low-cost and high-cost bands for the taxable ratio is 

too narrow given the possibility of continued change.

This position echoes the 2007 Technical Panel (“Highand low-cost ratios should provide a realistic range 

of uncertainty”). This Technical Panel recommends a 

band of + 1.8 and -3.2 percentage points around the 

intermediate value assumed for the taxable ratio, thus 

placing greater weight on the likelihood of a continued 

decline in rather than recovery of the taxable ratio.

Note that the assumed high-cost scenario of a taxable 

ratio of 79.0 percent is equal to the Congressional 

Budget Office’s expected value of the taxable share 

for 2025 (CBO 2015). While this Panel feels that the 

CBO’s projection may be unduly pessimistic, the Panel 

wanted to at least ensure that its high cost bound 

included CBO’s projected value.
68 | 2015 Technical Panel on Assumptions and Methods

Table 11. Summary of Technical Panel Recommendations on Inflation and Interest Rate Assumptions

Trustees Technical Panel

Variable Low Interm. High Low Interm. High

Inflation 3.4 2.7 2.0 3.5 2.5 1.8

Real interest rate 3.4 2.9 2.4 3.0 2.5 2.0

Nominal interest rate 6.8 5.6 4.4 6.5 5.0 3.8

Source: 2015 Trustees Report, Tables V.B1 and V.B2.

■ 2.5 Inflation and Interest Rates

Realized and expected rates of inflation, real interest rates, 

and nominal interest rates are important for projecting the 

operations of the Trust Funds and the Social Security program’s fiscal status. For example, post-retirement benefits 

are adjusted annually for inflation. The Trust Funds are 

invested in special-issue Treasury securities with initial rates 

indexed to nominal market interest rates. In addition, the 

Trustees and OCACT use projected nominal interest rates 

for discounting future cash flows when computing present 

values for various summary measures of system finances.

Assumption Recommendation 1: Inflation. The Technical 

Panel recommends that the Trustees lower their intermediate 

assumption for inflation from 2.7 percent to 2.5 percent.

The Panel also recommends that the range of alternatives for inflation be asymmetric. Specifically, with a new 

intermediate estimate of 2.5 percent for CPI-W, the Panel 

recommends that the low-cost and high-cost assumptions 

be 3.5 percent and 1.8 percent, respectively (see Table 11).

The Panel recommends this asymmetry because the range 

of inflation surprises appears to be larger on the high side 

than the low side.

Assumption Recommendation 2: Real Interest Rate. The 

Technical Panel recommends that the Trustees lower their 

intermediate assumption for the real interest rate from 2.9 

percent to 2.5 percent. The Panel recommends that the 

low-cost and high-cost assumptions for real rates should 

be 3.0 percent and 2.0 percent, respectively.

Assumption Recommendation 3: Nominal Interest Rate. 

Consistent with the recommended changes to inflation 

and the real interest rate, the Technical Panel recommends 

that the Trustees lower their intermediate assumption for 

the nominal interest rate from 5.6 percent to 5.0 percent.

The Panel recommends that the low-cost and high-cost 

assumptions for nominal rates should be 6.5 percent and 

3.8 respectively.

Method Recommendation 1. As inflation, real interest 

rates, and nominal interest rates are linked theoretically 

and empirically, the Technical Panel recommends that 

they be analyzed and discussed together, not separately.

Method Recommendation 2. In addition to reporting 

comparisons of historical data and projections by other 

organizations, the Technical Panel believes that the Trustees 

and OCACT should also consider: 1) evidence from surveys 

of professional forecasters; and 2) evidence inferred from 

market outcomes.

Rationale for Method Recommendations

The Technical Panel believes that the Trustees can improve 

their methods for projecting inflation and interest rates by 

analyzing the measures together, rather than separately, 

and considering insights from surveys of professional 

forecasters and models of market transactions that allow 

inferences about expectations held by market participants.

Combining Analysis of Inflation and Interest Rates

The interest rates on the bonds in the Trust Funds are 

indexed to market rates on long-term Treasuries at the 

time they are issued. Thus, the nominal interest rate has a 

direct impact on system finances, is part of the projection 

of system finances, and is relevant for discounting future 

shortfalls of finances when reporting such magnitudes.

The annual cost-of-living adjustment (COLA) for benefits 

is based on the CPI inflation rate. Just as the Trustees 

consider real productivity growth as part of projecting 

taxable wage growth, so too the Trustees consider real 

interest rates as part of projecting the system’s finances.

74

For moderate rates, the following relationship is often used 

as shorthand for the relation among the three economic 

factors under consideration:

Nominal Interest Rate – Inflation = Real Interest Rate

74 As noted in the Trustees Report (p. 104), “The real interest rate is defined as 

the annual yield rate for investments in these securities divided by the annual 

rate of growth in the CPI for the first year after issuance. The real rate shown 

for each year reflects the actual realized (historical) or expected (future) real 

yield on securities issuable in the prior year.” 
2015 Technical Panel on Assumptions and Methods | 69

Table 12. Average Annual Nominal Interest Rate, Inflation Rate, and Real Interest Rate

Period

Average annual 

nominal interest 

rates

Average annual 

change adjusted

CPI-W

Average annual

real interest 

rates

By 10-year historical period

 1973–1983 9.46% 7.60% 1.49%

 1983–1993 8.68% 3.30% 5.88%

 1993–2003 5.90% 2.22% 3.89%

 2003–2013 3.31% 2.47% 1.07%

By recent historical periods (to 2013)

 1973–2013 6.84% 3.87% 3.06%

 1983–2013 5.96% 2.66% 3.59%

 1993–2013 4.61% 2.34% 2.47%

By economic cycle (peak to peak)

Individual cycle

 1966–1973 6.12% 4.05% 1.84%

 1973–1979 7.74% 7.60% -0.13%

 1979–1989 10.52% 5.02% 5.54%

 1989–2000 6.78% 2.63% 4.38%

 2000–2007 4.60% 2.64% 2.19%

 Last two cycles (1989–2007) 6.08% 2.63% 3.52%

 Last three cycles (1979–2007) 7.62% 3.48% 4.24%

 Last four cycles (1973–2007) 7.57% 4.20% 3.45%

 Last five cycles (1966–2007) 7.29% 4.17% 3.17%

Note: This table reports an adjusted CPI-W that reflects BLS improvements to the Index. See Long-Range Economic Assumptions for the 2015 Trustees Report, 

Section 2.6 Appendix for a complete explanation of the adjustments. Nominal rates are the rates on new issues.

Sources: Data provided by OCACT and Long-Range Economic Assumptions for the 2015 Trustees Report, Tables 2.2 and 5.2.

A natural starting place for considering the ultimate 

assumptions is the historic record of the rate on ten-year 

Treasury bonds (an approximation to the actual rate on 

newly acquired bonds for the Trust Fund) and the inflation 

rate as measured for the COLA. These two time series 

also provide the historic record of the real interest rate 

(See Table 12). Given the strong interactions among the 

determinants of inflation and interest rates, consideration 

of the real rate helps select the ultimate assumptions.

The real rate should be considered in the context of labor 

force, capital, and productivity growth rates.
70 | 2015 Technical Panel on Assumptions and Methods

Anticipations of the future of inflation matter for determining 

both wages and nominal interest rates. These determinations 

are also affected by uncertainty about future inflation, and 

so, by the subjective probability distributions of possible 

inflation rates held by different participants in the economy.

Thus, it is necessary to consider two distinct real interest 

rates. The relation above applies to ex-post rates: the 

ex-post “real interest rate” is the nominal rate of interest 

less the realized inflation rate. While the realized inflation 

rate reduces the ex-post real interest rate point-for-point 

for a given nominal interest rate, nominal interest rates are 

affected by expectations of future inflation. The ex-ante real 

interest rate is the nominal interest rate less some measure 

of “the expected” inflation rate. The expected inflation 

rate is affected by the diversity of inflation expectations 

and by any inflation risk premium that may be present in 

market rates. Tax rates also matter for the relationship 

between real and nominal interest rates, since taxation 

is based on nominal incomes.

The ex-ante real rate of interest affects asset demands and 

thus influences the market nominal rate, which affects the 

interest income of the Trust Funds, and the ex-post rate 

matters for the real value of the Trust Funds. Thus, both 

anticipated and realized inflation need to be considered 

for the projections. For the ultimate assumptions, the 

Technical Panel believes it is appropriate to continue to 

assume that these two rates are the same.

75 Nevertheless, 

the distinction is worth drawing as it results in additional 

sources of evidence to consider when selecting the ultimate 

rate and underlines a role for inflation surprises.

Given these interactions, the Panel believes that the Trustees 

should present their analysis of inflation and interest rates 

together and should expand background research on the 

process of drawing inferences on these variables.

Tapping New Sources of Information

The Panel also thinks that the Trustees and OCACT should 

examine surveys of professional forecasters and expectations inferred from market transactions of bonds and 

derivatives.

Surveys of professional forecasters. The Panel recognizes 

that averaging projections from a group of separate knowledgeable forecasters has the potential to improve projections 

compared with a single projection from a single group.

However, many forecasters focus on a horizon that is much 

shorter than 75 years. And there remains the possibility of 

cognitive biases, which could be larger or smaller than in 

75 If we were considering an economy in a steady state, then the equality of the 

two real rates would be an obvious implication of standard modeling. However, 

the projection is based on using a single rate of interest meant to reflect the 

average over the ultimate period, without any expectation that the economy 

is in a steady state. Thus, there is no necessary reason for the two rates to be 

equal, with possible differences reflecting views on expectation formation and 

an assumed pattern of the signs of inflation “surprises.” 

the process followed by the Trustees. Ongoing research 

is focused on examining the successes, limitations, and 

biases present in such surveys and exploring methods of 

drawing inferences that might be better than taking answers 

to survey questions literally.

76 The Panel views this as an 

appropriate activity to be reviewed by OCACT and the 

Trustees as part of framing the underlying assumptions 

made by the Trustees and selecting ultimate rates.

Market-based analyses. An investor in bonds has multiple 

choices for any given horizon. For example, seeking to invest 

for 20 years, an investor could choose between a 20-year 

bond and a 10-year bond with the plan to purchase another 

10-year bond in 10 years, with an uncertain interest rate.

Conversely, an investor looking to cash out in 10 years could 

choose a 10-year bond, or could purchase a 20-year bond 

with the intention of selling it in 10 years. In this case, the 

price of a 20-year bond with ten years remaining in 10 years 

is a source of risk. Thus, investors considering alternative 

plans would think about the future of interest rates as 

part of the investment decision process. The market as a 

whole consists of many investors with different horizons, 

uncertain horizons, and different perceptions. Market rates, 

incorporating both expectations and the term premia on 

bonds reflect the views and plans of market participants.

Thus, any attempt to infer expectations of future interest 

rates from the yield curve needs to recognize the presence 

of time-varying term-premia.

An investor looking at real returns can purchase a real bond 

(TIPS) or purchase a nominal bond and face uncertainty 

about the inflation rate. In this case, attempts to infer 

inflation expectations must account for the presence of 

inflation risk premia that vary over time and by liquidity 

in the markets for different bonds.

The 2011 Technical Panel discussed expectations of future 

rates by examining TIPS rates, using the basic “expectations hypothesis.”77 However, the basic expectations 

hypothesis has a poor prediction record.

78 In response, a 

large literature has developed to separate out the expectations from the risk premium.

79 These models decompose 

yields into a risk-adjusted component and a term-premium 

component. By removing the term premia from the yields, 

these risk-adjusted components then satisfy the expectations hypothesis, and risk-adjusted longer term interest 

76 See, for example, Andrade, Philippe, Richard K. Crump, Stefano Eusepi, 

and Emanuel Moench, Fundamental Disagreement, Federal Reserve Bank of 

New York Staff Reports 655, Revised November 2014.

77 Brown and Pennacchi (2015) note that “TIPS are less liquid than nominal 

U.S. Treasuries, and there is evidence that their yields became unrealistically 

high (and prices unreasonably low) during stress periods such as the 2008–2009 

financial crisis.” For evidence that TIPS were under-priced relative to nominal 

Treasuries and inflation swaps, see Haubrich, Pennacchi, and Ritchken (2012) 

and Fleckenstein, Longstaff, and Lustig (2014).

78 Adrian, Crump, Diamond, and Yu (2015 forthcoming).

79 For example, see Piazzesi, Salomao, and Schneider (2015), and Abrahams, 

Michael , Adrian, Crump, and Moench (2015).
2015 Technical Panel on Assumptions and Methods | 71

rates simply reflect expectations about the path of future 

shorter term interest rates. This adjustment is important 

because the term premia vary over time. Thus, just as the 

Trustees reflect on different historical periods when making 

inferences directly from observed rates, so too one could 

examine models fitted to different time periods. As some 

of the data series are quite long, one could examine the 

quality of out-of-sample projections as well. The Technical 

Panel has not engaged in such an effort, but calls on OCACT 

to proceed in this direction. A number of term-structure 

models are updated and presented publicly on a regular 

(even daily) basis.

80 Without an extensive assessment of 

alternative models, no single model should be given too 

much weight.

In addition to inferences from bond markets, one can make 

inferences from derivatives markets. Particularly, it is 

possible to estimate inflation expectations from the market 

for inflation derivatives.

81 Such estimation of expectations 

requires risk adjustment and removal of other factors that 

affect the pricing of derivatives, especially perceptions of 

risk and levels of risk aversion.

Given the widespread view that market-based estimates 

contain important information, the use of and discussion 

of these approaches will lend additional credibility to the 

Trustees’ projections.

Rationale for Assumption Recommendations

The Technical Panel recommends that the Trustees lower 

their assumptions for inflation and interest rates for the 

reasons discussed below.

Inflation

For the ultimate rate, the Trustees Report assumes that the 

average annual growth rates in the CPI-W and CPI-U will 

be roughly equal and differ from the long-range average 

annual growth rate of the consumption portion of the GDP 

deflator (PGDP_C less CPI-W) by -0.30 percentage points.

The Panel considers these relationships to be reasonable.

80 By the New York Federal Reserve Bank, the San Francisco Bank and the Board 

of Governors of the Federal Reserve System. The point being there is not a single 

agreed-on model, just an agreed-on approach. The New York Federal Reserve 

Bank has produced projections of nominal returns on 10-year Treasury bonds. 

See Adrian, Tobias, Richard Crump, Peter Diamond, and Rui Yu, Discounting 

the Long-Run, 2015.

81 See, for example, Feldman et al. (2015), and Kitsul and Wright (2013). These 

papers focus on probabilities incorporating differences in marginal utilities 

across states and argue for their policy relevance. While there is a strong case 

for their relevance for some purposes, for projecting the financial status of the 

Social Security Trust Funds, there would need to be an adjustment for the risk 

premium element in these prices, paralleling the adjustment for term premia 

discussed in the text.

The Trustees set the assumed intermediate ultimate rate of 

increase in the CPI-W to 2.7 percent for the 2015 Trustees 

Report, and to 3.4 and 2.0 percent for the low-cost and 

high-cost projections, respectively. Although the Panel 

thinks that the 2.7 rate is within the range of reasonable 

assumptions, the Panel recommends a lower number for 

the intermediate assumption: 2.5 percent.

Central to consideration of long-run inflation is assumptions about monetary policy.

82 In response to the Federal 

Reserve’s increased commitment to avoiding high levels of 

inflation, the Trustees have significantly lowered the intermediate assumption from 4.0 percent in the 1996 Trustees 

Report to 2.8 percent in the 2004–2013 Reports and to 2.7 

percent in the 2014 and 2015 Reports. The Federal Reserve 

has spoken in terms of a 2-percent inflation rate target.

This current target is based on the personal consumption 

expenditures price index (PCE) implying a Federal Reserve 

target rate of 2.3 percent relevant for consideration of the 

Trustees’ assumption for CPI-W.

Several issues are relevant for interpreting the implications 

of this policy stance on the long-run average inflation rate.

First, the Fed is unlikely to hit its target year after year.

83

Second, the Fed may change its target—indeed the Fed is 

currently reviewing the 2-percent target. Third, personnel 

at the Fed will change over the next 75 years, which could 

lead to higher or lower inflation regimes. And fourth, the 

charge to the Fed may itself change, which could lead to 

higher or lower targets.

84

We note that OCACT cites Global Insight, Inc., Macroeconomic 

Advisers, Moody’s Analytics, the Office of Management 

and Budget (OMB), and the Congressional Budget Office 

(CBO), covering different time periods. All were reported as 

having lower inflation projection rates than the Trustees.

85

82 Another issue is the role of changing patterns of international trade.

83 Indeed, rates have been below the target since May 2012 and are likely to 

remain below the target for some period further. It is not clear whether all the 

key decision-makers view the target as something to be approached symmetrically; some decision-makers are more concerned with rates above the target 

than with those below the target. In addition to the so-far limited ability of 

the Fed to increase inflation, it is also unclear how successful the Fed would be 

in the event of a sizable inflationary shock, such as the oil price shock in the 

1970s, although recent gyrations in oil prices have not had a comparable impact 

on overall inflation. Variance in inflation rates would compound somewhat 

differently from the effects of a constant rate at the mean. If FOMC had only 

small deviations, this would matter little.

84 Some have argued that the Fed’s dual mandate to consider both inflation 

and employment should be changed to a consideration only of inflation, as is the 

case with some other central banks. This might lower the choice for a 75-year 

horizon. On the other hand, in light of the large costs of the Great Recession, 

and the limitations on policy coming from the zero lower bound on interest 

rates, some have argued for a higher target than 2 percent, although that has 

not seemed to have had much leverage. And some want more radical changes to 

the monetary system, such as a return to a gold standard or a focus on virtual 

currency displacing much of the current role of fiat currency.

85 We note that for the 30-year derivative contract, the implied rate of inflation 

in Brown and Pennacchi (2015) is less than 2.4 percent, a rate that incorporates 

differences in marginal utilities with different inflation rates.
72 | 2015 Technical Panel on Assumptions and Methods

In light of the Fed’s 2-percent target and the projections 

of other organizations, the Technical Panel thinks that 

the Trustees should continue to slowly lower the ultimate 

inflation assumption. While positive shocks to the inflation rate may well be larger than negative shocks, the Fed 

may be able to offset positive shocks more quickly than 

negative shocks. On balance, the Panel suggests that the 

band be asymmetric.

The discussion of possibly higher and lower inflation rates 

has led the Panel to conclude that the bands around the 

intermediate assumption should be larger in the upward 

direction—1.0 as opposed to 0.7, the symmetric band 

difference in the Trustees’ Report.

Nominal and Real Interest Rates

The Trust Funds hold special-issue Treasury securities. At 

issue, the bonds have an interest rate equal to the average 

market yield on all of the outstanding marketable U.S.

obligations that are due or callable more than 4 years in 

the future. OCACT reports that the rates on the special 

issue securities are approximately equal to the 10-year 

Treasury rate. Therefore, the analysis requires projecting the 

nominal interest rate on 10-year bonds, while recognizing 

that inflation expectations as well as actual inflation affect 

the realized real rate. It seems appropriate to focus directly 

on real rates, trying to select an ultimate real rate over a 

long period with an unknown macro environment at the 

beginning. This exercise is different than considering how 

the economy might behave over an extended time period 

at different constant inflation rates, because business 

cycles are not expected to disappear.

For the 2015 Trustees Report, the Trustees assume ultimate 

real interest rates (effective annual real yields on special 

public debt obligations issuable to the trust funds by the 

U.S. Treasury) of 2.9 percent for the intermediate case.

They assume 3.4 percent and 2.4 percent for the low-cost 

and high-cost, respectively.

The Trustees consider two primary data sources when 

setting assumptions for real and nominal interest rates.

First, they rely upon the average realized interest rate over 

selected historical periods. This is reasonable, especially 

for periods that have similar monetary policy regimes. For 

example, the realized average real interest rate over the 

post-1987 period is a useful indicator of the likely future 

rate because monetary policy was stable with few periods 

of inflation surprises that distort real realized rates. During 

this period, the CPI growth rate averaged 2.7 percent and 

the real interest rate averaged 3.1 percent.

However, in this period the federal government ran large 

budget deficits much of the time, potentially placing upward 

pressure on real interest rates during the late 1980s to the 

early 1990s. The CBO’s current law baseline projection 

estimates deficits that are relatively flat as a fraction of 

GDP for the near term, but that become notably larger in 

succeeding years. However, it is reasonable to believe that 

the Federal government may restore closer fiscal balance 

over the remainder of the long-range period.

86 Thus, the 

Trustees believe an ultimate real interest rate of 2.9 percent 

for the intermediate assumption is appropriate. Of course, if 

it is expected that the government debt will grow to a level 

higher than what investors are willing to absorb, then a 

higher real interest rate assumption would be reasonable.

The Trustees cite interest rate projections from Global 

Insight, Inc., Macroeconomic Advisers, Moody’s Analytics, 

the Office of Management and Budget (OMB), and the 

Congressional Budget Office (CBO), covering different time 

periods. Apart from CBO, all were reported as having lower 

projected real interest rates than the Trustees. Currently, 

the long-run projected nominal rate is roughly 3.9 percent 

in the model in Adrian et al. (2015), substantially below the 

currently assumed nominal rate of 5.6 percent.

The Panel suggests a reduction in the projected real 

interest rate of 0.4 (with no change in the bands). In light 

of the suggested decrease in the inflation rate, the implied 

projected nominal rate is 5.0, a decline of 0.6.

86 According to the CBO’s 2015 Long-Term Budget Outlook (p.1), “The economy’s 

gradual recovery from the recession, the waning budgetary effects of policies 

enacted in response to the weak economy, and other changes to tax and spending 

laws will cause the deficit to shrink in 2015 to its smallest percentage of GDP 

since 2007, CBO projects—2.7 percent, a much smaller percentage than the recent 

peak of nearly 10 percent in 2009. Throughout the next decade, however, an 

aging population, rising health care costs per person, and an increasing number 

of recipients of exchange subsidies and Medicaid benefits attributable to the 

Affordable Care Act would push up spending for some of the largest federal 

programs if current laws governing those programs remained unchanged. 

Moreover, CBO expects interest rates to rebound in coming years from their 

current unusually low levels, raising the government’s interest payments on 

debt. Budget deficits would not substantially increase at first, but eventually 

they would begin to rise. They would approach 4 percent of GDP toward the end 

of the 10-year period spanned by CBO’s baseline budget projections, the agency 

anticipates.” https://www.cbo.gov/sites/default/files/114th-congress-2015–2016/

reports/50250-LongTermBudgetOutlook-3.pdf
2015 Technical Panel on Assumptions and Methods | 73

Chapter 3. Presentation

■ 3.1 Presentation of Uncertainty

Past Technical Panels have consistently recommended 

improvements in the analysis and presentation of uncertainty about long-run Social Security finances in the 

Trustees Reports. With help from the Office of the Chief 

Actuary (OCACT), the Trustees have made significant 

progress toward these recommendations, including the 

development of stochastic modeling capabilities and 

changes in the presentation of data. The 2015 Technical 

Panel makes five recommendations that would continue the 

trend in improvement in the presentation of uncertainty.

Presentation Recommendation 1. The Technical Panel 

recommends that, for the key individual assumptions, 

the Trustees set and disclose standards for the selection 

of low-cost and high-cost alternative assumptions used 

to demonstrate the program’s financial sensitivity to each 

assumption. Acceptable standards would ensure that the 

alternative assumptions are plausible and comparable.

For example, the Trustees could conceptually target the 

10th and 90th percentile range of long-run averages for 

each assumption.

Presentation Recommendation 2. The Technical Panel 

recommends referring to the low-cost and high-cost alternatives as the “Higher Trust Fund Balance” and “Lower 

Trust Fund Balance” alternatives, respectively.

Presentation Recommendation 3. The Technical Panel 

recommends the use of plausible integrated scenarios 

to illustrate these Higher and Lower Trust Fund Balance 

estimates of the program’s long-run financial status. These 

scenarios would replace the low-cost and high-cost variants 

as currently presented in the Trustees Report.

Presentation Recommendation 4. The Technical Panel recommends periodic comparison of past key assumptions, 

cost rate projections, and taxable payroll projections to 

their realized values 5, 10, and 20 years later.

Presentation Recommendation 5. The Technical Panel 

recommends increasing the prominence of summary data 

about the uncertainty of projections.

More specifically, the Panel recommends:

• Summarizing the effects of uncertainty about individual 

key assumptions in the Overview to the Trustees Report;

• Including summary data from stochastic analyses 

where uncertainty is discussed; and

• Summarizing large data sets disclosed in the body of 

the report in a way that provides analytical insight and 

disclosing the complete data sets in the appendices 

to the report or in online databases.

Discussion

Projecting the financial condition of the Social Security Trust 

Funds 75 years into the future entails many assumptions 

about what may happen over that period. It is difficult to 

imagine the degree of uncertainty associated with how key 

variables, such as wage growth and life expectancy, will 

behave over a period that is longer than most Americans 

have lived. Yet, assumptions about long-run uncertainty 

must be made in order to understand how potential differences from assumed experience may affect the Social 

Security program. The Technical Panel offers several 

recommendations that will improve understanding of the 

uncertainty associated with the Trustees’ projections.

Disclose Standards for the Selection of 

Assumptions

It is clear that the intermediate assumptions receive 

serious attention and that they provide a consistent set of 

assumptions that result in the Trustees’ best estimate of 

future Trust Fund experience. The alternative assumptions, 

demonstrating the Trustees’ best estimate for a disclosed 

range of outcomes, should receive similar consideration.

The publicly available information, however, does not 

provide a clear indication about how the alternative 

assumptions are selected or standards that the Trustees 

apply to the selection of assumptions. Such disclosure 

could help readers understand the amount of uncertainty 

associated with individual assumptions, the relative sensitivity of financial results to different assumptions, and 

where their own estimates of future experience lie within 

the Trustees’ estimated range.

Ideally, the Trustees would determine probability distributions for each of the key assumptions and select alternative 

assumptions based upon a consistent percentile range.

This would simplify the assumption setting and disclosure 

process. However, the degree of uncertainty around 75-year 

projections of the key assumptions raises valid questions 

about the ability to estimate these distributions. Unless 
74 | 2015 Technical Panel on Assumptions and Methods

and until these questions can be resolved, the Technical 

Panel recommends the disclosure of assumption-setting standards that will help readers conceptualize and 

compare the sensitivity of financial results to individual 

key assumptions.

The Panel offers several guidelines for the assumption-setting standards. First, the Panel recommends that key 

assumptions individually reflect a plausible range, based on 

historical experience, expert opinion, statutory constraints, 

and so on. The Panel recommends that the alternative 

assumptions encompass a wide range of potential future 

experience, but not so wide as to be construed as the 

minimum or maximum boundaries of future experience.

Aside from providing a false sense of certainty, projections characterized as limits can damage confidence in 

the projections when actual experience exceeds their 

thresholds. Finally, the Panel recommends attempting 

to set alternative assumptions at a consistent degree of 

likelihood to improve comparability. This would allow 

readers to ascertain which assumptions are most likely 

to drive changes in the financial status of the program. If 

the underlying distribution is asymmetrical—or at least 

thought to be asymmetrical—the alternative assumptions 

should reflect the asymmetry.

As an example, the Trustees could disclose that they set 

their alternate assumptions by targeting the 10th and 90th

percentiles of their considered probability distribution for 

each key assumption. If they used this standard to set the 

alternative assumptions, readers would have a basis for 

conceptualizing the plausibility and comparability of the 

Trustees’ assumptions. Further disclosure by the Trustees, 

such as a record of historical ranges and their basis for 

selecting the ranges, could substantiate their application 

of the standard.

87

Appropriate Labeling

The Technical Panel recommends the use of more precise 

labels for low-cost and high-cost scenarios. The “low-cost” 

and “high-cost” monikers can be misleading. For example, 

lower real wage growth is associated with the high-cost 

alternative. This may be counter-intuitive when discussing 

87 Uncertainty associated with the projections comes from the design of the 

model as well as from the choice of assumed parameters and this additional 

source of uncertainty should be identified, even if it cannot be quantified. 

Similarly, the stochastic projection relies on a simplified specification of the 

behavior of some of the key variables and so is also subject to model uncertainty 

that is not captured in the calculated and reported distribution of outcomes.

the effect on benefits paid because lower real-wage growth 

actually lowers the real cost of benefits paid. The higher 

net cost results from the countervailing effect of reduced 

revenue flows. Similarly, those who possess a broader 

perspective may not interpret the names in the narrow 

context of trust fund finances. Higher mortality rates, from 

an increase in the prevalence of smoking, for example, 

may not seem like a “low-cost” scenario from a broader 

perspective. To be more precise, the Panel recommends 

referring to what is currently called the “low-cost” as the 

“Higher Trust Fund Balance” projection and to what is 

currently called the “high-cost” as the “Lower Trust Fund 

Balance” projection.

88

Integrated Scenarios

The Technical Panel recommends the use of plausible 

integrated scenarios to illustrate higher and lower trust 

fund balance estimates of the program’s long-run financial 

status. Currently, low-cost and high-cost scenarios are 

determined by setting all key assumptions at the selected 

limits of the ranges used to demonstrate sensitivities 

to individual assumptions. The culmination of setting 

each key assumption at an extreme value is a relatively 

unlikely projection, which could lead readers to discount 

its usefulness.

89 Further, perceptions of extreme scenarios 

could damage confidence when actual results fall outside 

of their bounds, as occurs on occasion.

Constraining assumption sets to the realm of plausible 

outcomes—either individually or collectively—improves 

deliberations about the assumptions, recognizes that 

actual experience may fall outside of illustrated ranges, and 

results in projections that are accessible by non-technical 

audiences. Readers can relate the alternative financial 

results with familiar scenarios. More broadly recognized 

scenarios could attract broader attention to the effects 

of uncertainty, particularly as the narrative may appeal 

to non-technical audiences. Believable scenarios could 

help to validate or improve stochastic results. And, the 

placement of plausible, integrated scenarios in the Trustees 

Report could generate a curiosity about other scenarios 

that leads to expanded scenario analysis and improved 

understanding of uncertainty.

88 The Panel does recognize that some may prefer that the Social Security and 

Medicare Trustees’ Reports use the same terminology; and the terms “Higher 

Trust Fund Balance” and “Lower Trust Fund Balance” do not have much meaning 

in the context of Medicare Parts B and D.

89 Take, for example, two independent assumptions that each has a 10-percent 

probability of occurring. The probability of both occurring is 1 percent. This 

effect is compounded by the number of assumptions set at their limits in the 

current alternative projections. The Trustees disclose that “Actual future costs 

are unlikely to be as extreme as those portrayed by the low-cost or high-cost 

projections”—in part because of this methodology.
2015 Technical Panel on Assumptions and Methods | 75

Table 13. Illustrative Assumptions for Faster Economic Growth and Slower Economic Growth Scenarios

Ultimate 

assumption

Intermediate assumptions 

2015 Trustees Report

Faster 

economic growth

Slower 

economic growth

Demographic:

 Fertility 2.0 2.1 1.9

 Mortality improvement 0.78 0.94 0.63

 Net immigration 1,155 1,214 1,087

Economic:

 Real-wage differential 1.17 1.74 0.61

 CPI 2.7 2.8 2.6

 Real interest rate 2.9 3.0 2.8

Programmatic:

 Disability incidence 5.4 5.1 5.7

 Disability termination 10.4 10.5 10.3

Note: The reported rate of improvement in mortality is the average over the entire projection period, which is slightly higher than the ultimate rate assumed 

for the last 50 years of the projection period.

Source: 2015 Trustees Report, and Technical Panel example.

In an effort to assist in the development of suitable scenarios, the Panel has devised examples of reasonable 

integrated scenarios. The first example examines a potential 

scenario for faster economic growth than assumed in the 

intermediate assumptions (see Table 13).

90 The scenario 

assumes that real wages increase more rapidly than the 

intermediate assumption as a result of faster economic 

growth, and that the United States experiences a higher 

rate of inflation. Real interest rates are also assumed 

to be higher than the intermediate assumption. More 

rapid economic growth could affect the demography of 

the United States as well. The faster growth scenario 

illustrated here assumes that higher levels of pay lead to 

increased fertility and lower incidence of disability relative 

to the intermediate assumptions. Net immigration to the 

United States is higher than assumed in the intermediate 

scenario, as the attractiveness of work in this country is 

90 The integrated scenario assumptions in Table 13 are based upon the 

individual assumption ranges in the 2015 Trustees Report. Each integrated 

scenario assumption is an interpolated value between the Trustees’ intermediate 

assumption and either their high-cost or low-cost assumption. The interpolations are weighted such that the assumptions disclosed as having the greatest 

influence on the 75-year Actuarial Balance also exhibit the greatest deviations 

from their intermediate assumptions. 

greater. Finally, the scenario assumes that a faster rate of 

economic growth results in healthier lifestyles and greater 

spending on health care research, which has the effect of 

increasing life spans more rapidly than assumed in the 

intermediate scenario.

The second example examines a potential scenario for 

slower economic growth than assumed in the intermediate 

assumptions. The slower growth scenario assumes opposite 

effects on individual assumptions, relative to the more rapid 

growth scenario. The rates of wage growth, inflation, and 

interest are all lower than their intermediate assumptions.

Fertility, immigration, and mortality improvement rates are 

lower, and disability incidence is higher than assumed in 

the intermediate assumptions.
76 | 2015 Technical Panel on Assumptions and Methods

The Technical Panel recognizes that this recommendation 

entails the use of assumptions that differ from the sensitivity assumptions (Presentation Recommendation 3), and 

some may object to the loss of this simplicity. The Panel 

suggests including in the report both the assumptions used 

to demonstrate the sensitivity to individual assumptions 

(see discussion of Presentation Recommendation 5) and 

the assumptions used for the integrated scenarios. This 

information would focus readers on the uncertainty of 

assumptions where the individual assumptions are analyzed 

and the uncertainty of the intermediate projection where 

long-range estimates are analyzed.

Analysis of Historical Projections

The Technical Panel recommends periodic comparison 

of historical key assumptions, cost rate projections, and 

taxable payroll projections to their realized values 5, 10 

and 20 years later. Emphasis should be placed on analyzing the key assumptions, since much of the uncertainty 

associated with the projected financial estimates derives 

from the uncertainty associated with the key assumptions.

In addition, analysis of the differences between a few key 

projected financial aggregates—such as the cost rates 

and taxable payroll—and their realized values may help 

to inform potential modeling improvements.

The Panel recommends that each analysis examine differences over an extended period of time—enough to 

distinguish the effects of relative fluctuations around the 

long-term average from systemic changes to the nature 

of the variable. The Panel also recommends including 

comparisons to publicly available projections made by 

other reputable institutions, such as the Bureau of Labor 

Statistics, the Congressional Budget Office, and the 

President’s Budget. To the extent that assumed values 

differ, these comparisons may help to identify potential 

improvement in the methodologies used to make the 

assumptions.

Analyses of historical projections would provide another 

means of informing the public about the uncertainty 

associated with long-range projections. They may also 

provide insights that could lead to improvements in 

projection methodologies or better understanding of the 

uncertainty around key assumptions.

Data Presentation

The Trustees Report has several potential audiences, and 

reorganization of where certain data are presented may help 

to better communicate important information. The Panel 

generally recommends placing summary data relevant to 

all audiences in the body of the report, using tables and/or 

graphs, and more detailed data for technical audiences in 

appendices and/or publicly available databases. Reducing 

the quantity of data on a page can help audiences focus on 

the critical evidence produced by the analysis. The ease of 

recognition offered by good summarization could help to 

attract attention to the presentation of uncertainty in the 

Trustees Reports. The Panel has several suggestions for 

summarizing information more succinctly and presenting 

it more prominently.

Uncertainty is synonymous with the use of assumptions, 

and the Technical Panel recommends that the uncertainty 

associated with key assumptions be demonstrated at the 

point where the assumptions are introduced. In the 2015 

Trustees Report, two sections (II.C and a subsection of II.D) 

in the Overview chapter introduce key assumptions and 

the uncertainty associated with them. The Technical Panel 

recommends merging this information into one section and 

introducing a table that includes expanded information 

about the sensitivity of the key assumptions (as in Table 

14). Table 14 relies on a single summary measure—the 

75-year Actuarial Balance—to demonstrate the sensitivity 

of Trust Fund finances to uncertainty about each assumption. Additional data on the sensitivity of key assumptions 

would still be included in an appendix, as it was in the 2015 

Trustees Report. Table 14 provides rapid identification of 

the significance of key variables to long-run finances and 

the placement of the table associates the uncertainty about 

results with the presence of assumptions.
2015 Technical Panel on Assumptions and Methods | 77

Table 14. Key Long-Range Assumptions and Estimated Uncertainty

Intermediate Higher trust fund balance sensitivity Lower trust fund balance sensitivity

Long-range

Assumption Expected 

average

Expected 

average

Change in 

expected 

average

Effect on 

actuarial 

balance

Expected 

average

Change in 

expected 

average

Effect on 

actuarial 

balance

Demographic:

 Fertility 2.0 2.2 0.2 0.34 1.8 -0.2 -0.33

 Mortality improvement 0.78 0.41 -0.37 0.45 1.18 0.40 -0.46

 Net immigration 1,155 1,465 310 0.21 850 -305 -0.25

Economic:

 Real-wage differential 1.17 1.80 0.63 1.00 0.55 -0.62 -1.01

 CPI 2.70 3.40 0.7 0.15 2.00 -0.7 -0.16

 Real interest rate 2.90 3.40 0.5 0.21 2.40 -0.5 -0.21

Programmatic:

 Disability incidence 5.4 4.3 -1.1 0.27 6.5 1.1 -0.27

 Disability termination 10.4 12.6 2.2 0.04 8.3 -2.1 -0.03

Source: 2015 Trustees Report, and Technical Panel example.

The stochastic model provides important insights to uncertainty that neither the sensitivity analysis nor a scenario 

analysis provide. The assumptions underlying the stochastic 

model are consistent with the intermediate assumptions, 

and thereby provide a historically-based perspective of 

uncertainty about the intermediate projection. Critically, 

it provides the best available means of assigning relative 

likelihood to variations from the intermediate projections 

in the Trustees Reports. The Technical Panel recommends 

including a stochastic range for each long-range financial 

measure based on the intermediate assumptions.

The Panel notes the importance of disclosing what historical data are used to generate the results of the stochastic 

model, since the results may be inconsistent with the 

Trustees’ best estimates of future uncertainty. For example, 

a deterministic scenario used to illustrate the uncertainty 

of OASDI cost rates may be at the 90th percentile of simulations based on historical deviations from the intermediate 

assumptions. However, the scenario may not be intended to 

communicate that the Trustees assign a 90-percent chance 

that future Trust Fund experience will be better than the 

illustrated scenario. This distinction needs to be clear in 

comparisons of the two sets of projections.

Tables IV.B1-IV.B4 in the Trustees Report provide good 

examples of where the presentation of less data may 

help non-technical audiences focus on key insights to 

the uncertainty of projections. For example, Table IV.B1 

(see below) presents two pages of annual income rates, 

cost rates, and balances, and approximately half of these 

data outline the low- and high-cost projections for each of 

these measures. Many readers will find these data useful 

and experts may detect important patterns at a glance.

However, many readers may avoid the data if they are not 

aware of the insights to be gained or choose not to spend 

time on analysis. Graphic representations, such as Figure 

IV.B1 on page 57 of the 2015 Trustees Report (see below), 

provide one means of condensing the data in these tables 

and making important insights more accessible. Tables 15 

and 16 (below) offer another option for summarizing the 

data. Using the data from Table IV.B1 as an example, Tables 

15 and 16 concisely describe the breadth and likelihood 

of variations from the intermediate projections. They 

also provide quick insight to how the long-range trend 

in cost rates and income rates changes under alternative 

projections of future experience.

Summary

The 2015 Technical Panel makes these recommendations 

with the intent of helping public understanding of the 

uncertainty around projections of Social Security’s finances 

and perhaps reaching a broader audience. The Technical 

Panel’s recommendations aim to make information about 

the uncertainty more accessible by reducing the potential 

for confusion, illustrating more plausible projections, and 

highlighting key information in the body of the report. As 

the likelihood of significant changes to the Social Security 

program increases, so does the importance of accessible, 

understandable information about how the program is 

affected by uncertain outcomes.
78 | 2015 Technical Panel on Assumptions and Methods

Exhibit: Trustees Report Table IV.B1

Source: 2015 Trustees Report.

Exhibit: Trustees Report Figure IV.B1

II

I

Historical Estimated III

I

III

II

0%

5%

10%

15%

20%

25%

1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090

Calendar Year

OASI Cost Rates

DI Cost Rates

Alternative II Income Rates

Figure IV.B1 Long Range OASI and DI Annual Income Rates and Cost Rates

[As a percentage of taxable payroll]

OASI

DI

Source: 2015 Trustees Report.
2015 Technical Panel on Assumptions and Methods | 79

Table 15. Annual Income Rates, Cost Rates, and Balances—Summary Data from Higher Trust Fund Balance 

and Lower Trust Fund Balance Projections, OASI and DI (as a Percent of Taxable Payroll)

OASI DI OASDI

Income 

rate

Cost 

rate Balance

Income 

rate

Cost 

rate Balance

Income 

rate

Cost 

rate Balance

Intermediate

 2090 11.46% 15.75% -4.28% 1.86% 2.27% -0.41% 13.32% 18.01% -4.69%

Higher Balance

2090 11.22% 11.57% -0.34% 1.84% 1.54% 0.30% 13.06% 13.10% -0.05%

Difference from 

intermediate -0.24% -4.18% 3.94% -0.02% -0.73% 0.71% -0.26% -4.91% 4.64%

2041–2090 Trend Increasing Decreasing Increasing

Lower Balance

2090 11.82% 22.14% -10.32% 1.88% 3.21% -1.32% 13.70% 25.35% -11.64%

Difference from 

intermediate 0.36% 6.39% -6.04% 0.02% 0.94% -0.91% 0.38% 7.34% -6.95%

2041–2090 Trend Decreasing Decreasing Decreasing

Source: Technical Panel example.

Table 16. Annual Income Rates, Cost Rates, and Balances—Summary Stochastic Data, OASDI (as a Percent 

of Taxable Payroll)

Income rates Cost rates Annual balances

Intermediate

 2090 13.32% 18.01% -4.69%

10th percentile

 2090 13.17% 15.23% -9.04%

 Difference from intermediate -0.15% -2.78% -4.35%

90th percentile

 2090 13.58% 22.61% -2.06%

 Difference from intermediate 0.26% 4.60% 2.63%

Percent of scenarios with

declining balance 2041–2090 72%

Source: Technical Panel example.
80 | 2015 Technical Panel on Assumptions and Methods

■ 3.2 Illustrating Scheduled 

Benefits Relative to Earnings

From 1989 to 2000, Social Security reported benefits as 

a percentage of final earnings for three types of “steady 

earners.” Low, medium and high earners were assumed 

to earn 45 percent, 100 percent, and 160 percent respectively of the Average Wage Index (AWI) in each year, and 

benefits were illustrated relative to the final year of these 

steady earnings. With earnings tracking AWI, this ratio was 

equivalent to using wage-indexed career-average earnings 

as the denominator.

From 2002–2013,91 the Trustees reported projected benefits 

as a percentage of career-average earnings, indexed by 

national wage growth to the year prior to retirement, for 

“scaled earners.” Scaled earners have earnings patterns 

that, instead of assuming steady and continuous growth, 

are more representative of actual earnings patterns.

The 2014 and 2015 Trustees Reports did not provide any 

measure of benefits as a percentage of earnings. Instead, 

they show scheduled benefit amounts upon retirement 

at the full retirement age (FRA) and at age 65, calculated 

under intermediate assumptions for various hypothetical 

scaled earners attaining age 65 in 2014/2015 and subsequent years (see table V.C7 in the 2014 and 2015 Trustees 

Reports). Table V.C7 also shows the National Average Wage 

Index in constant dollars (in the year of the published 

Report) from which it is possible to compute some of the 

percentage-of-earnings measures provided in prior reports.

Presentation Recommendation. The Technical Panel 

recommends the Trustees Report provide information on 

the relationships between benefits and earnings for three 

purposes. First, these ratios indicate an effect of changes 

to the benefit formula on the history of the program and the 

projection of its financial status. Second, measured on a 

lifetime basis, these ratios show the impact of improving 

mortality on the cost of individual benefits. Third, these 

ratios provide insights to workers, employers and policymakers about the role of Social Security benefits in 

individuals’ financial planning or employers’ retirement 

plan design. To meet these needs, the Panel recommends 

the following tables:

91 The table was not published in the 2001 Trustees Report while the shift in 

methodology from steady to scaled earners was being implemented. The relevant 

data are available electronically for 2001. See http://www.ssa.gov/OCACT/TR/

TR01/lrIndex.html (bottom of page).

1. Reporting the relationship between initial benefits 

and AIMEs for various combinations of claiming age 

and age for full benefits.

2. Reporting the relationship between lifetime benefits 

and lifetime earnings.

3. Reporting the relationship between initial benefits 

and late-career earnings (replacement rates) for actual 

and hypothetical workers.

4. Supplementing the calculations for workers with 

calculations for families, taking into account both 

worker and family benefits relative to the earnings 

of the family.

5. Providing supplemental information on the role of 

survivor benefits.

Method Recommendation. The Technical Panel recommends 

that OCACT undertake research for several purposes, 

including: 1) to help inform some of the measures that 

we recommend be included in the Trustees Report; 2) to 

show benefits relative to earnings for a sample of actual 

workers, following up the work in the 2014 Actuarial Note 

155 entitled “Replacement Rates for Retirees: What Makes 

Sense for Planning and Evaluation;” and 3) to show ratios 

involving auxiliary benefits.

The Relationship between Initial Benefits and 

AIME

Reporting initial benefit levels relative to AIME, for a 

matrix of claiming ages and ages for full benefits, helps 

understanding of the impact of existing legislation and 

individual decision-making on financial projections of 

Social Security. Following precedent, the focus is on individual worker benefits and earnings histories. Survivor 

and spousal benefits, which together comprise 20 percent 

of total OASI benefit expenditures, are discussed below.

The Panel recommends two separate tables. The first (Table 

17) reports the effect of actuarial adjustments on early and 

delayed claiming and how it varies with changes in the 

FRA. These effects are represented as a percentage of the 

Primary Insurance Amount (PIA) that the individual would 

receive. As the adjustment is the same for all retirees with 

the same birth year, a single table provides the information.

Tables 18A-18C move from percentages of PIA to percentages of AIME for scaled workers with different AIME 

levels. Note that for individuals claiming benefits at the 

Full Retirement Age, this measure is simply the ratio of 

PIA/AIME. For other claiming age and FRA combinations, 

the ratios will incorporate the adjustments from Table 17.
2015 Technical Panel on Assumptions and Methods | 81

Table 17. Scheduled Monthly Benefit, as a Percentage of the Primary Insurance Amount, at Various Claiming 

Ages for Different Full Retirement Ages (FRAs), Cohorts born in 1937 and Later

FRA = 65 FRA = 66 FRA = 67

Claim Age = 62 80.0% 75.0% 70.0%

Claim Age = 63.75 91.7% 85.0% 78.8%

Claim Age = 65 100.0% 93.3% 86.7%

Claim Age = 66 106.5% 100.0% 93.3%

Claim Age = 67 113.0% 108.0% 100.0%

Claim Age = 70 132.5% 132.0% 124.0%

Note: The increase in monthly benefits at ages after 65 for those whose normal retirement age was 65 (known as “delayed retirement credits”) are based on 

the actual increments available for those born in 1937 (6.5 percent) the last year the NRA was 65. The DRC increments increased from 3 percent per year 

for those born in 1924 by 0.5 percent every two years starting with those born in 1925–26 until they reached 8 percent for those born in 1943 and later 

when the NRA had reached age 66.

Source: This table is a simplified version of the one currently available at: http://www.ssa.gov/oact/ProgData/ar_drc.html.

Table 18A-18C. Monthly Retired Worker Benefit (excluding COLAs), as a Percentage of Average Indexed 

Monthly Earnings (AIME), at Various Claiming Ages for Different Full Retirement Ages (FRAs)

A. Scaled low earner

FRA = 65 FRA = 66 FRA = 67

Claim Age = 62 47% 44% 41%

Claim Age = 63.75 53% 50% 46%

Claim Age = 65 58% 54% 51%

Claim Age = 66 63% 58% 54%

Claim Age = 67 73% 63% 58%

Claim Age = 70 82% 77% 72%

B. Scaled medium earner

FRA = 65 FRA = 66 FRA = 67

Claim Age = 62 35% 33% 31%

Claim Age = 63.75 40% 37% 35%

Claim Age = 65 44% 41% 38%

Claim Age = 66 47% 44% 41%

Claim Age = 67 55% 47% 44%

Claim Age = 70 61% 58% 54%

C. Scaled high earner

FRA = 65 FRA = 66 FRA = 67

Claim Age = 62 28% 27% 25%

Claim Age = 63.75 33% 30% 28%

Claim Age = 65 35% 33% 31%

Claim Age = 66 38% 35% 33%

Claim Age = 67 44% 38% 35%

Claim Age = 70 50% 47% 44%

Note: Earnings used to calculate the Average Indexed Monthly Earnings (AIME) are average-wage indexed to age 60. The monthly benefit amount is CPIindexed to age 62.

Source: Technical Panel recommended table. Calculations provided by the Office of the Chief Actuary, Social Security Administration, based on the 2015 

Trustees Report.
82 | 2015 Technical Panel on Assumptions and Methods

Table 19. The Expected Present Discounted Value of Scheduled Lifetime Retired Worker Benefits, as a 

Percentage of Average Indexed Monthly Earnings (AIME) Relative to 1950 Birth Year

Scaled medium earner, claiming at age 65

Birth 

year

Year 

attain 

65

Full 

retirement 

age

Life 

expectancy 

at 65*

Lifetime benefits 

as percentage of 

AIME**

1920 1985 65.0 17.37 70%

1930 1995 65.0 18.40 81%

1940 2005 65.5 19.62 95%

1950 2015 66.0 20.50 100%

1957 2022 66.5 20.97 91%

1960 2025 67.0 21.15 85%

1975 2050 67.0 21.99 86%

1995 2065 67.0 23.00 89%

2015 2080 67.0 23.91 92%

Note: *Unisex cohort life expectancy ** Expected present discounted value of scheduled lifetime benefits, as a percentage of AIME (benefits are discounted 

by the Trustees assumed interest rates). The ratios are reported relative to the cohort turning 65 in 2015.

Source: Technical Panel recommended table. Calculations provided by the Office of the Chief Actuary, Social Security Administration, based on the 2015 

Trustees Report.

These tables illustrate several key features of the OASI 

benefit calculation. First, they show the effect on annual 

benefits of early versus late claiming. Second, they show the 

effect of a rising FRA on benefit levels for a fixed claiming 

age. Third, a comparison among the three tables reveals 

the progressivity of the benefit formula by showing higher 

ratios of initial benefits to AIME for lower earning workers.

The Relationship between the Cost of Lifetime 

Benefits and AIME

Two partially offsetting factors have affected and will 

affect the cost of the program—the past and scheduled 

increases in the FRA and the past and projected increases 

in life expectancy. Changes to the FRA were motivated, 

in part, by the expectation that beneficiaries would be 

living longer. To capture the offsetting impact of these two 

factors, the Panel recommends an additional set of tables 

based on the expected present discounted value of lifetime

worker benefits divided by AIME for a scaled medium 

worker who has survived to the age of claiming. Since the 

particular numbers in the ratio do not seem informative, 

Table 19 uses an index with the ratio for current retirees 

as the denominator for the index. This measure reflects 

the format in the benefit-AIME table above, recognizing 

that individuals subject to different ages for full benefits 

have different birth years. As a present discounted value 

reflecting cost, the discount rate is the realized real interest 

rate on the bonds held in the Trust Fund. Changes in the 

history and projection of this rate also affect the ratios.
2015 Technical Panel on Assumptions and Methods | 83

The Relationship between Initial Benefits and 

Late-In-Life Earnings (A Replacement Rate)

Information about benefits relative to earnings in the 

Trustees Report is sometimes used by private sector firms, 

reporters, financial advisers, and individuals as a guide 

for thinking about benefit adequacy or generosity. The 

Panel believes that the Trustees Report is a natural place 

to include measures designed for this purpose, because 

it has much broader reach than other OCACT documents, 

such as Actuarial Notes.

The Panel believes, as do many other commentators, that 

most individuals engaged in financial planning tend to think 

of Social Security replacing “near retirement” earnings, 

rather than lifetime earnings. Thus, it is natural to provide 

information about how initial Social Security benefits 

compare to, say, the average of real earnings in the five 

years prior to retirement. Older workers know their recent 

earnings history with some precision and slightly younger 

workers may have reasonably well-formed expectations, 

whereas most would struggle to estimate their wage-, 

price- or interest-factor-indexed lifetime earnings.

Even this relatively simple measure, however, requires 

decisions about implementation. One issue is the large 

variance associated with selecting a single year’s earnings.

Averaging over a few years lowers the variance (and we 

have simply followed standard practice in choosing five, 

without analysis of a best choice). On the other hand, 

the further back one goes from the end of work, the less 

informative the observation. Virtually all participants 

in debates about replacement rates agree that the final 

year of earnings should not be included in the average, 

because many individuals will work only part of the year, 

thus understating pre-retirement income. Similarly, as 

some workers cut back work effort and others stop work 

prior to claiming benefits, near-retirement earnings for 

full-career workers should not include zero-earnings 

years.

92 The calculation should use the same number of 

years for all individuals, going back to earlier years as 

needed.

93 The Panel suggests these final years of earnings 

be inflation-indexed; given the relatively short time horizon 

for the calculation, the choice of a price index rather than 

a wage index should make little difference.

Another issue is that such a replacement rate has very 

different meanings, and thus different uses, for long-career 

and incomplete-career workers. For the Trustees Report, 

the ratio should be reported in two ways. One way is for a 

set of hypothetical scaled workers. By construction, these 

hypothetical scaled workers are assumed to have full 

careers. The second way to report is to use the distribution 

of actual earnings, reporting averages of replacement 

rates over different levels of lifetime average earnings (see 

Tables 20A-G), which would have a similar structure to a 

table based on hypothetical earnings paths.

94 The reported 

tables are calculated for hypothetical workers, while the 

Panel hopes that calculations using actual histories will 

be done in the future. For a calculation based on actual 

histories, we suggest that the analysis be considered only 

for long-career workers, using a cutoff that will be informed 

by examining the pattern of careers. As many short-career 

workers are part of a family with a long-career worker, the 

role of their benefits (as well as family benefits) will be part 

of the consideration of family benefits relative to family 

earnings discussed below.

95

92 Moreover, years with earnings below some threshold should not be used. 

Actuarial Note 155 uses $100 as the cutoff; the Panel thinks it would be more 

informative to use an individual-specific cutoff, such as a percentage of AIME 

or some other measure of long-career earnings. 

93 Perhaps a cutoff on the number of years required should be established for 

inclusion in the sample, although this problem will be substantially mitigated 

by the focus on full-career workers.

94 Having limited the sample to long-career workers, these workers could 

be divided into quintiles of lifetime earnings. Then the average replacement 

rate could be calculated for each quintile of the lifetime earnings distribution. 

95 We recognize that this does not exhaust the set of short-career workers, 

and suggest analysis identifying histories that warrant a separate analysis.
84 | 2015 Technical Panel on Assumptions and Methods

Table 20A. Annual Initial Benefit at Age 62 as a Percentage of Average Annual Earnings over the Last Five 

Years of Positive Earnings, prior to Age 62 (CPI indexed up to age 61), for the cohort turning 62 in the 

year of the current Trustees Report

A: Cohort turning age 62 in 2015

Percentile 

of AIME

Annual 

benefit

(a)

Average of last five full 

years of positive earnings

(b)

Replacement

rate

(a)/(b)

10 $6,130 $11,129 55%

30 $9,670 $27,356 35%

50 $13,161 $45,165 29%

70 $17,150 $65,515 26%

90 $20,936 $98,048 21%

Table 20B-G. Annual Initial Benefit at Age 62 as a Percentage of Average Annual Earnings over the Last Five 

Years of Positive Earnings, prior to Age 62 (CPI indexed up to age 61) for the Cohort Turning Age 62 10 

Years before and 10 to 50 Years after the Cohort Used as the Basis for Table 20A

B: Cohort turning age 62 in 2005

Percentile 

of AIME

Annual 

benefit

(a)

Average of last five full 

years of positive earnings

(b)

Replacement

rate

(a)/(b)

10 $4,649 $8,575 54%

30 $7,342 $21,079 35%

50 $9,991 $34,801 29%

70 $13,018 $50,481 26%

90 $15,811 $75,549 21%

(Tables 20C–20F are not shown here)

G: Cohort turning age 62 in 2065

Percentile 

of AIME

Annual 

benefit

(a)

Average of last five full 

years of positive earnings

(b)

Replacement

rate

(a)/(b)

10 $40,468 $78,650 51%

30 $63,815 $193,328 33%

50 $86,840 $319,185 27%

70 $113,153 $463,002 24%

90 $138,133 $692,917 20%

Note: Earnings levels for the last 5 years with positive earnings in these tables are based on the scaled earnings profile adjusted to exclude years with no 

earnings. The scaled earnings profile is based on actual earnings of a 1% sample of workers from 1992 through 2011.

Source: Technical Panel recommended table. Calculations provided by the Office of the Chief Actuary, Social Security Administration, based on the 2015 

Trustees Report.
2015 Technical Panel on Assumptions and Methods | 85

The Panel recognizes that OCACT would have to invest 

significant resources in cleaning the data for the calculations based on the actual earnings distributions. Measures 

like these, however, are important enough to the public 

that resources should be made available to update them 

annually. However, if resource constraints are binding, 

the Panel would encourage the Trustees to report these 

measures annually but only update every 3–5 years or 

whenever a substantial policy change would significantly 

alter the conclusions. Extrapolated measures could be 

used in intervening years.

Additional Considerations

The tables suggested above are all measures of individual 

worker earnings and benefits. The Panel believes that 

two additional measures would be highly informative 

and important.

Family Benefits

The Panel believes that the reported measures on an 

individual basis should be supplemented with additional 

measures on a family basis to reflect spousal, child, and 

other ancillary benefits as well as worker benefits for both 

members of a couple. Both hypothetical examples and 

population sampled data could be used to provide additional information for each of these cases described above.

Survivor Benefits

A related but distinct issue is providing information about 

benefits to the surviving member of a couple after the death 

of a spouse. That is, when one member of a couple dies, 

it would be useful to report on the relationship between 

the benefit for the survivor and the benefits that had been 

received by the couple. This ratio varies with the makeup 

of the earnings history of the couple and their dates of 

birth. Because this information is important for the welfare 

of the population, and particularly the poverty rate of 

the elderly, the Panel thinks it should be calculated and 

presented. Moreover, such information would be helpful 

for the repeated discussions of changing the calculation 

of survivor benefits.

■ 3.3 Measures of Long-Run 

Financial Sustainability

Presentation Recommendation 1. The Technical Panel 

recommends enhancing the discussion of very long-run 

financial sustainability through: 1) reporting the cost-revenue gap in the 75th year in proportion to revenue and 

GDP; 2) reporting whether this gap is increasing, stable 

or decreasing; 3) explicitly discussing the financial consequences of any program features that are not expected 

to fully emerge during the 75-year valuation period; and 

4) providing a more extensive discussion of sustainable 

solvency than is currently included in the Trustees Reports.

Presentation Recommendation 2. At the same time that 

the above changes are made, the Technical Panel recommends eliminating the infinite horizon metric from the 

Trustees Report.

Although not related to the Trustees Report itself, the 

Technical Panel also recommends that, when evaluating 

proposed reforms to the Social Security program, OCACT 

include an analysis of the effect on the present value of 

changes in revenues minus the present value of changes 

in benefits for the expected lifetime of several cohorts.

Infinite Horizon Measures

Evaluating the financial sustainability of the Social Security 

system requires a time period for valuations. Social Security 

has long used a 75-year valuation period. Since 2003, all 

Trustees Reports have also included summary statistics 

from calculations made using an infinite horizon. The 2015 

Trustees Report includes a separate chapter, F, entitled 

“Infinite Horizon Projections,” which focuses on the present 

value of the unfunded obligation of OASDI over the indefinite future, both in current dollar terms and in proportion 

to taxable payroll and to GDP. These calculations take 

estimated demographic and economic trends at the end 

of the 75-year period and extrapolate them forward. The 

results are accompanied by the statement: “Of course, the 

degree of uncertainty associated with estimates increases 

substantially for years further in the future.”
86 | 2015 Technical Panel on Assumptions and Methods

To determine the value of the infinite horizon calculations, the Technical Panel first assessed the underlying 

concerns that such calculations were intended to satisfy.

These include:

1. To reduce concern about possible shifts in revenues 

or costs past the 75-year projection period, resulting 

from program features or assumptions whose effects 

do not fully emerge over the 75-year projection period.

2. To provide a quantitative metric (ratio of the unfunded 

liability to taxable payroll and GDP) of the program’s 

very long-term sustainable solvency.

3. To provide a quantitative basis to assess policy 

changes whose revenue or cost effects take more 

than 75 years to unfold.

Past Technical Panels

The last three Technical Panels have presented a wide 

range of views regarding the infinite horizon calculations.

• The 2003 Technical Panel endorsed projecting the 

trust funds’ status into the infinite horizon. The Panel 

argued that very long-term projections can provide 

additional information beyond that in the 75-year 

calculations, as some reform proposals might take 

longer than 75 years to phase in. The Panel noted that 

further study of projection techniques past 75 years 

would be important, as simpler modeling of projections 

over the very long-term period may be appropriate.

• The 2007 Technical Panel found that for analysis of 

the trust funds, the disadvantages of very long-range 

forecasts outweigh their advantages. In fact, they 

recommended that more attention be paid to the 

first 25 years of any forecast, as the 2007 Technical 

Panel believed that it is more important to focus on 

what is reasonably “knowable” than on the part of 

the future that is highly speculative. They pointed out 

that relatively small changes in assumptions can lead 

to exaggerated effects on the projection, especially 

over the long term.

• The 2011 Technical Panel recommended an expansion of the discussion of sustainable solvency. If the 

discussion was expanded, then the 2011 Technical 

Panel recommended eliminating the infinite horizon 

information from the Trustees Report. The reasons the 

Panel gave were: 1) it requires projections hundreds 

of years into the future, with no information provided 

regarding the huge uncertainties associated with 

estimates for this period, although if expressed as 

a percent of GDP this concern is reduced; and 2) the 

infinite horizon deficit had sometimes been quoted 

in policy discussions without including its relation 

to corresponding GDP, which is both misleading and 

shifts the focus from more useful metrics.

Concerns with the Infinite Horizon Calculations

In addition to concerns raised by the previous two Technical 

Panels, many commentators have expressed concern 

regarding the assumptions necessary for infinite horizon 

calculations, as well as their uncertainty and presentation 

in the Trustees Reports.

Uncertainty

The primary concern involves the extent of uncertainty in 

projections that increase with the length of the projection 

horizon. It is difficult to imagine conditions or trends more 

than 75 years in the future; the changes over a historical 

period longer than 75 years will always be enormous.

Any confidence interval around a projection extending 

into the infinite future would have to be so large as to 

make even a central projection unhelpful as a guide to 

policymaking. As discussed elsewhere in this report, it is 

difficult to effectively quantify and illustrate uncertainty 

over any period of time, with the challenges only growing 

at longer durations. Showing central estimates this long 

into the future without applicable caveats regarding its 

uncertainty provides an incomplete story.

Presentation

It is difficult to frame infinite horizon numbers, whether 

very large positive or negative, in a manner that makes 

them meaningful or useful to policymakers or the public.

This would especially be true if the growth rate in annual 

deficits exceeded the discount rate, which would lead to 

an infinite horizon deficit of infinity.

Basis for Recommendations

Given the enormous uncertainty bands at very long time 

horizons, the extreme sensitivities to small changes in 

assumptions, and the difficulties in communicating infinite 

horizon numbers in a manner that makes them meaningful, 

the 2015 Technical Panel believes that calculations to 

infinity (and current chapter F, Infinite Horizon Projections) 

should not be continued. However, as with the 2011 Panel, 

we believe this should be done if and only if the Trustees 

Report incorporates much more discussion of the long-term 

sustainability of the Social Security system’s finances, 

including the items in the 2015 Panel’s first recommendations above.
2015 Technical Panel on Assumptions and Methods | 87

References

■ Chapter 1. Demographic Assumptions 

and Methods

1.1 Fertility

Bongaarts, John and Griffith Feeney. 1998. “On the Quantum 

and Tempo of Fertility.” Population and Development 

Review 24(2): 271–291.

Cherlin, Andrew, Erin Cumberworth, S. Philip Morgan, and 

Christopher Wimer. 2013. “The Effects of the Great 

Recession on Family Structure and Fertility.” Annals of 

the American Academy of Political and Social Science 

650 (1): 214–231.

Goldin, Claudia and Lawrence F. Katz. 2002. “The Power 

of the Pill: Oral Contraceptives and Women’s Career 

and Marriage Decisions.” Journal of Political Economy

110(4): 730–770.

Max Planck Institute for Demographic Research and Vienna 

Institute of Demography. The Human Fertility Database, 

1917–2006. Rostock, Germany.

Morgan, Phillip S., Erin Cumberworth, and Christopher 

Wimer. 2011. “The Great Recession’s Influence on 

Fertility, Marriage, Divorce and Cohabitation.” In The 

Great Recession, edited by David B. Grusky, Bruce 

Wester, and Christopher Wimer, 220–245. New York, 

NY: Russell Sage Foundation.

National Center for Health Statistics. 2015. “Births: Final 

Data for 2013.” National Vital Statistics Reports 64(1).

Washington, DC: U.S. Department of Health and 

Human Services.

Rindfuss, Ronald R., John Shelton Reed, and Craig St.

John. 1978. “A Fertility Reaction to a Historical Event: 

Southern White Birthrates and the 1954 Desegregation 

Ruling.” Science 20: 178–180.

Ryder, Norman B. 1980. “Components of Temporal Variations 

in American Fertility.” In Demographic Patterns in 

Developed Societies, edited by Robert W. Hiroms, 

15–54. London, UK: Taylor and Francis.

Schneider, Daniel. 2015. “The Great Recession, Fertility, and 

Uncertainty: Evidence from the States.” Unpublished 

working paper.

Sobotka, Tomas, Vegard Skirbekk, and Dimiter Philipov. 2011.

“Economic Recession and Fertility in the Developed 

World.” Population and Development Review 37(2): 

267–306.

U.S. Social Security Administration, Office of the Chief 

Actuary. 2015. The Long-Range Demographic 

Assumptions for The 2015 Trustees Report. Washington, 

DC.

1.2 Mortality

Bongaarts, John. 2006. “How Long Will We Live?” Population 

and Development Review 32(4): 605–628.

Glei, Dana, Samuel Preston, and John Wilmoth. 2010.

“Contribution of Smoking to International Differences in 

Life Expectancy.” International Differences in Mortality 

at Older Ages: Dimensions and Sources, Eileen M.

Crimmins, Samuel H. Preston, and Barney Cohen, 

eds. Washington, DC: The National Academy Press.

Kashin, Konstantin, Gary King, and Samir Soneji. 2015.

“Systematic Bias and Non-transparency in US Social 

Security Administration Forecast.” Journal of Economic 

Perspectives 29(2): 239–258.

National Research Council of the National Academies.

2011. “Explaining Divergent Levels of Longevity in 

High-Income Countries.” Edited by Eileen M. Crimmins, 

Samuel H. Preston, and Barney Cohen. Washington 

(DC): The National Academies Press.

Preston, Samuel H., Dana Glei, and John R. Wilmoth. 2010.

“A New Method for Estimating Smoking-attributable 

Mortality in High-income Countries.” International 

Journal of Epidemiology 39: 430–438.

U.S. Social Security Administration. 2015. The 2015 Report 

of the Board of Trustees of the Federal Old-age and 

Survivors Insurance and Federal Disability Insurance 

Trust Fund. Washington, DC.

U.S. Social Security Administration, Office of the Chief 

Actuary. 2015. The Long-Range Demographic 

Assumptions for The 2015 Trustees Report. Washington, 

DC.

U.S. Social Security Advisory Board. Report of the Technical 

Panel on Assumptions and Methods, various years.

Washington, DC.
88 | 2015 Technical Panel on Assumptions and Methods

University of California, Berkeley and Max Planck Institute 

for Demographic Research. Human Mortality Database.

1.3 Immigration

Lowell, Lindsay B. 2014. “Managing Immigration: A Review of 

Some Past Projections.” Migration Letters 11 (1): 33–42.

Lowell, Lindsay B. and Micah Bump. 2006. “Projecting 

Immigrant Visas: Report on an Experts Meeting.” 

Working Paper. Washington, DC: Institute for the Study 

of International Migration, Georgetown University.

U.S. Census Bureau. 2009. Methodology Statement for the 

2009 National Projections. Washington, DC.

U.S. Social Security Administration. 2015. The 2015 Report 

of the Board of Trustees of the Federal Old-age and 

Survivors Insurance and Federal Disability Insurance 

Trust Fund. Washington, DC.

U.S. Social Security Administration, Office of the Chief 

Actuary. 2013. Effects of Unauthorized Immigration on 

the Actuarial Status of the Social Security Trust Funds.

Actuarial Note 151. Washington, DC.

U.S. Census Bureau. 2009. 2009 National Population 

Projections (Supplemental): Comparison Tables.

Washington, DC.

U.S. Census Bureau. 2014. Methodology, Assumptions, and 

Input for the 2014 National Projections. Washington, DC.

1.4 Disability

Autor, David, and Mark Duggan. 2003. “The Rise in the 

Disability Rolls and the Decline in Unemployment.” 

Quarterly Journal of Economics 118(1): 157–206.

Autor, David, and Mark Duggan. 2006. “The Growth in 

the Social Security Disability Rolls: A Fiscal Crisis 

Unfolding.” Working Paper 12436. Cambridge, MA: 

The National Bureau of Economic Research.

Black, Dan, Kermit Daniel, and Seth Sanders. 2002. “The 

Impact of Economic Conditions on Participation in 

Disability Programs: Evidence from the Coal Boom 

and Bust.” American Economic Review 92(1): 27–50.

Duggan, Mark, and Scott A. Iberman. 2009. “Why Are 

the Disability Rolls Skyrocketing? The Contribution 

of Population Characteristics, Economic Conditions, 

and Program Generosity.” In Health at Older Ages: 

The Causes and Consequences of Declining Disability 

among the Elderly, edited by David M. Cutler and 

David A. Wise, 337–379. Chicago, IL: University of 

Chicago Press.

Kearney, John. 2005/2006. “Social Security and the “D” 

in OASDI: The History of a Federal Program Insuring 

Earners Against Disability.” Social Security Bulletin

66(3): 1–25.

Liebman, Jeffery. 2015. “Understanding the Increase in 

Disability Insurance Benefit Receipt in the United 

States.” Journal of Economic Perspectives 29(2): 123–150.

Rupp, Kalman and Charles G. Scott. 1998. “Determinants of 

Duration on the Disability Rolls and Program Trends.” 

In Growth in Disability Benefits: Explanations and 

Policy Implications, edited by Kalman Rupp and David 

Stapleton, 139–176. Kalamazoo, MI: W. E. Upjohn 

Institute for Employment Research.

U.S. Social Security Administration. 2014. Annual Statistical 

Report on the Social Security Disability Insurance 

Program, 2013. Publication No. 13–11826. Washington 

D.C.

U.S. Social Security Administration. 2001. Annual Statistical 

Report on the Social Security Disability Insurance 

Program, 2000. Washington D.C.

U.S. Social Security Administration, Office of the Chief 

Actuary. 2013. Disabled Worker Allowance Rates: Variation 

Under Changing Economic Conditions. Actuarial Note 153.

Washington, DC.

U.S. Social Security Administration. 2010. Annual Report of 

Continuing Disability Review, Fiscal Year 2009. Washington, 

DC.

U.S. Social Security Administration. Report of the Board 

of Trustees of the Federal Old-age and Survivors Insurance 

and Federal Disability Insurance Trust Fund, various years.

Washington, DC.

■ Chapter 2. Economic Assumptions and 

Methods

2.1 Labor Force Participation Rate

Bell, Felicitie C. and Miller, Michael L. 2005. Life Tables for 

the United States Social Security Area 1900–2100.” 

Actuarial Study No. 120. Washington, DC: U.S. Social 

Security Administration.

Goss, Stephen C., Milton P. Glanz, and Seung An. 1985.

Economic Projections for OASDI Cost and Income 

Estimates, 1984. Pub. No. 11–11541. Washington, DC: 

Social Security Administration, U.S. Department of 

Health and Human Services.

Goldin, Claudia and Lawrence F. Katz. 2002. “The Power 

of the Pill: Oral Contraceptives and Women’s Career 

and Marriage Decisions.” Journal of Political Economy

110(4): 730–770.
2015 Technical Panel on Assumptions and Methods | 89

Organization for Economic Cooperation and Development 

(OECD). Employment and Labour Market Statistics.

Data available online. Paris, France.

U.S. Census Bureau. Current Population Survey, Annual 

Social and Economic Supplement, Various Years.

Washington, DC.

U.S. Social Security Administration, Office of the Chief 

Actuary. 2015. The Long-Range Demographic 

Assumptions for The 2015 Trustees Report. Washington, 

DC.

U.S. Social Security Administration. 2010. The 2010 Report 

of the Board of Trustees of the Federal Old-age and 

Survivors Insurance and Federal Disability Insurance 

Trust Fund. Washington, DC.

Yang, Eugene B. and Stephen C. Goss. 1992. Economic 

Projections for OASDHI Cost and Income Estimates: 

1992. Actuarial Study No. 108. Washington, DC: Social 

Security Administration, U.S. Department of Health 

and Human Services.

2.2 Unemployment Rate

U.S. Social Security Administration. 2011. The 2011 Report 

of the Board of Trustees of the Federal Old-age and 

Survivors Insurance and Federal Disability Insurance 

Trust Fund. Washington, DC.

U.S. Social Security Administration, Office of the Chief 

Actuary. 2015. The Long-Range Economic Assumptions 

for the 2015 Trustees Report. Washington DC.

2.3 Real Earnings Growth Rate

Department of Commerce, Bureau of Economic Analysis.

National Income and Product Accounts, 1948–2014.

Washington, DC.

U.S. Social Security Administration. 2015. The 2015 Report 

of the Board of Trustees of the Federal Old-age and 

Survivors Insurance and Federal Disability Insurance 

Trust Fund. Washington, DC.

U.S. Social Security Administration, Office of the Chief 

Actuary. 2015. The Long-Range Economic Assumptions 

for the 2015 Trustees Report. Washington DC.

2.4 Taxable Share of Total Earnings

Piketty, Thomas and Emmanuel Saez. 2013. “Top Incomes 

and the Great Recession: Recent Evolutions and Policy 

Implications. IMF Economic Review 61: 456–478.

U.S. Social Security Administration. 2015. “Annual Statistical 

Supplement to the Social Security Bulletin, 2014.” SSA 

Publication No. 13–11700. Washington, DC.

U.S. Congressional Budget Office. 2015. “The 2015 LongTerm Budget Outlook,” June. (Available at www.cbo.

gov/publication/50250)

Whitman, Kevin and David Shoffner. 201l. “The Evolution 

of Social Security’s Taxable Maximum.” Policy Brief 

No. 2011–02. Washington, DC: U.S. Social Security 

Administration.

2.5 Inflation and Interest Rates

Abrahams, Michael , Tobias Adrian, Richard K. Crump, 

and Emanuel Moench. 2015. “Decomposing Real and 

Nominal Yield Curves.” Staff Report No. 570. New York, 

NY: Federal Reserve Bank of New York.

Adrian, Tobias, Richard Crump, Peter Diamond, and 

Rui Yu. 2015 “Discounting the Long-Run,” http://

libertystreeteconomics.newyorkfed.org/2015/08/

discounting-the-long-run.html

Andrade, Philippe, Richard K. Crump, Stefano Eusepi, and 

Emanuel Moench. 2014. “Fundamental Disagreement.” 

Staff Report 655. New York, NY: Federal Reserve Bank 

of New York.

Brown, Jeffrey and George Pennacchi. 2015.

Congressional Budget Office. 2014. The 2014 Long-Term 

Budget Outlook. Pub. No. 4933. Washington, DC.

Kitsul, Yuriy and Jonathan H. Wright. 2013. “The Economics 

of Options-Implied Inflation Probability Density 

Functions.” Journal of Financial Economics 110: 696–711.

Feldman, Ronald, Ken Heinecke, Narayana Kocherlakota, 

Sam Schulhofer-Wohl, and Tom Tallarini. 2015.

“Market-Based Probabilities: A Tool for Policymakers.” 

Minneapolis, MN: Federal Reserve Bank of Minneapolis.

Fleckenstein, Matthias, Francis A. Longstaff, and Hanno 

Lustig. 2014. “The TIPS-Treasury Bond Puzzle.” The 

Journal of The American Finance Association 69 (5).

Haubrich, Joseph, George Pennacchi, and Peter Ritchken.

2012. Inflation Expectations, Real Rates, and Risk 

Premia: Evidence from Inflation Swaps. Oxford, UK: 

Oxford University Press.

Piazzesi, Monika, Juliana Salomao, and Martin Schneider.

2015. “Trend and Cycle in Bond Premia.” Working Paper 

2015–3. Stanford, CA: Stanford University.

U.S. Social Security Administration, Office of the Chief 

Actuary. 2015. The Long-Range Demographic 

Assumptions for The 2015 Trustees Report. Washington, 

DC.
90 | 2015 Technical Panel on Assumptions and Methods

U.S. Social Security Administration. 2015. The 2015 Report 

of the Board of Trustees of the Federal Old-age and 

Survivors Insurance and Federal Disability Insurance 

Trust Fund. Washington, DC.

■ Chapter 3. Presentation

3.1 Presentation of Uncertainty

U.S. Social Security Administration. 2015. The 2015 Report 

of the Board of Trustees of the Federal Old-age and 

Survivors Insurance and Federal Disability Insurance 

Trust Fund. Washington, DC.

3.2 Illustrating Scheduled Benefits to Earnings

U.S. Social Security Administration. Report of the Board of 

Trustees of the Federal Old-age and Survivors Insurance 

and Federal Disability Insurance Trust Fund, various 

years. Washington, DC.

U.S. Social Security Administration, Office of the Chief 

Actuary. 2014. “Replacement Rates for Retirees: What 

Makes Sense for Planning and Evaluation.” Actuarial 

Note 155. Baltimore, MD.

3.3 Measures of Long-Run Financial Sustainability

U.S. Social Security Administration. 2015. The 2015 Report 

of the Board of Trustees of the Federal Old-age and 

Survivors Insurance and Federal Disability Insurance 

Trust Fund. Washington, DC.

U.S. Social Security Advisory Board. Report of the Technical 

Panel on Assumptions and Methods, various years.

Washington, DC.
2015 Technical Panel on Assumptions and Methods | 91

List of Figures and Tables

■ Executive Summary

Table 1. Summary of Assumption Recommendations

Table 2. Summary of Effects of 2015 Technical Panel 

Recommendations on OASDI Actuarial Balance (as a 

Percent of Taxable Payroll)

■ Chapter 1. Demographic Assumptions 

and Methods

1.1 Fertility

Figure 1. Number of Children per Women, 1917–2013

Figure 2. Age-specific Fertility Rates, 1973 and 2013

Figure 3. Percent of Births by Parity: United States 1917- 2010

1.2 Mortality

Figure 4. Ultimate Average Annual Rate of Reduction in 

(Age-Sex-Adjusted) Central Death Rates: Trustees vs. 

Technical Panel Recommendations

Figure 5. Average Annual Reduction in Age-Sex-Adjusted 

Central Death Rates for Successive 10-Year Periods 

(Centered), 1950–2011, All Ages

Figure 6. Projections of Male Life Expectancy at Age 65 from 

1982–2015 versus Actual Experience

Figure 7a. International Comparison: Female Life Expectancy 

at Age 65 Trends 1960–2012

Figure 7b. International Comparison: Male Life Expectancy 

at Age 65 Trends 1960–2012

Table 3. Historical Average and Trustees’ Intermediate 

and Panel Recommended Ultimate Rate of Mortality 

Improvement by Sex and Age Groups and Calendar Year

1.3 Immigration

Table 4. Immigration Values Used for 2015 Trustees Report

Figure 8. Net Immigration Estimates/Projections, Trustees 

2015 Intermediate, 1980–2090

Table 5. Comparisons of Net Total Immigration Assumptions 

by SSA and Census Bureau for 2015–2060

1.4 Disability

Figure 9. Prevalence of SSDI Receipt: Worker Beneficiaries 

per 1000 Insured, 1975–2014

Figure 10. Decomposition of Various Factors’ Impact on 

the Percent of the Working-Age Population Receiving 

Disability Insurance, 1985–2007

Figure 11. Percentage Insured for DI, Men and Women, Ages 

50–54: 1977–2032, by Year of Projection, 2010 vs. 2015

Figure 12A. SSDI Incidence per 1,000 Exposed, Men Ages 

20–64

Figure 12B. SSDI Incidence per 1,000 Exposed, Women 

Ages 20–64

Figure 13A. DI Incidence (per 1000 insured) among Men, 

by Age Category, 1985–2040 Projected in 2010 vs. 

Projected in 2015

Figure 13B. DI Incidence (per 1000 insured) among Women 

by Age Category, 1985–2040 Projected in 2010 vs. 

Projected in 2015

Figure 14. Total Allowance Rate for Disabled-Worker DDS 

Claims by Filing Year, Actual Vs. Modeled

Figure 15A.Allowance Rate for Cases Decided by Administrative 

Law Judges , 2005–2015 (July)

Figure 15B. Percent of Decisions Allowed by ALJ Cohort 

2005–2014: Judges Active in 2014, Who Worked at 

Least 100 Cases in the Year

Figure 16. DI Recipients Converting to Retired Worker 

Benefits (per 1000 Recipients), Projections of 2011 

and 2015 Trustees Reports

Figure 17. DI Awards by Diagnosis per 1,000 DI-Insured: 

1983, 1989, 1999, 2009, 2013

Figure 18. Age-Sex-Adjusted Recovery Rate (per 1000 DI 

Recipients), Projections of 2011 and 2015 Trustees 

Reports

Figure 19. Percentage of DI Recipients Receiving Full Medical 

Continuing Disability Reviews, 1993–2012
92 | 2015 Technical Panel on Assumptions and Methods

■ Chapter 2. Economic Assumptions and 

Methods

2.1 Labor Force Participation Rate

Figure 20. Labor Force Participation Rates, Total, Male and 

Female, 1960–2014

Figure 21a. Male Labor Force Participation Rates, 1977–2014

Figure 21b. Female Labor Force Participation Rates, 1977–2014

Figure 22. Female Labor Force Participation by Five-Year 

Age Groups and Birth Cohorts

Figure 23a. Projected Male Labor Force Participation Rates, 

by Age, 2014, 2024, and 2089

Figure 23b. Projected Female Labor Force Participation 

Rates, by Age, 2014, 2024, and 2089

Table 6. Projected and Actual Labor Force Participation 

Rates for Women 60–64 Years Old

Figure 24a. Mean Years of Education Graduates by Sex and 

Year of Birth (U.S. Born) at Age 30

Figure 24b. Fraction College Graduates by Sex and Year of 

Birth (U.S. Born) at Age 30

Table 7. Alternative Labor Force Participation Rate Projections 

for 2089, by Scenario

2.2 Unemployment Rate

Figure 25. Unadjusted and Age-Sex-Adjusted Annual 

Unemployment Rates, 1960–2014

2.3 Real Earnings Growth Rate

Figure 26. Annual Productivity Growth and Five-Year Moving 

Average, 1960–2013

Figure 27. Compensation Share of Gross Domestic Product, 

1948–2014

Figure 28. Earnings as a Percent of Total Compensation, 

1948–2014

Figure 29. Employer Contributions for Earnings Supplements 

as a Percent of Total Compensation, 1950–2014

Figure 30. Average Hours Worked: Annual Percent Change, 

1960–2013

Table 8. Average Annual Percent Change in GDP Deflator 

and CPI-W, by Decade

Table 9. Technical Panel Recommendations for Average 

Annual Real Earnings Assumptions (2024–2089)

Table 10. Average Annual Real Percentage Change in Average 

Earnings and Its Components, 1963–2013

2.4 Taxable Share of Total Earnings

Figure 31. Historical and Projected Values of the Ratio 

of Taxable Payroll to Covered Earnings: Trustees’ 

Assumptions and Technical Panel Recommendation

Figure 32. Percent of Workers with Earnings Above the 

Annual Taxable Maximum, 1980–2012

Figure 33. The Top Decile Income Share in the U.S., 1917–2013, 

Excluding Capital Gains

Figure 34. Taxable Share of Earnings and the Percent of 

Workers with Earnings Below the Annual Taxable 

Maximum, 1984–2012

2.5 Inflation and Interest Rates

Table 11. Summary of Technical Panel Recommendations 

on Inflation and Interest Rate Assumptions

Table 12. Average Annual Nominal Interest Rate, Inflation 

Rate, and Real Interest Rate

■ Chapter 3. Presentation

3.1 Presentation of Uncertainty

Table 13. Assumptions for More Rapid Economic Growth 

and Slower Economic Growth Scenarios

Table 14. Key Long-Range Assumptions and Estimated 

Uncertainty

Table 15. Annual Income Rates, Cost Rates, and Balances—

Summary Data from Higher Trust Fund Balance and 

Lower Trust Fund Balance Projections, OASI and DI 

(as a Percent of Taxable Payroll)

Table 16. Annual Income Rates, Cost Rates, and Balances—

Summary Stochastic Data, OASDI (as a Percent of 

Taxable Payroll)

3.2 Illustrating Scheduled Benefits Relative to 

Earnings

Table 17. Scheduled Monthly Benefit, as a Percentage of the 

Primary Insurance Amount, at Various Claiming Ages 

for Different Full Retirement Ages (FRAs), Cohorts born 

in 1937 and Later

Table 18A-18C. Monthly Retired Worker Benefit (excluding 

COLAs), as a Percentage of Average Indexed Monthly 

Earnings(AIME), at Various Claiming Ages for Different 

Full Retirement Ages (FRAs)—Low, Medium, and High 

Scaled Earners
2015 Technical Panel on Assumptions and Methods | 93

Table 19. The Expected Present Discounted Value of Scheduled 

Lifetime Retired Worker Benefits, as a Percentage of 

Average Indexed Monthly Earnings(AIME), Scaled 

Medium Earner, Claiming at Age 65

Table 20A. Annual Initial Benefit at Age 62 as a Percentage 

of Average Annual Earnings over the Last Five Years 

of Positive Earnings, prior to Age 62 (CPI indexed up 

to age 61), for the cohort turning 62 in the year of the 

current Trustees Report

Table 20B-G. Annual Initial Benefit at Age 62 as a Percentage 

of Average Annual Earnings over the Last Five Years of 

Positive Earnings, prior to Age 62 (CPI indexed up to 

age 61)for the Cohort Turning Age 62 10 Years before 

and 10 to 50 Years after the Cohort Used as the Basis 

for Table 20A
94 | 2015 Technical Panel on Assumptions and Methods
2015 Technical Panel on 

Assumptions and Methods

Social Security Advisory Board

400 Virginia Avenue, SW, Suite 625

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