SOCIAL SECURITY ADMINISTRATION BALTIMORE, MD 21235-0001

SOCIAL SECURITY

Office of the Chief Actuary

September 19, 2017

The Honorable Sam Johnson

The Honorable Adrian Smith

United States House of Representatives

Washington, D.C. 20515

Dear Chairman Johnson and Representative Smith:

Enactment of H.R. 3112, the “Providing Choice for Social Security Retirees Act”, which you 

introduced on June 29, 2017, would provide a “partial lump sum” option for workers becoming 

initially entitled for retired worker benefits in 2019 or later at an age older than their normal 

retirement age (NRA). At the time of their initial benefit entitlement (that is, the first month for 

which benefits will be received), these workers could choose to receive a lump sum amount

equivalent to 2 percent (one-fourth of the value) of any 8 percent delayed retirement credits 

(DRCs) earned up to that time. A 6 percent DRC (the usual 8 percent DRC less the 2 percent 

converted to a lump sum) would apply for their subsequent monthly retired worker benefits. Any 

DRCs applicable for a surviving spouse of the worker would be unaffected by this provision.

Under the proposal, the lump sum amount would be calculated using projected unisex mortality 

for retirees by birth year and age of initial benefit entitlement. We assume that the lump sum 

amount would be calculated on a present discounted value basis using the assumed future 

effective interest rates earned on holdings of the combined OASI and DI Trust Funds. 

The initial effect of the proposal would consist almost entirely of additional lump sum benefit 

payments, because the effect of reduced monthly benefits for those who choose to take the lump 

sum option would not be fully realized on an annual basis for over 20 years. Therefore, while 

enactment of the proposal would have a negligible net effect on the long-range actuarial balance

(that is, less than 0.005 percent of taxable payroll) for the OASDI program, we estimate that it 

would increase OASDI cost (net of additional revenue from taxation of benefits) by a total of

about $19 billion over the period including calendar years 2017 through 2026 under our assumed 

take-up rate, described below. For years after 2032, we estimate that enactment of the proposal 

would generally result in a small net reduction in annual OASDI program cost. The projected 

year of reserve depletion for the combined OASI and DI Trust Funds would be unchanged, 

remaining at 2034 as projected under current law. 

Table 1, enclosed, presents annual and 75-year-summarized cost rates, income rates, balances, 

and changes in annual balances for the OASDI program under the proposal. The estimates 

presented here are based on the intermediate assumptions of the 2016 Trustees Report and reflect 
Page 2 – The Honorable Sam Johnson and The Honorable Adrian Smith

the combined effort of many in the Office of the Chief Actuary, but most particularly Karen 

Glenn, Chris Chaplain, and Daniel Nickerson.

Under current law, individuals who delay initial retired worker benefit entitlement until after 

attaining their NRA earn DRCs that increase their monthly benefits by 8 percent for each year of 

deferral. Because no retirement earnings test applies after attaining NRA, the choice to delay 

benefit claiming is presumed to be a deliberate choice, in general, with the intent of earning 

DRCs. Individuals with better than average health and survival prospects can delay the start of 

receipt of benefits until after NRA, with the expectation of receiving more lifetime value of 

benefits than would be expected with benefits starting at NRA. Thus, the choice to delay benefit 

entitlement until after NRA suggests an expectation that the DRCs will provide greater lifetime 

value, likely based on expectation of longer than average remaining lifetime. Given this 

motivation for delaying entitlement to earn DRC, it is not clear the degree to which individuals 

will “cash in” a portion of this earned DRC value by opting for the lump sum at initial benefit 

entitlement after NRA.

For the purpose of the estimate provided here, we assume that about two-thirds of eligible male 

initial entitlements over NRA and about one-third of eligible female initial entitlements over 

NRA will take the partial lump sum. With a take-up rate this high, there would be relatively little 

antiselection among those taking the lump sum option. That is, the large numbers choosing the 

lump sum would be reasonably representative of individuals who will live both longer and 

shorter than average remaining life expectancy. An alternative possible scenario is that far fewer

of the individuals earning DRCs will exercise the lump sum option, and that they will be largely

those who have unexpectedly had or learned of a serious health condition after attaining NRA. In 

particular, they now expect to have a shorter remaining life span than they expected when they 

deferred receipt of benefits at NRA. For this group, taking the lump sum on learning of their 

unexpected decline in health status would be clearly more attractive than continuing to defer 

receipt of benefits or applying the full DRC to their future monthly benefits. Under this 

alternative scenario, the size of both initial and long-term effects on OASDI program cost would 

be somewhat smaller than under the take-up rates assumed for the estimate presented here.

An additional possible effect of implementing this proposal would be that some individuals who 

under current law start to receive retired worker benefits at or before NRA might choose to delay 

their entitlement (start of benefit receipt) past NRA. Some healthier-than-average individuals 

might start benefits at NRA under current law out of concern that an unexpected change in health 

status later might shorten their prospects for long life and thus diminish or reverse the expected 

gain from earning the DRC. For healthy workers at NRA with this concern, deferral of benefit 

start until after NRA would be more attractive under the proposal, because a portion of the value 

of the DRCs earned would be available from the lump sum option if a decline in health status 

occurs. For the purpose of this estimate, we assume that the number of such individuals would be 

small.

Individuals exercising this option under the proposal would have additional benefits paid at their 

initial benefit entitlement in the lump sum, but would then receive less-than-full delayed 

retirement credit in their monthly benefit level thereafter. Therefore, for the latter years of the 
Page 3 – The Honorable Sam Johnson and The Honorable Adrian Smith

long-range projection period shown in Table 1, enactment of the proposal would have a 

relatively small net effect on OASDI cost.

We hope these estimates are helpful. Please let me know if we may provide further assistance.

Sincerely,

 Stephen C. Goss, ASA, MAAA

Chief Actuary

Enclosure
Year Cost Rate

Income

Rate

Annual

Balance Cost Rate

Income

Rate

Annual

Balance

2016 14.05 12.94 -1.10 303 0.00 0.00 0.00

2017 13.72 12.92 -0.80 293 0.00 0.00 0.00

2018 13.86 12.96 -0.90 277 0.00 0.00 0.00

2019 14.02 12.97 -1.05 261 0.04 0.00 -0.03

2020 14.17 12.98 -1.18 245 0.03 0.00 -0.03

2021 14.30 13.00 -1.30 230 0.03 0.00 -0.03

2022 14.52 13.04 -1.49 215 0.03 0.00 -0.03

2023 14.79 13.06 -1.73 198 0.03 0.00 -0.03

2024 15.05 13.09 -1.95 181 0.02 0.00 -0.02

2025 15.30 13.11 -2.19 164 0.02 0.00 -0.02

2026 15.48 13.13 -2.36 147 0.01 0.00 -0.01

2027 15.66 13.14 -2.51 130 0.01 0.00 -0.01

2028 15.82 13.16 -2.66 114 0.01 0.00 -0.01

2029 15.97 13.17 -2.80 97 0.00 0.00 -0.00

2030 16.10 13.18 -2.92 80 0.00 0.00 -0.00

2031 16.22 13.19 -3.03 62 0.00 0.00 -0.00

2032 16.33 13.20 -3.13 44 0.00 0.00 -0.00

2033 16.41 13.21 -3.20 26 -0.00 -0.00 0.00

2034 16.46 13.21 -3.25 7 -0.00 -0.00 0.00

2035 16.49 13.22 -3.28 ---- -0.00 -0.00 0.00

2036 16.55 13.22 -3.33 ---- -0.00 -0.00 0.00

2037 16.59 13.23 -3.37 ---- -0.00 -0.00 0.00

2038 16.61 13.23 -3.38 ---- -0.00 -0.00 0.00

2039 16.61 13.23 -3.37 ---- -0.00 -0.00 0.00

2040 16.59 13.23 -3.35 ---- -0.00 -0.00 0.00

2041 16.56 13.23 -3.32 ---- -0.01 -0.00 0.01

2042 16.53 13.23 -3.30 ---- -0.01 -0.00 0.01

2043 16.49 13.23 -3.26 ---- -0.01 -0.00 0.01

2044 16.46 13.23 -3.23 ---- -0.01 -0.00 0.01

2045 16.44 13.23 -3.21 ---- -0.01 -0.00 0.01

2046 16.42 13.23 -3.19 ---- -0.01 -0.00 0.01

2047 16.40 13.23 -3.17 ---- -0.01 -0.00 0.00

2048 16.38 13.23 -3.15 ---- -0.00 -0.00 0.00

2049 16.37 13.23 -3.13 ---- -0.00 -0.00 0.00

2050 16.36 13.23 -3.12 ---- -0.00 -0.00 0.00

2051 16.36 13.23 -3.12 ---- -0.00 -0.00 0.00

2052 16.37 13.23 -3.13 ---- -0.00 -0.00 0.00

2053 16.39 13.24 -3.15 ---- -0.00 -0.00 0.00

2054 16.42 13.24 -3.18 ---- -0.00 -0.00 0.00

2055 16.46 13.24 -3.22 ---- -0.00 -0.00 0.00

2056 16.51 13.25 -3.26 ---- -0.00 -0.00 0.00

2057 16.56 13.25 -3.31 ---- -0.00 -0.00 0.00

2058 16.61 13.25 -3.35 ---- -0.00 -0.00 0.00

2059 16.66 13.26 -3.40 ---- 0.00 0.00 -0.00

2060 16.71 13.26 -3.44 ---- 0.00 0.00 -0.00

2061 16.76 13.27 -3.49 ---- -0.00 -0.00 0.00

2062 16.81 13.27 -3.54 ---- -0.00 -0.00 0.00

2063 16.86 13.27 -3.58 ---- -0.00 -0.00 0.00

2064 16.90 13.28 -3.63 ---- -0.00 -0.00 0.00

2065 16.95 13.28 -3.67 ---- -0.00 -0.00 0.00

2066 17.01 13.28 -3.72 ---- -0.00 -0.00 0.00

2067 17.06 13.29 -3.77 ---- -0.00 -0.00 0.00

2068 17.11 13.29 -3.82 ---- -0.00 -0.00 0.00

2069 17.16 13.29 -3.87 ---- -0.00 -0.00 0.00

2070 17.22 13.30 -3.92 ---- -0.00 -0.00 0.00

2071 17.26 13.30 -3.96 ---- -0.00 -0.00 0.00

2072 17.30 13.30 -4.00 ---- -0.00 -0.00 0.00

2073 17.34 13.31 -4.03 ---- -0.00 -0.00 0.00

2074 17.37 13.31 -4.06 ---- -0.00 -0.00 0.00

2075 17.39 13.31 -4.08 ---- -0.00 -0.00 0.00

2076 17.40 13.31 -4.09 ---- -0.00 -0.00 0.00

2077 17.41 13.31 -4.10 ---- -0.00 -0.00 0.00

2078 17.41 13.31 -4.10 ---- -0.00 -0.00 0.00

2079 17.40 13.31 -4.09 ---- -0.00 -0.00 0.00

2080 17.40 13.31 -4.09 ---- -0.00 -0.00 0.00

2081 17.40 13.31 -4.09 ---- -0.00 -0.00 0.00

2082 17.40 13.31 -4.09 ---- -0.00 -0.00 0.00

2083 17.42 13.31 -4.10 ---- -0.00 -0.00 0.00

2084 17.44 13.31 -4.12 ---- -0.00 -0.00 0.00

2085 17.47 13.32 -4.15 ---- -0.00 -0.00 0.00

2086 17.50 13.32 -4.18 ---- -0.00 -0.00 0.00

2087 17.54 13.32 -4.22 ---- -0.00 -0.00 0.00

2088 17.58 13.32 -4.26 ---- -0.00 -0.00 0.00

2089 17.63 13.33 -4.30 ---- -0.00 -0.00 0.00

2090 17.68 13.33 -4.35 ---- -0.00 -0.00 0.00

2091 17.72 13.33 -4.39 ---- -0.00 -0.00 0.00

Cost Rate Income Rate

Actuarial 

Balance

Change in 

Cost rate

Change in 

Income Rate

Change in 

Actuarial

Balance

16.50% 13.84% -2.66% 2034 0.00% 0.00% 0.00%

Office of the Chief Actuary

Based on Intermediate Assumptions of the 2016 Trustees Report. Social Security Administration

1 Under present law the year of combined Trust Fund reserve depletion is 2034.

Summarized Rates: OASDI

Year of reserve 

depletion1

Summarized Rates: OASDI

2016 - 2090

September 19, 2017

Expressed as a percentage of present-law

taxable payroll Trust Fund

Ratio

1-1-year

Expressed as a percentage of present-law

taxable payroll

Table 1 - OASDI Cost Rate, Income Rate, Annual Balance, and Trust Fund Ratio

HR 3112 - Provide an option to split the 8-percent delayed retirement credit (DRC) to offer a lump sum benefit at initial entitlement 

equivalent to 2 percent of the 8 percent DRC earned, and a 6 percent DRC on subsequent monthly benefits. Effective for new 

entitlements in 2019 and later. 

Proposal Change from Present Law